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OBLIGATIONS

I. Defnition

A juridical necessity to give, to do or not to do,1 one impressed with the characterof enforceability.

II. Elements o an Obligation

1. Active subject2 The possessor of a right;

he in whose favor the

obligation is constituted;

2. Passive subject !e who has the duty of

giving, doing or not doing;

. "bject or prestation# $ay consist of giving a

thing, or doing or not

doing a certain act%and

#. &'icient cause( The reason why the

obligation e)ists

III. Dierent Kinds o Prestations

1. To give *onsists in the delivery of a

movable or an immovable thing,

in order to create a real right or

for the use of the recipient or for

its simple possession or in order

to return to its owner

2. To do All +inds of wor+ or services,

1 Art. 1156

2 obligee or creditor

3 obligor or debtor

4 the subject matter of the obligation

5 Requisites: 1. it must be licit 2. it must be possible ph!sicall! " juridicall! 3. it must be determinate or determinable 4. it must ha#e a possible equi#alent in mone!

6 vinculum or juridical tie



whether mental or physical

. ot to do *onsists in abstaining from some

act, includes -not to give, both

being negative obligations

I. !lassif"ation o Obligations

1. *riteria of

demandability/

a. Pure 0 one wc is not

subject to a condition or a

term.

b. *onditional 0 the

acuisition of rights, as well

as the e)tinguishment orloss of those already

acuired, shall depend

upon the happening of the

event which constitutes the

condition.3

c. 4 a term5 0

2. Plurality of objects

. Plurality of subjects

a. 6ingle

b. Alternative 0 where the

debtor must perform any of

the prestations7

c. 8acultative 0 where only

one thing is due but the

debtor has reserved theright to substitute it w

another19

d. :oint 0 one in wc each of

$ Art. 11%1 A past thing can ne#er be a condition. A condition is al&a!s future and uncertain. 'ast e#ent un(no&n to the parties.)) *t is reall! the (no&ledge of the e#ent &+c constitutes the future.*t is the (no&ledge &+c is future and uncertain.

,-ect of *mpossible ondition.)) *t annuls the obligation &+c depends upon them. /he entire juridicaltie is tainted b! the impossible condition.

% see Reference

0 /he characteristic of alternati#e obligations is that se#eral objects being due the fulllment of

one is sucient /olentino

1 Art. 126



the debtors is liable only for

a proportionate part of the

debt or each creditor is

entitled only to a

proportionate part of the

credit.11

e. 6olidary 0 one in wc thedebtor is liable for the

entire obligation or each

creditor is entitled to

demand the whole

obligation. There is only

one obligation is a solidary

obligation.

#. Performance a. ivisible 0 one

susceptible of partial

performance.

b. <ndivisible 0 one that

must be performed in one

act.12

%. 6anctions for =reach a. 6imple

b. 4 a penal clause 0 an

accessory underta+ing to

assume greater liability in

case of breach.1

11 there are as man! obligations as there are debtors multiplied b! the number of creditors. ,-ects of oint 7iabilit!:1. /he demand b! one creditor upon one debtor produces the e-ects of default onl! &+ respect to thecreditor &ho demanded and the debtor on &hom the demand &as made but not &+ respect to the others82. /he interruption of prescription b! the judicial demand of one creditor upon a debtor does not benetthe other creditors nor interrupt the prescription as to other debtors. 9n the same principle a partialpa!ment or ac(no&ledgement made b! one of se#eral joint debtors does not stop the running of thestatute of limitations as to the others83. /he #ices of each obligation arising from the personal defect of a particular debtor or creditor does nota-ect the obligation or rights of the others84. /he insol#enc! of a debtor does not increase the responsibilit! of his co)debtors nor does it authorie acreditor to demand an!thing from his co)creditors85. *n the joint di#isible obligation the defense of res judicata is not e;tended from one debtor to another.<anresa.

12 =eneral rule: 9bligation is indi#isible &+c means that it has to be performed in one act singl!. >h!?@ec. the la& pro#ides so: nless there is an e;press stipulation to that e-ect the creditor cannot becompelled partiall! to recei#e the prestations in &hich the obligation consists. Beither ma! the debtor berequired to ma(e partial pa!ments. ;;; Art. 124% par. 1. /hree ,;ceptions to the Rule on *ndi#isibilit!:1. >hen the parties so pro#ide. Art. 124% par. 1.2. >hen the nature of the obligation necessaril! entails performance in parts.3. >here the la& pro#ides other&ise.



. So#r"es o Obligations$%

A. A single act or omission can give rise to different causes of action

<t is a source of obligation because of the provision in Article 199 of the >evisedcode that -every person criminally liable is also civilly liable.1%

B. Natural Obligations16

They are real obligations to which the law denies an action, but which the debtormay perform voluntarily.13

A. Extra-contractual Obligations18

1. ?uasi0contract17 0 That juridical relation resulting from a lawful, voluntary andunilateral act, and which has for its purpose, the payment of indemnity to the end thatno one shall be unjustly enriched or bene@ted at the e)pense of another

2 +inds/

a Negotiorum gestio 0 unauthoried management29

b Solutio indebiti 0 undue payment 21

13 /he purpose is to strengthen the coerci#e force of the obligation. >hen a penal clause is

present damages do not ha#e to be pro#ed.

14 9bligations arise from: 1. 7a& 2. ontracts

3. Cuasi)contracts 4. Acts or omissions punished b! la& and 5. Cuasi)delicts.

15 Bolledo ose B. /he 'hilippine 7a& on 9bligations and ontracts ,;plained 10% ,d. p. 2

16 a. @ased not on positi#e la& but on equit! and natural la& b. Do not grant such right of action toenforce their performance

1$ ,;amples of natural obligations enumerated under the i#il ode: 1. 'erformance after the ci#ilobligation has prescribed8 2. Reimbursement of a third person for a debt that has prescribed8 3. Restitution b! minor after annulment of contract8 4. Deli#er! b! minor of mone! or fungible thing in fulllment of obligation8 5. 'erformance after action to enforce ci#il obligation has failed8 6. 'a!ment b! heir of debt e;ceeding #alue of propert! inherited8 and $. 'a!ment of legac! after &ill ha#e been declared #oid.

1% Arts. 2142 to 2104

10 obligation ex quasi-contractu

2 /his ta(es place &hen a person #oluntaril! ta(es charge of anotherEs abandoned business or

propert! &ithout the o&nerEs authorit!

21 /his ta(es place &hen something is recei#ed &hen there is no right to demand it and it &as

undul! deli#ered thru mista(e



2. ?uasi0delicttorts22 0 <t is a fault or act of negligence B or omission of care Cwhich causes damage to another, there being no pre0e)isting contractual relationsbetween the parties.2

I. Nat#re and Ee"t o obligations

A. Obligation to give24

1. A determinate or secific t!ing

4hen what is to be delivered is a determinate thing, the creditor, in addition tothe right granted him by Article 1139,2% may compel the debtor to ma+e the delivery.2(

The obligation to give a determinate thing includes that of delivering all itsaccessions and accessories, even though they may not have been mentioned.23

2. An indeterminate or generic t!ing

<f the thing is indeterminate or generic, he may as+ that the obligation becomplied with at the e)pense of the debtor.25

B. Obligation to do or not to do

"bligations to do <n "bligations not to do

<f a person is obliged to do

something, it must be done as

promised, and it cannot be

substituted by another act orforbearance against the obligeeDs

will27. <f the obligor fails to do it,

the same shall be e)ecuted at his

cost9 albeit he may not be

4hen the obligation consists in

not doing, and the obligor does

what has been forbidden him, it

shall also be undone at hise)pense.2

22 obligation e; quasi)delicto or e; quasi malecio

23 ,lements: a. /here must be fault or negligence attributable to the person charged b. /here must be damage or injur! c. /here must be a direct relation of cause and e-ect bet&een the fault or negligence on the one handand the damage or injur! on the other hand pro;imate cause

24 /hree Accessor! 9bligations: 1. /o ta(e care of the thing &+ the diligence of a good father of afamil! until actual deli#er!.Art. 1163 2. /o deli#er the fruits to the creditor fruits produced after obligation to deli#er arises.Art. 1164 3. /o deli#er accessions and accessoriesArt. 1166

25 Fee reference

26 Art. 1165 1st par.

2$ Art. 1166

2% Art. 1165 2nd par.

