3.

 Just and obligatory – treatment of law should be equal,

LAW AND OBLIGATION regardless of sex, creed, age and status in life and to follows
the law there should be equivalent punishment of penalties to
enforce them.
Lesson Proper for Week 1 4. For the common observance and benefit – the application
of law should not be tilted or favoring an individual but by the
Lesson 1. Introduction to Law observance of all and the benefits that may be derived from it.

To begin, the Law on Obligations and Contracts is defined as a SOURCES OF LAW

kind of positive law which deals with the nature and sources of
1. Legislative – Being a democratic form of government, the
obligations as well as the rights and duties arising from
legislative is the law-making body.
agreements in contracts. 
2. Constitution – All laws must conform and comply with the
Before discussing the particular concepts on the Law on
provisions of the Constitution, otherwise it becomes
Obligations and Contracts, it is important to know that in every
unconstitutional.
obligation, one must always observe the general principles on
human relations, to wit: 3. Administrative or Executive Orders, Regulations and
Rulings – They are those issued by an administrative officials
  “ART. 19. Every person must, in the exercise of his rights
under legislative authority.
and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good  4. Judicial Decisions or Jurisprudence – Decision of the
faith.”  Failure to observe the above principle makes a Supreme Court forms part as the law of the land.
person civilly liable”.
5. Custom – it consists of those habits and practices which
Failure to observe the above principle makes a person civilly though long and uninterrupted usage have become
liable. Basic provisions on Law on Obligations and Contracts acknowledged and approved by society as binding rule of
based on the Civil Code of the Philippines will be tackled in this conduct.
paper. Cases and applications related to business will also be
discussed. 6. Other source – Decisions of foreign tribunals, opinions of
experts and even religion may also be a source of law.
CONCEPT OF LAW
CLASSIFICATION OF LAWS
“Law” comes from the latin word “Lex” which is derived from
the verb Ligare meanng to “bind”. 1. Divine law – it is promulgated by God, e.g. Ten
Commandments
The need for law arises whenever a social group is formed
creating various relationships in order to create an orderly 2. Natural law – promulgated impliedly in our conscience and
society. Thus, there are laws defining the relationships of body, e.g. It is better to do good than to do evil for being a
husband and wife, of parent and child; in industry and God-fearing person
business, the relationship between employer and employee; in
the community respect for authority and loyalty to the duly 3. Physical law – refers to the act of rules governing the action
constituted government. and movement of things like the law on gravity by Newton

That law is a form of social control over the behavior of Lesson 3. Our Study of law are confined to the following:
individuals in a given society. 1. HUMAN LAW – those promulgated by man to regulate
Without law, there would be chaos and confusion among relations. This can be classified into:
individuals and even among nations. Therefore the need of a A. General of Public Law – body of rules which regulates the
law is essential for maintenance and preservation of order in
rights and duties arising from the relationship between the
society and for the promotion of the common good. state and the inhabitants, such as:
WHAT IS A LAW?
1. International Law – consist of those rules and principles
Sanchez Roman, a Spanish Civilist, defined law as: which governs the relations and dealing of nations with each
other.
“A Rule of conduct, just and obligatory promulgated by
legitimate authority for the common observance and benefit” 2. Constitutional Law – it governs the relations between the
State and its citizens.
Lesson 2. Characteristics of a Law
3. Administrative Law – the part of public law which fixes the
1. A rule of conduct –it means any action, things, dictate of organization and determines the competence of the authorities
reason if regulated or gathered together could become a that executes the law and indicates to the individual remedies
conglomeration of rules, regulation that can create an orderly, for the violation of the rights.
peaceful, harmonious relations among the people concerned
so that in the end justice will prevail. 4. Political Law – that branch of public law which deals with the
organization and operation of the government organs of the
2. Promulgated by legitimate authority – that is, made State and defines the relations of the State with the inhabitants
known to those who are expected to follow it. In a Republican of its territory.
State like the Philippines, we have three branches of the
government – legislative body is the law making body, the 5. Criminal Law – that which guarantees the coercive power of
executive is the implementing body and the judiciary as the the law so that it will be obeyed. It also governs the method of
enforcing body. trial and punishment of crimes.
   
B. Individual of Private Law – those laws which governs the (1) an active subject, also known as the obligee or creditor,
private relation of persons, such as: who has the power to demand the demand performance of the
obligation;
1. Civil Law – that which regulates the relation of individuals
with other individuals for purely private ends. The word civil is  
derive from Latin word “civiles” meaning citizen.
(2) a passive subject, also known as the debtor, who is bound
2. Commercial (business) Law – defined as a whole body of to perform the obligation;
substantial jurisprudence applicable to the rights, intercourse
and relation of persons engaged in commerce, trade or  
mercantile pursuits.
(3) an object or the prestation, which is an object or
3. Procedural Law – that branch of law which prescribed the undertaking to give, to do or not to do;
method of enforcing rights or obtaining redress for their
 
invasion.
(4) Efficient cause. The juridical or legal tie, the vinculum
Lesson 4. Civil Law
which binds the contracting parties. The juridical tie or vinculum
Civil Law defined as the mass of precepts which determines is based on the sources of obligation arising from either the law
and regulate the relation of assistance, authority and or contract.
obedience among the members of a society for the protection
 
of private interest.
It is important to identify the prestation in a certain obligation.
Sources of Philippine Civil Code
Once the prestation is identified, you can determine who the
1. The new civil code of the Philippines – it is the collection of passive subject is whom the active subject can demand
laws which regulates the private relations of the members of fulfillment of the obligation. 
civil society, determining the defective rights and obligations,
 
with reference to persons, things and civil acts.
A contract of sale and a contract of loan are examples of
2. Special laws or statutes, Presidential decrees and other
prestations to give; A contract of labor or a service contract is
social legislation.
an example of a prestation to do.
3. Customs and traditions – Custom is a judicial rule which
 
results from a constant and continuous uniform practice by the
members of a social group. To illustrate: In an obligation to pay taxes, the passive subject
is the taxpayer, the active subject is the government through
4. Laws we copied from Spain and the United States of
the Bureau of Internal Revenue, the prestation is “to give,”
America
specifically to pay taxes, the juridical tie is a source of
BUSINESS LAW DEFINED – Business (commercial) law is obligation arising from law.
that branch of private law which governs and regulate the
 
juridical relations arising from business acts.
 
