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TITLE I – OBLIGATIONS
CHAPTER 1
GENERAL PROVISIONS
1156. An obligation is a juridical necessity to give, to do, or not to do. JURIDICAL NECESSITY – juridical tie; connotes that in case of noncompliance, there will be legal sanctions. An obligation is nothing more than the duty of a person (obligor) to satisfy a specific demandable claim of another person (obligee) which, if breached, is enforceable in court. A contract necessarily gives rise to an obligation but an obligation does not always need to have a contract. DAMAGES – sum of money given as a compensation for the injury or harm suffered by the obligee for the violation of his right. KINDS OF OBLIGATION A. From the viewpoint of “sanction” - (a) CIVIL OBLIGATION – that defined in Article 1156; an obligation, if not fulfilled when it becomes due and demandable, may be enforced in court through action; based on law; the sanction is judicial due process (b) NATURAL OBLIGATION – a special kind of obligation which cannot be enforced in court but which authorizes the retention of the voluntary payment or performance made by the debtor; based on equity and natural law. (i.e. when there is prescription of duty to pay, still, the obligor paid his dues to the obligee – the obligor cannot recover his payment even there is prescription) the sanction is the law , but only conscience had originally motivated the payment. (c) MORAL OBLIGATION – the sanction is conscience or morality, or the law of the church. (Note: If a Catholic promises to hear mass for 10 consecutive Sundays in order to receive P1,000, this obligation becomes a civil one.) B. From the viewpoint of subject matter - (a) REAL OBLIGATION – the obligation to give (b) PERSONAL OBLIGATION – the obligation to do or not to do (e.g. the duty to paint a house, or to refrain from committing a nuisance) C. From the affirmativeness and negativeness of the obligation - (a) POSITIVE OR AFFIRMATIVE OBLIGATION – the obligation to give or to do (c) NEGATIVE OBLIGATION – the obligation not to do (which naturally inludes not to give) D. From the viewpoint of persons obliged - “sanction” - (a) UNILATERAL – where only one of the parties is bound (e.g. Plato owes Socrates P1,000. Plato must pay Socrates.) (d) BILATERAL – where both parties are bound (e.g. In a contract of sale, the buyer is obliged to deliver)
- may be: (b.1) reciprocal (b.2) non-reciprocal – where performance by one is non- dependent upon performance by the other ELEMENTS OF OBLIGATION a) ACTIVE SUBJECT – (Creditor / Obligee) the person who is demanding the performance of the obligation; b) PASSIVE SUBJECT – (Debtor / Obligor) the one bound to perform the prestation or to fulfill the obligation or duty; c) PRESTATION – (to give, to do, or not to do) object; subject matter of the obligation; conduct required to be observed by the debtor; d) EFFICIENT CAUSE – the JURIDICAL TIE which binds the parties to the obligation; source of the obligation. e) CAUSA (causa debendi/causa obligationes) - why obligation exists PRESTATION (Object)
- TO GIVE – delivery of a thing to the creditor (in sale, deposit, pledge, donation);
- TO DO – covers all kinds of works or services (contract for professional services);
- NOT TO DO – consists of refraining from doing some acts (in following rules and regulations). Requisites of Prestation / Object :
- licit (if illicit, it is void)
- possible (if impossible, it is void)
- determinate or determinable (or else, void)
- pecuniary value INJURY – wrongful act or omission which causes loss or harm to another DAMAGE – result of injury (loss, hurt, harm) 1157. Obligation arises from – (1) law; (2) contracts; (3) quasi-contracts; (4) acts or omissions punished by law; (5) quasi-delicts. (1) LAW (Obligation ex lege) – imposed by law itself; must be expressly or impliedly set forth and cannot be presumed
- [ See Article 1158 ] (2) CONTRACTS (Obligation ex contractu) – arise from stipulations of the parties: meeting of the minds / formal agreement
- must be complied with in good faith because it is the “law”
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between parties; neither party may unilaterally evade his obligation in the contract, unless: a) contract authorizes it b) other party assents Note: Parties may freely enter into any stipulations, provided they are not contrary to law, morals, good customs, public order or public policy
- [See Article 1159 ] (3) QUASI-CONTRACTS (Obligation ex quasi-contractu) – arise from lawful, voluntary and unilateral acts and which are enforceable to the end that no one shall be unjustly enriched or benefited at the expense of another
- 2 kinds: a. Negotiorum gestio - unauthorized management; This takes place when a person voluntarily takes charge of another’s abandoned business or property without the owner’s authority b. Solutio indebiti - undue payment; This takes place when something is received when there is no right to demand it, and it was unduly delivered thru mistake
- [ See Article 1160 ] (4) DELICTS (Obligation ex maleficio or ex delicto) – arise from civil liability which is the consequence of a criminal offense
- Governing rules:
- Pertinent provisions of the RPC and other penal laws subject to Art 2177 Civil Code [Art 100, RPC – Every person criminally liable for a felony is also civilly liable]
- Chapter 2, Preliminary title, on Human Relations ( Civil Code )
- Title 18 of Book IV of the Civil Code – on damages
- [ See Article 1161 ] (5) QUASI-DELICTS / TORTS (Obligation ex quasi-delicto or ex quasi-maleficio) – arise from damage caused to another through an act or omission, there being no fault or negligence, but no contractual relation exists between the parties - [See Article 1162 ] 1158. Obligations from law are not presumed. Only those (1) expressly determined in this code or (2) in special laws are demandable, and shall be regulated by the precepts of the law which establishes them; and as to what has not been foreseen, by the provisions of this code. Unless such obligations are EXPRESSLY provided by law, they are not demandable and enforceable, and cannot be presumed to exist. The Civil Code can be applicable suppletorily to obligations arising from laws other than the Civil Code itself. Special laws – refer to all other laws not contained in the Civil Code. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. CONTRACT – meeting of minds between two persons whereby one binds himself, with respect to the other, to give, to do something or to render some service; governed primarily by the agreement of the contracting parties. VALID CONTRACT – it should not be against the law, contrary to morals, good customs, public order, and public policy. In the eyes of law, a void contract does not exist and no obligation will arise from it. OBLIGATIONS ARISING FROM CONTRACTS – primarily governed by the stipulations, clauses, terms and conditions of their agreements. If a contract’s prestation is unconscionable (unfair) or unreasonable, even if it does not violate morals, law, etc., it may not be enforced totally. Interpretation of contract involves a question of law. COMPLIANCE IN GOOD FAITH – compliance or performance in accordance with the stipulations or terms of the contract or agreement. FALSIFICATION OF A VALID CONTRACT – only the unauthorized insertions will be disregarded; the original terms and stipulations should be considered valid and subsisting for the partied to fulfill. 