a2013 law 101 provisions reviewer (obligations and contracts) ealabitag

8/6/2019 A2013 Law 101 Provisions Reviewer (Obligations and Contracts) EALabitag

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Obligations and Contracts

Prof. E.A. Labitag

AY 2009-2010

1

Janz Hanna Ria

A2013(annotation of EALabitags Oblicon Syllabus, 2ndsemester AY 09-10)

Title I. ObligationsChpater I. General Provisions

I. Concept

A.

Definition

CC, 1156. An obligation is ajuridical necessityto give, to do or not to do.

Criticism. Incomplete, in that it views obligations only from the debt sideComplete Definition:An obligation is a juridical relation whereby a person (creditor) may demand from another (debtor) the observance

of a determinate conduct, and, in case of breach, may obtain satisfaction from the assets of the latter.

Obligation is a juridical necessity because in case of non-compliance, the courts of justice may be called upon by the aggrieved party to

enforce its fulfillment, or, in default thereof, the economic value it represents

B.

Elements

1. Active subjectcreditor/obligee; has the power to demand the prestation

2. Passive subjectdebtor/obligor; bound to perform the prestation

3. Prestation or objectnot a ting but a particular conduct of the debtor

- Object of an obligation is thus always a prestation, which may consist in giving or doing or not doing something

- Obligation to give the prestation consists in the delivery of a thing [sale, deposit, lease, antichresis, pledge, donation]

- Obligation to do all kinds of work or services

-

Obligation not to doconsists in abstaining from some act

- Requisites

o

It must be possible physically and juridicallyoMust be determinate, or at least, determinable according to pre-established elements or criteria

oMust have a possible equivalent in money

Need not be for one of the parties; may benefit 3rd

persons to the contract

The prestation, however, need not be of an economic character to have pecuniary value

There are some obligations which have for their object purely moral interests if they do not have an economic value in

themselves, the law attributes to them that value, following a criterion of ideal justice

Interest v. object

The creditors interes need not be economic or patrimonial; it may be sentimental, moral or ideal. But the object of the

prestation must have economic value or in case of nonfulfillment, be susceptible of substitution in money or something of

patrimonial value

4.

Efficient cause or juridical tie or vinculum jurismay either be a relation established by law or by bilateral acts or by unilateral acts

5. * Form (not essential)

- As a general rule, the law does not require any form in obligations arising from contracts for their validity or binding force

(1356)

- Obligations arising from other sources do not have any form at all

C.

Distinction Between Natural and Civil Obligations

Natural Obligation Civil Obligations

As to enforceability Cannot be enforced by court action but

depends exclusively upon the good

conscience of the debtor

Can be enforced by court action or the

coercive power of public authority

As to basis Binding on the party in conscience and

according to equity and natural justice

Derive their binding force from positive

law

Obligation Right Wrong (cause of action)

The act or performance which the law will

enforce

The power which a person has under the

law, to demand from another any

prestation

An act or omission of one party in

violation of the legal right/s of another

Essential elements:

- A legal right in favor of a person

-

A correlative legal obligation on the

part of another; to respect or not to

violate said right

- An act or omission by the latter in

violation of said right with resulting

injury to the former

Sources of Obligation

CC, 1157. Obligations arise from: (1) Law; (2) Contracts; (3) Quasi-contracts; (4) Acts or omissions punished by law; and (5) Quasi-delicts.

A. Law

CC, 1158. Obligations derived from law are not presumed. Only those expressly determined in this Code or in special laws are

demandable, and shall be regulated by the precepts of the law which establishes them; and as to what has not been foreseen, by theprovisions of this Book.

Examples:obligation to pay taxes, obligation to support ones family

B. Contracts

CC, 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good

faith.

- Compliance in good faith means compliance or performance in accordance with the stiopulations or terms of the contract or

agreement


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CC, 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something

or to render some service.

Example:The obligation to repay a loan by virtue of an agreement

-

Expresses autonomy of the will; presupposes that the contract is valid and enforceable

- Pre-contractual obligations: the offer must be clear and definite, thus leading the offeree in good faith to incur expenses in the

expectation of entering into the contract; and the withdrawal of the offer must be without any legitimate cause

C.

Quasi-ContractsCC, 1160. Obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII, of this Book

CC, 2142. Certain lawful, voluntary and unilateralacts give rise to the juridical relation of quasi-contract to the end that no one shall be

unjustly enriched or benefited at the expense of another actually have not done so, and irrespective of their intention, to prevent

injustice

- There is no consent but the same is supplied by fiction of law the law considers the parties as having entered into a contract,

although they

1.

Kinds

a. Negotiorum gestio: CC, 2144. Whoever voluntarily takes charge of the agency or management of the business or property of

another, without any power from the latter, is obliged to continue the same until the termination of the affair and its incidents,

or to require the person concerned to substitute him, if the owner is in a position to do so. This juridical relation does not arise

in either of these instances: (1) When the property or business is not neglected or abandoned; (2) If in fact the manager has

been tacitly authorized by the owner. In the first case, the provisions of Articles 1317, 1403, No. 1, and 1404 regarding

unauthorized contracts shall govern. In the second case, the rules on agency in Title X of this Book shall be applicable.

b.

Solution indebiti: CC, 2154. If something is received when there is no right to demand it, and it was unduly delivered throughmistake, the obligation to return it arises.

c.

Other quasi contracts

CC, 2164. When, without the knowledge of the person obliged to give support, it is given by a stranger, the latter shall have a

right to claim the same from the former, unless it appears that he gave it out of piety and without intention of being repaid

CC, 2165. When funeral expenses are borne by a third person, without the knowledge of those relatives who were obliged to

give support to the deceased, said relatives shall reimburse the third person, should the latter claim reimbursement

CC, 2166. When the person obliged to support an orphan, or an insane or other indigent person unjustly refuses to give

support to the latter, any third person may furnish support to the needy individual, with right of reimbursement from the

person obliged to give support. The provisions of this article apply when the father or mother of a child under eighteen years

of age unjustly refuses to support him

CC, 2167. When through an accident or other cause a person is injured or becomes seriously ill, and he is treated or helped

while he is not in a condition to give consent to a contract, he shall be liable to pay for the services of the physician or other

person aiding him, unless the service has been rendered out of pure generosity

CC, 2168. When during a fire, flood, storm, or other calamity, property is saved from destruction by another person without

the knowledge of the owner, the latter is bound to pay the former just compensation

CC, 2169. When the government, upon the failure of any person to comply with health or safety regulations concerning

property, undertakes to do the necessary work, even over his objection, he shall be liable to pay the expenses

CC, 2170. When by accident or other fortuitous event, movables separately pertaining to two or more persons are

commingled or confused, the rules on co-ownership shall be applicable.

