A2016 Oblicon Reviewer - Dilag

Obligations and Contracts
Jocs Dilag
Reviewer for Civil Law - Oblicon
Professor E.A. Labitag

Professor J.J. Disini
Obligations || General Provisions || Concept Other Definitions
Kinds of Prestations
Obligations 1. To Give
2. To Do
3. Not To Do
Chapter 1:
General Provisions Distinction between Natural and Civil Obligations
Natural Civil
As to basis Equity and Natural Law Positive Law
Concept As to Not court action, but Court action or coercive
Article 1156 enforceability good conscience of power of the law
An obligation is a juridical necessity to give, to do or not to do. debtor
Sources of Obligations
Other Definitions Article 1157
- An obligation is a juridical relation whereby a person (creditor) Obligations arise from:
may demand from another (debtor) the observance of a
(1) Law;
determinate conduct (behaviour) and in case of non-observance,
(2) Contracts;
may obtain satisfaction from the assets of the latter (Arias Ramos) (3) Quasi-contracts;
- An obligation is a juridical relation whereby a person should
(4) Acts or omissions punished by law; and
engage, or refrain from engaging, in a certain activity for the
(5) Quasi-delicts.
satisfaction of the private interest of another, who, in case of
non-fulfillment of such duty, may obtain from the patrimony of
the former, through a proper judicial proceeding, the very Law
prestation due or in default thereof, the economic value that it Article 1158
represents (Diaz Pairo)
Obligations derived from law are not presumed. Only those
expressly determined in this Code or in special laws are
Elements
demandable, and shall be regulated by the precepts of the law which
1. Active Subject (Obligee, Creditor)
establishes them; and as to what has not been foreseen, by the
2. Passive Subject (Obligor, Debtor)
3. Prestation or Object (Conduct of Debtor) provisions of this Book.
4. Efficient Cause / Juridical Tie / Vinculum Juris
- Does not require the concurrence of the creditors and debtors
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OBLIGATIONS and CONTRACTS Reviewer || Prof. J.J. Disini Jocel Isidro S. Dilag || UP Law A-2016
Obligations || General Provisions || Sources of Obligations Contracts
Kinds of Quasi-Contracts
Contracts 1. Negotiorum Gestio
2. Solutio Indebiti
Article 1159
3. Other Quasi-contracts
Obligations arising from contracts have the force of law between the Negotiorum Gestio (Officious Management)
contracting parties and should be complied with in good faith.
Article 2144
- Meeting of the minds of 2 or more persons, whereby one binds Whoever voluntarily takes charge of the agency or management
himself with respect to the other to give something or render of the business or property of another, without any power from the
some service Art. 1305 latter, is obliged to continue the same until the termination of the
- Principle of autonomy of will 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
Quasi-Contracts relation does not arise in either of these instances:
Article 1160 (1) When the property or business is not neglected or
Obligations derived from quasi-contracts shall be subject to the abandoned;
(2) If in fact the manager has been tacitly authorized by maythe
provisions of Chapter 1, Title XVII, of this Book.
owner.
Article 2142 In the first case, the provisions of Articles 1317, 1403, No. 1, and 1404
Certain lawful, voluntary and unilateral acts give rise to the juridical regarding unauthorized contracts shall govern.
relation of quasi-contract to the end that no one shall be unjustly
enriched or benefited at the expense of another. In the second case, the rules on agency in Title X of this Book shall be
- No previous relations/agreements exist applicable.
- The relation is created by the lawful, voluntary and unilateral
acts of one to another Solutio Indebiti (Mistake in Delivery)
ESSENCE:
Article 2154
- To avoid unjust enrichment
If something is received when there is no right to demand it, and
it was unduly delivered through mistake, the obligation to return it
arises.
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Obligations || General Provisions || Sources of Obligations Quasi-Contracts
Other Quasi Contracts Help when in an accident / seriously ill

Support given by stranger
Article 2167
Article 2164 When through an accident or other cause a person is injured or
When, without the knowledge of the person obliged to give becomes seriously ill, and he is treated or helped while he is not in
support, it is given by a stranger, the latter shall have a right to claim a condition to give consent to a contract, he shall be liable to pay
the same from the former, unless it appears that he gave it out of for the services of the physician or other person aiding him, unless the
piety and without intention of being repaid. service has been rendered out of pure generosity.
Funeral Expenses Property saved during a calamity
Article 2165 Article 2168

When funeral expenses are borne by a third person, without the When during a fire, flood, storm, or other calamity, property is
knowledge of those relatives who were obliged to give support to saved from destruction by another person without the knowledge
the deceased, said relatives shall reimburse the third person, should of the owner, the latter is bound to pay the former just
the latter claim reimbursement. compensation.
Support to orphans, insane, indigents Government undertaking necessary work

When the person obliged to support an orphan, or an insane or other When the government, upon the failure of any person to comply
indigent person unjustly refuses to give support to the latter, any with health or safety regulations concerning property, undertakes
third person may furnish support to the needy individual, with to do the necessary work, even over his objection, he shall be liable
right of reimbursement from the person obliged to give support. to pay the expenses.
The provisions of this article apply when the father or mother of a
child under eighteen years of age unjustly refuses to support him.
Confusion/.Commingling of Movables in an accident
Article 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.
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Obligations || General Provisions || Sources of Obligations
Finders of Lost personal property Acts or Omissions punishable by Law

The rights and obligations of the finder of lost personal property shall Civil obligations arising from criminal offenses shall be governed by
be governed by Articles 719 and 720. the penal laws, subject to the provisions of Article 2177, and of the
pertinent provisions of Chapter 2, Preliminary Title, on Human
Possessors in good faith
Relations, and of Title XVIII of this Book, regulating damages.
Article 2172
The right of every possessor in good faith to reimbursement for Article 100 (RPC)
necessary and useful expenses is governed by Article 546. Every person criminally liable for a felony is also civilly liable.
Paying the debts of another
Article 2173 Quasi-Delicts

When a third person, without the knowledge of the debtor, pays the Article 1162
debt, the rights of the former are governed by Articles 1236 and 1237. Obligations derived from quasi-delicts shall be governed by the
provisions of Chapter 2, Title XVII of this Book, and by special laws.
Project Expenses of a small community

When in a small community a nationality of the inhabitants of age Whoever by act or omission causes damage to another, there
decide upon a measure for protection against lawlessness, fire, being fault or negligence, is obliged to pay for the damage done.
flood, storm or other calamity, anyone who objects to the plan and Such fault or negligence, if there is no pre-existing contractual
refuses to contribute to the expenses but is benefited by the project relation between the parties, is called a quasi-delict and is governed
as executed shall be liable to pay his share of said expenses. by the provisions of this Chapter.
Paying taxes of another - Based on the principle of equity, where one should be responsible
for any damages caused by the abuse of his/her rights
Article 2175
Any person who is constrained to pay the taxes of another shall be
Kinds of Negligence
entitled to reimbursement from the latter.
1. Culpa Aquiliana (Quasi-Delict)
2. Culpa Contractual (Contractual Negligence)
3. Culpa Criminal (Criminal Negligence)
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Obligations || General Provisions || Sources of Obligations Quasi-Delicts
Culpa Aquiliana Culpa Contractual The father and, in case of his death or incapacity, the mother, are
Negligence as source of obligation Negligence in the performance responsible for the damages caused by the minor children who live in
of contract their company.
No previous relations Existence of an obligation
Plaintiff must prove the existence of Law presumes the negligence Guardians are liable for damages caused by the minors or
the negligent act from the non-performance incapacitated persons who are under their authority and live in their
company.
Quasi-delicts v. Crimes
Quasi-Delict Crime
The owners and managers of an establishment or enterprise are
Nature of Private rights; wrong Public rights; wrong
likewise responsible for damages caused by their employees in the
Right against the individual against the state
service of the branches in which the latter are employed or on the
Condition of Criminal intent Criminal intent
occasion of their functions.
Mind unnecessary necessary
Legal Basis Actionable as long as Need to have a penal
Employers shall be liable for the damages caused by their employees
there is fault/negligence statute
and household helpers acting within the scope of their assigned tasks,
Liability for Damages to the injured Not all have civil
even though the former are not engaged in any business or industry.
Damages party liabilities
Forms of Indemnification to the Indemnification + Fines The State is responsible in like manner when it acts through a special
Redress injured party or Imprisonment agent; but not when the damage has been caused by the official to
Amount of Preponderance of Beyond reasonable whom the task done properly pertains, in which case what is provided
evidence evidence doubt in Article 2176 shall be applicable.
Compromise Can be compromised Cannot be
compromised Lastly, teachers or heads of establishments of arts and trades shall
be liable for damages caused by their pupils and students or
Liability for fault of others apprentices, so long as they remain in their custody.
Article 2180
The obligation imposed by Article 2176 is demandable not only for The responsibility treated of in this article shall cease when the
one's own acts or omissions, but also for those of persons for whom persons herein mentioned prove that they observed all the
one is responsible. diligence of a good father of a family to prevent damage.
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Obligations || General Provisions || Classifications of Obligations Primary Classification under the Civil Code
Article 218 (FC) Classifications of Obligations

The school, its administrators and teachers, or the individual, Primary Classification under the Civil Code
entity or institution engaged in child care shall have special 1. WHEN: Pure and Conditional
parental authority and responsibility over the minor child while 2. WHEN: With a Period or Term
3. WHAT: Alternative and Facultative
under their supervision, instruction or custody.
4. WHO: Joint and Solidary
5. HOW: Divisible and Indivisible
Authority and responsibility shall apply to all authorized activities 6. ELSE: With a Penal Clause
whether inside or outside the premises of the school, entity or
institution.
Secondary Classification
1. Legal, Conventional, Penal
Article 219 (FC) 2. Real (to give) and Personal (To do or not to do)
Those given the authority and responsibility under the preceding 3. Determinate and Generic
4. Positive and Negative
Article shall be principally and solidarily liable for damages caused
5. Unilateral and Bilateral
by the acts or omissions of the unemancipated minor. The
6. Individual and Collective
parents, judicial guardians or the persons exercising substitute 7. Accessory and Principal
parental authority over said minor shall be subsidiarily liable. 8. As to object or prestation
a. Simple
The respective liabilities of those referred to in the preceding b. Multiple
paragraph shall not apply if it is proved that they exercised the c. Conjunctive
d. Distributive
proper diligence required under the particular circumstances.
e. Alternative
f. Facultative
All other cases not covered by this and the preceding articles shall be 9. Possible and Impossible
governed by the provisions of the Civil Code on quasi-delicts.
Difference between Civil and Criminal Action against employers

Art. 2180 (CC) Art. 103 (RPC)
Primary action Subsidiary Action
Employer can use the defense Liability is absolute upon conviction
of diligence of employee
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Obligations || Nature and Effects of Obligations || Kinds of Prestation Obligation to Give
Accessions Accessories
Chapter 2: Items or structure that are Necessary parts required for the
Nature and Effects of Obligations naturally/artificially incorporated Completeness, Use or Perfection
with the principal object [ CUP ] of the principal object
To deliver the fruits
Kinds of Prestation
Obligation to Give Article 1164
The creditor has a right to the fruits of the thing from the time the
A Specific Thing obligation to deliver it arises. However, he shall acquire no real right
Duties of the Obligor over it until the same has been delivered to him.
To deliver the thing itself
Article 1244 (1) Article 442

The debtor of a thing cannot compel the creditor to receive a Natural fruits are the spontaneous products of the soil, and the
different one, although the latter may be of the same value as, or young and other products of animals.
more valuable than that which is due.
Industrial fruits are those produced by lands of any kind through
cultivation or labor.
To Preserve the thing
Article 1163 Civil fruits are the rents of buildings, the price of leases of lands and
Every person obliged to give something is also obliged to take care other property and the amount of perpetual or life annuities or other
of it with the proper diligence of a good father of a family, unless similar income.
the law or the stipulation of the parties requires another standard of
Kinds of Fruits
care.
1. Natural
o Produce of the object without intervention of man
o Eggs, potato, milk, apple
To deliver the accessions and accessories
2. Industrial
Article 1166 o Goods through cultivation by man
The obligation to give a determinate thing includes that of delivering o Meat, vegetable crops
3. Civil
all its accessions and accessories, even though they may not have
o Produced by operation of law, by reason of a juridical act
been mentioned.
o Rent, interest, dividends, etc.
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Obligations || Nature and Effects of Obligations || Breach of Obligation Obligation To Do and Not To Do
A Generic Thing Modes of Breach