20 see Art. 1244



compelled to do so personally or

by himself.

This same rule shall be observed

if he does it in contravention of

the tenor of the obligation.

8urthermore, it may be decreed

that what has been poorly donebe undone.1

". Breac!es of obligations

1. "omlete failure to erform

ebtor is unable to comply with his obligation because of fortuitous event.

2. efault, delay or mora

34

E no default unless creditors ma+es a demand;

%

e)ceptions

1. "bligation or law e)pressly so declares

2. Time is of the essence of the contract

. emand is useless as when obligor has rendered beyond his power to perform

#. There is ac+nowledgment of default.

<n reciprocal obligations, one party incurs in delay from the moment the otherparty ful@lls his obligation, while he himself does not comply or is not ready to comply

in a proper manner with what is incumbent upon him.(

a Mora solvendi

elay of the debtor to perform his obligation. <t may be/

1. Ex re E obligation is to give

2. Ex persona E obligation is to do3

3 see Chavez vs. Gonzales 32 FRA 54$

31 Art. 116$

32 see Art. 116%8 Cui vs. Chan 41 'hil. 523

33 debtor is not liable for damages

34 Bon)fulllment of the obligation &ith respect to time

35 /here must be a demand judicial or e;tra)judicial before dela! ma! be incurred.

36 see Art. 1160 /he general rule is that fulllment b! both parties should be simultaneous e;cept&hen di-erent dates for the performance of obligation is ;ed b! the parties.Demand is still necessar! if their respecti#e obligations are to be performed on separate dates.

3$ /here can be dela! onl! in positi#e obligations to gi#e+to do. /here can be no dela! in

negati#e obligations not to gi#e+not to do.



b. Mora accipiendi

elay of the creditor to accept the delivery of the thing wc is the object of theobligation

c. Compesatio morae

elay of the parties or obligors in reciprocal obligation.

1. #raud in t!e erformance of obligation$8

a. %aiver of future fraud is void

>esponsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void.7

4. Negligence &cula'4( in t!e erformance of obligation

a. )iligence normall* re+uired is ordinar* diligence or diligence of a good fat!er of a famil*

b. Excetions, common carriers !ic! are re+uired to exercise extraordinar*diligence

. "ontravention of t!e tenor of obligation

The faithful observance of an obligation according to its tenor is mandated by law;an une)cused failure thereof renders the obligor liable for losses and damages caused

thereby.#1

6. /egal excuse for breac! of obligation 0 fortuitous event re+uisites

8ortuitous event#20 an event which could not be foreseen or which thoughforeseen, was inevitable.

>euisites/

3% Deliberate and intentional e#asion of the fulllment of an obligation

30 Art. 11$1Guture fraud cannot be &ai#ed because it &ould result to illusor! obligation.

4 9mission of that diligence &hich is required b! the nature of the obligation and corresponds &ith thecircumstances of the persons of the time and of the place Begligence can be &ai#ed unless the natureof the obligation or public polic! requires e;traordinar! diligence as in common carrier.

41 see Art. 11$

42 =eneral Rule: Bo liabilit! in case of fortuitous e#ent. ,;ceptions: 1. >hen e;pressl! declared b! la& e.g. Article 5522 11653 126% 1042 214$ 214% and 2150 of the i#il ode.

2. >hen e;pressl! declared b! stipulation or contract 3. >hen the nature of the obligation requires the assumption of ris( 4 >hen the obligor is in default or has promised to deli#er the same thing to 2 or more persons &hodo not ha#e the same interest HArticle 11653I.



1 cause is independent of the will of the debtor#

2 the event must be unforeseeable or unavoidable

occurrence must be such as to render it impossible for the debtor to ful@llhis obligation in a normal manner

# debtor must be free from any participation in the aggravation of the injuryresulting to the creditor##

B. emedies available to creditor in cases of breac!

1. 3ecific erformance4

4hen what is to be delivered is a determinate thing, the creditor, in addition to theright granted him by Art 1139,#( may compel the debtor to ma+e the delivery.#3

a. 3ubstituted erformance b* a t!ird erson on obligation to deliver generict!ing and in obligation to do5 unless a urel* ersonal act

"bligation to give

generic thing

"bligation to do

<f the thing is indeterminate or

generic, he may as+ that the

obligation be

complied with at the e)pense of

the debtor.#5

<f a person obliged to do

something fails to do it, the same

shall be e)ecuted at his cost. This

same rule shall be observed if he

does it in contravention of the

tenor of the obligation.8urthermore, it may be decreed

that what has been done poorly

be undone.#7

2. escission(

43 *t must not onl! be the pro;imate cause but it must be the onl! and sole cause.

44 Lasam vs. Smith 45 'hil. 65$

45 in obligation to gi#e specic thing

46 indemnication for damages

4$ Art. 1165 par 18 see also R9 Rule 30 Fec 1

4% Art 1165 'ar 2 Deli#er! of an!thing belonging to the species stipulated &ill be sucient. Debtor cannot a#oid obligation b! pa!ing damages if the creditor insists on the performance.

40 Art. 116$ /he court has no discretion to merel! a&ard damages to the creditor &hen the act can bedone in spite of the refusal or failure of debtor to do so. ,;ception: *mposition of personal force or coercion upon the debtor to compl! &ith his obligation )tantamount to in#oluntar! ser#itude and imprisonment for debt

5 resolution in reciprocal obligations 9nl! applies to reciprocal obligations &here there is Jreciprocit!Kbet&een the parties i.e. creditor debtor relations arise from the same cause or Jidentit! of causeK.



The power to rescind obligations is implied in reciprocal ones, in case one of theobligors should not comply with what is incumbent upon him.%1

The injured party may choose between the ful@llment and the rescission of theobligation,%2 with the payment of damages in either case. !e may also see+ rescission,even after he has chosen ful@llment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just causeauthoriing the @)ing of a period.

This is understood to be without prejudice to the rights of third persons who haveacuired the thing, in accordance with articles 15%% and 155%# and the $ortgageFaw.%%

<n case both parties have committed a breach of the obligation, the liability of the @rstinfractor shall be euitably tempered by the courts. <f it cannot be determined which of the parties @rst violated the contract, the same shall be deemed e)tinguished, and eachshall bear his own damages.%(

$. )amages5 in an* event

<n case of breach of the obligation,%3 e)clusive or in addition to speci@c performance.

2. 3ubsidiar* remedies of creditors

Reciprocal obligations ha#e a Jtacit resolutor! conditionK

51 'o&er to rescind: 'ertains to the injured part! part! &ho did not perform not entitled to insist uponthe performance of the contract b! the defendant or reco#er damages b! reason of his o&n breach Rights of injured part! subordinated to the rights of a 3rd person to &hom bad faith is not imputable Bot absolute not permitted in casual+slight breach ma! onl! be claimed in substantial breachSong Fo v. Hawaiian Philippines Rescission requires judicial appro#al to produce legal e-ect

,;ception: object is not !et deli#ered and obligation has not !et been performed *f the obligation has not !et been performed: e;trajudicial declaration of part! &illing to perform &ouldsuce8 can refuse to perform if the other part! is not !et read! to compl! *f the injured part! has alread! performed: cannot e;trajudiciall! rescind *G the other part! opposes therescission other&ise rescission produces legal e-ect. *n the case the other part! impugns rescission the

court comes in either to: a. Declare the rescission as properl! made b. =i#e a period to the debtor in &hichto perform

52 /he remed! is alternati#e. 'art! see(ing rescission can onl! elect one bet&een fulllment and

rescission. /here can be no partial performance and partial rescission.