Civil Obligation and Natural Obligation Distinguished

Lesson Proper for Week 2  

            A civil obligation ( as defined in Art. 1156 of the Civil
Lesson 1. General Provisions on Obligations Code of the Pilippine) is based on positive law; hence, it is
  enforceable by court action.

"Article 1156 of the Civil Code of the Philippines defines  

“Obligation is a juridical necessity to give, to do or not to             A natural obligation, on the other hand, is based on
do." natural law; hence, it is not enforceable by court action. The
  obligation, however exist in equity and moral justice, such that
if a debtor voluntarily performs it, he can no longer recover
Juridical necessity means that the court may be asked to order what he has given.
the performance of an obligation if the debtor refuses to
perform it. If an obligation cannot be enforced through the  
courts, it may be disregarded with impunity. Example:
   
An obligation is a legal duty, however created, the violation of             Maria is the maker of a promissory note with Petra as
which may become the basis of an action of law.  the payee for P20,000.00. If Maria does not pay on due date,
  Petra can enforce payment by filing a court action. If Petra
does not file action against Maria within 10 years from due date
Every obligation has four definite elements, without which no which is the prescriptive period for action upon written contract,
obligation can exist, to wit: Petra loses the right to enforce payment by court action.
  1. Consent
            However, if Maria voluntarily makes the payment to 2. Object
Petra although the obligation has prescribed, Maria will no
longer be allowed to recover the payment because in equity 3. Cause
and moral justice, he still owed Petra the amount of
 
P20,000.00.  
Parties may freely enter into any stipulations, provided they are
 
not contrary to law, morals, good customs, public order or
  public policy

Lesson 2. Sources of Obligations  

  Illustration:        Maya borrowed from Mario, 1Million Pesos,

promising to pay the same on December 31, 2015, with an
Art. 1157. Obligations arise from: (Sources of Obligation) agreement that if payment was not made at the expiration of
said period, it would be understood that a specific house and
(1) Law; (1158) lot belonging to Maya would be considered as absolutely sold
to Mario for the said sum of 1 Million Pesos. Maya failed to pay
(2) Contracts; (1159)
as promised. Is the agreement valid?
(3) Quasi-contracts; (1160)
 
(4) Acts or omissions punished by law; and (1161)
Answer: Yes, there is in this case a contract of loan and a
(5) Quasi-delicts. (1089a) (1162) promise to sell a house and lot. The agreement of the parties is
the law between them, and must be enforced. 
 
 
1. LAW  – A Rule of conduct, just and obligatory promulgated
by legitimate authority for the common observance and benefit. 3. QUASI-CONTRACT – That juridical relation resulting from a
Obligations derived from law are not presumed.  Must be lawful, voluntary and unilateral act, and which has for its
expressly or impliedly set forth and  cannot be presumed. Thus purpose, the payment of indemnity to the end that no one shall
in the absence of the law, the obligor has no obligation to fulfill be unjustly enriched or benefited at the expense of another.
or perform something he is not duty bound.
 
 
It simply means that when a person perform certain acts must
Examples:         be compensated by the one who benefited from it to avoid
enrichment.
 
 
1. It is the duty of the spouses to support each other (Art. 291,
Civil Code) Kinds of Quasi- Contracts

   

2. Under the National Internal Revenue Code, is the duty  of Negotiorum gestio  – management of anothers property. This
every person having an income to pay taxes. takes place when a person voluntarily takes charge of
another’s abandoned business or property without the owner’s
  authority.
3. The employer cannot give a salary below than that provided  
for by the Minimum Wage law.
Example:          Victor, a wealthy landowner suddenly left for
  abroad on a pleasure trip. While in the USA, a typhoon Maring
devastated the province of Victor, including the land owned by
2. CONTRACT – is the meeting of minds, between two person Victor. However, before the typhoon entered the PAR, Oscar, a
whereby one binds himself with respect to the other, to give neighbor of Victor, employed five (5) farmers to harvest the
something or to render some service. palay planted on the land of Victor. The expenses incurred was
  P20,000. In here, the obligation of Victor upon arrival is to
reimburse Oscar, bec. He must not be enriched at the expense
A contract must be complied with in good faith because it is the of another.
“law” between parties; neither party may unilaterally evade his
obligation in the contract, unless:  

  Solutio indebiti  – payment by mistake; This takes place when

something is received when there is no right to demand it, and
a)    contract authorizes it it was unduly delivered thru mistake.

b)    other party assents  

  Example:          A owes B P100,000 payable on December 31,

2015. On December 31, 2014, A thinking that the obligation
ESSENTIAL ELEMENTS  OF A CONTRACT was already due paid B the full amount of the obligation. In this
case, B’s obligation is to return the amount paid bec. The The following are some who may be liable for damages arising
obligation is not yet due and the oblige has no right to demand from quasi delict: 
it.
 
 
1. The owners and managers of an establishment with respect
  to damage caused by their employees in the service of their
branches in which the latter are employed or on the occasion
4. DELICTS or acts or omission punished by law as a source of their function. 
of obligations.
 