1160. Obligations derived from quasi-contracts shall be subject to the provisions of chapter 1, title 17 of this book. QUASI-CONTRACT – juridical relation resulting from lawful, voluntary and unilateral acts by virtue of which, both parties become bound to each other, to the end that no one will be unjustly enriched or benefited at the expense of the other. There is no consent - consent is PRESUMED. (1) NEGOTIORUM GESTIO – juridical relation which takes place when somebody voluntarily manages the property affairs of another without the knowledge or consent of the latter; owner shall reimburse the gestor for necessary and useful expenses incurred by the latter for the performance of his function as gestor. (2) SOLUTIO INDEBITI – something is received
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thing (that is one which is specific; a thing identified by its individuality) which an obligor is supposed to deliver to another. Reason: the obligor cannot take care of the whole class/genus DUTIES OF DEBTOR: Preserve or take care of the things due.
DILIGENCE OF A GOOD FATHER – a good father
does not abandon his family, he is always ready to provide and protect his family; ordinary care which an average and reasonably prudent man would do.
ANOTHER STANDARD OF CARE – extraordinary
diligence provided in the stipulation of parties.
FACTORS TO BE CONSIDERED – diligence
depends on the nature of obligation and corresponds with the circumstances of the person, time, and place. ** Debtor is not liable if his failure to deliver the thing is due to fortuitous events or force majeure… without negligence or fault in his part. Deliver the fruits of a thing Deliver the accessions/accessories Deliver the thing itself Answer for damages in case of non-fulfillment or breach
1164. The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. However, he shall acquire no real right over it until the same has been delivered to him. REAL RIGHT (jus in re) – right pertaining to person over a specific thing, without a passive subject individually determined against whom such right may be personally enforced.
a right enforceable against the whole world
PERSONAL RIGHT (jus ad rem) – a right pertaining to a person to demand from another, as a definite passive subject, the fulfillment of a prestation to give, to do or not to do.
a right enforceable only against a definite person or
group of persons. Before the delivery, the creditor, in obligations to give, has merely a personal right against the debtor
- a right to ask for delivery of the thing and the fruits thereof. Once the thing and the fruits are delivered, then he acquires a real right over them. Ownership is transferred by delivery which could be either actual or constructive. (Art. 1477) � The remedy of the buyer when there is no delivery despite demand is to file a complaint for “SPECIFIC PERFORMANCE AND DELIVERY” because he is not yet the owner of the property before the delivery. � ACTUAL DELIVERY – actual delivery of a thing from the hand of the grantor to the hand of the grantee (presonally), or manifested by certain possessory acts executed by the grantee with the consent of the grantor (realty). � CONSTRUCTIVE TRADITION – representative of symbolical in essence and with intention to deliver the ownership. FRUITS:
- NATURAL – spontaneous products of the soil, the young and other products of animals;
- INDUSTRIAL – produced by lands of any cultivation or labor;
- CIVIL – those derived by virtue of juridical relation. 1165. When what is to be delivered is a determinate thing, the creditor … may compel the debtor to make delivery. If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor. If the obligor delays or has promised to deliver the same ting to two or more persons who do not have the same interest, he shall be responsible for any fortuitous event until he has effected the delivery. DETERMINATE THING
something which is susceptible of particular
designation or specification;
obligation is extinguished if the thing is lost due to
fortuitous events. INDETERMINATE THING
something that has reference only to a class or
genus;
obligation to deliver is not so extinguished by
fortuitous events. REMEDIES FOR FAILURE OF DELIVERY (determinate thing)
- Complaint for specific performance – an action to compel the fulfillment of the obligation.
- Complaint for rescission of the obligation – action to rescind
- Complaint for damages – action to claim for compensation of damages suffered As a general rule, “no person shall be responsible for those events which could not be foreseen, or which, though foreseen, are inevitable, except:
- in cases expressly specified by the law
- when it is stipulated by the parties
- when the nature of the obligation requires assumption of risk An indeterminate thing cannot be object of destruction by a fortuitous event because genus never perishes. 1166. The obligation to give a determinate thing includes that of delivering all its accessions and
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accessories, even though they may not have been mentioned. ACCESSIONS – fruits of the thing or additions to or improvements upon the principal
those which are naturally or artificially attached to the
thing ACCESSORIES – things included with the principal for the latter’s embellishment, better use, or completion When does right to fruits arise? – from the time the obligation to deliver arises
Conditional – from the moment the condition
happens
With a term/period – upon the expiration of the
term/period
Simple – from the perfection of the contract
1167. If a person obliged to do something fails to do it, the same shall be executed at his cost. This same rule shall be observed if he does it in contravention of the tenor of the obligation … it may be decreed that what has been poorly done be undone. THREE SITUATIONS: a) Debtor’s failure to perform an obligation
creditor may do the obligation, or by another, at
the expense of the debtor;
recover damages
b) Performance was contrary to the terms agreed upon
order of the court to undo the same at the
expense of the debtor c) Performance in a poor manner
order of the court to undo the same at the
expense of the debtor
**1168. When the obligation consists in NOT DOING and the obligor does what has been forbidden him, it shall also be undone at his expense.