53 Fee Reference

54 ibid

55 Art. 1101

56 Art. 1102

5$ Art. 11$8 Fee Reference Reco#erable damages include an! and all damages that a human beingma! su-er. Responsibilit! for damages is indi#isible



a. Accion subrogatoria58

Action which the creditor may e)ercise in place of the negligent debtor in order topreserve or recover for the patrimony of the debtor the product of such action, and thenobtain therefrom the satisfaction of his own credit.%7

b. Accion pauliana60

*reditors have the right to set aside or revo+e acts which the debtor may havedone to defraud them. All acts of the debtor which reduce his patrimony in fraud of hiscreditors, whether by gratuitous or onerous title, can be revo+ed by this action.

c. Accion directa61

>ight of the lessor to go directly to sublessee for unpaid rents of the lessee.(2

>ight of the laborers or persons who furnish materials for a piece of wor+ underta+en by a contractor to go directly to the owner for any unpaid claims due to the

contractor.(

II. Kinds o !i&il Obligations

A. ure

The performance does not depend upon a future or uncertain event, or upon apast event un+nown to the parties, which is demandable at once.(#

B. "onditional

The acuisition of rights, as well as the e)tinguishment or loss of those already

acuired, shall depend upon the happening of the event which constitutes thecondition.(%

1. 3usensive condition66

The happening of the event gives birth to an obligation

5% An action against the debtorEs debtor

50 subrogator! action8 Fee Art. 11$$ 're#ious appro#al of court is not necessar! 'lainti- entitled onl! to so much as is needed to satisf! his credit an! balance shall pertain to thedebtor 'atrimon! of the debtor includes both present and future propert! is liable for the obligations he ma!contract b! being a legal guarant! in fa#or of his creditors. Lence he cannot maliciousl! reduce suchguarant!

6 rescissor! action An action to rescind contracts entered into b! the debtor in fraud of creditors Arts.11$$ last sentence and 13%1 par. 3 Fee Reference 'a!ments of pre)e;isting obligations alread! due &hether natural or ci#il cannot be impugned b! anaccion pauliana

61 Arts. 1652 16% 1$20 " 1%038 see reference

62 Fee Art. 1652

63 Fee Art. 1$20

64 Art. 11$0



2. esolutor* condition6

The happening of the event will e)tinguish the obligation.

$. otestative5 casual or mixed

Potestative *asual $i)ed

"ne wc depends

solely on the will of

either one party.(5

"ne where the

condition is made to

depend upon a third

person or upon

chance.(7

"ne wc depends

partly upon the will

of one of the parties

and partly on either

chance or the will of

a third person.

a. Obligations sub7ect to otestative susensive conditions are void

4hen the ful@llment of the condition depends upon the sole will of the debtor, theconditional obligation shall be void.

<f it depends upon chance or upon the will of a third person, the obligation shallta+e e'ect.39

4. Effect of t!e !aening of susensive condition or resolutor* condition

a' Extent of retroactivit*

The e'ects of a conditional obligation to give, once the condition has beenful@lled, shall retroact to the day of the constitution of the obligation. 4hen theobligation imposes reciprocal prestations upon the parties, the fruits and interestsduring the pendency of the condition shall be deemed to have been mutuallycompensated. <f the obligation is unilateral, the debtor shall appropriate the fruits andinterests received, unless from the nature and circumstances of the obligation it shouldbe inferred that the intention of the person constituting the same was di'erent.

65 ,#er! obligation &hich contains a resolutor! condition shall also be demandable &ithout prejudice tothe e-ects of the happening of the e#ent. >hen the debtor binds himself to pa! &hen his means permithim to do so the obligation shall be deemed to be one &ith a period subject to the pro#isions of Article110$ Art. 11% Art. 11%1

66 condition precedent

6$ condition subsequent

6% e.g. M* &ill gi#e !ou m! plantation in Da#ao pro#ided !ou reside in Da#ao permanentl!.M

60 e.g. M* &ill gi#e !ou m! land in 'ampanga if !ou &ill pass the bar e;ams this !ear.M

$ Art. 11%2



<n obligations to do and not to do, the courts shall determine, in each case, theretroactive e'ect of the condition that has been complied with.31

$. Effect of imrovement5 loss or deterioration of secific t!ing before t!e !aening of

a susensive condition in obligation to do or not to do

>ules in case of the improvement, loss or deterioration of the thing during thependency of the condition/

B1C <f the thing is lost without the fault of the debtor, the obligation shall bee)tinguished;

B2C <f the thing is lost through the fault of the debtor, he shall be obliged to paydamages; it is understood that the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its e)istence is un+nown or it cannot berecovered;

BC 4hen the thing deteriorates without the fault of the debtor, the impairment isto be borne by the creditor;

B#C <f it deteriorates through the fault of the debtor, the creditor may choosebetween the rescission of the obligation and its ful@llment, with indemnity for damagesin either case;

B%C <f the thing is improved by its nature, or by time, the improvement shall inureto the bene@t of the creditor;

B(C <f it is improved at the e)pense of the debtor, he shall have no other right thanthat granted to the usufructuary.32

6. Effect !en a resolutor* condition in obligation to do or not to do !aens and t!ere is

imrovement5 loss or deterioration of t!e secific t!ing

The provisions of the second paragraph of Article 11533 shall be observed asregards the e'ect of the e)tinguishment of the obligation.3#

". Obligation it! a eriod or a term

"bligations for whose ful@llment a day certain has been @)ed, which isdemandable only when that day comes.

"bligations with a resolutory period ta+e e'ect at once, but terminate uponarrival of the day certain.

A day certain is understood to be that which must necessarily come, although itmay not be +nown when.

$1 Art. 11%$

$2 Art. 11%0

$3 supra

$4 Art. 110 par. 3

$5 =eneral rule: *f a period is attached in an obligation the presumption is that it is for the benet of both parties. /he consequence is that the creditor cannot compel the performance before the arri#al of the term8 the debtor cannot compel acceptance before the arri#al of the term.



<f the uncertainty consists in whether the day will come or not, the obligation isconditional.3(

1. resumtion t!at eriod is for t!e benefit of bot! debtor and creditor

4henever in an obligation a period is designated, it is presumed to have beenestablished for the bene@t of both the creditor and the debtor, unless from the tenor of

the same or other circumstances it should appear that the period has been establishedin favor of one or of the other.33

2. Effect if susensive eriod8 is for t!e benefit of bot! debtor and creditor

Term is for the bene@t of

the creditor

Term is for the bene@t of

the debtor

The creditor can demand

performance anytime; but the

debtor cannot insist on paymentbefore the period.

The creditor cannot demand

performance anytime; but the

debtor can insist on performanceanytime.37

$. Effect if given to debtor alone

a' nstances !en debtor losses benefit of eriod

B1C 4hen after the obligation has been contracted, he becomes insolvent, unless hegives a guaranty or security for the debt;

B2C 4hen he does not furnish to the creditor the guaranties or securities which hehas promised;

BC 4hen by his own acts he has impaired said guaranties or securities after theirestablishment, and when through a fortuitous event they disappear, unless heimmediately gives new ones eually satisfactory;

B#C 4hen the debtor violates any underta+ing, in consideration of which thecreditor agreed to the period;

B%C 4hen the debtor attempts to abscond.59

4. esolutor* eriod

$6 Art. 1103

$$ Art.1106

$% /he obligation has alread! arisen e;cept that it is not !et demandable

$0 *llustrations: M* promise to pa! &ithin 6 da!s.M /his is a term for the benet of the debtor. M*promise to pa! lara the sum of '1 on or before 9ct. 31 1006.M /his is a term for the benet of thedebtor.

% Art. 110%



"bligations with a resolutory period ta+e e'ect at once, but terminate uponarrival of the day certain.51

. )efinite or indefinite eriod

a. nstances !en courts ma* fix t!e eriod

<f the obligation does not @) a period, but from its nature and the circumstances it

can be inferred that a period was intended.

The courts shall also @) the duration of the period when it depends upon the willof the debtor.

<n every case, the courts shall determine such period as may under thecircumstances have been probably contemplated by the parties. "nce @)ed by thecourts, the period cannot be changed by them.52

b. "reditor must as9 court to set t!e eriod before !e can demand a*ment

). Alternative or #acultative8$

1. )ifference beteen alternative and facultative obligations84

Alternative 8acultative As to contents of the obligation

There are various prestations all

of wc constitute parts of the

obligation

"nly the principal prestation

constitutes the obligation, the

accessory being only a means to

facilitate payment.

As to nullity

The nullity of one prestation does

not invalidate the obligation, wc

is still in force w respect to

those wc have no vice

The nullity of the principal

prestation invalidates the

obligation and the creditor

cannot demand the substitute

even when this is valid.

As to choice

The right to choose may be given "nly the debtor can choose the

%1 in diem or resolutor!

%2 Art. 110$

%3 Art. 1100 A person alternati#el! bound b! di-erent prestations shall completel! perform one of them. /he creditor cannot be compelled to recei#e part of one and part of the other underta(ing.

%4 Gacultati#e obligations al&a!s in#ol#e choice b! the debtor. *n theor! it is eas! to distinguish afacultati#e obligation from an alternati#e one. @ut in practice it is dicult to distinguish the t&o. Nou justha#e to nd out &hat the parties reall! intended @alane



to the creditor substitute prestation.