 
2. Employers, with respect to damages caused by their
While an act or omission is felonious because it is punished by employees or household helpers acting within the scope of
law, the criminal acts gives rise to civil liability as it caused their assigned tasks. In order to escape liablity on the ground
damage to another. Thus, every person criminally liable is also of quasi-delict, one must prove diligence of a good father of a
civilly liable family to prevent the damage.
What civil liability arising from a crime includes:  
Application of the Law Case:
1. Restitution – which is the restoration of or returning the
 
object of the crime to the injured party.
Anabel was crossing the street coming from the hotel to the
  nearby shopping mall. She was accidentally hit by a hotel car
driven by Leandro, a driver employed by the hotel. Can Anabel
sue to driver? Can she sue the hotel?
1. Reparation – which is the payment by the offender of the
 
value of the object of the crime, when such object
cannot be returned to the injured party. Legal Opinion: Yes, Anabel may sue the driver and the hotel
for damages on the ground of culpa-aquiliana. The pedestrian
may also sue the driver and the owner of the hotel for damages
  for reckless imprudence arising from a crime under the
Revised Penal Code.
1. Indemnification - the consequential damages which  
includes the payment of other damages that may have Negligence – is the failure to observe for the protection of the
been caused to the injured party. interests of another person, that degree of care, precaution and
vigilance which the circumstances justly demand, whereby
  such other person suffer injury.

Example: Mario was convicted and sentenced to imprisonment  

by the Court for the crime of theft, the gold wrist watch of Kinds of Neglligence (Culpa)
Maria. In addition to whatever penalty that the court may
impose, Mario may also be ordered to return (restitution) the  
gold watch of Maria. If restitution is no longer possible, Mario to
pay the value (reparation) of the gold watch. In addition to 1. Culpa aquiliana – the wrong or negligence committed
either restitution or reparation, Mario shall also pay for independent of contract and without criminal intent.
damages (indemnification) suffered by Maria.
 
 
2. Culpa contractual – the wrong or negligence in the
5. QUASI-DELICT – It is a fault or act of negligence (or performance of a contract.
omission of care ) which causes damage to another, there
 
being no pre-existing contractual relations between the parties.
3. Culpa criminal – physical injuries
 Elements:
 
a)    There must be fault or negligence attributable to the
person charged Illustrrative case:
b)    There must be damage or injury             Taxi driver D, driving recklessly, killed pedestrian X and
his passenger P. What are the sources of the obligation of D
c)    There is no pre-existing contract
and that of his employer to P and X?
 
 
Example:          D while driving his car negligently hit a
Answers:
pedestrian X, inflicting upon the latter bodily injury. In here, D is
liable because of his negligent act.             (A) The heirs of X, the pedestrian, is to proceed against
D or his employer and this is based on quasi delict or culpa
 
aquiliana because there is no existing contract between D and b.       Accession of accessories
X.
 
 
1. Accession – they include everything that is produced by a
            (B) The heirs of P may proceed against D’s operator thing or incorporated or attached thereto, either naturally, such
only. The source of the liability of D’s employer is the breach of as alluvium, the soil deposited by the current of a river or a
contract of carriage with P and this is known as culpa river bank, or whatever is built, planted or sown on a parcel of
contractual. land.

Lesson Proper for Week 3  

2. Accessories – are those things which are joined or attached
Lesson 1.  Obligation of the Debtor to give to the principal objects as ornament improvement to render it
perfect. Ex: Radio attached to a car; or key to a car, or a
  bracelet of a wristwatch.

1. As a general rule, every person obliged to give something is  

also obliged to take care of it with the proper diligence of a
good father of a family.             This involves placing the thing in the possession or
control of the creditor either actually or constructively.
 
 
The exceptions are:
3.  Will be liable for damages in case of breach of obligation,
  such as fraud, delay, negligence or in contravention of the
agreement
1.       When provide for by law
 
2.       When provided by the contractor agreement of the
parties Lesson 2. Definition of terms

   

            Diligence of a good father of a family means the 1. A determinate thing is one that is particularly designated or
ordinary care that an average person exercises in taking care physically segregated from all others of the same class. (Art.
of his property. 1460)

   

2. To deliver the object thing when the obligation to deliver Example:

arises; including:
 
 
1.       2020 Toyota Fortuner with engine No. 123456, Chassis
a.       The fruits of the thing if any. No. 789234 and Plate No. RRA 428

Kinds of Fruits  

  2.       House located at 234 Diamond St., Camarin, Caoocan

City
1. Industrial – produced by lands of any kind through cultivation
and labor, e.g. Rice, vegetables, and other crops produced  
through the intervention of human labor
3.       My only wristwatch
 
 
2. Natural – they are the spontaneous product of the soil and
the young and other product of animals. e.g. trees, plants on 2. A thing is indeterminate or generic thing when it is not
land without the intervention of man. particularly designated or physically segregated from all others
of the same class.
 
 
Thus, the trees that grow naturally on the soil without the
intervention of man and the colt delivered by a mare are Example:
natural fruits. For the young and other product of animals, they  
are natural fruits even with the intervention of human labor.
1.       A horse
 
2.       A car
3. Civil – they refer to fruits which are the result of a juridical
relation , e.g. rents of building, leases of land and other similar 3.       P10,000.00
income.
 