When the obligation consists in the delivery of an indeterminate or Those who in the performance of their obligations are guilty of fraud,
generic thing, whose quality and circumstances have not been negligence, or delay, and those who in any manner contravene the
stated, the creditor cannot demand a thing of superior quality. Neither tenor thereof, are liable for damages.
can the debtor deliver a thing of inferior quality. The purpose of the
obligation and other circumstances shall be taken into consideration.
- Fraud - Delay
- Negligence - Contravention of Tenor
Obligation To Do and Not To Do
Requisites of Breach
Article 1244 (2) 1. A Pre-existing obligation
In obligations to do or not to do, an act or forbearance cannot be 2. Conduct of the party, giving rise to an injustice / violation of
substituted by another act or forbearance against the obligee's any part of the obligation
will. 3. Imputability of the Conduct
4. Absence of justification or excuse
5. Injury to the other party
Breach of Obligation [ PACII ]
Concept
- Breach occurs when a party to a contract violates any provision Fraud (dolo)
thereof or fails to perform what is incumbent upon him
Article 1171
Substantial v. Slight/Casual Breach Responsibility arising from fraud is demandable in all obligations.
Substantial Breach Slight/Casual Breach Any waiver of an action for future fraud is void.
Refers to Major difference Differences between the tenor of the
- This fraud talks about fraud in the performance of an
between the tenor of the obligation and the actual performance
obligation
obligation and the actual will not cause serious injury to the - Awareness that an act is improper and that it violates the rights
performance creditor of others + its execution
Amounts to non- Partial performance almost amounts - An act or omission that prevents the normal fulfillment of an
performance to full performance obligation
Basis for rescission Gives rise to liability for damages
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Obligations || Nature and Effects of Obligations || Breach of Obligation Modes of Breach
Fraud Dolo Causante Dolo Incidente Culpa Aquiliana Culpa Contractual

When During the During the perfection of a contract or Negligence as source of obligation Negligence in the performance
present performance obligation of contract
of the contract No previous relations Existence of an obligation
Purpose Disrupt the Secure the consent Secure consent but Plaintiff must prove the existence of Law presumes the negligence
fulfillment of of another in the not the principal the negligent act from the non-performance
the obligation obligation inducement
Result Breach Voidable No Vitiation Standard of care required
Gives Right to Right to annul the Right to claim Article 1173
rise to recover contract damages
The fault or negligence of the obligor consists in the omission of
damages
that diligence which is required by the nature of the obligation and
corresponds with the circumstances of the persons, of the time and
Negligence of the place. When negligence shows bad faith, the provisions of
Articles 1171 and 2201, paragraph 2, shall apply.
Article 1172
Responsibility arising from negligence in the performance of every If the law or contract does not state the diligence which is to be
kind of obligation is also demandable, but such liability may be observed in the performance, that which is expected of a good
regulated by the courts, according to the circumstances. father of a family shall be required.
- Negligence is the failure to observe the proper diligence
Extra-ordinary diligence required in the ff:
required by law or by the contract
- Common Carriers Art. 1733
- Inn or Hotel Keepers Art. 1998 - 2002
Culpa Dolo
Absence of care or diligence in Voluntary acts with deliberate Effects of Negligence
acting that causes damage intent to cause damage - Damages are demandable
Liability may be mitigated by the Liability cannot be mitigated by - Bars the defense of the existence of a fortuitous event
courts the courts
Waiver for gross negligence is void Waiver for future fraud is void
Waiver for simple negligence may
be valid
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Obligations || Nature and Effects of Obligations || Breach of Obligation Modes of Breach
Delay Mora Solvendi

Requisites of Mora Solvendi
Article 1244 (1)
1. Prestation is Due
Those obliged to deliver or to do something incur in delay from the
2. Prestation is Demandable
time the obligee judicially or extrajudicially demands from them 3. Prestation is Liquidated
the fulfillment of their obligation. 4. Debtor Delays in performance
5. There is a Demand (Judicial / Extra-judicial)
However, the demand by the creditor shall not be necessary in [ DDLDD ]
order that delay may exist:
Article 1169
(1) When the obligation or the law expressly so declare; or
Those obliged to deliver or to do something incur in delay from the
(2) When from the nature and the circumstances of the
time the obligee judicially or extrajudicially demands from them the
obligation it appears that the designation of the time when
the thing is to be delivered or the service is to be rendered fulfillment of their obligation.
was a controlling motive for the establishment of the
contract; or However, the demand by the creditor shall not be necessary in
(3) When demand would be useless, as when the obligor has order that delay may exist:
rendered it beyond his power to perform. (1) When the obligation or the law expressly so declare; or
(2) When from the nature and the circumstances of the
In reciprocal obligations, neither party incurs in delay if the other obligation it appears that the designation of the time when
does not comply or is not ready to comply in a proper manner with the thing is to be delivered or the service is to be rendered
what is incumbent upon him. From the moment one of the parties was a controlling motive for the establishment of the
fulfills his obligation, delay by the other begins. contract; or
(3) When demand would be useless, as when the obligor has
- Failure to perform an obligation in due time rendered it beyond his power to perform.
o The period provided by law or stipulated in the contract
- Law, Stipulation, Motive and Impossibility are the exceptions to
o This is either through malice or negligence
the demand rule [ LIMS ]
Kinds of Delay
When will the effects of mora Cease?
1. Mora Solvendi Delay by Debtor
- By the creditors will (waiver, remission, extension, etc.)
2. Mora Accipiendi Delay by Creditor
- By mora of creditor (compensation morae)
- By concession of law (moratorium)
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Obligations || Nature and Effects of Obligations || Remedies of Creditor in Case of Breach Action for Performance
Mora Accipiendi Remedies of Creditor in Case of Breach

Requisites of Mora Accipiendi 1. Performance
1. Obligation requires an Act of cooperation by creditor 2. Damages
2. Debtor has Tendered the performance / completely performs 3. Rescission
the obligation
3. Creditor Refuses to accept performance / fails to perform the To give Specific To give generic To Do Not To Do
required action by the obligation Things things
[ ART ]
Specific Specific Specific
Performance Performance Performance
Article 1268
Substituted Substituted
When the debt of a thing certain and determinate proceeds from a
Performance Performance
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 Undoing Undoing
having been offered by him to the person who should receive it, the Damages Damages Damages Damages
latter refused without justification to accept it.
Action for Performance
Compensatio Morae Action for Specific Performance (To Give)
- Parties in a reciprocal or bilateral contract both occur in delay
Article 1165 (1)
Effects of Delay When what is to be delivered is a determinate thing, the creditor, in
Mora Solvendi addition to the right granted him by Article 1170, may compel the
- Debtor must indemnify the creditor for damages due to delay debtor to make the delivery.
- Debtor must answer for the loss or deterioration of the thing
due, even in fortuitous events Action for Substituted Performance (To Give)
Mora Accipiendi
- Destroys the effects of mora solvendi Article 1165 (2)
- All expenses incurred by the debtor for the preservation of the If the thing is indeterminate or generic, he may ask that the
thing after the delay is carried by the creditor obligation be complied with at the expense of the debtor.
- Debtor may relieve himself of the obligation by consigning the
thing
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Obligations || Nature and Effects of Obligations || Remedies of Creditor in Case of Breach Action for Damages
Action for Substituted Performance or Undoing Poor Work (To Do) Action for Damages
If a person obliged to do something fails to do it, the same shall be Those who in the performance of their obligations are guilty of
executed at his cost. fraud, negligence, or delay, and those who in any manner
contravene the tenor thereof, are liable for damages.
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 Action for Rescission
has been poorly done be undone. Article 1191
EXCEPTION: The power to rescind obligations is implied in reciprocal ones, in
- If there is imposition of personal force, coercion or involuntary case one of the obligors should not comply with what is incumbent
servitude / imprisonment of debtor -> No action anymore upon him.
Action for Undoing (Not To Do)

The injured party may choose between the fulfillment and the
Article 1168 rescission of the obligation, with the payment of damages in either
When the obligation consists in not doing, and the obligor does case. He may also seek rescission, even after he has chosen
what has been forbidden him, it shall also be undone at his expense. fulfillment, if the latter should become impossible.
EXCEPTION:
The court shall decree the rescission claimed, unless there be just
- If the act done is impossible to undo, then only an action for
cause authorizing the fixing of a period.
damages can be instituted
This is understood to be without prejudice to the rights of third

Characteristics of Obligations Not To Do:
persons who have acquired the thing, in accordance with Articles
1. Irregular/Improper performance is equivalent to total breach
2. Partial performance is not possible 1385 and 1388 and the Mortgage Law.
3. There is no mora
4. No accessory obligations may arise Article 1192
5. Breach may be excused in fortuitous events, when it forces the In case both parties have committed a breach of the obligation, the
execution of the forbidden acts
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
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Obligations || Nature and Effects of Obligations || Subsidiary Remedies of Creditor Accion Subragatoria
Exception:
- Action for rescission is only available to reciprocal obligations
Article 772
- Not absolute, not permitted in casual/slight breach, may only be
claimed in substantial breach (S ONG F O V . H AWAIIAN P HILIPPINES ) Only those who at the time of the donor's death have a right to
- Judicial approval is required to produce the legal effect of the legitime and their heirs and successors in interest may ask for
rescission the reduction of inofficious donations.
o UNLESS both parties agree to a rescission
Those referred to in the preceding paragraph cannot renounce their
Subsidiary Remedies of Creditor
right during the lifetime of the donor, either by express
Accion Subragatoria
declaration, or by consenting to the donation.
Article 1177
The creditors, after having pursued the property in possession of The donees, devisees and legatees, who are not entitled to the
the debtor to satisfy their claims, may exercise all the rights and bring legitime and the creditors of the deceased can neither ask for the
all the actions of the latter for the same purpose, save those which reduction nor avail themselves thereof.
are inherent in his person; they may also impugn the acts which
the debtor may have done to defraud them. 1. Inherent rights of the debtor
a. Right to existence
- The debtor of my debtor is my debtor b. Rights or relations of a public character
- Primary action of a creditor to protect his interest over the c. Rights of an honorary character
fulfillment of the obligation. d. Non-patrimonial rights like actions arising from family
- Only to the extent of the amount of credit; any extra amount relations
would be given back to the debtor 2. Mere options or powers of the debtor
a. Right to exercise legal redemption
b. Revocation of stipulation pour autrui
Requisites of Accion Subragatoria 3. Property exempt from execution
1. Creditor has an Interest in the rights of the debtor because of
the latters insolvency Effects of Accion Subragatoria
2. Malicious/Negligent Inaction by the debtor in the exercise of 1. Creditor may sue in the name of the debtor
his rights 2. The action is subject to all defences available to the debtor
3. Credit must be Due and demandable. 3. The creditor may apply the proceeds of the actions to the credit,
4. Exhaustion of the assets in the hands of the debtor but must return all the excess to the debtor
[ DIEE ]
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Obligations || Nature and Effects of Obligations || Subsidiary Remedies of Creditor Accion Pauliana
Accion Pauliana Other Specific Remedies