CC, 2171. The rights and obligations of the finder of lost personal property shall be governed by Articles 719 and 720.

CC, 2172. The right of every possessor in good faith to reimbursement for necessary and useful expenses is governed by

Article 546

CC, 2173. When a third person, without the knowledge of the debtor, pays the debt, the rights of the former are governed by

Articles 1236 and 1237

CC, 2174. When in a small community a nationality of the inhabitants of age decide upon a measure for protection against

lawlessness, fire, flood, storm or other calamity, any one who objects to the plan and refuses to contribute to the expenses

but is benefited by the project as executed shall be liable to pay his share of said expenses. CC, 2175. Any person who is constrained to pay the taxes of another shall be entitled to reimbursement from the latter.

D. Acts or omission punished by law

CC, 1161. Civil obligations arising from criminal offenses shall be governed by the penal laws, subject to the provisions of Article 2177,

and of the pertinent provisions of Chapter 2, Preliminary Title, on Human Relations, and of Title XVIII of this Book, regulating damages

Example: the obligation of a thief to return the stolen goods; duty of a killer to indemnify heirs of victim.

- Civil liability springs out of and is dependent upon facts, which, if true, would constitute a crime; such is a necessary consequence of

criminal responsibility

- Exempted persons (in exempting circumstances) are not exempt from civil liability for their acts

- Liability continues, notwithstanding the fact that the offender has served his sentence

- As a general rule, after a criminal action has been commenced, no civil action arising from the same offense can be prosecuted

- Criminal and civil actions arising from the same offense may be instituted separately, but after the criminal action has been

commenced the civil action cannot be instituted until final judgment has been rendered in the criminal action, except when an

independent civil action is allowed by law.

-

A civil action may be validly instituted, without the necessity of first instituting the criminal action, not only for the restitution of whathas been taken or otherwise illegally appropriated, but also for the reparation of any damage cause, and the indemnity for

consequential damages

- Independent civil action: obligations not arising from the crime; violations of constitutional rights, defamation, fraud or physical

injuries; refusal or failure of police to render protection to life or property

-

Acquittal in a criminal case is a bar to civil liability Tolentino: only when the civil action is based on the very same facts on which

the acquitted criminal action was based.

E. Quasi-delicts


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5. Unilateral and bilateral

-

Unilateral: one party bound to perform obligation [e.g., simple and remuneratory donation; to give support]

- Bilateral: two parties reciprocally bound [e.g. purchase and sale; ease]

6.

Individual and collective

7. Accessory and principal

8. As to object or prestation

-

Simple- Multiple

oConjunctive

oDistributive

Alternative

Facultative

9. Possible and impossible

Chapter II. Nature and Effects of Obligations

I. Kinds of Prestation

A.

Obligation to give

1. A specific thingone that is individualized and can be identified or distinguished from others of its kinds

a.

Duties of the obligor

i. To deliver thing itselfCC, 1244. The debtor of a thing cannot compel the creditor to receive a different one, although the

latter may be of the same value as, or more valuable than that which is due. In obligations to do or not to do, an act or

forbearance cannot be substituted by another act or forbearance against the obligee's will.ii. To preserve thing CC, 1163. 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, unless the law or the stipulation of the parties requires another standard of care.

- Diligence of a good father of a familyequated with ordinary care or that diligence which a reasonably prudent person

exercises over his own property

- Another standard of care however, if the law or the stipulation of the parties provides for another standard of care,

said law or stipulation must prevail.

o Example: CC, 1755. common carrierutmost [extraordinary] diligence of very cautious persons

- Contrary to public policy to stipulate for the avsolute exemption from liability of the obligor for any fault or negligence

on his part

-Factors to be considereddiligence required necessarily depends upon the nature of the obligation and corresponds with

the circumstances of the person, of the time and of the place

-Reason: to insure that the thing to be delivered would subsist in the same condition as it was when the obligation was

contracted

iii.

To deliver the accessions and accessoriesCC, 1166. The obligation to give a determinate thing includes that of deliveringall its accessions and accessories, even though they may not have been mentioned.

- Distinction between accession and accessory

Accessions Accessories

The fruits of a thing or additions to or improvements upon

a thing

Things joined to or included with the principal thing for

the latters embellishment, better use, or completion

Houses or trees on a land

Rents of a building

Air-conditioner in a car

Profits or dividends accruing from share of stocks

Key of a house

Frame of a picture

Bracelet of a watch

Machinery in a factory

Bow of a violin

- The general rule is that all accessions and accessories are considered included in the obligation to deliver a determinate

thing although they may not have been mentioned principle: accessory follows principal.

-

Unless otherwise stipulated, an obligation to deliver accessions or accessories of a thing does not include the latter

iv.

To deliver the fruitsCC, 1164 (1).The creditor has a right to the fruits of the thing from the time the obligation to deliver

it arises.

- Different kinds of fruits

oNatural spontaneous products of the soil, the young and other products of animals [produced without human

intervention]

o Industrialthose produced by lands of any kind through cultivation of labor

oCivilthose derived by virtue of a juridical relation [rent, price of leases, etc.

- Intention of law: to protect the interest of the oblige should the obligor commit delay in the fulfillment of his obligation

- When obligation to deliver fruits arises

oGenerally, the obligation to deliver the thing due, and consequently, the fruits thereof arises from the time of the

perfection of the contract perfection: refers to rthe birth of the contract or to the meeting of the minds between

the parties

o If the obligation is subject to a suspensive condition or period, it arises upon the fulfillment of the condition or arrival

of the term. However, the parties may make a stipulation to the contrary as regards the right of thecreditor ro the

fruits of the thing

o In a contract of sale, the obligation arises from the perfection of the contract even if the obligation is subject to a

suspensive condition or period where the price has been paid

o In obligations to give arising from law, quasi-contracts, delicts, and quasi-delicts, the time of performance is

determined by the specific provisions of the law applicable

CC, 1164(2).However, he shall acquire no real right over it until the same has been delivered to him

- Personal right v. real right


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Personal right Real right

right or power of a creditor to demand from debtor, the

fulfillment of the latters obligation

the right or interest of a person over a specific thing

(ownership, possession, mortgage), without a definitive

passive subject against whom the right may be personally

enforced

There is a definite active subject and a definite passive

subject

There is only a definite active subject without any definite

passive subjectBinding or enforceable only against a particular person Directed against the whole world

Example: if Y claims possession of land, X has personal

right to recover from Y the property

Example: X is the owner of a parcel of land. His ownership

is a real right directed against anybody

-

Ownership and other real rights are acquired and transmitted by tradition or delivery

- CC, 1164(2)creditor does not become the owner until the specific thing has been delivered to him.