 
Rules governing determinate and indeterminate things
1.       If the thing is determinate or specific, the obligor is A small degree of diligence is required between transporting
bound to comply with his obligation as stated. He can therefore logs but a higher degree of diligence is required when
be compelled to deliver the thing promised and in addition plus transporting explosives.
damages upon failure.
b.       As to circumstance of a person
 
 
2.       If the thing is indeterminate or generic, that is, indicated
only by its kind, without being designated and distinguished A chemist is expected to exercise and observe more diligence
from other of the same kind, the debtor has complied with his than an unskilled person in the manufacture of medication.
obligation to deliver if he delivers the object of average quality.
c.       As to circumstance of the place
 
 
Rights of the creditor if debtor fails to perform his
The degree of diligence required when driving a car at a speed
obligation
of 100 km/hr in the highway than in the city.
If it is a determinate thing:  
1. To compel the debtor to make delivery
2. To recover damages in case of breach  
 
If it is a generic thing:
Kinds of Neglligence (Culpa)
 
 
1. To ask for performance of the obligation
2. To ask for payment of damages 1. Culpa aquiliana – the wrong or negligence committed
independent of contract and without criminal intent.
Lesson 4. Grounds for liability to pay damages
 
 
2. Culpa contractual – the wrong or negligence in the
Art. 1170. Those who in the performance of their obligations performance of a contract.
are guilty of fraud, negligence, or delay, and those who in any
manner contravene the tenor thereof, are liable for damages.  

  3. Culpa criminal – physical injuries

(1) Fraud (Dolo). It is the intentional deception made by one  

person resulting in the injury of another.  Illustrrative case:
              Taxi driver D, driving recklessly, killed pedestrian X and
2      Kinds of Fraud his passenger P. What are the sources of the obligation of D
and that of his employer to P and X?
 
 
a.       Dolo incidente (incidental fraud) - which is fraud incident
to the performance of an obligation. It means that the obligor Answers:
deliberately and intentionally evades ti perform his valid and             (A) The heirs of X, the pedestrian, is to proceed against
existing obligation by means of malice, bad faith and D or his employer and this is based on quasi delict or culpa
dishonesty aquiliana because there is no existing contract between D and
b.       Dolo causante (casual fraud) – there is no pre-existing X.
obligation but the fraud committed is trough insidious words or  
machination.
            (B) The heirs of P may proceed against D’s operator
  only. The source of the liability of D’s employer is the breach of
(2) Negligence. The negligence referred here, in the case of contract of carriage with P and this is known as culpa
contracts (i.e. common carrier) is culpa contractual, the lack of contractual.
diligence or carelessness. Negligence consists in the omission  
of that diligence which is required by the nature of the
obligation and corresponds with the circumstances of the  
persons, or the time and of the place. 
(3) Delay (Mora). The debtor can be held liable for the delay or
  default in the fulfillment of his obligation only after the creditor
has made a demand, judicial or extrajudicial, on the debtor.
Stated briefly, it means lack of diligence.
The general rule is NO DEMAND NO DELAY
a.       As to the nature of obligation
 
 
Delay is incurred only when there is judicial or extrajudicial obligation is lost or destroyed through the fault of the debtor,
demand. demand is already useless
   
Kinds of Demand 5. In reciprocal obligation
1. Judicial – with the intervention of the court.  
2. Extrajudicial – without the intervention of the court. Example: In contract of sale, when the obligation of the seller
and the buyer will take place at the same time. Thus, if the
  buyer does not pay, then delay on the part of the buyer begins,
or when the buyer pays and the seller did not deliver the
The debtor incurs delay if:
object, then the seller is in delay.
1. he fails to perform his obligation when it falls due; and
 
2. a demand has been made by the creditor judicially or
Kinds of delay
extrajudicially.
 
 
1. Mora solvendi – delay on the part of the debtor
Example: Maya obliged herself to deliver a determinate horse
to Mario on June 20, this year. Maya failed to deliver on the  
agreed date. Is Maya already on delay?
2. Mora accipiendi – delay on the part of the creditor. Like
  when the creditor unjustly refused to accept payment at the
time it was due.
Answer: No, because delay is incurred only when there is
judicial or extrajudicial demand. In this case, Mario has to  
make a judicial or extrajudicial demand to Maya.
3. Compensatio morae – delay by both parties in reciprocal
obligation
Exception to the rule ( when demand by the creditor is not
necessary to place the debtor on delay)  
  (4) Contravention of the tenor of the obligation. Refers to the
violation of the terms and conditions or defects in the
1.  When the law expressly provides that demand is not performance of the obligation.
necessary;
 
 
Kinds of Damages
Example: Taxes must be paid on the date prescribed by law,
and demand is not necessary in order that the taxpayer is 1. Moral – include physical sufferings, mental anguish, fright,
liable for penalties. serious anxiety, besmirched reputation, wounded feeling, moral
shock, social humiliation and similar injury.
 2. When the contract expressly stipulates that demand is not  
necessary;
2. Exemplary (or corrective damages) – imposed by way of
  example or correction for the public good.
Example: D obliges himself to give C a specific car on  
December 31, 2014 without the need of a demand.If on the
agreed date, D failed to deliver the car, the next day he is 3. Nominal – to vindicate a right
considered in default without need of a demand.
 
 
4. Temperate (or moderate damages) exact amount cannot be
 3. When time is of the essence;
determined.
 
 
Example: Mika binds herself to sew the wedding gown of
5. Actual (compensatory) – actual losses and unrealized profit
Marian. However, Mika failed to deliver the said gown on the
agreed date. Even without demand, Mika will be in delay  
because time of the essence.
6. Liquidated – Those agreed upon by the parties to a contract
to be paid in case of breach thereof.
 4. When demand would be useless.
 