, save those which are inherent in his person; they may also The sublessee is subsidiarily liable to the lessor for any rent due
impugn the acts which the debtor may have done to defraud from the lessee. However, the sublessee shall not be responsible
them. beyond the amount of rent due from him, in accordance with the
terms of the sublease, at the time of the extrajudicial demand by the
Article 1381 lessor.
The following contracts are rescissible:
(3) Those undertaken in fraud of creditors when the latter cannot in Article 1729
any other manner collect the claims due them; Those who put their labor upon or furnish materials for a piece of
work undertaken by the contractor have an action against the owner
- An action available to a creditor when the debtor fraudulently up to the amount owing from the latter to the contractor at the time
alienates property to another in order to prevent his creditor from the claim is made. However, the following shall not prejudice the
claiming any properties from him
laborers, employees and furnishers of materials:
(1) Payments made by the owner to the contractor before they
Requisites of Accion Pauliana
are due;
1. Debtor has a credit prior to the alienation (2) Renunciation by the contractor of any amount due him from
2. Debtor made a subsequent contract to transfer property to a the owner.
3rd person
3. Creditor has no other remedy left but to rescind the debtors
This article is subject to the provisions of special laws.
contract with the 3rd person
4. Act being impugned is fraudulent
5. Both the debtor and the 3rd person acted with bad faith Article 1608
The vendor may bring his action against every possessor whose
Accion Subragatoria Accion Pauliana right is derived from the vendee, even if in the second contract no
Credit may exist before or after Credit must exist prior to the mention should have been made of the right to repurchase, without
any acts by the debtor fraudulent acts prejudice to the provisions of the Mortgage Law and the Land
No fraudulent intent needed Fraudulent intent must exist Registration Law with respect to third persons.
No prescription period Action prescribes after 4 years
(discovery of fraud)
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Obligations || Nature and Effects of Obligations || Concept of Fortuitous Event
Extinguishment of Liability
Article 1893
In the cases mentioned in Nos. 1 and 2 of the preceding article, the Article 1165 (3)
principal may furthermore bring an action against the substitute If the obligor delays, or has promised to deliver the same thing to two
with respect to the obligations which the latter has contracted under or more persons who do not have the same interest, he shall be
the substitution responsible for any fortuitous event until he has effected the
delivery.
Extinguishment of Liability in Case of Breach Due to Article 552

Fortuitous Event 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
Article 1174
he has acted with fraudulent intent or negligence, after the judicial
Except in cases expressly specified by the law, or when it is
summons.
otherwise declared by stipulation, or when the nature of the
obligation requires the assumption of risk, no person shall be
A possessor in bad faith shall be liable for deterioration or loss in
responsible for those events which could not be foreseen, or which,
every case, even if caused by a fortuitous event.
though foreseen, were inevitable.
Article 1942
Concept of Fortuitous Event
- These are either Acts of God or Acts of Man The bailee is liable for the loss of the thing, even if it should be
- These events would be a justification for the non-compliance or through a fortuitous event:
delay in the performance of an obligation (1) If he devotes the thing to any purpose different from that
- Casus fortuito = general term for which it has been loaned;
- Force majeure = Acts of God (2) If he keeps it longer than the period stipulated, or after the
accomplishment of the use for which the commodatum has
Requisites of the applicability of Fortuitous Event been constituted;
(3) If the thing loaned has been delivered with appraisal of its
1. Must be Independent of human will
value, unless there is a stipulation exemption the bailee from
2. Either Impossible to be seen or if not, Unavoidable
responsibility in case of a fortuitous event;
3. Must render the debtor Impossible to fulfil the obligation
(4) If he lends or leases the thing to a third person, who is not
normally
a member of his household;
4. There is No concurrent fault or aggravation by the debtor
(5) If, being able to save either the thing borrowed or his own
[ III N ]
thing, he chose to save the latter.
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Obligations || Nature and Effects of Obligations || Usurious Transactions Presidential Decrees
Article 1979
Usurious Transactions
The depositary is liable for the loss of the thing through a fortuitous Article 1175
event: Usurious transactions shall be governed by special laws.
(1) If it is so stipulated;
(2) If he uses the thing without the depositor's permission; Article 1961
(3) If he delays its return; Usurious contracts shall be governed by the Usury Law and other
(4) If he allows others to use it, even though he himself may special laws, so far as they are not inconsistent with this Code.
have been authorized to use the same.
Article 1413
Article 2001 Interest paid in excess of the interest allowed by the usury laws
The act of a thief or robber, who has entered the hotel is not may be recovered by the debtor, with interest thereon from the date
deemed force majeure, unless it is done with the use of arms or of the payment.
through an irresistible force.
- Usury is the act of contracting to earn more than what is allowed
by law, usually in the form of interest in the forbearance of
Article 2147
money, good or chattels
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;
Presidential Decrees
(2) If he has preferred his own interest to that of the owner; PD 858
(3) If he fails to return the property or business after demand by The Monetary Board is hereby authorized to prescribe the maximum rate
the owner; or rates of interest for the loan or renewal thereof or the forbearance of
(4) If he assumed the management in bad faith. any money, goods or credits, and to change such rate of rates whenever
warranted by prevailing economic and social conditions.
Exceptions to the rule on extinguishment of liability PD 1685

1. Specified by law Foreign loans obtained by the Central Bank from international or
2. Expressly declared by stipulation
regional financial organizations of which the Republic of the Philippines
3. When the nature of the obligation requires the assumption of
is a member may be guaranteed by the Republic of the Philippines if
risk Art. 1717, 1724
4. When debtor is guilty of fraud, delay or negligence required by the charter, regulation or policy of the lender.
`_______________________________________________________________
Obligations || Nature and Effects of Obligations || Usurious Transactions Central Bank Circulars
Central Bank Circulars Two Concepts on Payment of Interest (from Sir Labitag)
CBC 416 Interest for the Use or Loan/Forbearance of money, goods or credit
Removed loans to exporters to the extent guaranteed by the Guarantee There is No stipulation No interest
Fund for Small and Medium Enterprises (GFSME) from the list of 0% risk There is stipulation, but No Rate 12% per annum (MB 905)
weighted assets There is Stipulation and Rate No ceiling rate (MB 905)
Monetary Board Circular Lifting the Interest Rate Ceiling Interest as damages from breach or default in payment of loan or
MB 905 (1982) forbearance of money, goods or credit
SECTION 2.The rate of interest for the loan or forbearance of any money, There is No stipulation 12% per annum from date of
goods or credits and the rate allowed in judgments, in the absence of judicial/extrajudicial demand
express contract as to such rate of interest, shall continue to be twelve There is Stipulation and Rate 12% interest on the Loan +
per cent (12%) per annum. Stipulated Interest from date of
judgement
SECTION 26.Subsection 4303Q.1 to 4303Q.9 of the Manual of
Regulations are hereby amended to read as follows: Interest in obligations NOT consisting of forbearance of money,
Subsection 4303Q.2. Loans. The rate of interest, including goods or credit
commissions, premiums, fees and other charges, on loan transactions, There is No stipulation 6% per annum from date of
regardless of maturity and whether secured or unsecured, shall not be judicial/extrajudicial demand
subject to any ceiling prescribed under or pursuant to the Usury Law, There is Stipulation and Rate Interest agreed upon
as amended.
All money judgement shall earn 12% from finality of judgement
Article 2209
until full payment, as they are considered as forbearance of credit
If the obligation consists in the payment of a sum of money, and the
(E ASTERN S HIPPING L INES V . CA )
debtor incurs in delay, the indemnity for damages, there being no
stipulation to the contrary, shall be the payment of the interest
agreed upon, and in the absence of stipulation, the legal interest,
which is six per cent per annum.
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Obligations || Different Kinds of Obligations || Fulfillment of Obligations Payment
Fulfillment of Obligations Chapter 3:

Payment
Different Kinds of Obligations
Article 1232
Payment means not only the delivery of money but also the
performance, in any other manner, of an obligation. Pure and Conditional Obligations
Pure Obligations
Article 1179 (1)
Presumptions in payment of interests and installments Every obligation whose performance does not depend upon a
Article 1176 future or uncertain event, or upon a past event unknown to the parties,
The receipt of the principal by the creditor without reservation with is demandable at once.
respect to the interest, shall give rise to the presumption that said
- Though demandable at once, the court may grant the debtor a
interest has been paid.
reasonable time to comply with the obligation, if the
circumstances so justify
The receipt of a later installment of a debt without reservation as
to prior installments, shall likewise raise the presumption that such
Conditional Obligations
installments have been paid.
Article 1181
In conditional obligations, the acquisition of rights, as well as the
extinguishment or loss of those already acquired, shall depend upon
Transmissibility of Rights
the happening of the event which constitutes the condition.
Article 1178
Subject to the laws, all rights acquired in virtue of an obligation
Condition
are transmissible, if there has been no stipulation to the contrary.
- A future and uncertain event
- The happening of the uncertain event must not be impossible
Condition Period/Term
Future and Uncertain Future and Certain
Determines the existence of an Determines the demandability of
obligation an obligation
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Obligations || Different Kinds of Obligations || Pure and Conditional Obligations Conditional Obligations
Kinds of Condition
Article 1188
As to Effect of on Obligation
The creditor may, before the fulfillment of the condition, bring the
Suspensive Condition
appropriate actions for the preservation of his right.
- A condition precedent on the existence of an obligation
- The effectiveness of the obligation and the acquisition of the
creditors rights depend upon the fulfillment of the condition The debtor may recover what during the same time he has paid by
mistake in case of a suspensive condition.
Resolutory Condition
Suspensive Resolutory
- A condition subsequent to the existence of an obligation
Fulfillment Obligation arises Obligation is extinguished
- The obligation is immediately effective but is subject to
extinguishment upon fulfillment of the condition Non- No Obligation Obligation continues
fulfillment
Article 1187 Pendency No Obligation Obligation is effective
The effects of a conditional obligation to give, once the condition
has been fulfilled, shall retroact to the day of the constitution of the As to the Cause/Origin
obligation. Nevertheless, when the obligation imposes reciprocal
Article 1182
prestations upon the parties, the fruits and interests during the
When the fulfillment of the condition depends upon the sole will of
pendency of the condition shall be deemed to have been
the debtor, the conditional obligation shall be void. If it depends
mutually compensated. If the obligation is unilateral, the debtor
upon chance or upon the will of a third person, the obligation shall
shall appropriate the fruits and interests received, unless from the
take effect in conformity with the provisions of this Code.
nature and circumstances of the obligation it should be inferred that
the intention of the person constituting the same was different. - Potestative Depending on the sole will of a party
- Casual Depending upon chance or a will of a stranger
In obligations to do and not to do, the courts shall determine, in - Mixed Partly will of a party and partly chance/will of a
stranger
each case, the retroactive effect of the condition that has been
complied with.
Suspensive Resolutory
Potestative (Creditor) VALID VALID
Potestative (Debtor) VOID VALID
- A potestative (debtor) resolutory condition is valid, as the
obligation is already effective
`_______________________________________________________________
As to Possibility As to Mode
- Possible Positive
- Impossible
Article 1184
The condition that some event happen at a determinate time shall
Article 1183 extinguish the obligation as soon as the time expires or if it has
Impossible conditions, those contrary to good customs or public become indubitable that the event will not take place.
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 Negative
be valid. Article 1185
The condition that some event will not happen at a determinate
The condition not to do an impossible thing shall be considered as time shall render the obligation effective from the moment the time
not having been agreed upon. indicated has elapsed, or if it has become evident that the event
cannot occur.
Type of Impossibility
- Physical (contrary to law of nature)
- Juridical (contrary to law, morals, good customs, etc.) If no time has been fixed, the condition shall be deemed fulfilled at
such time as may have probably been contemplated, bearing in
Effects of Impossibility mind the nature of the obligation.
GENERAL RULE (ANNULS BOTH THE OBLIGATION AND CONDITION:
- POSITIVE and SUSPENSIVE conditions only. Loss, Deterioration and Improvement
Loss
EXCEPTIONS (CONVERTS TO A PURE OBLIGATION): - Perishes
- Negative conditions (Not to do - Goes out of commerce
- Simple, remuneratory and testamentary donations and - Disappears in such a way that its existence is unknown or is
dispositions Art. 727 and 873 unrecoverable
Deterioration
*These are impossibility that existed at the time of making of the - Any reduction/impairment in the substance/value of a thing that
contract. Impossibility arising after is covered by Art. 1266 does not result to a loss.
Improvement
- Anything added, incorporated or attached to a thing.
`_______________________________________________________________
Rules in case of Loss, Deterioration, Improvement Rules in case of Loss, Deterioration, Improvement
(Pending the happening of a Suspensive Condition) (Pending the happening of a Resolutory Condition)

