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The Law on Obligations

and Contracts!
 LAW
CIVIL CODE LEGISLATION

MORAL STATE

OBLIGATIONS CONTRACTS

CONSTITUTION NATURAL

DIVINE
SOCIAL CONTROL
RULES
Introduction to Law
The General Nature of Law
General
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 Subjects of Law

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Characteristics of Law
The characteristics of law (in its specific sense) are:

(1) It is a rule of conduct. – as a rule of human conduct, law takes

cognizance of external act only;
(2) It is obligatory – Law is considered a positive command imposing a
duty to obey and involving a sanction which forces obedience.
(3) It is promulgated by legitimate authority – In a democratic country,
like Philippines, the legitimate or competent authority is the
legislature.
(4) It is of common observance and benefit – It regulates the relations of
men to maintain harmony in society and to make order and co-
existence possible.
Necessity and functions of law.

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Sources of Law
◈ Constitution
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Custom decisions
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 Organization of Courts
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Under the present legislation, the other courts are: Court of
court and in such lower courts as may be established by laws.”
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Law on Obligations and contracts defined

“The law of obligations and contracts is the body of rules which

deals with the nature and sources of obligations and the rights and
duties arising from agreements and the particular contracts.” (ibid.;
see Art.1307.)
Civil Code of the Philippines

The law on obligations and contracts is found in Republic Act

No. 386, otherwise known as the Civil Code of the Philippines.

The Civil Code of the Philippines is based mainly on the Civil

Code of Spain which took effect in the Philippines on
December 7, 1889. It was approved as Republic Act No. 386 on
June 18, 1949 and took effect on August 30, 1950.
ART. 1160

Kind of Quasi-Contracts
Quasi-contract is that juridical relation resulting from lawful,
voluntary and unilateral acts by virtue of which the parties
become
Negotiorum
boundgestio
to each other to the end that no one will be
unjustly enriched or benefited at the expense of another.
Is a voluntary management of the property or affairs of another
without
The law the knowledge
considers or consent
the parties of the entered
as having latter. into a contract,
although they have not actually done so, and irrespective of their
intention,
Solutio Indebiti
to prevent injustice or the unjust enrichment of a
person at the expense of another.
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 requisites are:

a) There is no right to receive the thing delivered; and
b) The thing was delivered through mistake
ART. 1161

Civil Liability includes:

1. Restitution
2. Reparation for the damage caused; and
3. Indemnification for consequential damages
ARTICLE 1156

The term obligation is derived from the Latin word obligatio which
means tying or binding.

It is a tie or bond recognized by law by virtue of which one is bound in

favor of another to render something.

Obligation is a JURIDICAL NECESSITY because in case of

noncompliance, the courts of justice may be called upon by the
aggrieved party to enforce its fulfillment or, in default thereof, the
economic value that it represents.
Essential requisites of an obligation

1. A passive subject – the person who is bound to the fulfillment of the

obligation.
2. A active subject – the person who is entitled to demand the fulfillment of
the obligation.
3. Object or prestation – the conduct required to be observed by the debtor.
It may consist in giving, doing, or not doing.
4. A juridical or legal tie – this binds or connects the parties to the
obligation.

The form of an obligation refers to the manner in which an obligation is

manifested or incurred.

Kinds of obligation according to the subject matter.

1. Real obligation (obligation to give) is that in which the subject matter is a
thing which the obligor must deliver to the obligee.
2. Negative personal obligation is obligation not to do (which naturally
includes obligations “not to give”).
ART. 1157

Sources of Obligations

Law – when they are imposed by law itself.

Contracts – when they arise from the stipulation of the parties.

Quasi-contracts – when they arise from lawful, voluntary and unilateral

acts which are enforceable to the end that no one shall be unjustly
enriched or benifited at the expense of another. In a sense, these
obligations may be considered as arising from law.

Crimes or acts or omissions punished by law – when they arise from civil
liability which is the consequence of a criminal offense.

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. 1163

A thing is said to be specific or determinate particularly designated or

physically segregated others of the same class.