 
Lesson 5. FORTUITOUS EVENT (Art. 1174.)
When the debtor cannot comply his obligation as when it is
beyond his power to perform. Like when the object of the  
Except in cases expressly specified by the law, or when it is (b) Real and personal obligations (Articles 1163-1168); 13
otherwise declared by stipulation, or when the nature of the
obligation requires the assumption of risk, no person shall be (c) Civil and natural obligations (Articles 1423); and
responsible for those events which could not be foreseen, or
(d) Legal, conventional, and penal obligations (Articles 1157,
which, though foreseen, were inevitable.
1159, 1161)
 
 
 Fortuitous event or caso fortuito are acts of God such as
 
volcanic eruption, earthquake, lightning, etc.
 Art. 1179. Every obligation whose performance does not
 
depend upon a future or uncertain event, or upon a past event
Force majeure are acts of man, such as conflagration, war unknown to the parties, is demandable at once. Every
robbery, riots, strikes, pirates and brigands,  etc. obligation which contains a resolutory condition shall also be
demandable, without prejudice to the effects of the happening
  of the event.
General Rule: No person shall be held responsible for  
fortuitous events or force majeure, the obligation to comply is
extinguished subject to the following exceptions. 1. PURE AND CONDITIONAL OBLIGATION

   

1. When the law expressly so provides Pure Obligation – is one which is not subject to condition or
burdens nor does it mention a specific date for its fulfillment
2. When declared by stipulation or agreement of the parties. and as such is immediately demandable.
3. When the nature of  obligation requires the assumption of  
risk
Example: (1) I promise to give you a specific car.
 
 
Example: Maya obliged herself to deliver a determinate car to
Mika on December 31, this year. Before the arrival of the                (2) I obliged to give you 1 Million Pesos on demand.
period, the car was struck by lightning and was totally
 
destroyed. Maya cannot be held responsible for the destruction
of the car, hence her obligation to deliver the car is Conditional Obligation – is one which is subject to a condition
extinguished. or whose performance depends upon a future or uncertain
events or upon past events unknown to the parties.
 
Effects of conditional obligation to give:

Lesson Proper for Week 4             Once the condition is fulfilled, the effects of the
conditionl obligations shall retroact to the day of the
constitution of the obligation and not on the date when the
Lesson 1. Classifications of Obligations: condition was fulfilled.
   
(1) Primary classification of obligations under the Civil Code: Example: On Jan. 1 next year, A agreed to give B a parcel of
  Land if he passes the May CPA exam. If B passes the CPA
exam, he is entitled to the land effective January 1, because
(a) Pure and conditional obligations (Articles 1179-1192); B’s right over the land retroacts to the date when the obligation
was constituted.
(b) Obligations with a period (Articles 1193-1198);
 
(c) Alternative (1199-1205) and facultative obligations (Article
1206); Kinds or classifications of condition:

 (d) Joint and solidary obligations (Articles 1207-1222);  

(e) Divisible and indivisible obligations (Articles 1223-1225); (1) Suspensive and Resolutory
and
           
 (f) Obligations with a penal clause (Articles 1226-1230)
            Suspensive – the demandability or enforceability of the
  obligation is suspended until the happening of the condition.

(2) Secondary classification of obligations under the Civil Code:  

  Example: Mika binds herself to deliver a determinate car to

Miko if he marries Anna. The obligation is only demandable
 (a) Unilateral and bilateral obligations (Articles 1169-1191);
upon the happening of the condition, that is, if Miko marries Example: Grace will give Tina a gold necklace if she swims
Anna. across the Pacific Ocean.
   
            Resolutory – once the condition takes place the right of 2. Illegal Impossibility – When the condition imposed is
the obligee and the obligation of the obligor is extinguished. contrary to law, good custom or public policy. It simply means
that there is legal prohibition for its fulfillment.
 
 
Example: Marvin binds himself to lend his only car to Melchor
until the latter passes the BAR exam. Melchors right over the Examples:
car is extinguished upon his passing the BAR exam. Melchor is
now obliged to return the car.  

  1.       Contrary to law: Pedro agrees to give Petra 1Million

Pesos if Tina agrees to kill Mario.
(2) Potestative, Casual and Mixed
 
 
2.       Contrary to good custom – Susan binds herself to give
            Potestative – the fulfillment of which depends upon the Sandra a gold watch if she will cohabit with Roger without the
sole will of the debtor. benefit of marriage.
               
Example: Mika allows Maya to use his only parcel of land until 3.       Contrary to public policy – Maria agrees to employ Grace
she decides to leave for the USA. if grace agrees to receive below the minimum wage law.
   
            Casual – is when the fulfillment of which depends upon (4) Positive of Negative
chance.
 
 
-          A positive condition refers to the performance of an act
Example: Mario agrees to give Maria a determinate car if or consist of an obligation that an event will take place within a
Maria’s only racing horse will win in the horse racing on definite period of time.
Sunday.
 
 
-          A negative condition is one where some event will not
            Mixed – is one which depends partly upon the will of happen at a determinate time.
third person and partly upon chance.
 
 
Example: Vicky will give Jason a car if he will not marry Helen
Example: Vincent promise to give Victor a new Toyota car if until December 31, this year. If Jasonhas not married Helen or
Victor will be able to play with and beat Efren Bata in a game of if Helen died without having married Jason within the
Billiard. This is a mixed condition, that is Efren Bata willingness prescribed period, the obligation becomes demandable. If
to play Billiard with Victor and the latter’s winning over Efren Jason married Helen within the prescribed time, the obligation
Bata. of Vicky is extinguished.
   
(3) Possible and Impossible (5) Divisible or Indivisible
   
            -Possible conditions when it can be done legally and             -Divisible – The condition is susceptible of partial
physically performance.
            -Impossible conditions if it cannot be fulfilled leaglly and             -Indivisible – the condition is not susceptible to partial
physically. performance.
   