- 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. However, the demand by the creditor shall not be necessary in order that delay may exists:** When the law or obligation so expressly declares; When from the nature of the contract, time us the essence and motivating factor for its establishment; When demand would be useless (prestation is impossible); In reciprocal obligations, from the moment one of the parties fulfills his obligation; When the debtor admits he is in default ORDINARY DELAY – mere failure to perform an obligation at the appointed time. LEGAL DELAY (DEFAULT) – tantamount to non-fulfillment of the obligation and arises after an extrajudicial or judicial demand was made upon the debtor. KINDS OF DEFAULT : a) MORA SOLVENDI – delay on the part of the debtor to fulfill his obligation; REQUISITES:
- failure of the obligor to perform obligation on the DATE agreed upon;
- demand (j/ej) by the creditor;
- failure to comply with such demand EFFECTS:
- debtor – liable for damages and interests
- debtor – liable for the loss of a thing due to a fortuitous event KINDS:
- mora solvendi ex re – default in real obligations (to give)
- mora solvendi ex persona – default in personal obligations (to do) b) MORA ACCIPIENDI – delay on the part of the creditor to accept the performance of the obligation; Effects:
- creditor – liable for damages
- creditor – bears the risk of loss of the thing
- debtor – not liable for interest from the time of creditor’s delay
- debtor – release himself from the obligation c) COMPENSATIO MORAE – delay of the obligors in reciprocal obligation. Effect: the default of one compensates the default of the other; their respective liabilities shall be offset equitable.
Default / Delay in negative obligation is not possible.
(In negative obligation, only fulfillment and violation are possible)
1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages. FRAUD (dolo) – deliberate intentional evasion of the faithful fulfillment of an obligation; NEGLIGENCE (culpa or fault) – voluntary act or omission of diligence, there being no malice, which prevents the normal
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1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable. FORTUITOUS EVENT – an occurrence or happening which could not be foreseen or even if foreseen, is inevitable; absolutely independent of human intervention; act of God. FORCE MAJEURE - an event caused by the legitimate or illegitimate acts of persons other than the obligor; there is human intervention.
conditions which exempt obligor from liability:
- event is independent of the will of obligor
- it must either be unforeseeable or unavoidable
- occurrence must render it impossible for the debtor to fulfill the obligation in a normal matter
- the obligor is free of partiipation in injury to creditor. REQUISITES OF FORTUITOUS EVENT:
- Independent of the human will (or at least of the obligor’s)
- Unforeseen or unavoidable
- Of such character as to render it impossible for the obligor to comply with his obligation in a normal manner
- Obligor – free from any participation/aggravation of the injury to the obligee (no negligence or imprudence) EXEPTIONS:
- When it is expressly stipulated that he shall be liable even if non-performance of the obligation is due to fortuitous events;
- When the nature of the obligation requires the assumption of risk;
- When the obligor is in delay;
- When the obligor has promised the same thing to two or more persons who do not have the same interest;
- When the possessor is in bad faith and the thing lost or deteriorated due to fortuitous event;
- When the obligor contributed to the loss of the thing. 1175. Usurious transactions shall be governed by special laws. USURY – contracting for or receiving interest in excess of the amount allowed by law for the loan or use of money, goods, etc. SIMPLE LOAN – 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. USURY LAW – makes the usurers criminally liable if the interest charged on loans are more that the limit prescribed by law. This law is repealed – Circular No. 905 of the Central Bank has expressly removed the interest ceilings prescribed by the USURY LAW. 1176. The receipt of the principal by the creditor without reservation with respect to the interest, shall give rise to the presumption that said interest has been paid. The receipt of a later installment of a debt without reservation as to prior installments, shall likewise raise the presumption that such installments have been paid. These are mere presumptions. To be sure – write the interest and the dates covered by such payment in the receipt. 1177. The creditors, after having pursued the property in possession of the debtor to satisfy their claims, may exercise all the rights and bring all the actions of the latter for the same purpose, save those which are inherent in his person; they may also impugn the acts which the debtor may have done to defraud them. REMEDIES AVAILABLE TO CREDITORS FOR THE SATISFACTION OF THEIR CLAIMS:
- Exact fulfillment with right to damages
- Exhaustion of the debtor’s properties still in his possession – writ of attachment (before judgment) or writ of execution (for final judgment not yet executed)
- ACCION SUBROGATORIA – an action where the creditor whose claims had not been fully satisfied, may go after the debtors (3rd^ person) of the defendant debtor.