When the conditions have been imposed with the intention of When the conditions have for their purpose the extinguishment
suspending the efficacy of an obligation to give, the following rules of an obligation to give, the parties, upon the fulfillment of said
shall be observed in case of the improvement, loss or conditions, shall return to each other what they have received.
deterioration of the thing during the pendency of the condition:
(1) If the thing is lost without the fault of the debtor, the In case of the loss, deterioration or improvement of the thing, the
obligation shall be extinguished; provisions which, with respect to the debtor, are laid down in the
(2) If the thing is lost through the fault of the debtor, he shall
preceding article shall be applied to the party who is bound to return.
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 As for the obligations to do and not to do, the provisions of the
recovered; second paragraph of Article 1187 shall be observed as regards the
(3) When the thing deteriorates without the fault of the effect of the extinguishment of the obligation.
debtor, the impairment is to be borne by the creditor;
(4) If it deteriorates through the fault of the debtor, the Loss Deterioration Improvement
creditor may choose between the rescission of the obligation Without Obligation is Creditor bears the Creditor to
and its fulfillment, with indemnity for damages in either case; Fault extinguished impairments benefit
(5) If the thing is improved by its nature, or by time, the Debtors Pay Creditor to choose either Debtor has
improvement shall inure to the benefit of the creditor; Fault / Damages fulfillment or rescission rights only to
(6) If it is improved at the expense of the debtor, he shall have
Expense (always with damages) the usufruct
no other right than that granted to the usufructuary.
- Only applicable to the delivery of specific things, not to generic Effect of Prevention of the Fulfillment of the Condition by the
things Obligor
- If the suspensive condition never happens, the creditor does not
Article 1186
obtain any cause of action to demand any of the above
The condition shall be deemed fulfilled when the obligor voluntarily
prevents its fulfillment.
Loss, deterioration and Improvement in Obligations To Do
- To be determined by the courts - Only applies to Suspensive conditions that do not depend upon
chance
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Obligations || Different Kinds of Obligations || Reciprocal Obligations Concept
Reciprocal Obligations Concept

- A reciprocal obligation is an obligation with all the requisites of a
Article 1191 valid obligation occurs simultaneously for both parties
The power to rescind obligations is implied in reciprocal ones, in (Each is a creditor & debtor of the other simultaneously)
case one of the obligors should not comply with what is incumbent
upon him. Alternative remedies of injured party in case of breach
1. Action for Fulfillment
The injured party may choose between the fulfillment and the 2. Action for Rescission
rescission of the obligation, with the payment of damages in either
Action for Fulfillment
case. He may also seek rescission, even after he has chosen
- If suddenly becomes impossible, rescission is the only option
fulfillment, if the latter should become impossible.
Action for Rescission
The court shall decree the rescission claimed, unless there be just Requisites of Rescission
cause authorizing the fixing of a period. 1. One of the obligors should not comply with what is incumbent
upon him
2. The injured party chose rescission OR chose performance but it
This is understood to be without prejudice to the rights of third
became impossible
persons who have acquired the thing, in accordance with Articles 3. Breach is substantial and must be through fault or fraud
1385 and 1388 and the Mortgage Law.
How Made
Article 1192 GENERAL RULE:
In case both parties have committed a breach of the obligation, the - Rescission must be asked from the courts
liability of the first infractor shall be equitably tempered by the EXCEPTIONS:
courts. If it cannot be determined which of the parties first violated - If there is a stipulation for extra-judicial rescission (UP V . D E L OS
the contract, the same shall be deemed extinguished, and each A NGELES )
shall bear his own damages. - If the obligation has not yet been performed
Unilateral Obligations
Other cases where it resolution may not be granted
- Resolution must be expressed in the contract
- If the courts find just cause to fix a period
Bilateral/Reciprocal Obligations
o Delay but there is possibility of fulfillment, unless time is
- Can be either expressed or implied of the essence
BREACH is a tacit resolutory condition - Contract of life annuities
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Obligations || Different Kinds of Obligations || Reciprocal Obligations Differences of Arts. 1191 & 1380
Effects of Rescission Article 1788

- Annuls the principal and accessory obligations
A partner who has undertaken to contribute a sum of money and
- Art. 1192s rule on mitigation of liabilities
fails to do so becomes a debtor for the interest and damages from
- Does not affect 3rd persons who acted in good faith
the time he should have complied with his obligation.
Differences of Arts. 1191 & 1380

The same rule applies to any amount he may have taken from the
Resolution (1191) Rescission (1380)
partnership coffers, and his liability shall begin from the time he
Only by a contracting party Party suffering from lesion / third
converted the amount to his own use.
party prejudiced
Non-performance of obligation Various reasons of equity, mainly
economic injury Article 1484
Court determines sufficiency of Only needs to satisfy the In a contract of sale of personal property the price of which is
reason (Slight or Casual Breach) requisites. No need to measure payable in installments, the vendor may exercise any of the
sufficiency of reason following remedies:
Only to reciprocal obligations Unilateral or reciprocal obligations (1) Exact fulfillment of the obligation, should the vendee fail to
Principal Remedy Subsidiary Remedy pay;
(2) Cancel the sale, should the vendee's failure to pay cover two
or more installments;
Article 1786 (3) Foreclose the chattel mortgage on the thing sold, if one has
Every partner is a debtor of the partnership for whatever he may been constituted, should the vendee's failure to pay cover two
have promised to contribute thereto. or more installments. In this case, he shall have no further
action against the purchaser to recover any unpaid balance of
He shall also be bound for warranty in case of eviction with regard the price. Any agreement to the contrary shall be void.
to specific and determinate things which he may have contributed to
the partnership, in the same cases and in the same manner as the
vendor is bound with respect to the vendee. He shall also be liable Article 1485
for the fruits thereof from the time they should have been delivered, The preceding article shall be applied to contracts purporting to be
without the need of any demand. leases of personal property with option to buy, when the lessor
has deprived the lessee of the possession or enjoyment of the thing.
`_______________________________________________________________
Obligations || Different Kinds of Obligations || Obligation with a Period Period or Term
Article 1486 Obligation with a Period

In the case referred to in two preceding articles, a stipulation that
Article 1193
the installments or rents paid shall not be returned to the vendee
Obligations for whose fulfillment a day certain has been fixed, shall
or lessee shall be valid insofar as the same may not be
be demandable only when that day comes.
unconscionable under the circumstances.
Obligations with a resolutory period take effect at once, but

RA 6552 Realty Installment Buyer Act terminate upon arrival of the day certain.
Rights of Buyers in case he defaults in payments of succeeding
installments: A day certain is understood to be that which must necessarily come,
- To pay, without additional interest, the unpaid installments although it may not be known when.
due within the total grace period earned by him which is
hereby fixed at the rate of one month grace period for every If the uncertainty consists in whether the day will come or not,
one year of installment payments made: Provided, That this the obligation is conditional, and it shall be regulated by the rules of
right shall be exercised by the buyer only once in every five years
the preceding Section.
of the life of the contract and its extensions, if any.
- If the contract is cancelled, the seller shall refund to the buyer
Article 1180
the cash surrender value of the payments on the property
equivalent to fifty per cent of the total payments made, and, When the debtor binds himself to pay when his means permit him
after five years of installments, an additional five per cent every to do so, the obligation shall be deemed to be one with a period,
year but not to exceed ninety per cent of the total payments subject to the provisions of Article 1197
made: Provided, That the actual cancellation of the contract shall
take place after thirty days from receipt by the buyer of the notice
of cancellation or the demand for rescission of the contract by a Period or Term
notarial act and upon full payment of the cash surrender value to - A period/term is a span of time where it either suspends the
the buyer. demandability of an obligation produces the extinction of a
Down payments, deposits or options on the contract shall be included in contract
the computation of the total number of installment payments made. - It must be a day certain, and not a condition
`_______________________________________________________________
Obligations || Different Kinds of Obligations || Obligation with a Period Kinds of Period/Term
Kinds of Period/Term Rules in case of Loss, Deterioration, or Improvement

before arrival of period
As to Effect
Suspensive Article 1194
- A suspensive period fixes a period when the demandability of an In case of loss, deterioration or improvement of the thing before
obligation will arise (e.g. In one year, when his means allows him) the arrival of the day certain, the rules in Article 1189 shall be
Resolutory observed.
- A resolutory period fixes a period when the obligation should run.
It starts from the establishment of the obligation and ends in a Rules in Art. 1189 and 1190
particular day. Loss Deterioration Improvement
o Failure to perform the obligation during the period is a Without Obligation is Creditor bears the Creditor to
substantial breach of the obligation Fault extinguished impairments benefit
As to Expression Debtors Pay Creditor to choose either Debtor has
Express Fault / Damages fulfillment or rescission rights only to
- Period is specified in the contract, obligation or by law Expense (always with damages) the usufruct
Implied
- Period can be inferred from the nature and circumstances Effect of Payment in Advance
surrounding the obligation
Article 1195
As to Definiteness Anything paid or delivered before the arrival of the period, the
Definite obligor being unaware of the period or believing that the obligation
- Period is fixed has become due and demandable, may be recovered, with the fruits
Indefinite and interests.
- Period was intended, so must be fixed by the courts
- Period will happen but its definiteness is not yet known (death, - Applicable only to Obligations To Do
movable holidays, etc.) - Bad faith/good faith of creditor is immaterial
- Action must be done before arrival of the period
As to Source
Voluntary Fixed by the parties
Legal Fixed by law
Judicial Fixed by the courts
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Obligations || Different Kinds of Obligations || Obligation with a Period Benefit of a Period
GENERAL RULE: When debtor loses right to make use of period

- Payment in advance does not allow recovery
Article 1198
EXCEPTIONS:
The debtor shall lose every right to make use of the period:
- If the debtor was unaware of the period
- If the debtor believed that the obligation was due and (1) When after the obligation has been contracted, he
demandable becomes insolvent, unless he gives a guaranty or security for
the debt;
(2) When he does not furnish to the creditor the guaranties or
Benefit of a Period securities which he has promised;
(3) When by his own acts he has impaired said guaranties or
For whose benefit and its effects
securities after their establishment, and when through a
- Creditor
fortuitous event they disappear, unless he immediately gives
o May demand performance anytime, but cannot be
new ones equally satisfactory;
compelled to receive anytime (Before or after period)
(4) When the debtor violates any undertaking, in consideration
- Debtor
of which the creditor agreed to the period;
o May oppose premature demand
(5) When the debtor attempts to abscond.
- Both
o Cannot compel the debtor to pay in advance and cannot
compel the creditor to receive in advance - Obligation then turns into a pure obligation
Presumption When Court may Fix a Period

Whenever in an obligation a period is designated, it is presumed to If the obligation does not fix a period, but from its nature and the
have been established for the benefit of both the creditor and circumstances it can be inferred that a period was intended, the
the debtor, unless from the tenor of the same or other circumstances courts may fix the duration thereof.
it should appear that the period has been established in favor of one
or of the other. The courts shall also fix the duration of the period when it depends
upon the will of the debtor.
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.
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Obligations || Different Kinds of Obligations || Alternative Obligations Concept
Alternative Obligations Effect of Notice of Choice

Concept - The obligation ceases to be alternative and becomes a pure
obligation
Article 1199 - This notice is also irrevocable
A person alternatively bound by different prestations shall
completely perform one of them.
When Notice produces effect
Article 1201
The creditor cannot be compelled to receive part of one and part
The choice shall produce no effect except from the time it has been
of the other undertaking.
communicated.
Characteristics of an alternative obligation
Ways in order to communicate choice
1. Plurality of the prestations
2. Only one of the prestations is required to be performed 1. Orally
2. In Writing
3. Tacit declaration (creditor sues or debtor just performs)
Right of Choice 4. Only one prestation remains
Article 1200
The right of choice belongs to the debtor, unless it has been What if the debtor elects a prestation that is not part of the choices?
expressly granted to the creditor. - It shall be valid if the creditor accepts it (Novation)
The debtor shall have no right to choose those prestations which Effect of Loss or Impossibility of one or all prestations
are impossible, unlawful or which could not have been the object Article 1202
of the obligation. The debtor shall lose the right of choice when among the prestations
whereby he is alternatively bound, only one is practicable.
GENERAL RULE:
- Debtor has the right of choice
o But if the debtor does not choose a prestation, the
creditor can sue him to make a choice Article 1203
EXCEPT: If through the creditor's acts the debtor cannot make a choice
- If they stipulate for the creditor or a third party to choose according to the terms of the obligation, the latter may rescind the
contract with damages.
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Obligations || Different Kinds of Obligations || Alternative Obligations