2. A generic thing one that is indicated only by its kinds, without being designated and distinguished from others of the same kind

CC, 1246.When the obligation consists in the delivery of an indeterminate or generic thing, whose quality and circumstances have

not been stated, the creditor cannot demand a thing of superior quality. Neither can the debtor deliver a thing of inferior quality.

The purpose of the obligation and other circumstances shall be taken into consideration.

Duties of Debtor:

-

To deliver a thing which is of the quality intended by the parties taking into consideration the purpose of the obligation, and

other circumstances [1246]

-

To be liable for damages in case of fraud, negligence, or delay, in the performance of his obligation, or contravention of the

tenor thereof [1170]

Specific thing Generic thing

Identified by its individuality; debtor cannot substitute it with

another although the latter is of the same kind and quality

without the consent of the creditor

Identified only by its species. The debtor can give anything of

the same class so long as it is of the same kind

B. Obligation to doCC, 1244. The debtor of a thing cannot compel the creditor to receive a different one, although the latter may be of the

same value as, or more valuable than that which is due.

C.

Obligation not to doCC, 1244.The debtor of a thing cannot compel the creditor to receive a different one, although the latter may be

of the same value as, or more valuable than that which is due.

II.

Breach of Obligation

A. Concept

1.

Distinction between substantial and casual/slight breach

B. Modes of BreachCC, 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.

1. Fraud (dolo)the deliberate or intentional evasion of the normal fulfillment of an obligation

As a ground for damages, it implies some kind of malice or dishonesty and it cannot cover cases of mistake and errors of judgment

made in good faith

Synonymous to bad faith in that, it involves a design to mislead or deceive another

a.

Concept

i. vs. dolo incidentecommitted in the performance of an obligation already existing because of contract

ii.

vs. dolo causantefraud employed in the execution of a contract (1338), which vitiates consent

b. Non-waiver CC, 1171. Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future

fraud is void.

c. Effects

2. NegligenceCC, 1172. Responsibility arising from negligence in the performance of every kind of obligation is also demandable, but

such liability may be regulated by the courts, according to the circumstances.

-

Any voluntary act or omission, there being no malice, which prevents the normal fulfillment of an obligation

-

Courts given wide discretion in fixing the measure of damages negligence is a question which must necessarily depend upon

the circumstances of each particular case

a. Concept CC, 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the

nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence

shows bad faith, the provisions of Articles 1171 and 2201, paragraph 2, shall apply. If the law or contract does not state the

diligence which is to be observed in the performance, that which is expected of a good father of a family shall be required.

Factors to be considered

Nature of the obligation

Circumstances of the person

Circumstances of time

Circumstances of the place

i. Culpa v. dolo

Culpa DoloMere want of care or diligence

It is not the voluntary act or omission, as such or in itself,

which gives rise to the responsibility, but the want of care

required by the circumstances

Involves willfulness or deliberate intent to cause damage or

injury to another

Waiver of liability may be allowed in negligence (1172) Waiver of liability for future fraud is void (1171)

Liability may be reduced according to circumstances Cannot be mitigated or reduced by the courts

Voluntarycommitted with volition


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ii. Culpa aquiliana v. culpa contractual

Culpa aquiliana [quasi-delict] Culpa contractual

Negligence as a source of obligation between the parties

not so related before by any pre-existing contract

Negligence in the performance of a contract

Not a source of obligation it merely makes the debtor liable

for damages in view of his negligence in the fulfillment of a

pre-existing obligation

b.

Standard care required CC, 1173 (2). If the law or contract does not state the diligence which is to be observed in the

performance, that which is expected of a good father of a family shall be required

c.

Effects

3. Delay (mora) CC, 1169. 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 exist: (1) When the obligation or the law expressly so declare; or (2) When from the nature and the

circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be

rendered was a controlling motive for the establishment of the contract; or (3) When demand would be useless, as when the obligor

has rendered it beyond his power to perform. In reciprocal obligations, neither party incurs in delay if the other does not comply or

is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his

obligation, delay by the other begins.

a. Concept

Delay is used in this article as synonymous to default or mora, which means dealy in the fulfillment of obligations It is non-fulfillment with respect to time

To be in default, however, is different from mere delay in the grammatical sense, because it involves the beginning of a

special condition or status which has its own peculiar effects or results

There can be delay only in positive obligations (to do and to give).

When demand is not necessary to put debtor in delay

oWhen the obligation so provides

oWhen the law so provides

oWhen time is of the essence

oWhen demand would be useless

oWhen there is performance by a party in reciprocal obligations

b. Kinds

i.

Mora solvendidelay on the part of the debtor to fulfill his obligation

- Requisites

a.

Failure of the debtor to perform his obligation on the date agreed upon

b. Demand (not mere reminder or notice) made by the creditor upon the debtor to comply with his obligation which

demand may be either judicial or extra-judicial

c.

Failure of the debtor to comply with the demand

Presupposes that the obligation is already due or demandable

Creditor has the burden of proving that demand has been made

Incumbent upon debtor to prove that the delay is not caused by his fault to relieve himself from liability

- General ruleCC, 1169.

-

Exceptions

ii. Mora accipiendidelay on the part of the creditor to accept the performance of the obligation

-

Requisites

oAn offer of performance by the debtor who has the required capacity

oThe offer must be to comply with the prestation as it should be performed

oCreditor refuses performance without just cause

-

CC, 1268. When the debt of a thing certain and determinate proceeds from a criminal offense, the debtor shall not be

exempted from the payment of its price, whatever may be the cause for the loss, unless the thing having been offered

by him to the person who should receive it, the latter refused without justification to accept it.

iii.

Compensatio moraedelay of the obligors in reciprocal obligations

- Requisites

c. Effects

i. Mora solvendi

- The debtor is guilty of breach or violation of the obligation

-

He is liable to the creditor for interest or damages. In the absence of extra-judicial demand, the interest shall commence

from the filing of the complaint

- He is liable even for a fortuitous event when the obligation to deliver a determinate thing. However, if the debtor can

prove that the loss would have resulted just the same even if he had not been in default, court may equitably mitigate

damages.

-

In an obligation to deliver of generic thing, debtor not relieved from liability for loss due to a fortuitous event; he canstill be compelled to deliver a thing of the same kind, or held liable for damages.

ii.