As to e'ect of loss

"nly the impossibility of all the

prestations due wo fault of the

debtor e)tinguishes the

obligation

The impossibility of the principal

prestation is su'icient to

e)tinguish the obligation, even if

the substitute is possible.5%

2. Effect of loss of secific t!ings or imossibilit* of erformance of alternative5 t!roug!

fault of debtor:creditor or t!roug! fortuitous events

*hoice is debtorGs *hoice is the

creditorGs

%5 *O /olentino



a. 4hen only one prestation is

left,5( the debtor may perform the

one that is left.53

b. <f the choice is limited

through the creditorGs own acts,

the debtor can as+ for resolutionplus damages.55

c. <f everything is lost through

the debtorGs fault, the latter is

liable to indemnify the creditor

for damages.57

d. <f some things are lost

through the debtorGs fault, thedebtor can still choose from

those remaining.

e. <f all are lost through

fortuitous event, the obligation is

e)tinguished.

f. <f all prestations but one are

lost through fortuitous event, and

the remaining prestation was lost

through the debtorGs fault, the

latter is liable to indemnify the

creditor for damages.

g. <f all but one are lost through

the fault of the debtor and the

last one was lost through through


e)tinguished.

a. <f one or some are lost through

fortuitous event, the creditor may

choose from those remaining.79

b. <f one or some are lost through

the debtorGs fault, the creditor

has choice from the remainder orthe value of the things lost plus

damages.71

c. <f all are lost through the

debtorGs fault,

the choice of the creditor shall

fall upon the price of any of

them, w indemnity fordamages.72

d. <f some are lost through the

creditorGs fault, the creditor may

choose from the remainder.

e. <f all are lost through


e)tinguished.

f. <f all are lost through the

creditorGs fault, the obligation is

e)tinguished.

%6 &hether or not the rest of the prestations ha#e been lost through fortuitous e#ent or through

the fault of the debtor

%$ Art. 122

%% Art. 123

%0 Art. 124

0 Art. 125 1

01 *d. 2

02 *d. 3



III. 'oint and Solidar( obligation

A. ;oint &divisible' obligation

1. "oncurrence of to or more creditors and or to or more debtors

a. ;oint obligation is resumed5 unless ot!erise indicated b* t!e la or nature

of obligation

The concurrence of two or more creditors or of two or more debtors in one andthe 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 e)pressly so states, or whenthe law or the nature of the obligation reuires solidarity.7

b. Obligation resumed to be divided into as man* e+ual s!ares as t!ere arecreditors or debtors

The credit or debt or deemed divided into as many shares as there are creditorsor debtors to each other, each resulting credit or debt being considered distinct fromone another.7#

c. Eac! credit is distinct from one anot!er5 t!erefore a 7oint debtor cannot be

re+uired to a* for t!e s!are of anot!er it! debtor5 alt!oug! !e ma* a* if !e

ants to

<f 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 thedebtors. <f one of the latter should be insolvent, the others shall not be liable for hisshare.7%

d. nsolvenc* of a 7oint debtor5 ot!ers not liable for !is s!are<6

B. ;oint ndivisible Obligation

1. Obligation cannot be erformed in arts but debtors are bound 7ointl*

Henerally, obligations are indivisible since the integrity of the obligations reuires their

payment or performance completely.73

2. n case of failure of one 7oint debtor to erform !is art &s!are'5 t!ere is default but

onl* guilt* debtor s!all be liable for damages

A joint indivisible obligation gives rise to indemnity for damages from the timeanyone of the debtors does not comply with his underta+ing. The debtors who may havebeen ready to ful@ll their promises shall not contribute to the indemnity beyond the

03 Art. 12$

04 see Art. 12%

05 Art. 120

06 ibid

0$ Arts. 1233 and 124%



corresponding portion of the price of the thing or of the value of the service in whichthe obligation consists.75

". 3olidar* obligation

1. =utual agenc* among solidar* debtors

The debtor may pay any one of the solidary creditors; but if any demand, judicialor e)trajudicial, has been made by one of them, payment should be made to him.77

ovation, compensation, confusion or remission of the debt, made by any of thesolidary creditors or with any of the solidary debtors, shall e)tinguish the obligation,without prejudice to the provisions of Article 1217.199

The creditor who may have e)ecuted any of these acts, as well as he who collectsthe debt, shall be liable to the others for the share in the obligation corresponding tothem.191

2. =utual guarant* among solidar* debtors

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 tothose which may subseuently be directed against the others, so long as the debt hasnot been fully collected.192

Payment made by one of the solidary debtors e)tinguishes the obligation. <f two ormore solidary debtors o'er to pay, the creditor may choose which o'er to accept.

!e who made the payment may claim from his co0debtors only the share which

corresponds to each, with the interest for the payment already made. <f the payment ismade before the debt is due, no interest for the intervening period may be demanded.

4hen one of the solidary debtors cannot, because of his insolvency, reimburse hisshare to the debtor paying the obligation, such share shall be borne by all his co0debtors, in proportion to the debt of each.19

A solidary debtor may, in actions @led by the creditor, avail himself of all defenseswhich are derived from the nature of the obligation and of those which are personal tohim, or pertain to his own share. 4ith respect to those which personally belong to theothers, he may avail himself thereof only as regards that part of the debt for which thelatter are responsible.19#

0% Art. 1224

00 Art. 1214

1 /he remission made b! the creditor of the share &hich a-ects one of the solidar! debtors

does not release the latter from his responsibilit! to&ards the co)debtors in case the debt had

been totall! paid b! an!one of them before the remission &as e-ected.

11 Art. 1215

12 Art. 1216

13 Art. 121$

14 Art. 1222



$. Eac! one of solidar* creditors ma* do !atever ma* be useful to t!e ot!ers5 but not

an*t!ing re7udicial to t!em1(

a' Effect of an* novation5 comensation5 confusion or remission of debt executed

b* a solidar* creditor

The obligation is e)tinguished, without prejudice to the provisions of Article 1217.19(

The creditor who may have e)ecuted any of these acts, as well as he who collectsthe debt, is liable to the others for the share in the obligation corresponding to them.193

). )ivisible and ndivisible

"bligations to give de@nite things and those which are not susceptible of partialperformance shall be deemed to be indivisible.

4hen the obligation has for its object the e)ecution of a certain number of days of wor+, the accomplishment of wor+ by metrical units, or analogous things which by theirnature are susceptible of partial performance, it shall be divisible.

!owever, even though the object or service may be physically divisible, anobligation is indivisible if so provided by law or intended by the parties.

<n obligations not to do, divisibility or indivisibility shall be determined by thecharacter of the prestation in each particular case.195

E. Obligations it! a enal "lause

The penalty shall substitute the indemnity for damages and the payment of interests in case of noncompliance, if there is no stipulation to the contrary. amages

shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in theful@llment of the obligation.

The penalty may be enforced only when it is demandable.197

Proof of actual damages su'ered by the creditor is not necessary in order that thepenalty may be demanded. 119

The judge shall euitably reduce the penalty when the principal obligation hasbeen partly or irregularly complied with by the debtor. &ven if there has been noperformance, the penalty may also be reduced by the courts if it is iniuitous orunconscionable.111

The nullity of the penal clause does not carry with it that of the principalobligation.

15 Art. 1212

16 supra

1$ Art. 1215

1% Art. 1225

10 Art. 1226

11 Art. 122%

111 Art. 1220



The nullity of the principal obligation carries with it that of the penal clause.112

I). E*ting#is+ment o Obligations

A. a*ment

The creditor is not bound to accept payment or performance by a third person

who has no interest in the ful@llment of the obligation, unless there is a stipulation tothe contrary.

4hoever pays for another may demand from the debtor what he has paid, e)ceptthat if he paid without the +nowledge or against the will of the debtor, he can recoveronly insofar as the payment has been bene@cial to the debtor.11

4hoever pays on behalf of the debtor without the +nowledge or against the will of the latter, cannot compel the creditor to subrogate him in his rights, such as thosearising from a mortgage, guaranty, or penalty.11#

Payment made by a third person who does not intend to be reimbursed by thedebtor is deemed to be a donation, which reuires the debtorGs consent. =ut thepayment is in any case valid as to the creditor who has accepted it11%

1. )ation in a*ment

Property is alienated to the creditor in satisfaction of a debt in money.11(

2. #orm of a*ment

The payment of debts in money shall be made in the currency stipulated. <f it isnot possible to deliver such currency, then in the currency which is legal tender in thePhilippines.