The creditor shall have a right to indemnity for damages when, When the choice has been expressly given to the creditor, the
through the fault of the debtor, all the things which are obligation shall cease to be alternative from the day when the
alternatively the object of the obligation have been lost, or the selection has been communicated to the debtor.
compliance of the obligation has become impossible. Until then the responsibility of the debtor shall be governed by the
following rules:
The indemnity shall be fixed taking as a basis the value of the last (1) If one of the things is lost through a fortuitous event, he
thing which disappeared, or that of the service which last became shall perform the obligation by delivering that which the
impossible. 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
Damages other than the value of the last thing or service may also be
the debtor, the creditor may claim any of those subsisting, or
awarded. the price of that which, through the fault of the former, has
disappeared, with a right to damages;
(3) If all the things are lost through the fault of the debtor, the
Comparative Table choice by the creditor shall fall upon the price of any one of
Debtors Choice Creditors Choice* them, also with indemnity for damages.
One is lost through Debtor to choose Debtor to comply
a fortuitous event from the others with creditors choice The same rules shall be applied to obligations to do or not to do in
One is loss through No indemnity for Creditor can choose case one, some or all of the prestations should become impossible.
debtors fault loss. Same rule above any or the value of
All are lost through Indemnity for value the one that is lost,
fault of debtor of the last thing with indemnity for
which disappeared damages
All are lost through No indemnity and obligation is
a fortuitous event extinguished**
* Same rules apply to choices assigned to a third person
** Even if the other prestations were lost through the fault of the debtor,
there will still be no indemnity if the LAST prestation was lost through a
fortuitous event
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Obligations || Different Kinds of Obligations || Joint and Solidary Obligations Facultative Obligation
Facultative Obligation Joint and Solidary Obligations

Article 1206 Joint Obligations
When only one prestation has been agreed upon, but the obligor
Concept
may render another in substitution, the obligation is called
- Obligations existing among several persons (whether creditors
facultative. or debtors), among whom the benefit/burden is divided
- Each debtor is only liable for their part of the debt; each creditor
The loss or deterioration of the thing intended as a substitute, is only entitled to their share in the obligation
through the negligence of the obligor, does not render him liable.
But once the substitution has been made, the obligor is liable for Requisites of a Joint Obligation
the loss of the substitute on account of his delay, negligence or 1. Plurality of subjects
fraud. 2. Determinability of shares in the demandability of the obligation
a. Shares may be unequal
- Also called a substitutable obligation b. Share must be distinct from each other
- This is akin to a simple/pure obligation but the debtor has the
option of substituting another prestation for the principal one Words Used
o Rules on pure obligation applies to it + Art. 1206 - Mancomunada - Jointly
- The creditor cannot compel the debtor to make the substitution - Pro rata - We promise to pay
Alternative Obligations Facultative Obligations Presumption

Obligation is only demandable Obligation is demandable at once Article 1207
upon choice The concurrence of two or more creditors or of two or more
Several prestations due Only one prestation is due debtors in one and the same obligation does not imply that each
Loss of any of the prestation Loss of the substitute does not one of the former has a right to demand, or that each one of the latter
renders the debtor liable if choice render him liable is bound to render, entire compliance with the prestation. There is a
is by creditor (through fault) solidary liability only when the obligation expressly so states, or
Choice may be granted to the Choice is only reserved to the when the law or the nature of the obligation requires solidarity.
creditor or to a third person debtor
- Presumption of a joint obligation
- Presumption of equality of shares
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Obligations || Different Kinds of Obligations || Joint and Solidary Obligations Joint Obligations
Article 1208 Extent of right of creditor

If from the law, or the nature or the wording of the obligations to 1. Demand by one creditor upon one debtor produces the effects
of default only with respect to the creditor who demanded and
which the preceding article refers the contrary does not appear, the
the debtor on whom the demand was made, but not with respect
credit or debt shall be presumed to be divided into as many to others
shares as there are creditors or debtors, the credits or debts being 2. Interruption of prescription by the judicial demand of one
considered distinct from one another, subject to the Rules of Court creditor upon a debtor does not benefit the other creditors nor
governing the multiplicity of suits. interrupt the prescription as to other debtors
In case of:
Effects
Novation: Affects only the share of the joint co-debtor in
Article 1277 whom the novation is created
Confusion does not extinguish a joint obligation except as regards Compensation: Affects only the share of the joint co-debtor in
the share corresponding to the creditor or debtor in whom the two whom the compensation takes place
characters concur. Confusion: Confusion does not extinguish a joint obligation
except as regards the share corresponding to the
Extent of liability of debtor
creditor or debtor in whom the two characters
1. Only with respect to his particular share in the debt
2. Vices of each obligation arising from the personal defect of a concur.
particular debtor or creditor does not affect the obligation or Remission: Benefits only the joint co-debtor in whom the
rights of the others remission is granted, obligation extinguished
3. The insolvency of a debtor does not increase the responsibility of
his co-debtors nor does it authorize a creditor demand anything
from his co-creditors
4. JOINT DIVISIBLE OBLIGATION: defense of res judicata is not
extended from one debtor to another
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Obligations || Different Kinds of Obligations || Joint and Solidary Obligations Solidary Obligations
Solidary Obligations Article 1915

Article 1207 If two or more persons have appointed an agent for a common
There is a solidary liability only when the obligation expressly so transaction or undertaking, they shall be solidarily liable to the agent
states, or when the law or the nature of the obligation requires for all the consequences of the agency.
solidarity.
Concept Article 1945
- There is a concurrence of several debtors or creditors to a When there are two or more bailees to whom a thing is loaned in
particular obligation, where they bind themselves each the ability the same contract, they are liable solidarily.
to perform the obligation or the right to demand the
performance, respectively Article 2194
- It must either be: The responsibility of two or more persons who are liable for quasi-
o Expressly stipulated
delict is solidary.
o Mandated by law
o Inferred by the nature of the obligation
o Imputed by final judgement Article 2146 (2)
The responsibility of two or more officious managers shall be
Requisites of a Solidary Obligation solidary, unless the management was assumed to save the thing or
1. Plurality of subjects business from imminent danger.
2. Unity of prestation without definite shares
a. Ability to perform/demand Article 2157 (Solutio Indebiti)
3. Distribution among solidary parties The responsibility of two or more payees, when there has been
payment of what is not due, is solidary.
Words used
- Mancomunada solidaria - Solidarily
- In solidum - Joint and several
Article 110 - RPC
- Individually and collectively - I promise to pay
Notwithstanding the provisions of the next preceding article, the
Kinds principals, accomplices, and accessories, each within their
As to Source respective class, shall be liable severally (in solidum) among
1. Legal By Law themselves for their quotas, and subsidiaries for those of the other
2. Conventional By Stipulation persons liable.
3. Real By Nature of the obligation
`_______________________________________________________________
As to Parties bound
1. Active (Creditors)
Article 1215
2. Passive (Debtors)
3. Mixed Novation, compensation, confusion or remission of the debt,
made by any of the solidary creditors or with any of the solidary
As to Uniformity debtors, shall extinguish the obligation, without prejudice to the
1. Uniform Same terms/conditions for all provisions of Article 1219.
2. Varied / Non-Uniform Different terms/conditions
The creditor who may have executed any of these acts, as well as
Article 1211
he who collects the debt, shall be liable to the others for the share in
Solidarity may exist although the creditors and the debtors may
the obligation corresponding to them.
not be bound in the same manner and by the same periods and
conditions.
Article 1216
The creditor may proceed against any one of the solidary debtors
Effects
or some or all of them simultaneously. The demand made against
Solidary Creditor in relation to:
one of them shall not be an obstacle to those which may subsequently
> Common Debtor
be directed against the others, so long as the debt has not been
Article 1214 fully collected.
The debtor may pay any one of the solidary creditors; but if any
demand, judicial or extrajudicial, has been made by one of them,
> Solidary Co-Creditors
payment should be made to him.
Article 1212
Article 1217 (1) Each one of the solidary creditors may do whatever may be
Payment made by one of the solidary debtors extinguishes the useful to the others, but not anything which may be prejudicial to the
obligation. If two or more solidary debtors offer to pay, the creditor latter.
may choose which offer to accept.
Article 1213
A solidary creditor cannot assign his rights without the consent of
the others.
`_______________________________________________________________
Solidary Debtor in relation to: Article 1219

> Common Creditor The remission made by the creditor of the share which affects
Article 1207 one of the solidary debtors does not release the latter from his
The concurrence of two or more creditors or of two or more debtors responsibility towards the co-debtors, in case the debt had been
in one and the same obligation does not imply that each one of the totally paid by anyone of them before the remission was
former has a right to demand, or that each one of the latter is bound effected.
to render, entire compliance with the prestation. There is a solidary
liability only when the obligation expressly so states, or when the Article 1220
law or the nature of the obligation requires solidarity. The remission of the whole obligation, obtained by one of the
solidary debtors, does not entitle him to reimbursement from his co-
> Solidary Co-Debtors
debtors.
Article 1217
Payment made by one of the solidary debtors extinguishes the Article 1221
obligation. If two or more solidary debtors offer to pay, the creditor If the thing has been lost or if the prestation has become impossible
may choose which offer to accept. without the fault of the solidary debtors, the obligation shall be
extinguished.
He who made the payment may claim from his co-debtors only
the share which corresponds to each, with the interest for the If there was fault on the part of any one of them, all shall be
payment already made. If the payment is made before the debt is responsible to the creditor, for the price and the payment of damages
due, no interest for the intervening period may be demanded. and interest, without prejudice to their action against the guilty
or negligent debtor.
When one of the solidary debtors cannot, because of his
insolvency, reimburse his share to the debtor paying the obligation, If through a fortuitous event, the thing is lost or the performance
such share shall be borne by all his co-debtors, in proportion to the debt has become impossible after one of the solidary debtors has
of each. incurred in delay through the judicial or extrajudicial demand
upon him by the creditor, the provisions of the preceding paragraph
Article 1218 shall apply.
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.
`_______________________________________________________________
Obligations || Different Kinds of Obligations || Joint and Solidary Obligations Joint Indivisible Obligations
Defenses available to a solidary debtor against the creditor Indivisibility Solidarity
Article 1222 Source Arises from the nature of Arises from the nature of the
the prestation (not capable tie among debtors/creditors
A solidary debtor may, in actions filed by the creditor, avail himself
of partial performance) (defines the extent of liability)
of all defenses which are derived from the nature of the
Parties Can happen between one Must have at least 2 debtors
obligation and of those which are personal to him, or pertain to
his own share. With respect to those which personally belong to the debtor and creditor or creditors
others, he may avail himself thereof only as regards that part of the Effects Breach by debtor does not Breach by one affects
debt for which the latter are responsible. affect co-debtors everyone
Possible Defenses based on nature: Effects

- Vices of consent Article 1209
- Prescription If the division is impossible, the right of the creditors may be
- Illegality
prejudiced only by their collective acts, and the debt can be enforced
- Absence of a requisite of an obligation/contract
only by proceeding against all the debtors. If one of the latter
should be insolvent, the others shall not be liable for his share.
Effects of the defense:
- If from nature: Everyone is benefited
- If personal: Only him benefited Article 1224
- If from co-debtor: Partial defense A joint indivisible obligation gives rise to indemnity for damages
from the time anyone of the debtors does not comply with his
Joint Indivisible Obligations undertaking. The debtors who may have been ready to fulfill their
promises shall not contribute to the indemnity beyond the
Concept
corresponding portion of the price of the thing or of the value of the
- A special kind of joint obligation where the prestation is
service in which the obligation consists.
indivisible
- Usually found in obligations To Do or Not To Do 1. Need to proceed against all debtors
2. In case of Breach, need to pay the value
Indivisibility v. Solidarity
3. Damage is liability of guilty party
Article 1210 4. There is no mutual agency
The indivisibility of an obligation does not necessarily give rise to
solidarity. Nor does solidarity of itself imply indivisibility.
`_______________________________________________________________
Obligations || Different Kinds of Obligations || Divisible and Indivisible Obligations Divisible Obligations
Divisible and Indivisible Obligations Indivisible Obligations