A thing is generic or indeterminate when it refers only to a class or

genus to which it pertains and cannot be pointed out with particularly.

Specific thing and generic thing distinguished

1. A determinate thing is identified by its individuality.

2. A generic thing is identified only by its specie.
ART. 1164

Different Kinds of Fruits

1. Natural Fruits – are the spontaneous products of the soil, and the
young and other products of animals.
2. Industrial Fruits – are those produced by lands of any kind through
cultivation or labor.
3. Civil Fruits – are those derived by virtue of a juridical relation.

Meaning of personal right and real right

4. Personal right is the right or power of a person (creditor) to demand
from another (debtor), as a definite passive subject, the fulfillment of
the latter’s obligation to give, to do, or not to do.
5. Real right is the right or interest of person over a specific thing
(like ownership, possession, mortgage), without a definite passive
subject against whom the right may be personally enforced.
Art. 1165.

Remedies of creditor in real obligation

(1) Specific real obligation – the creditor may exercise the following
remedies or right in case the debtor fails to comply with his obligation:

(a) demand specific performance or fulfillment (if it is possible) of

the obligation with a right to indemnity for damages; or
(b) demand rescission or cancellation (in certain cases) of the
obligation also with a right to recover damages (Art. 1170); or
(c) demand payment of damages only, where it is the only feasible
remedy.

Consequently, only the debtor can comply with the obligation. This is the
reason why the creditor is granted the right to compel the debtor to
make the delivery. (Art. 1165)
(2) Generic real obligation – can be performed by a third person since
the object is expressed only according to its family of genus.

In any case, the creditor has the right to recover damages under Article
1170 in case of breach or violation of the obligation.

The manner of compliance with an obligation to deliver a generic thing

is governed by Article 1246.

Genus nunquam perit (genus never perishes)

Article 1166.

Accessions are the fruits of a thing or additions to or improvements

upon a thing.

Accessories are things joined to or included with the principal thing for
the latter’s embellishment, better use, or completion.

The general rule is that all accessions and accessories are considered
included in the obligation to deliver a determinate thing although they
may not have been mentioned.
ART. 1167

It contemplates three (3) situations:

1. The debtor fails to perform an obligation to do;

2. The debtor performs an obligation to do but contrary to the terms thereof; or
3. The debtor performs an obligation to do but in poor manner.
ART. 1169

The word delay, as used in the law, is not to be understood according to its
meaning in common parlance. A distinction, thereof, should be made between
ordinary delay and legal day (default or mora) in the performance of an
obligation.

1. Ordinary delay is merely the failure to perform an obligation on time.

2. Legal delay or default or mora is the failure to perform an obligation on
time which failure constitutes a breach of the obligation.

Kinds of Delay or default

3. Mora Solvendi
4. Mora Accipiendi
5. Compensatio Morae
Note: In an obligation not to do, no fulfillment may take place but delay is
impossible for the debtor fulfills by not doing what has been forbidden him.

Requisites of delay or default by the debtor.

There are three (3) conditions that must be present before mora solvendi can
exist or its effects may arise:

1. Failure of the debtor to perform his (positive) obligation on the date agreed
upon;
2. Demand made by the creditor upon the debtor to comply with his
obligation which demand may be either judicial or extra judicial; and
3. Failure of the debtor to comply with such demand.

It is incumbent upon the debtor to prove that the delay was not caused by his
fault to relieve himself from liability.
ART. 1170

Grounds for Liability

1. Fraud (deceit or dolo) – As used in Article 1170, it is the deliberate or
intentional evasion of the normal fulfillment of an obligation.

Example: S obliged himself to deliver to B 20 bottles of wine, of a particular

brand. Subsequently, S delivered 20 bottles knowing that they contain
cheaper wine. S is guilty of fraud and is liable for damages to B.

Article 1170 refers to incidental fraud (dolo incidente) committed in the

performance of an obligation already existing because of contract. It is to be
differentiated from causal fraud (dolo causente) or fraud employed in the
execution of a contract under Article 1338, which vitiates consent.
2. Negligence (fault or culpa) – It is voluntary act or omissions, there being no
bad faith or malice , which prevents the normal fulfillment of an obligation.