The delivery of promissory notes payable to order, or bills of e)change or othermercantile documents shall produce the e'ect of payment only when they have beencashed, or when through the fault of the creditor they have been impaired.

<n the meantime, the action derived from the original obligation shall be held inabeyance.113

$. Extraordinar* inflation or deflation

The value of the currency at the time of the establishment of the obligation shallbe the basis of payment, unless there is an agreement to the contrary.115

112 Art. 123

113 Art. 1236

114 Art. 123$

115 Art. 123%

116 Art. 1245 Dation in pa!ment is go#erned b! the la& on sales because it is as if the creditor is no&the #endeeand the debtor becomes no& the #endor.

11$ Art. 1240



4. Alication of a*ment11<

!e who has various debts of the same +ind in favor of one and the same creditor,may declare at the time of ma+ing the payment, to which of them the same must beapplied. Inless the parties so stipulate, or when the application of payment is made bythe party for whose bene@t the term has been constituted, application shall not be madeas to debts which are not yet due.

<f the debtor accepts from the creditor a receipt in which an application of thepayment is made, the former cannot complain of the same, unless there is a cause forinvalidating the contract.129

<f the debt produces interest, payment of the principal shall not be deemed tohave been made until the interests have been covered.121

4hen the payment cannot be applied, or if application cannot be inferred fromother circumstances, the debt which is most onerous to the debtor, among those due,shall be deemed to have been satis@ed.

<f the debts due are of the same nature and burden, the payment shall be appliedto all of them proportionately.122

. >ender of a*ment and "onsignation

<f the creditor to whom tender of payment has been made refuses without justcause to accept it, the debtor shall be released from responsibility by the consignationof the thing or sum due.

*onsignation alone shall produce the same e'ect in the following cases, when/

B1C *reditor is absent or un+nown, or does not appear at the place of payment;

B2C !e is incapacitated to receive the payment at the time it is due;

BC 4ithout just cause, he refuses to give a receipt;

B#C Two or more persons claim the same right to collect;

B%C The title of the obligation has been lost.12

<n order that the consignation of the thing due may release the obligor, it must@rst be announced to the persons interested in the ful@llment of the obligation.12#

11% Art. 125

110 the designation of a debt &hich is being paid b! the debtor &ho has se#eral obligations of

the same (ind in fa#or of the creditor to &hom the pa!ment is made quoting /olentino.

12 Art. 1252

121 Art. 1253

122 Art. 1254

123 Art.1256

124 Art. 125$



*onsignation shall be made by depositing the things due at the disposal of judicialauthority, before whom the tender of payment shall be proved, in a proper case, and theannouncement of the consignation in other cases.

The consignation having been made, the interested parties shall also be [email protected]%

The e)penses of consignation, when properly made, shall be charged against thecreditor.12(

"nce the consignation has been duly made, the debtor may as+ the judge to orderthe cancellation of the obligation.

=efore the creditor has accepted the consignation, or before a judicial declarationthat the consignation has been properly made, the debtor may withdraw the thing orthe sum deposited, allowing the obligation to remain in force.123

<f, the consignation having been made, the creditor should authorie the debtor towithdraw the same, he shall lose every preference which he may have over the thing.The co0debtors, guarantors and sureties shall be released.125

B. /oss of )eterminate >!ing )ue or mossibilit* or difficult* of erformance

The obligation is e)tinguished if it should be lost or destroyed without the fault of the debtor, and before he has incurred in delay.

4hen by law or stipulation, the obligor is liable even for fortuitous events, theloss of the thing does not e)tinguish the obligation, and he shall be responsible fordamages. The same rule applies when the nature of the obligation reuires theassumption of ris+.127

The debtor in obligations to do shall also be released when the prestationbecomes legally or physically impossible without the fault of the obligor.19

4hen the service has become so di'icult as to be manifestly beyond thecontemplation of the parties, the obligor may also be released therefrom, in whole or inpart.11

". "ondonation or emission of )ebt

An act of liberality by virtue of which, without receiving any euivalent, thecreditor renounces enforcement of an obligation which is e)tinguished, in whole or inpart.12

125 Art. 125%

126 Art. 1250

12$ Art. 126

12% Art. 1261

120 Art. 1262

13 Art. 1266

131 Art. 126$



1. Exress condonations and re+uired formalit* t!ereof

&)press condonation shall comply with the forms of donation.1

2. mlied

The delivery of a private document evidencing a credit, made voluntarily by thecreditor to the debtor, implies the renunciation of the action which the former had

against the latter.

<f in order to nullify this waiver it should be claimed to be ino'icious, the debtorand his heirs may uphold it by proving that the delivery of the document was made in virtue of payment of the debt.1#

4henever the private document in which the debt appears is found in thepossession of the debtor, it shall be presumed that the creditor delivered it voluntarily,unless the contrary is proved.1%

<t is presumed that the accessory obligation of pledge has been remitted when thething pledged, after its delivery to the creditor, is found in the possession of the debtor,or of a third person who owns the thing.1(

). "onfusion or =erger of ig!ts

4hen the characters of creditor and debtor are merged in the same person. 13

E. "omensation

4hen two persons, in their own right, are creditors and debtors of each other.15

<t is necessary that/

B1C &ach one of the obligors be bound principally, and that he be at the same timea principal creditor of the other;

132 Gour 4 requisites:1. Debt that is e;isting. Nou can remit a debt e#en before it is due.2. Renunciation must be gratuitous. *f renunciation is for a consideration the mode of

e;tinguishment ma! be something else. *t ma! be no#ation compromise of dacion en pago.3. Acceptance b! the debtor4. apacit! of the parties.

133 ondonation or remission is essentiall! gratuitous and requires the acceptance b! the obligor. *tma! be made e;pressl! or impliedl!. 9ne and the other (ind shall be subject to the rules &hich go#erninocious donations Art. 12$ /he form of donation must be obser#ed. *f the condonation in#ol#es mo#ables appl! Art. $4%. *f itin#ol#es immo#ables appl! Art. $40. @ut note that the creditor ma! just refuse to collect &+o obser#ingan! form. *n this case the obligation &ill be e;tinguished not b! #irtue of condonation but b! &ai#erunder Art. 6.

134 Art. 12$1

135 Art. 12$2

136 Art. 12$4

13$ Art. 12$5

13% Art. 12$%



B2C =oth debts consist in a sum of money, or if the things due are consumable,they be of the same +ind, and also of the same uality if the latter has been stated;

BC The two B2C debts be due;

B#C They be liuidated and demandable;

B%C "ver neither of them there be any retention or controversy, commenced bythird persons and communicated in due time to the debtor.17

1. ?inds

a. /egal comensation

*ompensation ta+es place by operation of law, even though the debts may bepayable at di'erent places, but there shall be an indemnity for e)penses of e)change ortransportation to the place of payment.1#9

4hen all the reuisites mentioned above are present, compensation ta+es e'ectby operation of law, and e)tinguishes both debts to the concurrent amount, even thoughthe creditors and debtors are not aware of the compensation.1#1

b. Agreement

The parties may agree upon the compensation of debts which are not yet due.1#2

c. @oluntar*14$

d. ;udicial

<f one of the parties to a suit over an obligation has a claim for damages againstthe other, the former may set it o' by proving his right to said damages and the amountthereof.1##

e. #acultative

4hen compensation is claimable by only one of the parties but not of the other.1#%

130 ompensation shall not be proper &hen one of the debts arises from a depositum or from theobligations of a depositar! or of a bailee in commodatum. Beither can compensation be set up againsta creditor &ho has a claim for support due b! gratuitous title &ithout prejudice to the pro#isions of par. 2of Article 31 Art. 12%$ Beither shall there be compensation if one of the debts consists in ci#il liabilit! arising from a penalo-ense Art. 12%% *f a person should ha#e against him se#eral debts &hich are susceptible of compensation the rules onthe application of pa!ments shall appl! to the order of the compensation Art. 12%0 Art. 12$0

14 Art. 12%6

141 Art. 120

142 Art. 12%2

143 Fee Agreement supra

144 Art. 12%3



2. Obligations not comensable

a. 4hen one of the debts arises from a depositum or from the obligations of adepositary or of a bailee in commodatum.