Mora accipiendi

- Creditor is guilty of breach of obligation

- He is liable for damages suffered, if any, by the debtor

- He bears the risk of loss of the thing due

- Where the obligation is to pay money, the debtor is not liable for interest from the time of creditors delay

-

The debtor may release himself from the obligation by the consignation or deposit in court of the thing or sum due.

iii. Compensatio morae


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- Delay of the obligor cancels the delay of the obligee and vice versa. Legally speaking, there is no default or delay on part

of both

- If delay of one party is followed by that of the other, the liability of the first infractor shall equitably be tempered or

balanced by the courts

- If it cant be determined which of the parties is g uilty of delay, the contract shall be deemed extinguished and each shall

bear his own damages.

4.

Contravention of the tenorCC, 1171. Responsibility arising from fraud is demandable in all obligations. Any waiver of an action forfuture fraud is void.

III.

Remedies of Creditor in Case of Breach

A. Action for performance

1.

Action for specific performance in obligation to give a specific thing

- CC, 1165(1).When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by Article 1170,

may compel the debtor to make the delivery.

o In a specific real obligation, the creditor may exercise the following remedies or rights in case the debtor fails to comply:

a) Demand specific performance or fulfillment of the obligation with a right to indemnity for damages; or,

b)

Demand rescission or cancellation of the obligation, also with a right to recover damages; or

c) Demand payment of damages only, where it is the only feasible remedy

-

ROC 39, Sec. 10.

2. Action for substituted performance in obligation to give a generic thing

- CC, 1165(2). If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the

debtor.oA generic real obligation can be performed by a third person since the object is expressed only according to its family or genus

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

-

3. Action for substituted performance or undoing of poor work in obligation to do

- CC, 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. Furthermore, it may be decreed that what has been poorly done be

undone.

o Situations contemplated

Debtor fails to perform an obligation to do

The debtor performs an obligation to do but contrary to the terms thereof

The debtor performs an obligation to do but in poor manner

oRemedies of creditor in positive personal obligation

If debtor fails to comply with his obligation to do, creditor has the right:

a)

To have the obligation performed by himself or by another, unless personal considerations are involved, at the debtorsexpense; and,

b) To recover damages

In case the obligation is done in contravention of the terms of the same or is poorly done, it may be ordered that it be

undone if it still possible to undo what was done

oPerformance by a third person

A personal obligation to do can be performed by a third person. Creditor cannot compel debtor to do because it may amount

to involuntary servitude

- Exception: Where, however, the personal qualifications of the debtor are the determining motive for the obligation contracted

(e.g. to sing in a night club), the performance of the same by another would be impossible or would result to be so different that

the obligation could not be considered performed. Hence, the only feasible remedy of the creditor is indemnification for damages.

4. Action for undoing in obligation not to do

-

CC, 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.

o

In an obligation not to do, the duty of the obligor is to abstain from an act.oThere is no specific performance

- As a rule the remedy of the obligee is the undoing of the forbidden thing plus damages.

- Exception: If it not possible to undo what was done, either physically or legally or because of the rights acquired by third persons

who acted in good faith, or for some other reason, his remedy is an action for damages caused by the debtors violation of his of

his obligation.

B. Action for damagesCC, 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.

C. Action for rescission

- CC, 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.

-

CC, 1192. In case both parties have committed a breach of the obligation, the liability of the first infractor shall be equitably temperedby 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.

IV.

Subsidiary Remedies of Creditor

A. Accion subrogatoriaCC, 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.


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d. The debtor must be free from any participation in, or aggravation of, the injury to the creditor, i.e., there is no concurrent negligence

on his part.

** mere pecuniary inability or poverty is not an excuse for the non-fulfillment of an obligation

** neither is mere difficulty to foresee the happening of an event different from impossibilityto foresee the same

1. Effect of concurrent fault

C. Extinguishment of Liability, Exceptions

CC, 1174.oA person is not, as a rule, responsible for loss or damages caused to another resulting from fortuitous events

oExceptions

When expressly specified by law

Debtor is guilty of fraud, negligence, or delay, or contravention of the tenor of the obligation

Debtor has promised to deliver the same thing to two or more persons who do not have the same interests.

Obligation to deliver a specific thing arises from a crime

Thing to be delivered is generic

When declared by stipulation

When the nature of the obligation requires the assumption of risk

o

CC, 1165(3). If the obligor delays, or has promised to deliver the same thing 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.

o

An indeterminate thing cannot be the object of destruction by fortuitous event because genus nunquam perit(genus never perishes)

CC, 552.A possessor in good faith shall not be liable for the deterioration or loss of the thing possessed, except in cases in which it is

proved that he has acted with fraudulent intent or negligence, after the judicial summons

CC, 1942.The bailee is liable for the loss of the thing, even if it should be through a fortuitous event: (1) If he devotes the thing to any

purpose different from that for which it has been loaned; (2) If he keeps it longer than the period stipulated, or after the

accomplishment of the use for which the commodatum has been constituted; (3) If the thing loaned has been delivered with appraisal

of its value, unless there is a stipulation exemption the bailee from responsibility in case of a fortuitous event; (4) If he lends or leases

the thing to a third person, who is not a member of his household; (5) If, being able to save either the thing borrowed or his own thing,

he chose to save the latter.

CC, 1979.The depositary is liable for the loss of the thing through a fortuitous event: (1) If it is so stipulated; (2) If he uses the thing

without the depositor's permission; (3) If he delays its return; (4) If he allows others to use it, even though he himself may have been

authorized to use the same.

CC, 2001. The act of a thief or robber, who has entered the hotel is not deemed force majeure, unless it is done with the use of arms or

through an irresistible force.

CC, 2147. The officious manager shall be liable for any fortuitous event: (1) If he undertakes risky operations which the owner was not

accustomed to embark upon; (2) If he has preferred his own interest to that of the owner; (3) If he fails to return the property or

business after demand by the owner; (4) If he assumed the management in bad faith.

VI. Usurious Transactions

CC, 1175.Usurious transactions shall be governed by special laws.

Simple loan (mutuum) contract whereby one of the parties delivers to another, money or other consumable thing, upon the condition that

the same amount of the same kind and quality shall by paid. It may be gratuitous or with a stipulation to pay interest.

Usury contracting for or receiving interest in excess of the amount allowed by law for the loan or use of money, goods, chattels or credits.

Requisites for recovery of interest:

1) The payment of interest must be expressly stipulated

2)

The agreement must be in writing

3) Interest must be lawful

A.

PD 858; PD1685

B.

Central Bank Circular 416C.

Monetary Board Circular #905 the rate of interest and other charges on a loan or forbearance of money, goods, or credit, regardless of

maturity and whether secured or unsecured, that may be charged or collected shall not be subject to any ceiling prescribed under the

Usury Law. Usury is now legally non-existent, parties are now free to stipulate any amount of interest

v. Art. 2209

VII.