Divisible Obligations Concept
Concept - Obligations that are not susceptible of partial performance
- Partial performance shall constitute a breach of the obligation
Article 1225 (2)
When the obligation has for its object the execution of a certain Kinds and Presumptions
number of days of work, the accomplishment of work by metrical Article 1225
units, or analogous things which by their nature are susceptible of For the purposes of the preceding articles, obligations to give
partial performance, it shall be divisible. definite things and those which are not susceptible of partial
performance shall be deemed to be indivisible.
- An obligation which is susceptible of partial performance
- Creditor cannot demand a single performance of the obligation
However, even though the object or service may be physically
divisible, an obligation is indivisible if so provided by law or
Effects intended by the parties.
Article 1223
1. Natural Determinate things
The divisibility or indivisibility of the things that are the object of 2. Conventional Determined by the parties
obligations in which there is only one debtor and only one creditor 3. Legal Provided by law
does not alter or modify the provisions of Chapter 2 of this Title.
In obligations Not To Do
Article 1233 Article 1225 (3)

A debt shall not be understood to have been paid unless the thing In obligations not to do, divisibility or indivisibility shall be
or service in which the obligation consists has been completely determined by the character of the prestation in each particular
delivered or rendered, as the case may be case.
`_______________________________________________________________
Obligations || Different Kinds of Obligations || Obligations with a Penal Clause Concepts
Cessation of Indivisibility
1. Natural Indivisibility Obligations with a Penal Clause Facultative Obligation
o Will only turn into a divisible obligation if it is converted Payment of penalty in lieu of the Power of the debtor to choose is
into an obligation to pay damages principal = only by express absolute
2. Conventional/Legal Indivisibility
stipulation
o Contract is novated
o Death of the debtor/creditor (as it gets divided to the Creditor may demand both Creditor can never demand both
heirs) obligations in case of stipulation prestations
Obligations with a Penal Clause

Penal Clause
Concepts - An accessory stipulation added to an obligation, which would be
Principal Obligation Accessory Obligation effective upon failure to perform the obligation or upon violation
Can stand alone, independent of Must attach to a principal of any part of the contract
other obligations obligation in order to have effect - Purpose is to induce performance
- These are construed strictly against the creditor
Obligations with a Penal Clause Conditional Obligation
Obligation is in existence already Needs to wait for the happening Kinds of Penal Clause
of a condition for the obligation
As to effect:
to take place
1. Subsidiary Only the penalty may be enforced
Accessory obligation is dependent Principal obligation is 2. Complementary Both the principal obligation and penalty
upon the non-performance of the dependent upon the happening are enforced
principal obligation of the condition
As to source:
1. Conventional
Obligations with a Penal Clause Alternative Obligation
2. Legal
Only one prestation Two or more prestations
Impossibility of the obligation Impossibility of one of the As to purpose:
annuls the penal clause prestations does not annul the 1. Punitive Damages and Penalty
2. Reparatory Penalty only over damages
obligation
Cannot choose to pay the Debtor chooses the prestation to
penalty perform
`_______________________________________________________________
Obligations || Different Kinds of Obligations || Obligations with a Penal Clause Demandability of Penalty
Demandability of Penalty Debtor not exempt from Performance
Article 1226 (2) Article 1227

The penalty may be enforced only when it is demandable in The debtor cannot exempt himself from the performance of the
accordance with the provisions of this Code. obligation by paying the penalty, save in the case where this right
has been expressly reserved for him. Neither can the creditor
Requisites for Enforcement of Penalty
demand the fulfillment of the obligation and the satisfaction of
1. Only the debtor must have breached the obligation
the penalty at the same time, unless this right has been clearly
2. Penalty must not be illegal
granted him. However, if after the creditor has decided to require the
fulfillment of the obligation, the performance thereof should
Effects of Penal Clause
become impossible without his fault, the penalty may be enforced.
Substitute for Indemnity and Payment of Interest
Article 1226 (1)

When Penalty shall be equitably reduced
In obligations with a penal clause, the penalty shall substitute the
indemnity for damages and the payment of interests in case of Article 1229
noncompliance, if there is no stipulation to the contrary. The judge shall equitably reduce the penalty when the principal
Nevertheless, damages shall be paid if the obligor refuses to pay the obligation has been partly or irregularly complied with by the
penalty or is guilty of fraud in the fulfillment of the obligation. debtor. Even if there has been no performance, the penalty may also
be reduced by the courts if it is iniquitous or unconscionable.
GENERAL RULE:
- Penalty substitutes for damages and interests
EXCEPTIONS: Nullity of Principal Obligation or Penal Clause
- Obligor refuses to pay the penalty
- Obligor is guilty of fraud in the fulfilment of the obligation Article 1230
The nullity of the penal clause does not carry with it that of the
Article 1228 principal obligation.
Proof of actual damages suffered by the creditor is not necessary in

The nullity of the principal obligation carries with it that of the
order that the penalty may be demanded.
penal clause.
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Obligations || Extinguishment of Obligations || Modes of Extinguishment
Chapter 4: [ PP II TPC ]
Extinguishment of Obligations 1. Payor Who can pay

- Debtor / Duly authorized agent
Modes of Extinguishment - Debtors Heir / Successor-in-interest
Article 1231 - Any Interested person
[A person who will benefit from the fulfilment of the obligation
Obligations are extinguished:
like a co-debtor]
(1) By payment or performance: (with or without consent OR knowledge)
(2) By the loss of the thing due: - A Stranger with consent from debtor
(3) By the condonation or remission of the debt; (creditor is not bound to accept, unless there is a stipulation to
(4) By the confusion or merger of the rights of creditor and the contrary - Art. 1236 (1))
debtor; [ DHIS ]
(5) By compensation;
(6) By novation.
Rules on Payment by Strangers
Payment or Performance 1. Whoever pays without the knowledge or against the will of the
debtor:
a. Can only recover only insofar as the payment has been
Article 1232
beneficial to the debtor Art. 1236 (2)
Payment means not only the delivery of money but also the
b. Cannot compel the creditor to subrogate him in his rights,
performance, in any other manner, of an obligation. such as those arising from a mortgage, guaranty, or
penalty. Art. 1237
- Execution or carrying out of an obligation (Planiol)
2. There is legal subrogation when a stranger pays with express or
- Performance of the prestation due under the obligation, whether
tacit approval of the debtor. Art. 1302 (2)
it consists in delivering money or not (Crome)
3. Payment by a stranger who does not intend to be reimbursed, is
Requisites of a Valid Payment deemed to be a donation
1. Payor (Who can pay) a. Requires the debtors consent
2. Payee (Who can receive payment) b. BUT is still valid payment, regardless of acceptance by the
3. Identity (What is to be paid) debtor
4. Integrity (How is payment to be paid)
5. Time (When payment is to be made)
6. Place (Where to be paid)
7. Costs (Expenses of making payment)
`_______________________________________________________________
Obligations || Extinguishment of Obligations || Payment or Performance Requisites of a Valid Payment
Rules on Capacity of Payor Rules on Capacity of Payee

In obligations to GIVE: Payment to a person incapacitated to administer his property is valid if:
1. No free disposal / no capacity to alienate = INVALID Art. 1239 - Payee has kept the thing delivered
2. IF payment was done voluntarily by a minor between 18-21, - Insofar as payment has been beneficial to him (Proof of benefit
without the consent of his parent or guardian, of a fungible thing, required.
does not entitle him to recover the payment thus made, IF the Art. 1241 (1st paragraph)
creditor spent/consumed it in good faith Art. 1427
Instances where benefit need not be proved
Rules on Solidarity - If after the payment, the third person acquires the creditor's
- The debtor may pay any of the solidary creditors, but if demand rights;
is made by one of them, payment should be made to him Art. - If the creditor ratifies the payment to the third person;
1214 - If by the creditor's conduct, the debtor has been led to believe
- Payment made by one of the solidary debtors extinguishes the that the third person had authority to receive the payment.
obligation. Art. 1217 Art. 1241 (2nd paragraph)
- Payment made in good faith to any person in possession of the
credit shall release the debtor.
2. Payee Who can receive payment Art. 1242
- Creditor at the time of payment (To whom the payment is
expected to be made)
- Successor-in-interest 3. Identity What is to be paid
- Authorized person to receive payment (law/stipulation) - The very prestation (thing/service/abstention) due
- A person Not authorized, provided that the creditor is benefited
(Proof of benefit required) In obligations to GIVE A SPECIFIC THING
- Payment made in good faith to any Person in Possession of the
credit Article 1244 (1)
Arts. 1240, 1241 & 1242 The debtor of a thing cannot compel the creditor to receive a
[ CSANP ] different one, although the latter may be of the same value as, or
more valuable than that which is due.
Article 1166
The obligation to give a determinate thing includes that of delivering
all its accessions and accessories, even though they may not have
been mentioned.
`_______________________________________________________________
R.A. 8183 (1996)

Exceptions to the No substitution rule
All monetary obligations shall be settled in the Philippine currency
- If the obligation is facultative
which is legal tender in the Philippines. However, the parties may
- If the creditor agrees to the substitution = dation in payment
(datio in solutum) agree that the obligation or transaction shall be settled in any other
currency at the time of payment.
In obligations to GIVE A GENERIC THING Repealed R.A. 529
- Generally, the thing paid must be of the quantity and quality
specified
When payment is tendered through check/negotiable instrument
Article 1246 - Payment shall only be valid if:
When the obligation consists in the delivery of an indeterminate or o The instrument has been cashed
o Through the fault of the creditor, they have been
generic thing, whose quality and circumstances have not been stated,
impaired
the creditor cannot demand a thing of superior quality. Neither
Art. 1249 (2)
can the debtor deliver a thing of inferior quality. The purpose of
the obligation and other circumstances shall be taken into
consideration. Article 1250
In case an extraordinary inflation or deflation of the currency
- The Kind and Quantity (not Quality) must be determinable,
stipulated should supervene, the value of the currency at the time
without a new agreement of the parties, otherwise the contract
is VOID of the establishment of the obligation shall be the basis of
payment, unless there is an agreement to the contrary.
In obligations TO DO or NOT TO DO
Article 1244 (2) In obligations to PAY INTEREST

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. Article 1956
No interest shall be due unless it has been expressly stipulated in
In obligations to PAY MONEY
writing.
Article 1249 (1)
The payment of debts in money shall be made in the currency Article 1253
stipulated, and if it is not possible to deliver such currency, then in If the debt produces interest, payment of the principal shall not be
the currency which is the legal tender in the Philippines. deemed to have been made until the interests have been covered.
`_______________________________________________________________
4. Integrity How payment is to be paid Requisites of Substantial Performance

- It must be complete 1. Attempt in good faith to perform, without any wilful or intentional
Article 1233 departure
A debt shall not be understood to have been paid unless the thing or 2. Deviation from the obligation must be slight
service in which the obligation consists has been completely 3. Omission or defect is unimportant and technical
delivered or rendered, as the case may be. 4. Must not be so material that intention of the parties is not
attained
No Partial payment is allowed Art. 1248

Estoppel
Exceptions:
1. In cases of Express stipulation Article 1235
2. Debt is in Part liquidated and part unliquidated, creditor may When the obligee accepts the performance, knowing its
demand and the debtor may effect payment WITHOUT incompleteness or irregularity, and without expressing any protest
awaiting liquidation of the rest. - Art. 1248 or objection, the obligation is deemed fully complied with.
3. In cases of Compensation, both debts are extinguished to
the concurrent amount, with the remainder of the larger
Presumptions in payment of interests and installments
amount still outstanding Art. 1290
4. When several guarantors invoke the benefit of division, each Article 1176
guarantor can pay only his share Art. 2073 The receipt of the principal by the creditor without reservation with
5. When the debtor dies, the obligation is divided to his/her respect to the interest, shall give rise to the presumption that said
heirs unless the obligations is indivisible interest has been paid.
6. When work is to be done by arts, if there is no contrary
stipulation Art. 1720 The receipt of a later installment of a debt without reservation as
to prior installments, shall likewise raise the presumption that such
Substantial performance in good faith installments have been paid.
Article 1234
If the obligation has been substantially performed in good faith,
the obligor may recover as though there had been a strict and
complete fulfilment, less damages suffered by the obligee.
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Obligations || Extinguishment of Obligations || Payment or Performance Application of Payments
5. Time When payment is to be made Application of Payments