b. Against a creditor who has a claim for support due by gratuitous title, withoutprejudice to the provisions of paragraph 2 of Article 91.1#(

c. <f one of the debts consists in civil liability arising from a penal o'ense.1#3

#. Novation

"bligations may be modi@ed by/

B1C *hanging their object or principal conditions;

B2C 6ubstituting the person of the debtor;

BC 6ubrogating a third person in the rights of the creditor.1#5

<n order that an obligation may be e)tinguished by another which substitute thesame, it is imperative that it be so declared in uneuivocal terms, or that the old andthe new obligations be on every point incompatible with each other.1#7

ovation which consists in substituting a new debtor in the place of the originalone, may be made even without the +nowledge or against the will of the latter, but notwithout the consent of the creditor. Payment by the new debtor gives him the rightsmentioned in articles 12( and 123.1%9

<f the substitution is without the +nowledge or against the will of the debtor, thenew debtorGs insolvency or non0ful@llment of the obligations shall not give rise to anyliability on the part of the original debtor.1%1

The insolvency of the new debtor, who has been proposed by the original debtorand accepted by the creditor, shall not revive the action of the latter against the originalobligor, e)cept when said insolvency was already e)isting and of public +nowledge, or+nown to the debtor, when the delegated his debt.1%2

145 e.g. Arts. 12%$ 12%%

146 Art. 12%$ Fupport in arrears ma! be compensated and renounced and the right to demand thesame ma! be transmitted b! onerous or gratuitous title Art. 31 par. 2

14$ Art. 12%%

14% Art. 1201

140 Art. 1202

15 Art. 1203

151 Art. 1204

152 Art. 1205



4hen the principal obligation is e)tinguished in conseuence of a novation,accessory obligations may subsist only insofar as they may bene@t third persons whodid not give their consent.1%

<f the new obligation is void, the original one shall subsist, unless the partiesintended that the former relation should be e)tinguished in any event. 1%#

The novation is void if the original obligation was void, e)cept when annulment

may be claimed only by the debtor or when rati@cation validates acts which are voidable.1%%

<f the original obligation was subject to a suspensive or resolutory condition, thenew obligation shall be under the same condition, unless it is otherwise stipulated.1%(

6ubrogation of a third person in the rights of the creditor is either legal orconventional. The former is not presumed, e)cept in cases e)pressly mentioned in this*ode; the latter must be clearly established in order that it may ta+e e'ect. 1%3

*onventional subrogation of a third person reuires the consent of the original

parties and of the third person.1%5

<t is presumed that there is legal subrogation/

B1C 4hen a creditor pays another creditor who is preferred, even without thedebtorGs +nowledge;

B2C 4hen a third person, not interested in the obligation, pays with the e)press ortacit approval of the debtor;

BC 4hen, even without the +nowledge of the debtor, a person interested in theful@llment of the obligation pays, without prejudice to the e'ects of confusion as to thelatterGs share.1%7

6ubrogation transfers to the persons subrogated the credit with all the rightsthereto appertaining, either against the debtor or against third person, be theyguarantors or possessors of mortgages, subject to stipulation in a conventionalsubrogation.1(9

A creditor, to whom partial payment has been made, may e)ercise his right for theremainder, and he shall be preferred to the person who has been subrogated in hisplace in virtue of the partial payment of the same credit.1(1

153 Art. 1206

154 Art. 120$

155 Art. 120%

156 Art. 1200

15$ Art. 13

15% Art. 131

150 Art. 132

16 Art. 133



!ONT,A!TS

I. Essential ,e-#isites

B1C *onsent of the contracting parties;

B2C "bject certain which is the subject matter of the contract;

BC *ause of the obligation which is established.1(2

II. Kinds o !ontra"ts

*onsensual >eal 8ormal or

6olemn

Perfected by mere

consent and from

that moment, the

parties are bound not

only to the ful@llment

of what has been

e)pressly stipulated

but also to all

conseuences which,

according to their

nature may be in

+eeping with good

faith, usage and law.

>euires delivery of

object for

perfection.1(

>euires compliance

with certain

formalities

prescribed by law,

such prescribed form

being an essential

element

1. )onations

$ovable <mmovable

$ay be made orally or in writing

An oral donation reuires the

simultaneous delivery of thething or of the document

representing the right donated.

<f the value of the personal

property donated e)ceeds @ve

thousand pesos BP%,999.99C, the

donation and the acceptance

shall be made in writing.

"therwise, the donation shall be

void.1(#

<t must be made in a public

document, specifying therein the

property donated and the value

of the charges which the doneemust satisfy.

161 Art. 134

162 Art. 13%1

163 li(e deposit pledge and commodatum



The acceptance may be made in the same deed of donation or in a

separate public document, but it shall not ta+e e'ect unless it is

done during the lifetime of the donor.

<f the acceptance is made in a separate instrument, the donor shall

be noti@ed thereof in an authentic form, and this step shall be noted

in both instruments.1(%

2. artners!i166 !ere real roert* contributed

A public instrument is necessary.1(3

There must be/

1. an inventory of said property

2. signed by the parties; and. attached to the public instrument.1(5

$. Antic!resis

The amount of the principal and of the interest shall be speci@ed in writing;otherwise, the contract of antichresis is void.1(7

4. Agenc* to sell real roert* or an interest t!erein

The authority of the agent must be in writing; otherwise, the sale is void.139

. 3tiulation to c!arge interest

o interest shall be due unless it has been e)pressly stipulated in writing.131

6. 3tiulation limiting common carriers dut* of extraordinar* diligence to ordinar*

diligence

164 Art. $4%

165 Art. $40

166 ma! be constituted in an! form

16$ Art. 1$$1

16% Art. 1$$38 other&ise the contract of partnership is #oid

160 Art. 2134

1$ Art. 1%$4

1$1 Art. 1056



A stipulation between the common carrier and the shipper or owner limiting the

liability of the former for the loss, destruction, or deterioration of the goods to a degree

less than e)traordinary diligence shall be valid, provided it be/

B1C <n writing, signed by the shipper or owner;B2C 6upported by a valuable consideration other than the service rendered by thecommon carrier; and

BC >easonable, just and not contrary to public policy.132

. "!attel mortgage

Personal property is recorded in the *hattel $ortgage >egister as security for theperformance of an obligation.

<f the movable, instead of being recorded, is delivered to the creditor or a thirdperson, the contract is a pledge and not a chattel mortgage.13

8. 3ale of large cattle

Hoverned by special law13# which reuires that the same be in a publicinstrument.

o person, partnership, association, corporation or entity shall engage in thebusiness of buy and sell of large cattle without @rst securing a permit for the saidpurpose from the Provincial *ommander of the province where it shall conduct suchbusiness and the citymunicipal treasurer of the place of residence of such person,partnership, association, corporation or entity. The permit shall only be valid in suchprovince.13%

III. ormalit(

*ontracts shall be obligatory, in whatever form they may have been entered into,provided all the essential reuisites for their validity are present. !owever, when thelaw reuires that a contract be in some form in order that it may be valid orenforceable, or that a contract be proved in a certain way, that reuirement is absoluteand indispensable. <n such cases, the right of the parties stated in the following articlecannot be e)ercised.13(

<f the law reuires a document or other special form, the contracting parties maycompel each other to observe that form, once the contract has been perfected. Thisright may be e)ercised simultaneously with the action upon the contract.133

The following must appear in a public document/

1$2 Art. 1$44

1$3 Art. 214

1$4 Act Bo. 114$

1$5 Fec. 5 '.D. 533

1$6 Art. 1356

1$$ Art. 135$



B1C Acts and contracts which have for their object the creation, transmission,modi@cation or e)tinguishment of real rights over immovable property; sales of realproperty or of an interest therein are governed by Articles 1#9, o. 2, and 1#9%;135

B2C The cession, repudiation or renunciation of hereditary rights or of those of theconjugal partnership of gains;

BC The power to administer property, or any other power which has for its object

an act appearing or which should appear in a public document, or should prejudice athird person;

B#C The cession of actions or rights proceeding from an act appearing in a publicdocument.