- ACCION PAULIANA – an action where the creditor files an action in court for the RESCISSION of acts or contracts entered into by the debtor designed to defraud the former. 1178. Subject to the laws, all rights acquired in virtue of an obligation are transmissible, if there has been no stipulation to the contrary. EXCEPTIONS: a) Those not transmissible by their nature like purely personal rights; b) Those not transmissible by provision of law; c) Those not transmissible by stipulation of parties. CHAPTER 3 DIFFERENT KINDS OF OBLIGATIONS Section 1 – Pure and Conditional Obligations
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1179. Every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once. Every obligation which contains a resolutory condition shall also be demandable, without prejudice to the effects of the happening of the event. CONDITION – an event which is both future and uncertain upon which the existence or extinguishment of an obligation is made to depend. PURE OBLIGATION – an obligation which does not contain any condition or term upon which the fulfillment is made to depend; immediately demandable by the creditors and the debtor cannot be excused from not complying with his prestation. CONDITIONAL OBLIGATION – an obligation subject to a condition. a) Suspensive Obligation – its fulfillment gives rise to an obligation; the demandability of the obligation or the effectivity of the contract can take place only after the condition has been fulfilled. b) Resolutory Obligation – its happening extinguishes the obligation which is already existing; 1180. When the debtor binds himself to pay when his means permit him to do so, the obligation shall be deemed to be one with a period, subject to the provisions of Article 1197. Speaks of a period depending on the will of the DEBTOR. If its purpose is to delay, immediate action is allowed. The court fixes the terms. PERIOD – a future and certain event upon the arrival of which, the obligation subject to it either arises or is extinguished. INDICATIONS OF A TERM OR PERIOD: When the debtor binds himself to pay – when his means permit him to do so little by little as soon as possible from time to time as soon as I have the money in partial payment when in the position to pay 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition. Suspensive Condition – the acquisition of rights by the creditor depends upon the happening of the event which constitutes the condition; if such condition does not take place, it would be as of the conditional obligation had never existed. (e.g. promise to give a car after graduating from law school as cum laude) Resolutory Condition – the rights and obligations already existing are under threat of extinction upon the happening or fulfillment of such condition. (e.g. donation by reason of marriage – the celebration of marriage is a resolutory condition; if the marriage did not push through, the donation may be revoked) 1182. When the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void. If it depends upon chance or upon the will of a third person, the obligation shall take effect in conformity with the provisions of this Code. Applies only to suspensive conditions. 3 KINDS OF CONDITIONS UNDER THIS ARTICLE: 1. POTESTATIVE – a suspensive condition which depends upon the will of one of the contracting parties = if at the sole will of the debtor, it is void; if at the creditor’s, still valid. this is to prevent the establishment of illusory obligations. 2. CASUAL – the condition depends upon chance or the will of a third person;(i.e. cellphone warranty) 3. MIXED – the condition depends partly upon the will of the parties and partly upon chance or the will of a third person; (example ni Atty. De Chavez: passing the bar) 1183. Impossible conditions, those contrary to good customs or public policy and those prohibited by law shall annul the obligation which depends upon them. If the obligation is divisible, that part thereof which is not affected by the impossible or unlawful condition shall be valid. The condition not to do an impossible thing shall be considered as not having been agreed upon. POSSIBLE CONDITION – if it is capable of realization or actualization according to nature, law, public policy or good customs. 2 KINDS OF IMPOSSIBLE CONDITIONS: 1. Physically Impossible – cannot exist or cannot be done in its nature; 2. Legally Impossible – contrary to law, good customs, or public policy.
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The article does not require the delivery of fruits or payment of interests accruing (accumulating) before the fulfillment of the suspensive condition. Obligations to do or not to do – the retroactive effect shall be determined by the court using its sound discretion without disregarding the intentions of the parties.
1188. The creditor may, before the fulfillment of the condition, bring the appropriate actions for the preservation of his right. The debtor may recover what during the same time he has paid by mistake in case of a suspensive condition. Preservation of the rights of CREDITOR – the debtor may render nugatory (not serious, ignore) the obligation upon the happening of the obligation.
Action for prohibition restraining the alienation of the
thing pending the happening of the suspensive condition;
Action to demand security if the debtor has become
insolvent;
Action to set aside alienations made by the debtor in
fraud of creditors;
Actions against adverse possessors to interrupt the
running prescriptive period.
To have his rights annotated in the registry.
Rights of the DEBTOR – entitled to recover what has been paid by mistake prior to the happening of the suspensive condition.
1189. When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give, the following rules shall be observed in case of the improvement, loss or deterioration of the thing during the pendency of the condition: LOSS (1) debtor without fault – obligation is extinguished (2) debtor with fault – obligation to pay damages DETERIORATION 1. debtor without fault – impairment is to be borne by the creditor 2. debtor with fault – creditor chooses: rescission of obligation, fulfillment, indemnity IMPROVEMENT 1. by nature or time – improvement: inure to the benefit of the creditor 2. at the expense of the debtor – granted to the usufructuary 1190. When the conditions have for their purpose the extinguishment of an obligation to give, the parties, upon the fulfillment of said conditions, shall return to each other what they have received. In case of the loss, deterioration or improvement of the thing, the provisions which, with respect to the debtor, are laid down in the preceding article shall be applied to the party who is bound to return. As for the obligations to do and not to do, the provisions of the second paragraph of Article 1187 shall be observed as regards the effect of the extinguishment of the obligation. Refers to the fulfillment of a resolutory condition. When the resolutory condition happened, the obligation is considered as if it did not exist. The parties are bound to return or restore whatever they have received from each other – “reciprocal restitution” Donation by reason of marriage – if the marriage does not happen, such donation should be returned to the donor. Loss, deterioration and improvement – governed by 1189. In obligations to do and not to do, the courts shall determine, in each case, the retroactive effect of the condition that has been complied with. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law. RECIPROCAL – arise from same causse; each is a debtor and creditor of the other RESCISSION – resolution or cancellation of the contract Applies only to reciprocal obligations where two parties are mutually debtor and creditor of each other in the same transaction. The cause must be identical ad the obligations must arise simultaneously. The party who can demand rescission should be the party who is ready, willing, and able to comply with his own obligations while the other is not capable to perform his own.
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REMEDIES:
- Specific performance or fulfillment of obligation with damages;
- Rescission of contract with damages. Effect of rescission: the parties must surrender whatever they have received from the other, and the obligation to pay is extinguished. If there is an express stipulation of automatic rescission between parties – such resolution shall take place only after the creditor has notified the debtor of his choice of rescission subject to judicial scrutiny. 1192. In case both parties have committed a breach of the obligation, the liability of the first infractor shall be equitably tempered by the courts. If it cannot be determined which of the parties first violated the contract, the same shall be deemed extinguished, and each shall bear his own damages. FIRST INFRACTOR KNOWN The liability of the first infractor should be equitably reduced.