- When the debt has become due and demandable
- Upon demand Art. 1169 Article 1252
- No demand needed when time is essential He who has various debts of the same kind in favor of one and the
- When the debtor loses the benefit of the period (immediately same creditor, may declare at the time of making the payment, to
due and demandable) Art. 1198 which of them the same must be applied. Unless the parties so
- When the obligation is reciprocal, tender of performance must stipulate, or when the application of payment is made by the party
accompany the demand
for whose benefit the term has been constituted, application shall
6. Place Where to be paid not be made as to debts which are not yet due.
Article 1251
If the debtor accepts from the creditor a receipt in which an
Payment shall be made in the place designated in the obligation.
application of the payment is made, the former cannot complain of
the same, unless there is a cause for invalidating the contract.
There being no express stipulation and if the undertaking is to deliver
a determinate thing, the payment shall be made wherever the
Concept
thing might be at the moment the obligation was constituted.
Designation of payment by a debtor to a creditor, where the former has
several obligations of the same kind
In any other case the place of payment shall be the domicile of the
debtor.
Requisites of Application of Payment
If the debtor changes his domicile in bad faith or after he has incurred 1. Same creditor and debtor
in delay, the additional expenses shall be borne by him. 2. Several debts owed
3. Debts are Due
These provisions are without prejudice to venue under the Rules of 4. Debts are of the same Kind
Court. 5. Payment is Not sufficient to cover all the debts
[ SS DKN ]
7. Costs Expenses of making the payment

- Paid according to stipulation
- ABSENT THE STIPULATION: Debtor to pay the required
extrajudicial expenses of the payment. Art. 1247 (1)
- Judicial costs governed by the Rules of Court
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Obligations || Extinguishment of Obligations || Payment or Performance Payment by Cession / Assignment
Rules on Application of Payment Payment by Cession / Assignment

1. Debtor may exercise the right to designation at the time of
Article 1255
payment Art. 1252 (1)
The debtor may cede or assign his property to his creditors in
2. Creditor may also undertake the application (if debtor did not
payment of his debts. This cession, unless there is stipulation to the
exercise the right), subject to debtors approval.
contrary, shall only release the debtor from responsibility for the
Upon approval and receipt of application, the debtor cannot net proceeds of the thing assigned. The agreements which, on the
complain unless there is cause in invalidating the contract
effect of the cession, are made between the debtor and his creditors
Art. 1252 (2) shall be governed by special laws.
3. If BOTH creditor and debtor did not apply the payment:
a. Apply to interest first. Art. 1253
i. Interest as stipulated Concept
ii. OR legal interest An act whereby the debtor abandons all of his/her properties to his/her
b. If the debts are of the same nature and burden Art. creditors, for the latter to apply the proceeds of the sale of the said
1254 (2) properties to the debts.
i. Payment shall be made in proportion Requisites of Cession/Assignment:
c. If there is no interest to apply payment OR if application 1. Plurality of debts
cannot be inferred from other circumstances 2. Plurality of creditors
Debt which is most onerous to the debtor 3. Partial or Complete insolvency of the debtor
i. Secured v. Unsecured (M ISION V . R EYES ) 4. Abandonment of the totality of the debtors properties for the
ii. Guaranteed v. Not Guaranteed benefit of the creditors
iii. Sole Debtor v. Co-debtor 5. Acceptance/Consent by the creditors
iv. Older v. Younger debt (same amount) [ PPP AA ]
v. Debts affecting honor or good reputation
vi. Debts with penal cause
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Obligations || Extinguishment of Obligations || Payment or Performance Dation in Payment
Effects of Cession/Assignment
1. Debtor is released from the indebtedness only up to the amount Dation in Payment Cession / Assignment
of the proceeds of the sale There is transfer of ownership Only possession and
a. Unless the contrary is stipulated administration + authority to sell
2. Creditors do not own the properties May totally extinguish the debt Only to the extent of the price
a. They merely have the right to sell/liquidate obtained
3. Creditor will collect credits in the order of preference agreed Specific properties All properties
upon Any number of creditors Needs 2 or more creditors
a. By default, order as established by law. Does not presupposes Presupposes insolvency
Dation in Payment insolvency
(dacion en pago / datio in solutum) Novatory Not novatory
(changes the payment from
Article 1245
money to property)
Dation in payment, whereby property is alienated to the creditor
in satisfaction of a debt in money, shall be governed by the law of
Requisites of Dation in Payment:
sales.
1.Dation will not prejudice other creditors
2.Consent of creditor
3.Debtor is not declared judicially Insolvent
Concept 4.Not a Pactum commissorium (a stipulation when the property
is used as a security, where there is automatic appropriation by
- A special kind of payment, where instead of money, property is
the creditor in case debtor fails to pay)
given
[ DC I P ]
- Onerous in nature, as the creditor still needs to liquidate said
property in order to get the money
- Lacks the Identity element of payment Effects of Dation in Payment:
o Not the exact thing intended as payment 1. Obligation is extinguished
2. Dation is governed by the law of sales
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Obligations || Extinguishment of Obligations || Payment or Performance Tender of Payment and Consignation
Tender of Payment and Consignation When Tender & Refusal is not required - Art. 1256
1. When the creditor is absent or unknown, or does not appear at
Tender of Payment the place of payment;
Concept 2. When he is incapacitated to receive the payment at the time it
- Act of offering payment by the debtor to a creditor, coupled is due;
with demand from creditor, in order to satisfy the obligation 3. When, without just cause, he refuses to give a receipt;
o Refusal without just cause gives rise to the opportunity 4. When two or more persons claim the same right to collect;
to consign payment 5. When the title of the obligation has been lost.
o Desire to comply with the obligation must be present
- Preparatory act to consignation Two Notice Requirements
- Extinguishment of obligation only happens after proper 1st Notice:
consignation
Article 1257 (1)
Requisites of Tender of Payment: In order that the consignation of the thing due may release the
1. Made in lawful currency obligor, it must first be announced to the persons interested in the
2. Should include interest fulfillment of the obligation.
3. Must be unconditional
- PURPOSE: To give creditors a chance to reconsider and accept
Consignation payment
- Act of depositing the thing due by the debtor whenever the - CONTENTS:
creditor cannot accept or refuses to accept payment - Fact and date of tender and undue refusal
- The thing deposited must be at the disposal of judicial authorities - Intention to make deposit
- PURPOSE: To avoid delay (mora) - Date and Hour to make the deposit
- The Court where the deposit will be made
Requisites of Consignation: - Must be given to all interested parties
1. There is a Debt due
2. Consignation was made because of a Legal cause 2nd Notice:
a. Creditor did not accept without just cause
Article 1258 (2)
b. Creditor cannot accept payments
3. Prior Notice of Consignation (1st Notice) The consignation having been made, the interested parties shall
4. Actual deposit / Consignation with Judicial authorities also be notified thereof.
5. Subsequent Notice of Consignation (2nd Notice) - PURPOSE: So that the creditor knows if he/she can already claim
[ DL 1C2 ] the item consigned to avoid deterioration of the thing
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Obligations || Extinguishment of Obligations || Loss or Impossibility Loss of the Thing Due
Effects of Non-Compliance Withdrawal by Debtor after proper consignation

Article 1257 (2) - If the creditor authorizes the withdrawal of the thing consigned
1. Obligation is revived
The consignation shall be ineffectual if it is not made strictly in
2. Co-debtors, guarantors and sureties are released
consonance with the provisions which regulate payment. - If the creditor does not authorize
- Reverts back to the original condition
Effects of Consignation
Expenses of Consignation
The expenses of consignation, when properly made, shall be charged Once the consignation has been duly made, the debtor may ask the
against the creditor. judge to order the cancellation of the obligation.
1. Obligation is extinguished AND debtor is liberated
- Creditor/Court accepts consignation Loss or Impossibility
2. The debtor is released in the same manner as if he had Loss of the Thing Due
performed the obligation at the time of consignation,
because this produces the effect of a valid payment. Concept
3. The accrual of interest on the obligation is suspended from the
moment of the consignation. Article 1189 (2)
4. The deteriorations/loss of a thing/amount consigned If the thing is lost through the fault of the debtor, he shall be obliged
occurring without fault of the debtor must be borne by the to pay damages; it is understood that the thing is lost when it:
creditor, because the risks of the thing are transferred to the - Perishes
creditor from the moment of deposit. - Goes out of commerce
5. Any increment or increase in value of the thing after the - Disappears in such a way that its existence is unknown
consignation inures to the benefit of the creditor. - Cannot be recovered;
Withdrawal by Debtor before proper consignation - Generally applies to determinate things

- Debtor is still the owner and he may withdraw it (TLG V . F LORES )
- Obligation remains in force
- Debtor bears all the expenses incurred because of the
consignation
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Obligations || Extinguishment of Obligations || Loss or Impossibility Loss of the Thing Due
Kinds of Loss Effects of Loss

As to Extent In Obligations to Give a Specific Thing
1. Total - Obligation shall be extinguished Art. 1262
2. Partial - If the debt is from the proceeds of a criminal offense
- Will always be liable for the loss
Requisites of Loss EXCEPT:
1. Without the fault of the debtor i. If the receiver refuses without just cause Art.
2. Before the debtor incurs delay (mora) 1268
3. After the obligation is constituted
Presumptions In Obligations to Give a Generic Thing

- Loss through the Debtors fault - Does not extinguish the obligation
- If it was lost in the possession EXCEPT:
- Burden of proof: Debtor - When the kind/class is limited in itself and the whole
- Does not apply in case of: class perishes
- Earthquake - The goods are made specific by segregation
- Flood - Monetary obligations
- Storm Art. 1263
- Other natural calamity
Art. 1265 In Case of Partial Loss
- If through delay / debtor promising delivery to two/more
Article 1264
persons who do not have the same interest
- Debtor shall be responsible for any fortuitous event The courts shall determine whether, under the circumstances, the
until he has effected delivery partial loss of the object of the obligation is so important as to
Art. 1165 extinguish the obligation.
- Provided that there was no fault/negligence on the debtors part

- Intention of the parties was the controlling factor in the solution
of each case
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Obligations || Extinguishment of Obligations || Loss or Impossibility Impossibility
Actions against 3rd Persons Effects of Impossibility

In Obligations to Do
Article 1269
- Debtor is released when the prestation becomes
The obligation having been extinguished by the loss of the thing, the
legally/physically impossible (Impossibility)
creditor shall have all the rights of action which the debtor may - Through fortuitous event / force majeure
have against third persons by reason of the loss. Art. 1266
- Debtor is released (partially/totally) when the performance has
- Pertains to rights, actions, benefits or indemnities the debtor
become so difficult to be manifestly beyond the contemplation
may get from 3rd persons.
of the parties (Difficulty) Art. 1267
EXCEPT:
Impossibility - By law
- By stipulation
Concept - When there is an assumption of risk
- Includes legal or physical impossibility and impracticability Art. 1262 (2) by analogy
because of extreme difficulty - When there is partial impossibility, the courts can only extinguish
Art. 1266 and 1267 the obligation NOT modify the contract - Art. 1264
Kinds of Impossibility
Impossibility v. Difficulty
As to Extent
- Impossibility = Inability to perform
1. Total
- Difficulty = Manifest disequilibrium in the prestation, such that
2. Partial
one party would be placed at a disadvantage by the unforeseen
event.
As to Source
1. Legal Rules on Difficulty
2. Physical
- Must be such neither part could have possibly anticipated it
- Must be beyond the capacity of most people, not just the
debtor
Requisites of Impossibility
- If performance would be dangerous to life and property, debtor
1. Without the fault of the debtor
is released
2. Before the debtor incurs delay (mora)
- Inconvenience, unexpected impediments or increases in
3. After the obligation is constituted
expenses are not excuses
[ WBA ]
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Obligations || Extinguishment of Obligations || Condonation or Remission Concept
Condonation or Remission Presumptions

Concept Article 1271 (1)
- The gratuitous abandonment by a creditor of his right (Sanchez The delivery of a PRIVATE DOCUMENT evidencing a credit, made
Roman)
voluntarily by the creditor to the debtor, implies the renunciation
- This is done without receiving anything in return, in effect
of the action which the former had against the latter.
extinguishing the obligation
- In order to nullify:
Kinds of Condonation/Remission - Should be claimed to be inofficious
As to Extent - Debtor and heirs to prove that the delivery was made by
1. Total virtue of payment of the debt
2. Partial - Creditor to prove that it was for examination only
As to Form Art. 1270 (1) Article 1272