All other contracts where the amount involved e)ceeds @ve hundred pesosBP%99.99C must appear in writing, even a private one. =ut sales of goods, chattels orthings in action are governed by articles, 1#9, o. 2 and 1#9%.137

I. Dee"ti&e !ontra"ts

A. escissible "ontracts18(

B1C Those which are entered into by guardians whenever the wards whom theyrepresent su'er lesion by more than one0fourth of the value of the things which are theobject thereof;

B2C Those agreed upon in representation of absentees, if the latter su'er thelesion stated in the preceding number;

BC Those underta+en in fraud of creditors when the latter cannot in any othermanner collect the claims due them;

B#C Those which refer to things under litigation if they have been entered into bythe defendant without the +nowledge and approval of the litigants or of competent judicial authority;

B%C All other contracts specially declared by law to be subject to rescission.151

B(C Payments made in a state of insolvency on account of obligations not yetenforceable

1. i'erence with >escission BresolutionC under Art. 1171

>escission in Article

1171

>escission Proper in Article

151

<t is a principal action retaliatory

in character.

<t is a subsidiary remedy.

1$% infra

1$0 Art. 135%

1% ontracts #alidl! agreed upon but b! reason of lesion or economic prejudice ma! be

rescinded in cases established b! la&.

1%1 Art. 13%1



The only ground is non0

performance of oneDs obligations

or what is incumbent upon him.

There are % grounds to rescind.

on0performance by the other

party is not important.

<t applies only to reciprocal

obligation

<t applies to both unilateral and

reciprocal obligations.

"nly a party to the contract may

demand ful@llment or see+ the

rescission of the contract.

&ven a rd person who is

prejudiced by the contract may

demand the rescission of the

contract.

B. @oidable "ontracts182

*ontracts entered into during a lucid interval are valid. *ontracts agreed to in astate of drun+enness or during a hypnotic spell are voidable.15

The incapacity declared in Article 12315# is subject to the modi@cationsdetermined by law, and is understood to be without prejudice to specialdisuali@cations established in the laws.15%

A contract where consent is given through mista+e, violence, intimidation, undueinJuence, or fraud is voidable.15(

<n order that mista+e may invalidate consent, it should refer to the substance of the thing which is the object of the contract, or to those conditions which haveprincipally moved one or both parties to enter into the contract.

$ista+e as to the identity or uali@cations of one of the parties will vitiate consentonly when such identity or uali@cations have been the principal cause of the contract.

A simple mista+e of account shall give rise to its correction.153

1%2 Art. 140 /hose in &hich all of the essential elements for #alidit! are present although the elementof consent is #itiated either b! lac( of capacit! of one of the contracting parties or b! O*<G. >hat contracts are #oidable: 1. /hose &here one of the parties is incapable of gi#ing consent to a contract 2. /hose &here the consent is #itiated b! mista(e #iolence intimidation undue inPuence or fraud 3. @! loss of the thing &hich is the object of the contract through fraud or fault of the person &ho isentitled to annul the contract. Requisites: a. there must be (no&ledge of the reason &hich renders the contract #oidable b. such reason must ha#e ceased and c. the injured part! must ha#e e;ecuted an act &hich e;pressl! or impliedl! con#e!s an intention to&ai#e his right.

1%3 Art. 132%

1%4 Fee Reference

1%5 Art. 1320

1%6 Art. 133



4hen one of the parties is unable to read, or if the contract is in a language notunderstood by him, and mista+e or fraud is alleged, the person enforcing the contractmust show that the terms thereof have been fully e)plained to the former.155

There is no mista+e if the party alleging it +new the doubt, contingency or ris+ a'ecting the object of the contract.157

$utual error as to the legal e'ect of an agreement when the real purpose of the

parties is frustrated, may vitiate consent.179

There is violence when in order to wrest consent, serious or irresistible force isemployed.

There is intimidation when one of the contracting parties is compelled by areasonable and well0grounded fear of an imminent and grave evil upon his person orproperty, or upon the person or property of his spouse, descendants or ascendants, togive his consent.

To determine the degree of intimidation, the age, se) and condition of the person

shall be borne in mind.

A threat to enforce oneGs claim through competent authority, if the claim is just orlegal, does not vitiate consent.171

Kiolence or intimidation shall annul the obligation, although it may have beenemployed by a third person who did not ta+e part in the contract.172

There is undue inJuence when a person ta+es improper advantage of his powerover the will of another, depriving the latter of a reasonable freedom of choice. Thefollowing circumstances shall be considered/ the con@dential, family, spiritual and otherrelations between the parties, or the fact that the person alleged to have been undulyinJuenced was su'ering from mental wea+ness, or was ignorant or in @nancialdistress.17

There is fraud when, through insidious words or machinations of one of thecontracting parties, the other is induced to enter into a contract which, without them,he would not have agreed to.17#

8ailure to disclose facts, when there is a duty to reveal them, as when the partiesare bound by con@dential relations, constitutes fraud.17%

1%$ Art. 1331

1%% Art. 1332

1%0 Art. 1333

10 Art. 1334

101 Art. 1335

102 Art. 1336

103 Art. 133$

104 Art. 133%



The usual e)aggerations in trade, when the other party had an opportunity to+now the facts, are not in themselves fraudulent.17(

A mere e)pression of an opinion does not signify fraud, unless made by an e)pertand the other party has relied on the formerGs special +nowledge.173

$isrepresentation by a third person does not vitiate consent, unless suchmisrepresentation has created substantial mista+e and the same is mutual.175

$isrepresentation made in good faith is not fraudulent but may constituteerror.177

<n order that fraud may ma+e a contract voidable, it should be serious and shouldnot have been employed by both contracting parties.

<ncidental fraud only obliges the person employing it to pay damages.299

The following contracts are voidable or annullable, even though there may havebeen no damage to the contracting parties/

B1C Those where one of the parties is incapable of giving consent to a contract;

B2C Those where the consent is vitiated by mista+e, violence, intimidation, undueinJuence or fraud.

These contracts are binding, unless they are annulled by a proper action in court.They are susceptible of [email protected]

The action for annulment shall be brought within four B#C years.

This period shall begin/

<n cases of intimidation, violence or undue inJuence, from the time the defect of the consent ceases.

<n case of mista+e or fraud, from the time of the discovery of the same.

And when the action refers to contracts entered into by minors or otherincapacitated persons, from the time the guardianship ceases.292

>ati@cation e)tinguishes the action to annul a voidable contract.29

105 Art. 1330

106 Art. 134

10$ Art. 1341

10% Art. 1342

100 Art. 1343

2 Art. 1344

21 Art. 130

22 Art. 1301



>ati@cation may be e'ected e)pressly or tacitly. <t is understood that there is atacit rati@cation if, with +nowledge of the reason which renders the contract voidableand such reason having ceased, the person who has a right to invo+e it should e)ecutean act which necessarily implies an intention to waive his right.29#

>ati@cation may be e'ected by the guardian of the incapacitated person.29%

>ati@cation does not reuire the conformity of the contracting party who has no

right to bring the action for annulment.29(

>ati@cation cleanses the contract from all its defects from the moment it wasconstituted.293

The action for the annulment of contracts may be instituted by all who arethereby obliged principally or subsidiarily. !owever, persons who are capable cannotallege the incapacity of those with whom they contracted; nor can those who e)ertedintimidation, violence, or undue inJuence, or employed fraud, or caused mista+e basetheir action upon these Jaws of the contract.295

An obligation having been annulled, the contracting parties shall restore to eachother the things which have been the subject matter of the contract, with their fruits,and the price with its interest, e)cept in cases provided by law.

<n obligations to render service, the value thereof shall be the basis fordamages.297

4hen the defect of the contract consists in the incapacity of one of the parties,the incapacitated person is not obliged to ma+e any restitution e)cept insofar as he hasbeen bene@ted by the thing or price received by him.219

4henever the person obliged by the decree of annulment to return the thingcannot do so because it has been lost through his fault, he shall return the fruitsreceived and the value of the thing at the time of the loss, with interest from the samedate.211

The action for annulment of contracts shall be e)tinguished when the thing whichis the object thereof is lost through the fraud or fault of the person who has a right toinstitute the proceedings.

23 Art. 1302

24 Art. 1303

25 Art. 1304

26 Art. 1305

2$ Art. 1306

2% Art. 130$

20 Art. 130%

21 Art. 1300

211 Art. 14



<f the right of action is based upon the incapacity of any one of the contractingparties, the loss of the thing shall not be an obstacle to the success of the action, unlesssaid loss too+ place through the fraud or fault of the plainti'.212

As long as one of the contracting parties does not restore what in virtue of thedecree of annulment he is bound to return, the other cannot be compelled to complywith what is incumbent upon him.21

". nenforceable "ontracts214

The following contracts are unenforceable, unless they are rati@ed/

B1C Those entered into in the name of another person by one who has been givenno authority or legal representation, or who has acted beyond his powers;

B2C Those that do not comply with the 6tatute of 8rauds.