- equitably offset each other’s damages. FIRST INFRACTOR CANNOT BE DETERMINED The court shall declare the extinguishment of the obligation and each shall bear his own damages. Section 2 – Obligations with a Period 1193. Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that day comes. Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain. A day certain is understood to be that which must necessarily come, although it may not be known when. If the uncertainty consists in whether the day will come or not, the obligation is conditional, and it shall be regulated by the rules of the preceding Section. PERIOD / TERM – consists in a space or length of time upon the arrival of which, the demandability or the extinguishment of an obligation is determined ; it may be definite (exact date or time is known) or indefinite (arrival of date is unknown but sure to come).
- Future + Certain event GENERAL CLASSIFICATIONS: a) EX DIE / SUSPENSIVE PERIOD – from a day certain give rise to the obligation; suspensive effect. b) IN DIEM / RESOLUTORY PERIOD – arrival of a term certain terminated the obligation; resolutory effect. Term – length of time sure to come Condition – fact or event uncertain to come Basis Period/Term Condition
- TIME Always refers to FUTURE Can refer to past events unknown to the parties
- FULFILLMENT Sure to happen at an exact date or indefinite time but sure to come. May or may not happen.
- INFLUENCE Merely fixes the time for the demandability or performance of obligation. May cause the arising or cessation of the obligation. REQUISITES:
- Future
- Certain, sure to come
- Physically or legally possible **1194. In case of loss, deterioration or improvement of the thing before the arrival of the day certain, the rules in Article 1189 shall be observed.
- Anything paid or delivered before the arrival of the period, the obligor being unaware of the period or believing that the obligation has become due and demandable, may be recovered, with the fruits and interests.** The payment or delivery is done before the arrival of the period. CONSEQUENCES:
- If he was not aware of the period or he believes that the obligation has become due and demandable – he can recover what he paid or delivered including fruits and interests;
- If he was aware and he paid voluntarily – he cannot recover the delivery made; it is deemed a waiver of the benefit of the term and the obligation is considered already matured. The presumption is that the debtor knew that the debt was not yet due. He has the burden of proving that he was unaware of the period. 1196. Whenever in an obligation a period is designated, it is presumed to have been established for the benefit of both the creditor and the debtor, unless from the tenor of the same or other circumstances it should appear that the period has been established in favor of
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1199. A person alternatively bound by different prestations shall completely perform one of them. The creditor cannot be compelled to receive part of one and part of the other undertaking. OBLIGATIONS WITH PLURAL PRESTATIONS: 1. CONJUNCTIVE/COMPOUND OBLIGATION - an obligation where the debtor has to perform ALL the several prestations in the contract to extinguish the obligation. 2. ALTERNATIVE OBLIGATION – an obligation where the debtor is required to fulfill ONLY ONE of the several prestations to extinguish the obligation. 3. FACULTATIVE OBLIGATION – an obligation where the debtor is bound to perform ONLY ONE prestation, with a reserved right to choose another prestation as SUBSTITUTE for the principal. 1200. The right of choice belongs to the debtor, unless it has been expressly granted to the creditor. The debtor shall have no right to choose those prestations which are impossible, unlawful or which could not have been the object of the obligation. Implied grant to the creditor is not allowed. If it does not appear on the agreement as to whom among them has the right to choose, it is the debtor who can choose. 1201. The choice shall produce no effect except from the time it has been communicated. 1. The choice shall not produce any legal effect until it has been duly communicated to the other party. 2. It can be done in writing, verbally, impliedly, or any unequivocal means. 3. Once the choice has been communicated to the other party: 1. The obligation is now LIMITED only to the PRESTATION CHOSEN, with all the natural consequences flowing therefrom; 2. The choice is IRREVOCABLE. a. The performance of prestation without announcing the choice to the creditor is NOT BINDING. b. The consent of the other party is NOT REQUIRED in making the choice – that will in effect frustrate the clear intention of the law and the nature of the alternative obligation. c. If there is delay in the making of choice – punish the one who is supposed to exercise the right of choice for the delay he caused – court may order the debtor to make a choice, or creditor to make the choice within certain period, or court makes the choice. 1202. The debtor shall lose the right of choice when among the prestations whereby he is alternatively bound, only one is practicable.
There being but one prestation available, this
prestation becomes a simple obligation.
1203. If through the creditor's acts the debtor cannot make a choice according to the terms of the obligation, the latter may rescind the contract with damages. (1) If the debtor could not make a choice due to the creditor’s act of making the prestations impossible, debtor may RESCIND the contract with damages - rescission takes place at the initiative of the debtor. (2) If the debtor is being prevented to choose only a particular prestation, and there are others available, he is free to choose from them, after notifying the creditor of his decision. 1204. The creditor shall have a right to indemnity for damages when, through the fault of the debtor, all the things which are alternatively the object of the obligation have been lost, or the compliance of the obligation has become impossible. The indemnity shall be fixed taking as a basis the value of the last thing which disappeared, or that of the service which last became impossible. Damages other than the value of the last thing or service may also be awarded.
If the impossibility of all the objects of the
alternative obligation is caused by the debtor, the creditor is entitled to damages.
If such impossibility is caused by a fortuitous event,
the obligation is extinguished and the debtor is released from responsibility, unless the contrary is stipulated by the parties.
The creditor cannot claim for damages if the debtor
can still perform the remaining prestations.
The damages that may be recovered is based on the
last thing which disappeared or the service which became impossible. This last one is converted into a simple obligation.