Impossible condition is divided into: Example: X promise to pay Y the sum of 1million Pesos if Y
furnishes X with information as to the whereabouts of Z and
  another sum of 2 million Pesos if Y kills Z. In the obligation, the
first is valid while the second is void because the latter is
1. Physical Impossibility – the condition imposed is not capable
affected by the condition.
of being performed physically.
 
 
(6) Express and Implied
           
              b.         “when I am able to”                                e.        
“little by little”
-          Express – the condition is clearly stated
            c.         “when I have money”                              f.         
  “in partial payment”
-          Implied – the condition is merely inferred.            
  The obligation is not conditional but with a period. The payment
here does not depend upon the will of the debtor – it is only the
 
time when payment is to be made. Since we are referring to
  the time of effectivity, we consider it a term or a period.

   

Lesson 2. Obligation with a period Example:           A promissory note states that “This is to
acknowledge receipt of the sum of 1million Pesos and I am to
  pay my debt to Angela as soon as possible or as soon as I
have the money.”
Art. 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. It was held that the conditional obligation is void, because the
collection would be impossible, the remedy of the creditor is to
  ask the Court to fix the period of payment. Thus, it is an
obligation with a period.
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 – is a future and certain length of time which Instances when debtor loses the right to make use of a
determines the effectivity or the extinguishment of obligation. period

   

A day certain is understood to be that which must necessarily 1.       When debtor does not furnish guaranties or securities
come although it may not be known when. promised.

  2.       When debtor becomes insolvent.

Kinds of period 3.       When by fortuitous event, the guaranty or security was

lost.
1. Definite – specific date
4.       When by his own acts he has impaired said guaranties
2. Indefinite – Unknown or securities.
3. Legal – granted by law 5.       When debtor violates an undertakings.
4. Conventional – agreed by the parties 6.       When the debtor attempts to abscond.
5. Judicial – fixed by the court  
6. Suspensive – performance of which depend upon the  
happening of the period.
Lesson 3. Alternative and Facultative Obligations
 
 
 Art. 1180. When the debtor binds himself to pay when his
means permit him to do so, the obligation shall be deemed to Art. 1199. A person alternatively bound by different prestations
be one with a period, subject to the provisions of article 1197. shall completely perform one of them. The creditor cannot be
compelled to receive part of one and part of the other
  undertaking.
If the debtor will pay when his means permit him to do so, or  
words of similar import, such as,
Alternative – means an obligation where two or more
  prestations are due but the delivery of one is sufficient to
extinguish the obligation.
            a.         “when I can afford”                                 d.        
“payable as soon as possible”  
Example:          Mely Bogg binds herself to give Mcka Ty either  
a determinate refrigerator or a TV set. If Mely Bogg chooses
and delivers the TV set, the obligation is extinguished. Lesson 4. Joint and Solidary Obligations

   

 Art. 1200. The right of choice belongs to the debtor, unless it  Art. 1207.The concurrence of two or more creditors or of two
has been expressly granted to the creditor.  The debtor shall or more debtors in one and the same obligation does not imply
have no right to choose those prestations which are that each one of the former has a right to demand, or that each
impossible, unlawful or which could not have been the object one of the latter is bound to render, entire compliance with the
of the obligation. 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.
As a general rule, the right of choice or right to select the  
prestation belongs to the debtor, unless the right to choose is
expressly granted to the creditor. JOINT OBLIGATION – is an obligation where there is a
concurrence of two or more debtors or two or more creditors or
  of several debtors and creditors, by virtue of which each of the
debtors is liable for a proportionate part of the credit.
The debtor cannot choose those prestations which are:
 
 
Examples:         A. B and C borrowed P9,000 from D. The
1. Unlawful – E.g. May obliged herself to deliver to April a kilo presumption is that A, B, and C are jointly liable. D can
of shabu or a car.  demand only P3,000 from each of them.
   
2. Impossible – E.g. May promised to deliver to April a A borrowed from B, C and D P9,000. There is one debtor and
diamond ring from Venus and a car. three creditors. Each creditors can demand only P3,000 fro A.
   
3. Could not have been the object of the obligations  - E.g. A and B are liable to C and D for P9,000. Each creditor can
May borrowed from April P50K. It was agreed that May would demand only P4,500 from each debtor.
give her motorcycle or her Laptop. Now May has two (2)
Laptop, an Apple brand worth P50K and an unbranded on  
worth P10K. In this case, May cannot choose to deliver the
Laptop of lesser value as it could not have been the object of SOLIDARY OBLIGATIONS –  is one where each of the
the obligation. debtors is bound to render compliance of the entire obligation
and/or each one of the creditors has a right to demand entire
  compliance of the prestation.
4. Only one prestaion is practicable -E.g.  May will deliver to  
April her carabao or her horse or her refrigerator. However,
through no fault of May, the horse and the carabaoo were lost Kinds of Solidary Oblligations:
by fortuitous event. May can only deliver the refrigerator which
(1) Passive – solidarity o the part of the debtors, where anyone
is the only one practicable.
of them can be made liable for the fulfillment of the entire
  obligation.

Art. 1206. When only one prestation has been agreed upon,  

but the obligor may render another in substitution, the
            Example: A and B are solidary debtors of C in the
obligation is called facultative. The loss or deterioration of the
amount of P10,000. C can demand P10,000 from either A or B
thing intended as a substitute, through the negligence of the
the entire obligation.
obligor, does not render him liable.
 