Fulfillment of Obligations

A. See Payment (Chapter IV)

B. Presumptions in payment of interests and installments

CC, 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.

Presumptionthe inference of a fact not actually known arising from its usual connection with another which is known or proved

Kinds of presumption

a. Conclusiveone which cannot be contradicted

b.

Disputable [rebuttable]one that can be contradicted by presenting proof to the contrary.When presumptions in 1176 do not apply:

1) With reservation as the interest

2) Receipt without indication of particular installment paid

3) Receipt for a part of the principal

4)

Payment of taxes

5) Non-payment proven

VIII. Transmissibility of Rights

CC, 1178. Subject to the laws, all rights acquired in virtue of an obligation are transmissible, if there has been no stipulation to the contrary.


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Exceptions:

Prohibited by law

Prohibited by the stipulations of parties

Chapter III. Different Kinds of Obligations

I. Pure and Conditional Obligations

A. Pure Obligations

CC, 1179(1).Every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown tothe parties, is demandable at once.

A pure obligation is one which is not subject to any condition and no specific date is mentioned for its fulfillment and is therefore,

immediately demandable.

B.

Conditional Obligations

CC, 1181. 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.

A conditional obligationis one whose consequences are subject in one way or another to the fulfillment of a condition

1. Condition

a.

Concept a condition is a future and uncertain event, upon the happening of which, the effectivity or extinguishment of an

obligation (or right) subject to it depends

Future and uncertain

Past but unknown a past even cannot be said to be a condition since the demandability of an obligation subject to a

condition depends upon whether the event will happen or will not happen. What is really contemplated is the knowledgeto be

acquired in the future of a past event which at the moment is unknown to the parties interested.b. Condition v. period/term

A period is a future and certain event upon the arrival of which the obligation subject to it either arises or is extinguished

What depends upon the partys will is not whether he should fulfill the obligation; what is left only to his will is the dura tion of

the period within which he shall fulfill the obligation

2. Kinds of condition

a. As to effect on obligation

CC, 1181.

i. Suspensive (precedent)

- Retroactive effect when condition is fulfilled

- A condition the fulfillment of which will give rise to an obligation

- The demandability of the obligation is suspended until the happening of the uncertain event which constitutes the

condition

CC, 1187.The effects of a conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of

the constitution of the obligation. Nevertheless, when the obligation imposes reciprocal prestations upon the parties,the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated. If

the obligation is unilateral, the debtor shall appropriate the fruits and interests received, unless from the nature and

circumstances of the obligation it should be inferred that the intention of the person constituting the same was

different. 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.

Obligations to give subject to a suspensive condition becomes demandable only upon the fulfillment of the

condition. However, once the condition is fulfilled, its effects shall retroact to the day the obligation was constituted.

Why? The condition is only accidental to the contract

In obligations to do or not to do, courts shall fix retroactive effect

Retroactive effect as to fruits and interests:

o In reciprocal obligations,there is no retroactivity because the fruits and interests received during the pendency of

the condition are deemed to have been mutually compensated

o In unilateral obligations, there is usually no retroactive effect because they are gratuitous

Acts of administration by debtor are not affected by the retroactivity

- Rights of creditor and debtor before fulfillment of condition

CC, 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.

Creditor cannot enforce the obligation; his right is a mere expectancy

Debtor cannot make contracts disposing of or alienating or encumbering the specific thing, or otherwise creating a

real right over the thing incompatible with creditors right

Creditor: may go to court to prevent alienation of property

Debtor: entitled to recover what he has paid by mistake prior to the happening of the suspensive condition; but once

suspensive condition is fulfilled, he cannot recover what he has prematurely paid.

ii. Resolutory (subsequent)

- Fulfillment of which will extinguish an obligation already existing

b. As to cause or origin

CC, 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.

i.

Potestative

- Effect if fulfillment of condition depends solely on will of debtor

oThe conditional obligation is void

oOnly the condition is void if the obligation is a pre-existing one and does not depend for its existence upon the

fulfillment by the debtor of the potestative condition.

-

Debtors promise to pay when he can is not a conditional obligation


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CC, 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

- If the suspensive condition depends upon the will of the creditor: valid.

-

Where resolutory condition depends upon will of the debtorvalid

ii. Casualthe condition depends upon chance or upon the will of a third person

iii. Mixedthe condition depends partly upon chance and partly upon the will of a third person

c.

As to possibilityCC, 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.

i.

Possible

ii. Impossible

- Physically impossiblewhen they, in the nature of things, cannot be exist or cannot be done

-

Legally impossiblewhen they are contrary to law, morals, good customs, public order or public policy

- Effect

o Conditional obligation void impossible conditions annul the obligation which depends upon them. Both the

obligation and the condition are void.

o Conditional obligation valid if the condition is negative, that is, not to do an impossible thing, it is disregarded and

the obligation is rendered pure and valid

o Only the affected obligation voidif the obligation is divisible, the part thereof not affected shall be valid

o

Only the condition void if the obligation is a pre-existing obligation and does not depend upon the fulfillment ofthe condition which is impossible, for its existence

d.

As to mode

i. Positive

CC, 1184.The condition that some event happen at a determinate time shall extinguish the obligation as soon as the

time expires or if it has become indubitable that the event will not take place.

The obligation is extinguished:

1.

As soon as the time expires without the event taking place

2.As soon as it has become indubitable that the event will not take place although the time specified has not expired

ii. Negative

CC, 1185.The condition that some event will not happen at a determinate time shall render the obligation effective

from the moment the time indicated has elapsed, or if it has become evident that the event cannot occur. If no time

has been fixed, the condition shall be deemed fulfilled at such time as may have probably been contemplated,

bearing in mind the nature of the obligation.

The obligation shall become effective and binding: 1) From the moment the time indicated has elapsed without the event taking place

2) From the moment it has become evident that the event cannot occur, although the time indicated has not

yet elapsed

3. Rules in case of loss, deterioration or improvement pending the happening of the condition

CC, 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: (1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished; (2) If the thing is lost through

the fault of the debtor, he shall be obliged to pay damages; it is understood that the thing is lost when it perishes, or goes out of

commerce, or disappears in such a way that its existence is unknown or it cannot be recovered; (3) When the thing deteriorates

without the fault of the debtor, the impairment is to be borne by the creditor; (4) If it deteriorates through the fault of the debtor,

the creditor may choose between the rescission of the obligation and its fulfillment, with indemnity for damages in either case; (5) If

the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor; (6) If it is improved at the

expense of the debtor, he shall have no other right than that granted to the usufructuary.