1205. When the choice has been expressly given to the creditor, the obligation shall cease to be alternative from the day when the selection has been communicated to the debtor. Until then the responsibility of the debtor shall be governed by the following rules: A. only one thing lost – fortuitous event – creditor chooses from the remainder – debtor delivers the choice to creditor; B. only one remains – debtor delivers the same to the creditor; C. only one thing lost – fault of the debtor 1. creditor may choose any one of the
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remainders;
- creditor may choose the price or value of the one which was lost;
- may choose 1 or 2 plus damages D. all things lost – fault of the debtor – creditor may choose the price of ANYONE of the things, with damages if warranted. The same rules shall be applied to obligations to do or not to do in case one, some or all of the prestations should become impossible.
This article applies only when the right of choice has
been expressly granted to the creditor.
1206. When only one prestation has been agreed upon, but the obligor may render another in substitution, the obligation is called facultative. The loss or deterioration of the thing intended as a substitute, through the negligence of the obligor, does not render him liable. But once the substitution has been made, the obligor is liable for the loss of the substitute on account of his delay, negligence or fraud.
If loss or deterioration happened before substitution
is made, obligor is not liable; after substitution is communicated, he is liable for loss (through delay, negligence or fraud) Section 4 – Joint and Solidary Obligations
1207. The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestation. There is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity. INDIVIDUAL OBLIGATION – one debtor and one creditor COLLECTIVE OBLIGATION – two or more debtors and two or more creditors 1. JOINT – entire obligation is to be paid or performed proportionately by the debtors; 2. SOLIDARY – each one of the debtors are obliged to pay the entire obligation , each one of the creditors has the right to demand from any of the debtors, the fulfillment of the entire obligation; A. Passive Solidarity – solidarity on the part of the DEBTORS B. Active Solidarity – solidarity on the part of the CREDITORS.
SOLIDARITY SHOULD BE EXPRESSED – law,
stipulation, nature of obligation.
When the obligation is ambiguous, it must be
considered as joint obligation. CONSEQUENCES OF SOLIDARITY:
- Passive Solidarity – full payment made by anyone of the solidary debtors extinguishes the obligation. The one who paid can claim reimbursement from his co- debtors as regards their corresponding shares in the obligation. A, B, & C are solidary debtors of D in the sum of P900. D can demand payment of the entire obligation when it becomes due, from any one of the debtors or from all of them at the same time. If C paid the whole P900 to D, he may claim reimbursement from A and B.
- Active Solidarity – full payment to any of the creditors extinguishes the obligation. The creditor who received the entire amount will be liable to pay the corresponding shares of his co-creditors in accordance with their internal agreement. Garfield owes the sum of P40,000 to Mickey, Minnie, Donald, and Pluto, who are solidary creditors. Garfield can pay anyone of them. If Mickey received the P40,000, he is liable to pay the corresponding shares of his co-creditors. MIXED SOLIDARITY a. Solidary Debtors, Joint Creditors
P9,000.00 – total debt
Debtors (Solidary) Creditors (Joint) Aida pays P4,500.00 John = P 4,500. Lorna pays P4,500.00 Marsha P 4,500. Fe b. Joint Debtors, Solidary Creditors
P 9,000.00 – total debt
Debtors (Joint) Creditors (Solidary) Aida (P 3,000.00) John (can claim from debtors) Lorna (P 3,000.00) Marsha (-same-) Fe (P 3,000.00)
1208. If from the law, or the nature or the wording of the obligations to which the preceding article refers the contrary does not appear, the credit or debt shall be presumed to be divided into as many shares as there are creditors or debtors, the credits or debts being considered distinct from one another, subject to the Rules of Court governing the multiplicity of suits.
This provision speaks of JOINT DIVISIBLE
OBLIGATION.
When there is a concurrence of several creditors or
of several debtors in one and in the same obligation, there is a presumption that the obligation is joint.
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Happy will pay P50 with 4% on December 30, 2007 Fanny will pay P50 with 5% on December 30, 2008 On December 31, 2006, Smiley can collect his P50 with 3% from any one of the debtors, but not the whole P150 because it is not yet entirely due. The maturity of the other amounts should still be awaited. If maturity comes, Smiley can collect from any of the debtors, because they are expressly solidary in liabilities, and not affected by the secondary stipulations.
1212. Each one of the solidary creditors may do whatever may be useful to the others, but not anything which may be prejudicial to the latter.
Every solidary creditor is benefited by the useful acts
of any one of them.
If a solidary creditor performs an act which is not fair
to his co-creditors, the act may have valid legal effects or the obligation of the debtor due to them may be extinguished, but the performing creditor shall be liable to his co-creditors.
Question : May solidary creditors perform an act
that is beneficial to others?
1213. A solidary creditor cannot assign his rights without the consent of the others. Assign – transfer of right
The assignee does not become a solidary creditor,
and any payment made upon him by the debtor does not extinguish the obligation. He is considered a STRANGER, and his acts are not binding to the solidarity.
DOCTRINE OF MUTUAL AGENCY - In solidary
obligations, the act of one is act of the others.
Exceptions to the doctrine:
- Art. 1212 – a creditor may not perform an act prejudicial to other creditors
- Art. 1213 – a creditor cannot transfer his right without consent 1214. The debtor may pay any one of the solidary creditors; but if any demand, judicial or extrajudicial, has been made by one of them, payment should be made to him.
The debtor can pay any one of the solidary creditors.
Such payment when accepted by any of the solidary creditors will extinguish the obligation.
To avoid confusion on the payment of the obligation,
the debtor is required to ay only to the demanding creditor and that payment is sufficient to effect the extinguishment of the obligation.
In case two or more demands made by the other
creditors, the first demand must be given priority.