<n the following cases an agreement hereafter made shall be unenforceable byaction, unless the same, or some note or memorandum thereof, be in writing, andsubscribed by the party charged, or by his agent; evidence, therefore, of the agreementcannot be received without the writing, or a secondary evidence of its contents/

BaC An agreement that by its terms is not to be performed within a year fromthe ma+ing thereof;

BbC A special promise to answer for the debt, default, or miscarriage of another;

BcC An agreement made in consideration of marriage, other than a mutualpromise to marry;

BdC An agreement for the sale of goods, chattels or things in action, at aprice not less than @ve hundred pesos BP%99.99C, unless the buyer accept andreceive part of such goods and chattels, or the evidences, or some of them, of such things in action or pay at the time some part of the purchase money; butwhen a sale is made by auction and entry is made by the auctioneer in his sales

212 Art. 141

213 Art. 142

214 /hose &hich cannot be enforced b! proper action in court unless the! are ratied >hat contractsare unenforceable 1. those entered into in the name of another b! one &ithout or acting in e;cess of authorit!8 2. those &here both parties are incapable of gi#ing consent8 and 3. those &hich do not compl! &ith the Ftatute of Grauds Agreements &ithin the scope of the Ftatute of Grauds e;clusi#e list: 1. Agreements not to be performed &ithin one !ear from the ma(ing thereof8 2. Fpecial promise to ans&er for the debt default or miscarriage of another8 ) this does not refer to the original or independent promise of the debtor to his o&n creditor. *trefers rather to a collateral promise.

3. Agreement in consideration of marriage other than a mutual promise to marr!8 4. Agreement for the sale of goods etc. at a price not less than '5.8 5. ontracts of lease for a period longer than one !ear8

6. Agreements for the sale of real propert! or interest therein8 and $. Representation as to the credit of a third person. /he contracts+agreements under the Ftatute of Grauds require that the same be e#idenced b! somenote memorandum or &riting subscribed b! the part! charged or b! his agent other&ise the saidcontracts shall be unenforceable. /he statute of frauds applies onl! to e;ecutor! contracts not to those that are partiall! or completel!fullled.

Ratication of contracts in #iolation of the Ftatute of Grauds 1. Gailure to object to the presentation of oral e#idence to pro#e such contracts 2. Acceptance of benets under these contracts



boo+, at the time of the sale, of the amount and +ind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale ismade, it is a su'icient memorandum;

BeC An agreement for the leasing for a longer period than one B1C year, or forthe sale of real property or of an interest therein;

BfC A representation as to the credit of a third person.

BC Those where both parties are incapable of giving consent to a contract.21%

Inauthoried contracts are governed by Article 11321( and the principles of agency.213

*ontracts infringing the 6tatute of 8rauds, referred to in o. 2 of Article 1#9,are rati@ed by the failure to object to the presentation of oral evidence to prove thesame, or by the acceptance of bene@t under them.215

4hen a contract is enforceable under the 6tatute of 8rauds, and a public

document is necessary for its registration in the >egistry of eeds, the parties mayavail themselves of the right under Article 1%3.217

<n a contract where both parties are incapable of giving consent, e)press orimplied, rati@cation by the parent, or guardian, as the case may be, of one of thecontracting parties shall give the contract the same e'ect as if only one of them wereincapacitated.

<f rati@cation is made by the parents or guardians, as the case may be, of bothcontracting parties, the contract shall be validated from the inception.

o one may contract in the name of another without being authoried by the

latter, or unless he has by law a right to represent him.

A contract entered into in the name of another by one who has no authority orlegal representation, or who has acted beyond his powers, shall be unenforceable,unless it is rati@ed, e)pressly or impliedly, by the person on whose behalf it has beene)ecuted, before it is revo+ed by the other contracting party.229

. @oid "ontracts221

B1C Those whose cause, object or purpose is contrary to law, morals, goodcustoms, public order or public policy;

215 Art. 143

216 Bo one ma! contract in the name of another &ithout being authoried b! the latter or unless he hasb! la& a right to represent him. A contract entered into in the name of another b! one &ho has noauthorit! or legal representation or &ho has acted be!ond his po&ers shall be unenforceable unless it isratied e;pressl! or impliedl! b! the person on &hose behalf it has been e;ecuted before it is re#o(ed b!the other contracting part!

21$ Art. 144

21% Art. 145

210 Art. 146 *f the la& requires a document or other special form the contracting parties ma! compeleach other to obser#e that form once the contract has been perfected. /his right ma! be e;ercisedsimultaneousl! &ith the action upon the contract Art. 135$

22 Art. 14$



B2C Those which are absolutely simulated or @ctitious;

BC Those whose cause or object did not e)ist at the time of the transaction;

B#C Those whose object is outside the commerce of men;

B%C Those which contemplate an impossible service;

B(C Those where the intention of the parties relative to the principal object of thecontract cannot be ascertained;

B3C Those e)pressly prohibited or declared void by law.

These contracts cannot be rati@ed. either can the right to set up the defense of illegality be waived.222

An absolutely simulated or @ctitious contract is void. A relative simulation, whenit does not prejudice a third person and is not intended for any purpose contrary to law,

morals, good customs, public order or public policy binds the parties to their realagreement.22

*omparative table of defective contracts

221 /hose &here all of the requisites of a contract are present but the cause object or purpose is

contrar! to la& morals good customs public order or public polic! or contract itself is

prohibited or declared #oid b! la&.

222 Art. 140

223 Art. 1346



Koid Koidable >escissible Inenforceable

1. efect iscaused bylac+ of essential

elements orillegality

efect iscaused by viceof consent

efect iscaused byinjury damageeither to one of

the parties of toa rd person

efect iscaused by lac+ of form,authority, or

capacity of both partiesnot cured byprescription

2. o not, asa general ruleproduce anylegal e'ect

Kalid andenforceableuntil they areannulled by acompetent

court

Kalid andenforceableuntil they arerescinded by acompetent

court

*annot beenforced by aproper actionin court

. Action forthedeclaration ornullity orine)istence ordefense of nullity orine)istence

does notprescribe

Action forannulment ordefense of annulabilitymay prescribe

Action forrescission mayprescribe

*orresponding action forrecovery, if there wastotal or partialperformanceof theunenforceable

contractunder o. 1 or of Article1#9 mayprescribe

#. ot curedbyprescription

*ured byprescription

*ured byprescription

ot cured byprescription

%. *annot berati@ed

*an be rati@ed eed not berati@ed

*an berati@ed

(. Assailednot only by acontractingparty buteven by athird personwhoseinterest isdirectlya'ected

Assailed only bya contractingparty

Assailed notonly by acontractingparty but evenby a thirdperson who isprejudiced ordamaged by thecontract

Assailed onlyby acontractingparty

3. Assaileddirectly orcollaterally

Assaileddirectly orcollaterally

Assaileddirectly only

Assaileddirectly orcollaterally



1. Pactum commissorium

<t can be found in Article 2955 of the civil code which provides/ The creditorcannot appropriate the things given by way of pledge or mortgage, or dispose of them. Any stipulation to the contrary is null and void.

6imply put, it is a stipulation in a contract of mortgage of pledge which providesthat the mortgagee will automatically own the property mortgaged in case the

mortgagor fails to pay the loan. This stipulation is void.

2. Pactum de non alienando

A stipulation forbidding the owner from alienating the immovable mortgaged.22#

. Pactum leonina

A stipulation which e)cludes one or more partners from any share in the pro@ts orlosses.22%

. Ee"t o !ontra"ts

*ontracts ta+e e'ect only between the parties, their assigns and heirs, e)cept incase where the rights and obligations arising from the contract are not transmissible bytheir nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent.

<f a contract should contain some stipulation in favor of a third person, he maydemand its ful@llment provided he communicated his acceptance to the obligor beforeits revocation. A mere incidental bene@t or interest of a person is not su'icient. Thecontracting parties must have clearly and deliberately conferred a favor upon a thirdperson.22(

224 Art. 213

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