3. Delay (mora)

4. Contravention of the terms of the obligation – This is the violation of the

terms and condition stipulated in the obligation. The contravention must not be
due to a fortuitous event or force majeure. (Art. 1174)
ART. 1171

Responsibility arising from fraud can be demanded with respect to all kinds of
obligation and unlike in the case of responsibility arising from negligence (Art.
1172), the court is not given the power to mitigate or reduce the damages to
be awarded.

Waiver of action for future fraud void

A waiver of an action for future fraud is void as being against the law and
public policy.

Any waiver of an action for future fraud is void. Waiver of action for future
fraud is VOID It is void when one of the provisions of the contract contained
an agreement that: in case he committed a fraud in the future, he would not
be liable for it or you cannot charge him for the fraud that he committed.
Waiver of action for past fraud valid

Waiver of action for past fraud is VALID A past fraud can be the subject of
a valid waiver because the waiver can be considered as an act of generosity
on the part of the victim. The waiver must be expressed in clear language
which leaves no doubt as to the intention of the oblige to give up his right
against the obligor.
ART. 1172

Kinds of negligence according to source of obligation

1. Contractual negligence (culpa contractual) or negligence in contracts
resulting in their breach. Accusations of breach of contract or professional
negligence can result in lawsuits
2. Civil negligence (culpa aquiliana) or negligence which by itself is the source
of an obligation between the parties not so related before by any preexisting
contract.
3. Criminal negligence (culpa criminal) or negligence resulting in the
commission or crime.
ART. 1173

Fault or negligence is defined by the above provision. According to Supreme

Court, “negligence is the failure to observe for the protection of the interests of
another person, that degree of care, precaution and vigilance which the
circumstances justly demand, whereby such other person suffers injury.”

Measure of liability for damages

Damages signify the money compensation awarded to a party for loss or injury
resulting from breach of contract or obligation by the other.
ART. 1174

A fortuitous event is any event which cannot be foreseen, or which, though

foreseen, is inevitable.

Fortuitous event distinguished from force majeure.

Acts of man – fortuitous event is an event independent of the will of the obligor
but not of other human wills.

Acts of God – They refer to what is called majeure or those events which are
totally independent will of every human being.
Kinds of fortuitous events

1. Ordinary fortuitous event – or those events which are common and which
the contracting parties could reasonably foresee; and
2. Extra-ordinary fortuitous events – or those events which are uncommon
and which the contracting parties could not have reasonably foreseen.
ART. 1175

Meaning of simple loan or mutuum.

Simple loan or mutuum is a contract whereby one of the parties delivers to another,
money or other consumable thing, upon the condition that the same amount of the same
kind and quality shall be paid.
QUIZ – FINAL

Fill-in the blanks:

1. _______________, those contrary to good customs or 2. _____________ and those
prohibited by law shall annul the obligation which depends upon them.
3. Subject to laws, all rights acquired in virtue of an obligation are _______________,
If there has been no stipulation to the contrary.
4. Every obligation whose performance does not depend upon a future or uncertain event, or
upon a _______________________ to the parties, is demandable at once.
5. Every obligation which contains a resolutory condition shall also be ____________, without
prejudice to the effects of the happening of the event.
6. When the debtor binds himself to pay when his means permit to do so, the obligation shall be
deemed to be one with a period, subject to the provisions of ______________.
7. In __________________, the acquisition of rights, as well as the extinguishment or loss of
those already acquired, shall depends upon the happening of event which 8. ___________ the
condition.
9. When the _________________ of the condition depends upon the sole will of the debtor, the
conditional obligations shall be void.
10. _______________ shall be govern by special laws.
11. The receipt of the principal by the creditor, without reservation with respect to the interest,
shall give rise to the ___________________ that said interest has been paid.
12. The ______________, after having pursued the property in possession of the debtor to
satisfy their claims.