1215. Novation, compensation, confusion or remission of the debt, made by any of the solidary creditors or with any of the solidary debtors, shall extinguish the obligation, without prejudice to the provisions of Article 1219. The creditor who may have executed any of these acts, as well as he who collects the debt, shall be liable to the others for the share in the obligation corresponding to them. NOVATION – obligations are modified by: 1. Changing their object or principal conditions; 2. Substituting the person of the debtor; and 3. Subrogating (placing) a third person in the rights of the creditor. [Art. 1291, CC] COMPENSATION – takes place when two persons, in their own right, become creditors and debtors of each other
the amount of one is covered by the amount of the other
Erap borrowed P100 from Fernando. Fernando borrowed P75 from Erap. Erap’s obligation to Fernando is now P25 only, because the original obligation was offset by Fernando’s supposed-to-be obligation to Erap. CONFUSION – takes place when the characters of creditor and debtor are merged in the same person. Tito pays his debt to Vic with a check payable to “cash”. Vic paid his debt to Joey with the same check. Joey paid his debt to Tito, with the same check Tito issued to Vic. Tito becomes paid by his own check. He becomes the debtor and the creditor of himself at the same time. REMISSION – the gratuitous abandonment by the creditor of his right; acceptance of the obligor is necessary.
These 4 modes of extinguishing obligations are acts
prejudicial to the other solidary co-creditors because these have the effect of extinguishing the debt or obligation which is due to all of them.
The only recourse of the co-creditors is to let the one
who executed any of those acts be liable for the shares corresponding to all his co-creditors (in their internal agreement).
1216. The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected.
When there is passive solidarity, the creditor can
proceed against:
- Any of the solidary debtors;
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- Some of the solidary debtors;
- All of the solidary debtors, simultaneously. Extrajudicial demands - first demand shall not prevent subsequent demands on the other co-debtors, if co-debtor first to have been required to fulfill obligation did not act on it. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may choose which offer to accept. He who made the payment may claim from his co- debtors only the share which corresponds to each, with the interest for the payment already made. If the payment is made before the debt is due, no interest for the intervening period may be demanded. When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor paying the obligation, such share shall be borne by all his co-debtors, in proportion to the debt of each. Payment – consists in the delivery of the thing or the rendition (rendering) of the service whish is the object of the obligation. Interest – compensation for the use of borrowed money Partial payment – the solidary debtor who made the partial payment is entitles to be reimbursed only for such amount of money which he had paid and which exceeds his own share in the obligation. If one of the debtors is insolvent and could not pay his share in the obligation, all solidary debtors including the paying debtor shall share proportionately in the settlement of the corresponding share of the insolvent debtor. [In short, his co- debtors will save his ass.] 1218. Payment by a solidary debtor shall not entitle him to reimbursement from his co-debtors if such payment is made after the obligation has prescribed or become illegal. No reimbursement if:
- Obligation PRESCRIBES
The creditor did not make any demand for more than
10 years.
- Obligation becomes ILLEGAL
Law has been passed, making such prestation illegal.
1219. The remission made by the creditor of the share which affects one of the solidary debtors does not release the latter from his responsibility towards the co-debtors, in case the debt had been totally paid by anyone of them before the remission was effected.
Atty De Chavez: Ito ay provision sa tanga...
(siyempre, 'pag nagbayad na, wala nang obligation, wala na ding ire-remit...)
Any belated (delayed) remission by the creditor of
the share of any of the debtor has no effect on the internal relationship of the co-debtors. Payment before remission : A, B, and C solidarily owe D P1,500.00. B paid the entire obligation. After which, D remitted the share of C. B can collect P500.00 each from A and C even if the share of C in the obligation had been remitted. Remission before payment : A, B, and C solidarily owe D P1,500.00. D remitted the share of C. Thereafter, B paid the entire obligation. B can collect P500.00 from A but not from C. However, B may ask D to give back P500, which is the supposed-to-be share of C.
After the prior payment of the entire obligation,
there is nothing to remit because the obligation had been extinguished.
1220. The remission of the whole obligation, obtained by one of the solidary debtors, does not entitle him to reimbursement from his co-debtors.
There is nothing to be reimbursed because he did not
spend any money, the remission being a gratuitous act.
1221. If the thing has been lost or if the prestation has become impossible without the fault of the solidary debtors, the obligation shall be extinguished. If there was fault on the part of any one of them, all shall be responsible to the creditor, for the price and the payment of damages and interest, without prejudice to their action against the guilty or negligent debtor. If through a fortuitous event, the thing is lost or the performance has become impossible after one of the solidary debtors has incurred in delay through the judicial or extrajudicial demand upon him by the creditor, the provisions of the preceding paragraph shall apply. Loss of the thing or impossibility of prestation – 1. NO FAULT – solidary debtors – obligation is extinguished 2. FAULT of any one of them – all are liable because of their mutual agency 3. FORTUITOUS EVENT – delay on the part of the debtors – all will be liable
If the thing due was not lost, but there is merely a
delay, fraud or negligence on the part of one of the
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Code. PENALTY CLAUSE
Purposes: Jurado book
This is an accessory obligation attached to the
principal obligation, which imposes an additional liability in case of breach of the principal obligation.
It pushes the debtor to perform his obligation
faithfully and without delay – within the period agreed upon, or else, he suffers a fixed civil penalty without need of proving the damages of the other party. The penalty imposable is a substitute for the indemnity for: a. damages b. payment of interest in case of breach of obligation
- unless the contrary is stipulated! EXCEPTIONS – additional damages may be recovered from the following acts:
- If the debtor refuses to pay the penalty
- If the debtor is guilty of fraud in the fulfillment of the obligation
- If there is express stipulation that the other damages or interests are demandable to the penalty in the penal clause 1227. The debtor cannot exempt himself from the performance of the obligation by paying the penalty, save in the case where this right has been expressly reserved for him. Neither can the creditor demand the fulfillment of the obligation and the satisfaction of the penalty at the same time, unless this right has been clearly granted him. However, if after the creditor has decided to require the fulfillment of the obligation, the performance thereof should become impossible without his fault, the penalty may be enforced.