 
(2)  Active – solidary on the part of the creditors, where anyone
But once the substitution has been made, the obligor is liable
of them can demand the fulfillment of the entire obligation.
for the loss of the substitute on account of his delay,
negligence or fraud.  
              Example:          A is liable solidarily to B and C P10,000.
B or C can demand the entire obligation from A.
Facultative – is one where only one prestation has been
agreed upon but the obligor may render another substitution.  
  (3) Mixed – solidarity on the part of the debtors and creditors
where each of the debtors is liable to render and each one of
Example:           I will give you my Toyota car but I may give my
the creditors has a right to demand entire compliance with the
Ferrari car as a substitute.
obligation.
 
 
            Example:          A and B are solidarity debtor to C and Lesson 1. Modes of Extinguishment of Obligation: (Art.
D, solidary creditors in the amount of P10,000. C or D can 1231)
demand the entire obligation from A or B. Conversely, A or B
may pay C or D the full amount.
1. Payment or performance
 
2. Loss of the thing due
  3. Condonation or remission of debt
Lesson 5. Divisible and Indivisible Obligations 4. Confusion or merger of rights
  5. Compensation
6. Novation
Divisible – obligation that is capable of partial performance
7. Annulment
 
8. Rescission
            Example:          A agreed to pay B P10,000 in five 9. Fulfillment of resolutory condition
monthly installment. The obligation of A is divisible bec. It is
payable in partial payments 10. Prescription
Indivisible – one not capable of partial performance
11. Other causes
            Example:          A agreed to deliver a determinate car to  
B on December 31. This is an indivisible obligation bec. It is not
subject to partial performance. 1. PAYMENT OR PERFORMANCE – delivery of money and
performance, in any other manner of the obligation
 
 Example:         A purchased the only car of B. If the car was
  delivered to A and the payment was made, the obligation was
extinguished by payment.
Lesson 6. Obligations with a Penal Clause
*When debt considered paid – the rule is that debt is
  considered paid when it has been completely delivered or
- An obligation with a penal clause is one which contains an rendered as the case may be.
accessory undertaking to pay a previously stipulated indemnity  How payment or performance is made:
in case of breach. It  is attached to the obligations in order to
insure their performance. 1. if obligation is monetary, by delivery of the money in full.
  2. if it is a thing or an object, by delivery of the thing or object.
Purpose of a Penal Clause: 3. if to do something, by performance of the same undertaking.
  4. if not doing a thing, to desist or refrain from doing the thing.
1. To Ensure the performance of the obligations  
2. To penalize the obligor in case of breach of the principal EFFECTS OF PAYMENT BY A THIRD PERSON
obligation.
 
3. To substitute for indemnity for damages and the payment of
interest in case of non-compliance of the principal obligations. (1) If made without the consent or against the will of the debtor
– the 3rd person is not subrogated to the rights of the creditor
  but entitled to reimbursement only to the extent that the debtor
has been benefited by the payment.
Example:          D obliges himself to pay C P10,000 with a
penalty of P1,000 if he cannot comply on time. If D failed to  
comply as stated, C can demand from D the principal of
P10,000 plus P1,000 penalty. ( He cannot demand interest Example:          Maya who owed Maria P10,000, paid the latter
plus damages) P6,000 threby leaving the balance of P4,000. Mario a
3rd person, paid Maria P10,000 without the knowledge of Maya
  and without knowing that the debt was partially paid.
Instances when a creditor can demand, aside from the penalty,  
damages and interest
In this case, Mario will not be subrogated to the rights of Maria
1. when it is stipulated neither can he recover the P10,000. Mario is entitled only to
reimbursement of P4,000 bec. Maya was benefited to that
2. when the debtor is guilty of fraud extent.
3. when the debtor refuses to pay the penalty.  

Lesson Proper for Week 5 (2) With the knowledge and consent of the debtor – such
3rd person is subrogated to the rights of the creditor and is
entitled to reimbursement of whatever he has paid.
   
Example:          Maya owed Maria the amount P10,000. Mario a Requisites for application of payment
3rd person, with the consent of Maya paid the obligation. Mario
therefore is subrogated to the rights of Maria and is entitled to 1. two or more debts
reimbursement of the P10,000 paid by the former.
2. of the same kind
 
3. one debtor and one creditor
Subrogation – it is the substitution of another person in the
4. all debts are due
place of the creditor to whose rights he succeeds in relation to
the debt. 5. tendered payment is not sufficient to extinguish all
obligation.
 
HOW APPLICATION IS MADE:
Who are the persons from whom the creditor must accept
payment
 
1. Debtor makes the designation
2. If not, creditor makes it by so stating in the receipt that
1. the debtor
he issues – unless there is cause for invalidating the
2. person who has an interest in the obligation contract
3. person stipulated in the contract to make payment 3. If neither the debtor nor creditor has made the
  application or if the application is not valid, then

Persons to whom payment must be made application, is made by operation of law

1. creditor  
2. successor in interest Art. 1253. If the debt produces interest, payment of the
principal shall not be deemed to have been made until the
3. Person authorized to receive payment
interests have been covered. (1173)
 
 
SPECIAL FORMS OF PAYMENT
The rule is that the interest must first be paid and whatever
  balance is left, will be applied to the principal.

1. Dation in payment  

  Art. 1254. When the payment cannot be applied in accordance

with the preceding rules, or if application cannot be inferred
2. Application of payment from other circumstances, the debt which is most onerous to
the debtor, among those due, shall be deemed to have been
  satisfied.
3. Payment by cession                  If the debts due are of the same nature and burden,
  the payment shall be applied to all of them proportionately.
(1174a)
4. Tender of payment and consignation
 
 
Rules if no application of payment is made
 
1.  DATION IN PAYMENT -  it is a mode of extinguishing an 1. Apply payment to the most onerous
obligation whereby the debtor alienates in favor of the creditor 2. If debts are of the same nature and burden, application
property for the satisfaction of monetary debt.
shall be made to all proportionately
 
Example: Marvin owes Maria P10,000. To fulfill the obligation,  
Marvin with the consent of Maria delivers a piano.
Examples of more burdensome or more onerous debts.
 