Requisites for application:a. The obligation is a real obligation

b. The object is a specific or determinate thing

c. The obligation is subject to a suspensive condition

d. The condition is fulfilled

e.

There is loss, deterioration, or improvement of the thing during the pendency of the condition

CC, 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.

Effects of fulfillment of resolutory condition:

In obligations to give, the obligation is extinguished and the parties are obliged to return to each other what they have received

under the obligation [return to status quo]

Obligation of mutual restitution applies not only to the thing received but also to the fruits and interests

Exception: when the intention of the parties is otherwise

In obligations to do/not to docourts discretion

The fulfillment of the resolutory condition converts the creditor into debtor, and the debtor into creditor

a. Meaning of loss, deterioration, and improvement

CC, 1189(2).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: (2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is understood that the


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thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or it cannot

be recovered

LOSS:

Physicalwhen the thing perishes (burnt house)

Legalwhen a thing goes out of commerce (when expropriated) or when a legal thing becomes illegal

Civilwhen a thing disappears such that its existence unknown, or even if known, cant be recovered whether as a matter of

fact or of lawDETERIORATIONa thing deteriorates when its value is reduced or impaired

IMPROVEMENTwhen its value is increased or enhanced by nature or by time or at the expense of the debtor or creditor

b. Effect of loss or deterioration

i.

Without debtors fault

- loss: obligation extinguished

- deterioration: creditor will have to suffer the deterioration or impairment

ii.

With debtors fault

- Loss: creditor entitled to demand damages

-

Deterioration: creditor may choose between rescission with damages or fulfillment of the obligation with damages

c. Effect of improvement

i.

By nature or timecreditor shall be entitled to improvement

ii. At the debtors expensedebtor has the right granted to a usufructuary with respect to the improvement [usufruct: right

to enjoy the use and fruits of a thing belonging to another]

4.

Effect of prevention of the fulfillment of the condition by the obligorCC, 1186.The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.

Requisites:

1. The condition is suspensive

2. The obligor actually prevent the fulfillment of the condition;

3. He acts voluntarily

C. Reciprocal Obligations

CC, 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.

- This article recognizes an implied or tacit resolutory condition a condition imposed exclusively by law, even if there is no

corresponding agreement between the parties

-

In reciprocal obligations, when one party has performed his part of the contract, the other party incurs delayCC, 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.

1. Conceptreciprocity arises from identity of cause, and necessarily the two obligations are created at the same time

Reciprocal obligations, therefore, are those which arise from the same cause, and in which each party is a debtor and a creditor of

the other, such that the obligation of one is dependent upon the obligation of the other.

They are to be performed simultaneously, so that the performance of one is conditioned upon the simultaneous fulfillment of the

other.

2. Alternative remedies of injured party in case of breach

a. Action for fulfillment

i. When fulfillment no longer possible; effect

-

Rescission with damages to the injured party is proper although the latter had sought specific performance

b. Action of rescission

Vs. 1381: the principal action for rescission for non-performance under 1191 must be distinguished from the subsidiary actionfor rescission by reason of lesion or damage under 1381

i. Requisites

ii. How made

- May take place by the declaration of the injured party rescission is a power which does not require the previous

declaration of rescission by the courts

- Extra-judicial declaration of the creditor electing rescission produces legal effect

-

If debtor impugns the declaration of rescission, it shall be subject to judicial determination

- Court may grant guilty party term for performance should there be just cause

iii. Effects

-

The exercise of the power to rescind extinguishes the obligatory relation as if it had never been created, the extinction

having a retroactive effect

-

Rescission is equivalent to invalidating and unmaking the juridical tie

- Where a contract is rescinded, it is the duty of the court to require both parties to surrender that which they have

respectively received and to place each other as far as practicable in his original situation, the rescission has the effect ofabrogating the contract in all parts

- So long as there has been no judgment declaring rescission, the creditor who asked for it may change his mind and

demand specific performance instead, or vice-versa.

Limitations on right to demand rescission

1)

Resort to the courtspar. 3

2) Power of court to fix period

3) Right of third person


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4) Substantial violation rescission not granted to slight breaches of contract, the violation should be substantial as to

defeat the object of the parties in making the agreement

5) Waiver of rightright to rescind may be waived

Rescission without previous judicial decree

1) Where automatic rescission expressly stipulated

2) Where contract is still executory

II.

Obligation with a Periodone whose consequences are subjected in one way or another to the expiration of said period or termA. Period or Term

1.

Concept a space of time which, exerting an influence on obligations as a consequence of a juridical act, suspends their

demandability or determines their extinguishment

2.

Period/term v. condition

Condition Period/term

As to fulfillment An uncertain event

** even when an event must necessarily

happen, the obligation will be conditional

when the condition that such even shall

or shall not happen within a certain time

An event that must necessarily come,

whether on a date known beforehand or

at a time which cannot be predetermined

As to influence on the obligation Give rise to an obligation or extinguishes

one already existing

Has no effect upon the existence of

obligations, but only their demandability

or performance

EFFECT: obligations with a term are

demandable only when the day fixed for

their performance arrives

As to time May refer to a past event unknown Always refers to the future

As to will of debtor Void Empowers the court to fix such period

As to retroactivity of effects Has retroactive effect Does not carry with it any retroactive

effect

Requisites: future, certain, possible

B. Kinds of Period/Term

CC, 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.

1.

As to effect

a. Suspensive (ex diefrom a day certain)

CC, 1193(1).Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that day comes.

- The obligation begins only from a day certain upon the arrival of period

b. Resolutory (in diemto a day certain)

CC, 1193(2).Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain.

- The obligation is valid up to a day certain and terminates upon arrival of the period

2.

As to expression

a. Express

b. Implied

3. As to definiteness

a. Definitewhen it is fixed or it is known when it will come

b. Indefinitewhen it is not fixed or it is not known when it will come; where the period is not fixed but a period is intended, the

courts are usually empowered by law to fix the same

4.

As to source

a. Voluntarywhen agreed by parties

b.

Legalwhen provided for by laws

c. Judicialwhen fixed by the court

C. Rules in case of loss, deterioration or improvement before arrival of period

CC, 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.

CC, 1189.

D. Effect of payment in advance

CC, 1195. 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.

Note: CC, 1197(3). In every case, the courts shall determine such period as may under the circumstances have been probably

contemplated by the parties. Once fixed by the courts, the period cannot be changed by them.- Applies only to obligation to give

-

similar to 1188(2)

- creditor cannot unjustly enrich himself by retaining the thing or money received before the arrival of the period

- the debtor is presumed to be aware of periodhe has the burden of proving that he was unaware of the period

- obligor may no longer recover the thing or money once the period has arrived but he can recover the fruits or interests thereof

from the date of premature performance to the date of maturity of the obligation

E.