A debtor cannot evade from payment of his principal
obligation by choosing to pay the penalty stipulated, except when the debtor is EXPRESSLY granted with the right to substitute the penalty for the principal obligation. – an obligation with penalty clause cannot be turned to facultative obligation unless expressly stipulated in the contract.
The creditor cannot demand the stipulated fulfillment
of the principal obligation and the penalty at the same time, except a. when the creditor was clearly given the right to enforce both the principal obligation and penalty; b. when the creditor has demanded fulfillment of the obligation but cannot be fulfilled due to the
- debtor’s fault – creditor may demand for penalty
- creditor’s fault – he cannot claim the penalty
- fortuitous event – principal obligation and penalty are extinguished 1228. Proof of actual damages suffered by the creditor is not necessary in order that the penalty may be demanded. d. As long as the agreement or contract is breached. e. The mere non-fulfillment of the principal obligation entitles the creditor to the penalty stipulated. f. The purpose of the penalty clause is precisely to avoid proving damages. 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable. JUDICIAL REDUCTION OF PENALTY
Principal obligation – partly complied with by the
debtor (but not in indivisible obligation, because it is tantamount to non-compliance)
Principal obligation – complied not in accordance
with the tenor of the agreement (refers to irregular performance)
Penalty – iniquitous or unconscionable
Judge’s power to reduce penalties are limited to
private contracts. INIQUITOUS OR UNCONSCIONABLE – when it is revolting to the conscience or common sense; grossly disproportionate to the damages suffered. PENALTY NOT ENFORCEABLE:
- Impossible performance of principal obligation due to fortuitous events
- Creditor prevented the debtor from fulfilling the obligation
- Penalty is contrary to good morals or good customs
- Both parties are guilty of breach of contract
- Breach of contract by the creditor
- None of the parties committed any willful or culpable violation of the agreement 1230. The nullity of the penal clause does not carry with it that of the principal obligation. The nullity of the principal obligation carries with it that of the penal clause. Because the penal clause is only an accessory to the principal obligation, it cannot exist alone. If the penal clause is void, the principal obligation remains enforceable. The nullity of penal clause does not mean the nullity of the
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principal. For example: In case of non-payment of P10,000, P1,000 per day as penalty shall be imposed. It is a void contract but it is not an excuse that you don't have to pay the principal which is P10,000. CHAPTER 4 EXTINHGUISHMENT OF OBLIGATIONS GENERAL PROVISIONS
1231. Obligations are exringuished: 5. by payment or performance 6. by loss of the thing due 7. by condonation or remission 8. by confusion or merger of the rights of creditor and debtor 9. by compensation 10. **by novation Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a resolutory condition, and prescription, are governed elsewhere in this Code.
- Payment means not only the delivery of money but also the performance, in any other manner of an obligation.** Payment means not only delivery of money but also the performance.
It is the fulfillment of the prestation due that
extinguishes the obligation by the realization of the purposes for which it was constituted
It is a juridical act which is voluntary, licit and made
with the intent to extinguish an obligation
Requisites:
- person who pays
- the person to whom payment is made
- the thing to be paid
- the manner, time and place of payment etc
The paying as well as the one receiving should have
the requisite capacity
Kinds:
- normal –when the debtor voluntarily performs the prestation stipulated
- abnormal – when he is forced by means of a judicial proceeding either to comply with prestation or to pay indemnity 1233. A debt shall not be understood to have been paid unless the thing or service in which the oligatoin consists has been completely delivered or rendered, as the case may be.
States 2 requisites of payment:
a.) identity of prestation - the very thing or service due must be delivered or released b.) integrity – prestation must be fulfilled completely
Time of payment – the payment or performance
must be on the date stipulated (may be made even on Sundays or on any holiday, although some states like the Negotiable Instruments Law states that payment in such case may be made on the next succeeding business day)
The burden of proving that the obligation has been
extinguished by payment devolves upon the debtor who offers such a defense to the claim of the plaintiff creditor
The issuance of a receipt is a consequence of usage
and good faith which must be observed (although our Code has no provision on this) and the refusal of the creditor to issue a receipt without just cause is a ground for consignation under Art 1256 ( if a receipt has been issued by payee, the testimony alone of payer would be insufficient to prove alleged payments)
1234. If the obligation has been substantially performed in good faith, the obligor may recover as though there had been a strict and complete fulfillment, less damages suffered by the obligee.
In order that there may be substantial performance
of an obligation, there must have been an attempt in good faith to perform, without any willful or intentional departure therefrom
The non-performance of a material part of a contract
will prevent the performance from amounting to a substantial compliance
A party who knowingly and willfully fails to perform
his contract in any respect, or omits to perform a material part of it cannot be permitted under the protection of this rule to compel the other party to perform; and the trend of the more recent decisions is to hold that the percentage of omitted or irregular performance may in and of itself be sufficient to show that there has not been a substantial performance
The party who has substantially performed may
enforce specific performance of the obligation of the other party or may recover damages for their breach upon an allegation of performance, without proof of complete fulfillment.
The other party, on the other hand, may by an
independent action before he is sued, or by a counterclaim after commencement of a suit against him, recover from the first party the damages which he has sustained by the latter’s failure to completely fulfill his obligation 1235 – When the oblige accepts the performance, knowing its incompleteness or irregularity, and without expressing any protest or objection, the obligation is