 
 
1. older debts in case of running accounts
2. APPLICATION OF PAYMENT
2. interest bearing debts
 Application of payment is the designation of the debt to which
3. debts with penalty
should be applied a payment made by the debtor who has
various debts of the same kind in favor of the same creditor. 4. debts secured by mortgage or by pledge
5. exclusive debt is more onerous than of a solidary debt. 3. previous notice of consignation to persons interested in the
fulfillment of the obligation.
 
4. consignation of the thing or sum due.
 
5. Subsequent notice of consignation made to the interested
3. TENDER OF PAYMENT AND CONSIGNATION parties.
   
Tender of Payment – is the offer of payment made by the  
debtor to the creditor of what is due coupled with the demand
that the creditor accept the offer. 3. PAYMENT BY CESSION
              - is a special form of payment whereby the debtor
abandons or transfer all his property for the benefit of his
Art. 1249. The payment of debts in money shall be made in creditors in order that from the proceeds thereof the latter may
the currency stipulated, and if it is not possible obtain payment of their credits.
   
to deliver such currency, then in the currency which is legal Requisites for payment by cession
tender in the Philippines.
1. there must be two or more debts
 
2. there must be only one debtor and two or more creditors
                 The delivery of promissory notes payable to order, or
bills of exchange or other mercantile documents shall produce 3. total or partial insolvency of the debtor
the effect of payment only when they have been cashed, or
when through the fault of the creditor they have been impaired. 4. acceptance or consent on the part of the creditors

                 5. abandonment of all the property of the debtor

                 In the meantime, the action derived from the original  

obligation shall be held in the abeyance. (1170)
 
 
 
Legal Tender – it is the currency which a debtor can legally
 
compel a creditor to accept payment of a debt in money when
tendered by the debtor in the right amount. 2. LOSS OF THE THING DUE
   
Promissory notes, checks, bill f exchange and other             The general rule in an obligation to give, is that if the
commercial documents are not legal tender and therefore the thing to be delivered is determinate and it is lost without the
creditor cannot be compelled to accept them. But the creditor, fault of the debtor or it lost through fortuitous event pending
if he chooses, may accept them without the acceptance delivery, the obligation is extinguished and the debtor cannot
producing the effect of payment. be held liable.
   
Consignation – refers to the deposit of the obligation in a Exceptions to the rule, are as follows:
competent court in accordance with the rules prescribed by law
after refusal or inability of the creditor to accept the tender of  
payment.
1. by stipulation or agreement of the parties
 
 
Requisites of a valid tender
2. by provision of law
1. it must be made in legal tender or lawful currency
 
2. it must include whatever interest is due
3. when the nature of the obligation requires the assumption of
3. it must be unconditional risk

4. the obligation must already be due  

  4. when the thing to be delivered is generic or indeterminate

Requisites of valid consignation  

1. existence of a valid debt which is due 5. if the debtor is at fault

2. tender of payment by the debtor and refusal without  

justifiable cause by the creditor to accept it
6. when the debt or thing certain and determinate proceeds  
from crime
            Example: Mario owes Maria 1M. Maria also owes Mario
  1M. Bothe debt are due and demandable. The parties do not
need to pay each other as their obligations are extinguished by
7. when the debtor has promised to deliver the same thing to compensation
two or more persons who do not have the same interest
 
 
The requisites of a valid compensation are as follows:
 
1. There are two persons who are creditors and debtors of
3. CONDONATION OR REMISSION OF THE DEBT each other
  2. There are two or more debts of the same kind, nature and
quality
Condonation or Remission – is a n act of liberality by which
the obligee, without receiving any price or equivalent, 3. The debts to be compensated are due and demandable
renounces the enforcement of the obligation, as a result of
which it is extinguished  in its entirety or in part or aspect of the 4. There is no retention, controversy or adverse claim over
same to which the remission refers. anyone of the debts to be compensated.
   
Requisites of Condonation or Remission            
   6. NOVATION
1. it must be gratuitous  
  It is the creation of a new obligation to alter, substitute or
replace an existing obligation, with the intention of
2. it must be accepted by the debtor extinguishing or modifying the latter in any of the following
ways:
 
 
3. the parties must have capacity
             I. By changing the object of the principal obligation: •
 
 
4. must not be inofficious
                        Requisites:
 
                                    a) There is a prior existing obligation
5. made after the obligation has become demandable
                                    b) There is mutual agreement between
 
the parties to make a new                                                 
  contract.

            But if the personal property exceeds P5,000.00, the                                     c) The new contract is also valid
same must be in writing. Remission of an obligation involving
                                    d) The new contract extinguishes the
real property must likewise appear in a public instrument.
prior contract.
 
 
 
            II. By substituting the person of the debtor •
4. CONFUSION OR MERGER OF RIGHTS
           
 
            Example: D owe C P1M.
It is the meeting in one person the qualities of a creditor and
 
debtor with respect to the same obligation.
1.    f the parties later agree that D should give instead a car,
 
there is novation by changing the object or prestation
Example:  Confusion of rights with respect to a check that is
2.    If the parties agree that T shall take the place of D as the
payable to bearer or ―PAY TO THE ORDER OF CASH.
new debtor, there is novation by substituting the person of the
  debtor.

5. COMPENSATION 3.    If the parties later agree that X shall take the place of C as
the new creditor, there is novation by subrogating a third
  person in the rights of the creditor.
This takes place when two persons who, in their own right, are
creditors and debtors of each other..