Benefit of period

1. For whose benefit


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CC, 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.

o It is the very nature of an alternative obligation that the debtor can make his choice without the consent of the creditor. Hence, the

right given to the debtor to rescind the contract and recover damages if, through the creditors fault, he cannot make a choi ce

according to the terms of the obligation

CC, 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 indemnityshall 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.

o Some of the objects if some of the objects of the obligation have been lost or have become impossible even through the fault of

the debtor, the latter is not liable since he has the right of choice and the obligation can still be performed

o All of the objects if all of them have become impossible through his fault, the creditor shall have the right to indemnity for

damages since the obligation can no longer be complied with. If the loss is due to fortuitous event, he obligation is extinguished

o Basis of indemnitythe value of the last thing which disappeared or that of the service which last became impossible

In case of disagreement, it is incumbent upon the creditor to prove such value or which thing last disappeared or which service

last became impossible

CC, 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: (1)

If one of the things is lost through a fortuitous event, he shall perform the obligation by delivering that which the creditor should

choose from among the remainder, or that which remains if only one subsists; (2) If the loss of one of the things occurs through the

fault of the debtor, the creditor may claim any of those subsisting, or the price of that which, through the fault of the former, hasdisappeared, with a right to damages; (3) If all the things are lost through the fault of the debtor, the choice by the creditor shall fall

upon the price of any one of them, also with indemnity for damages. 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.

oBefore the creditor makes the selection, the debtor cannot incur delay

oRules applicable to personal obligations

F. Facultative obligation

CC, 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.

1. Conceptone where only one prestation has been agreed upon but the obligor may render another in substitution

2. Distinguished from alternative obligation

Alternative Facultative

Number of prestations Several are due but compliance with one is

sufficient

Only one prestation is due although the

debtor is allowed to substitute it

Right of choice May be given to the creditor or third

person

Only given to the debtor

Loss through a fortuitous event Loss of one or more of the alternatives

does not extinguish the obligation

The loss of the thing due extinguishes the

obligation

Loss through fault of debtor Loss of one of the alternatives through the

fault of the debtor does not render him

liable

Loss of the thing due through his fault

makes him liable

Where the choice belongs to the creditor,

loss of one alternative through the fault of

the debtor gives rise to liability

The loss of the substitute before the

substitution does not render him liable

3.

Effect of substitution

Before substitution

if the principal thing is lost through a fortuitous event, the obligation is extinguished After substitution if the principal thing is lost, the debtor is not liable whatever may be the cause of the loss, because it is no

longer due

Once substitution is made, the obligation is converted into a simple one to deliver/perform the substituted thing or prestation

IV.

Joint and Solidary Obligations

A. Joint Obligations one where the whole obligation is to be paid or fulfilled proportionately by the different debtors and/or is to be

demanded proportionately by the different creditors

1. Concept

a. Requisites

a)

There are as many debts as there are debtors

b)There are as many credits as there are creditors

c)

The debts and/or credits are considered distinct and separate from one another

d)Each debtor is liable only for a proportional part of the debt

e)Each creditor is entitled only to a proportionate part of the credit

b.

Words used to indicate joint obligations mancomunada, mancomunadamente, pro rata, proportionately; we ppromise topay signed by 2 or more persons

2.

Presumption

CC, 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


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CC, 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.

-

Collective obligations are presumed to be joint

- Multiplicity of suitsprevents forum shopping [suits or complaint for a single cause of action

3. Effects

CC, 1207.CC, 1208.

-

The demand by 1 creditor upon 1 debtor produces the effects of default only with respect to the creditor who demanded and

the debtor on whom demand was made, but not with respect to others

-

The interruption of prescription by the judicial demand of one creditor upon a debtor does not benefit the other creditors nor

interrupt the prescription as to other debtors

- The vices of each obligation arising from the personal defectof a particular debtor/creditor does not affect the obligation or

rights of the others

- Insolvency of a debtor does not increase the responsibility of his co-debtors, nor does it authorize a creditor to demand

anything from his co-creditors

- In joint divisible obligation, res judicata is not extended from one debtor to another

a.

Extent of liability of debtorliable only for a proportional part of the debt

b. Extent of right of creditorentitled only to a proportionate part of the credit

c. In case of novation, compensation, confusion, remission

CC, 1277.Confusion does not extinguish a joint obligation except as regards the share corresponding to the creditor or debtorin whom the two characters concur.

B.

Solidary obligations

1. Concept

a. Requisites

b. Words used to indicate solidary obligations

- Sufficient: the obligation declares that each one of the debtors can be compelled to pay the entire obligation, or can be

proceeded against for the full amount of the obligation

- Jointly and/or severally

- Solidaria; in solidum; together and/or separately; individually and/or collectively; juntos o separadamente

2. Kinds

a. As to source

CC, 1208.

i. Legal

CC, 1915. two or more persons have appointed an agent for a common transaction or undertaking, they shall besolidarily liable to the agent for all the consequences of the agency.

CC, 1945.When there are two or more bailees to whom a thing is loaned in the same contract, they are liable solidarily.

CC, 2194.The responsibility of two or more persons who are liable for quasi-delict is solidary

RPC, 119.

ii. Conventionalwhere solidarity is agreed upon by the parties

iii. Realwhere solidarity is imposed by the nature of the obligation moral wrongs (Art.19-22, CC); a moral wrong cannot

be divided into parts, hence liability must be solidary

b. As to parties bound

i. Activesolidarity on the part of the creditors, where any one of them can demand the fulfillment of the entire obligation;

essential feature: mutual representation among the solidary creditors with powers to exercise the rights of others in the

same manner as their rights

oDeath of a solidary creditor does not transmit the solidarity to each of his heirs but to all of them taken together

ii. Passivesolidarity on the part of the debtors, where any one of them can be made liable for the fulfillment of the entire

obligation; nature: mutual guaranty

iii. Mixedsolidarity on the part of the debtors and creditors, where each one of the debtors is liable to render, and each one

of the creditors has a right to demand, entire compliance of obligation`

c. As to uniformity

i. Uniformwhen parties are bound by the same stipulation

ii. Varied/non-uniformwhen the parties are not subject to the same stipulations

CC, 1211.Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by the

same periods and conditions.

- Effects: solidarity not affected by diverse stipulations

oRule: creditor may bring his action in toto against any of the solidary debtors less the shares of the other debtors with

unexpired terms or unfulfilled conditions who are entitled to defenses under 1222. Upon the expiration of the term

or fulfillment of the condition, the creditor will have the right to demand the payment of the remainder

3.

Effects

a. Solidary creditor in relation to:

i.

Common debtor

- Right to demand

CC, 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

oThe debtor may pay to any solidary creditor, but if a judicial demand is made on him, he must pay only to the

plaintiff

CC, 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


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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.

oOne creditor, however, does not represent the others in such acts as novation, compensation and remission. In

these cases, even if the debtor is released, the other creditors can still enforce their rights against the creditor who

made the novation, compensation or remission

CC, 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 againstthe others, so long as the debt has not been fully collected.

oThe credit and its benefits are divided equally among the creditors unless there is an agreement among them to

divide differently

oEach creditor may renounce his right, even against the will of the debtor, and the latter need not thereafter pay the

obligation to the former

CC, 1217(1). 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.

- In case of novation, compensation, confusion, remission by a creditor

CC, 1215(1).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.

ii.

Solidary co-debtor/s


CC, 1215(2).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.- Prejudicial acts prohibited

CC, 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.

oEach creditor represents the others in the act of receiving payment, and in all other acts which tend to secure the

credit or make it more advantageous

oOne creditor, however, does not represent the others in such acts as novation, compensation and remission. In these

cases, even if the debtor is released, the other creditors can still enforce their rights against the creditor who made

the novation, compensation or remission

-

Assignment of rights not allowed

CC, 1213.A solidary creditor cannot assign his rights without the consent of the others.

Reason: each creditor represents the others and the assignee may not have the confidence of the original solidary

creditors

IF assignment is made to a co-creditor, the consent of the other creditors is not necessary.

b.

Solidary debtor in relation to:i. Common creditor

-

Obligation to perform

CC, 1207.


CC, 1215(1).

ii. Solidary co-debtor

-

In case of payment by a co-debtor

CC, 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.

o

Each debtor can required to pay the entire obligation; but, after payment, he can recover from co-debtors their

respective shares

oThe debtor who is required to pay may set up by way of compensation his own claim against the creditor, in this

case, the effect is the same as that of payment

oAll the debtors are liable for the loss of the thing due, even if such loss is caused by the fault of only one of them

oThe interests due by reason of the delay of one of the debtors are borne by all of them

CC, 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.

oThe interruption of prescription by one debtor affects all others; but the renunciation by one debtor of prescription

already had does not prejudice the others

CC, 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.

oWhen this remission affects only the share of one debtor, the other debtors are still liable for the balance of the

obligation

CC, 1220.The remission of the whole obligation, obtained by one of the solidary debtors, does not entitle him to

reimbursement from his co-debtors.

oThe total remission of the debt in favor of a debtor releases all other debtors

- In case of fortuitous event

CC, 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


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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 is without fault or delay obligation extinguished

- Loss is due to fault on the part of a solidry debtor all shall be responsible to creditor

- Loss is without fault but after delay

4.

Defenses available to a solidary debtor against the creditorCC, 1222. A solidary debtor may, in actions filed by the creditor, avail himself of all defenses which are derived from the nature of

the obligation and of those which are personal to him, or pertain to his own share. With respect to those which personally belong to

the others, he may avail himself thereof only as regards that part of the debt for which the latter are responsible.

a.

Types

i. Those derived from the nature of the obligation

- Complete defense

-

Example: A&B liable to C, D paid debt. If C sues A, A can raise defense of payment by D.

- Fraud, prescription, remission, illegality/absence of consideration, res-judicata, non-performance of suspensive

condition

ii. Personal defenses [defenses personal to, or which pertain to the share of, debtor sued]

-

Complete defense

- Incapacity, insanity, mistake, violence, minority

iii. Defenses pertaining to his share

-

Partial defense- Example: Portion of obligation of B is subject to a suspensive condition which has not yet happened can be set up by

B only in relation to his share, C can demand from B the obligation pertaining to A because B is solidarily liable

iv. Those personally belonging to other co-debtors

- Partial

- If B is insane, A may avail himself of the defense only with regard to that part of the debt for which B is liable

b. Effects

C.

Joint indivisible obligations

1. Concept

Joint indivisible obligation

a. joint because the parties are merely proportionately liable

b. indivisible because the object or subject matter is not physically divisible into different parts

c. joint as to liabilities of the debtors/rights of creditors; indivisible as to compliance

d. middle ground between joint and solidary obligations

i.

Distinguished from joint obligationsii. Distinguished from solidary obligations

2. Indivisibility distinguished from solidarity

CC, 1210.The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does solidarity of itself imply indivisibility

Indivisibility Solidarity

Refers to the prestation Refers to the juridical or legal tie that binds the parties

Only the debtor guilty of breach of obligation is liable for

damages

All of the debtors are liable for the breach of the obligation

committed by a debtor

Can exist although there is only one creditor and one debtor There must be at least two creditors or two debtors

The others are not liable in case of insolvency of one debtor The other debtors are proportionately liable

3. Effects

CC, 1209.If the division is impossible, the right of the creditors may be prejudiced only by their collective acts, and the debt can be

enforced only by proceeding against all the debtors. If one of the latter should be insolvent, the others shall not be liable for his

share

a. Liability for damages in case of breach

CC, 1224. A joint indivisible obligation gives rise to indemnity for damages from the time anyone of the debtors does not

comply with his undertaking. The debtors who may have been ready to fulfill their promises shall not contribute to the

indemnity beyond the corresponding portion of the price of the thing or of the value of the service in which the obligation

consists

If one of the debtors does not comply with the undertaking in a joint indivisible obligation, the obligation is converted into

one for damages.Creditor cannot ask for specific performance or rescission because there is no cause of action against the

other debtors who are willing to fulfill their promises

V. Divisible and Indivisible Obligations

A. Divisible obligations

1. Conceptthe object of which is capable of partial fulfillment

Kinds

a.Qualitative

b.

Quantitative

c.Ideal or intellectual division

2. Effects

CC, 1223.The divisibility or indivisibility of the things that are the object of obligations in which there is only one debtor and only

one creditor does not alter or modify the provisions of Chapter 2 of this Title.

CC, 1233.A debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been

completely delivered or rendered, as the case may be.

B. Indivisible Obligations


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1. Conceptthe object of which is incapable of partial fulfillment

a.

Distinguished from solidary obligations.

2. Kinds

a.

Natural

CC, 1225(1).For the purposes of the preceding articles, obligations to give definite things and those which are not susceptible

of partial performance shall be deemed to be indivisible .

Example: to deliver a car, to sing, to dance hiphopb. Legal

CC, 1225(3).However, even though the object or service may be physically divisible, an obligation is indivisible if so provided by

law or intended by the parties

Example.Payment of taxes

a2013 law 101 provisions reviewer (obligations and contracts) ealabitag

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