1. Express Whenever the PRIVATE DOCUMENT in which the debt appears is
2. Implied
found in the possession of the debtor, it shall be presumed that
the creditor delivered it voluntarily, unless the contrary is proved.
Requisites of Condonation/Remission
1. Capacity and Consent of Parties
Article 1274
2. Object to be remitted
It is presumed that the accessory obligation of pledge has been
3. Liberality as consideration
4. Formalities required by law remitted when the thing pledged, after its delivery to the creditor, is
a. Both At least comply with Rules on Inofficious found in the possession of the debtor, or of a third person who
Donations owns the thing.
b. Implied Remissions No other
c. Express Remissions Must comply further with Rules on Effects of Condonation/Remission
Donations - Extinguishes Totally/Partially the obligation
[ COLF ] - Art. 1270 - In case of Joint/Solidary Obligations:
Proof and Presumptions of Condonation/Remission - Affects only the share corresponding to the debtor
Proof receiving the condonation/remission
- Renunciation of the Principal Obligation also extinguishes the
- Clearer and more convincing evidence than what is required to
Accessory Obligations, but not the other way around Art. 1273
establish payment
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Obligations || Extinguishment of Obligations || Confusion or Merger of Rights Concept
Confusion or Merger of Rights Compensation

Concept Concept
- Meeting in one person of the qualities of creditor and debtor of
the same obligation (Sanchez Roman) Article 1278
- Erases the plurality of subjects in an obligation Compensation shall take place when two persons, in their own right,
- May be revoked, which would recreate the same condition are creditors and debtors of each other.
before the merger happened
- Extinction in the concurrent amount of the obligations whose
persons who are reciprocally debtors and creditors of each other
Requisites (Castan)
1. It should take place between the Principal Debtor and - Offsetting of two obligations if they are of equal value or
Creditor extinguishing only the concurrent amount
2. Very same obligation
3. Confusion must be Total or the whole obligation Confusion Compensation
[ PVT ]
Only 1 obligation At least 2 obligations
One person in whom the Two persons who are mutually
Effects characters of the creditor and debtors and creditors of each
- Obligation is extinguished
debtor concur other in two separate obligations
- Benefits the guarantors by releasing them, as they are
accessories to the obligation Art. 1276
- In Joint obligations Kinds of Compensation
- Does not extinguish the whole obligation, but only to the As to Extent
share of the solidary creditor/debtor in whom the two 1. Total
characters concur Art. 1277 - When the 2 debts are of the same amount Art. 1281
2. Partial
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Obligations || Extinguishment of Obligations || Compensation Legal Compensation
As to Origin
1. Legal 1. Principal debtor and creditor
2. Conventional a. Must be principal creditor/debtor and not just a
- Parties may agree to the compensation of the debts guarantor, guardian, trustee or agent
which are not yet due Art. 1282 2. Both debts must be of the Same kind
- The requisites for compensation need not apply a. Either both are sums of money, or same kind of thing
3. Judicial (with same amount, if quantifiable)
- Also called as set-off, must be pleaded and only b. If quality was included, then both should be of the same
effective by decision of the Court quality
4. Facultative 3. Debts are Due
- When one of the parties can choose to claim a. A thing is due when a suspensive condition or a period
compensation or to object to it has been satisfied
b. In pure obligations, a thing is due after the obligation
Legal Compensation was constituted
4. Debts are Liquidated and Demandable
Requisites of Legal Compensation: a. Liquidated = existence and amount are determinable
b. Demandable = enforceable in court
Article 1279 c. Not all debts that are Due are Demandable (e.g.
In order that compensation may be proper, it is necessary: Prescribed debts)
(1) That each one of the obligors be bound Principally, and that 5. Should Not be subject of retention/controversy by third
he be at the same time a principal creditor of the other; persons
(2) That both debts consist in a sum of money, or if the things a. Must not have been waived
due are consumable, they be of the Same kind, and also of b. Must be communicated in due time to debtor
the same quality if the latter has been stated;
(3) That the two debts be Due; Exception to Paragraph (1)
(4) That they be Liquidated and demandable;
Article 1280
(5) That over Neither of them there be any retention or
Notwithstanding the provisions of the preceding article, the
controversy, commenced by third persons and
communicated in due time to the debtor. guarantor may set up compensation as regards what the creditor
may owe the principal debtor.
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Obligations || Extinguishment of Obligations || Compensation When Compensation is not allowed
Effects of Legal Compensation Effect of Nullity of debts to be compensated

1. Both debts are extinguished to the concurrent amount
2. Interest stops accruing on the amount extinguished Article 1284
3. Period of prescription stops with respect to the amount When one or both debts are rescissible or voidable, they may be
extinguished compensated against each other before they are judicially
4. All accessory obligations of the principal which was extinguished rescinded or avoided.
are also extinguished
5. If a person has several debts that are susceptible of Effects of Assignment of Credit
compensation, the rules on Application of Payments shall be Basic Rules:
applied - Debtor needs to be notified for the assignment to have effect
- If the assignment is made after the debts have been due and the
When Compensation is not allowed other requisites under Art. 1279 concur, the assignment is
1. Depositum (Art. 1287) ineffective due to legal compensation
2. Commodatum (Art. 1287)
With Consent of Debtor
3. Support due by gratuitous title (Art. 1287)
GENERAL RULE:
4. Civil liability arising from a penal offense (Art. 1288)
- Debtor who consented to the creditors assignment of rights to a
third person cannot set up against the assignee (3rd person) the
REASON:
compensation that pertains to debtor-creditor
- The thing is given as a deposit/commodatum on the basis of
UNLESS:
confidence of the owner. That is why it is important that the
- At the time the debtor consented, he notified the creditor that
depository/borrower performs the obligation, else the trust is
he reserves his right to the compensation
broken.
With Knowledge but Without Consent of Debtor
Compensation of debts payable in different places - Debtor may set up the compensation of debts (maturing)
before the cession, but not subsequent ones
Article 1286
Compensation takes place by operation of law, even though the Without Knowledge of Debtor
debts may be payable at different places, but there shall be an Debtor may set up the compensation of all the credits prior to
-
indemnity for expenses of exchange or transportation to the the assignment and also later ones until he had knowledge of
place of payment. the assignment - Art. 1285
REASON:
- NOTE: Legal Compensation only, other forms of compensation - To prevent one party from being fraudulently deprived of the
not covered benefits of compensation (Manresa)
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Obligations || Extinguishment of Obligations || Novation Concept
Novation - Subjective / Personal

- Change of debtor (Passive)
Concept
i. Expromision
Article 1291 ii. Delegacion
Obligations may be modified by: - Subrogation of right of creditor to another (active)
(1) Changing their object or principal conditions; i. Conventional
(2) Substituting the person of the debtor; ii. Legal Subrogation
(3) Subrogating a third person in the rights of the creditor. Requisites of Novation:
1. An Old valid (or voidable but not yet void) obligation
- The substitution/alteration of an obligation by a new one that 2. A New valid obligation
cancels/modifies the old one (Manresa) 3. A Substantial difference (aliquid novum)
4. Capacity of the parties
Kinds of Novation 5. Intention to extinguish/modify (animus novandi)
As to Effect
1. Total / Novation Proper
Effects of Novation
2. Partial / Improper Novation
Extinctive Novation
As to Form 1. The Old obligation is Extinguished and is replaced by the new
1. Express one
- Parties declare that there is novation 2. Accessory obligations are also extinguished
2. Implied - But they may subsist insofar as they may benefit 3rd
- The old and new obligations are incompatible (cannot persons who did not consent to the novation Art. 1296
stand together) - But the parties may agree that the said obligations shall
not be affected, PROVIDED that the debtors of such
As to Origin obligations give their consent
1. Legal
Modificatory Novation
- E.g. Breach of a joint indivisible obligation Art. 1224
1. The obligation remains, subject to the modification established
2. Conventional
2. If the obligation becomes more onerous, the modification will
not bind the sureties/guarantors, who stand on the original
As to Object
obligation, unless they consented
- Objective / Real
- Cause, object, principal obligations
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Obligations || Extinguishment of Obligations || Novation Effect of the Status of the Original/New Obligation
Effect of the Status of the Original/New Obligation

Effects of Expromision
Nullity/Voidability of Original Obligation
- Old debtor is released
- The novation is void if the original obligation was void - If done without the knowledge / against the will of the old
EXCEPT when annulment may be claimed only by the debtor OR debtor, Insolvency and Non-fulfillment of the obligation
when ratification validates acts which are voidable. Art. 1298 shall not give rise to any liability on the part of the old
debtor Art. 1294
Nullity/Voidability of New Obligation
- If the new obligation is void, the original shall subsist 2. Delegacion
UNLESS the parties intended that the former relation should be - Old debtor substitutes a third person to be the new
extinguished in any event Art. 1297 debtor
Requisites of Delegacion
Suspensive/Resolutory Condition of Original Obligation
1. Consent of the old debtor
- If the original obligation was subject to a suspensive/resolutory
2. Consent of the new debtor
condition, the new obligations shall be under the same condition
3. Consent of the Creditor
UNLESS otherwise stipulated Art. 1299
i. May be express or implied
1. But acceptance of payment is not
Objective / Real Novation necessarily consent
- Change in the object of the prestation, cause for its ii. May be given at any time (not necessarily upon
establishment or the principal conditions assent of new debtor)
- Principal Conditions = the conditions or terms of the obligation, iii. If consent is conditional, there is no novation
when removed or changed, will make a substantial change in the until the condition is complied with
fulfilment of the obligation Effects of Delegacion
Subjective / Personal Novation - Old debtor is released
- Change in the active/passive subjects of an obligation - Insolvency of the new debtor shall not revive any action
against the old debtor
Change in the Active Subject (Debtor) EXCEPT when he delegated the debt:
1. Expromision i. The said insolvency was already existing AND
- Creditor allows a third person (new debtor) to substitute ii. It is either of public knowledge OR known to the
the old debtor old debtor
Requisites of Expromision Art. 1295
1. Consent of the Creditor
2. Consent of the new debtor
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Obligations || Extinguishment of Obligations || Novation Subjective / Personal Novation
Change in the Passive Subject (Creditor) Effects of Subrogation

1. Conventional Subrogation
Article 1303
- Takes place by agreement of the parties
Subrogation transfers to the persons subrogated the credit with all
Requisites of Conventional Subrogation
the rights thereto appertaining, either against the debtor or against
a. Consent of old creditor
b. Consent of new creditor third person, be they guarantors or possessors of mortgages, subject
c. Consent of debtor to stipulation in a conventional subrogation.
Article 1304
Conventional Subrogation Assignment of Credit A creditor, to whom partial payment has been made, may exercise
Debtors Consent Necessary Debtors Consent Not his right for the remainder, and he shall be preferred to the person
Necessary who has been subrogated in his place in virtue of the partial payment
Extinguished the old obligation Right is preserved and only of the same credit.
and gives rise to a new one transferred to another person
- Obligation is not yet extinguished until paid
Nullity of an old obligation may be Nullity is not remedied
cured by a new valid obligation
2. Legal Subrogation
- Not presumed, unless in cases enumerated in the Civil
Code
When is Legal Subrogation presumed?
a. When a creditor pays another creditor who is preferred
even without the knowledge of the debtor
b. When a third person, not interested in the obligation, pays
with the express/tacit approval of the debtor
c. When a third person, interested in the fulfilment of the
obligation, pays even without the knowledge of the debtor,
without prejudice to the effects of confusion
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Contracts || General Provisions || Definition 1. Obligatory Force
Characteristics
Contracts 1.
2.
Obligatory Force
Mutuality
3. Relativity
Chapter 1: 4. Consensuality
5. Freedom
General Provisions
Definition 1. Obligatory Force
Article 1305
Article 1159
A contract is a meeting of minds between two persons whereby one
Obligations arising from contracts have the force of law between the
binds himself, with respect to the other, to give something or to
contracting parties and should be complied with in good faith.
render some service.
Force of Law
- It may be to create, modify or extinguish a juridical relation - a party is bound by the stipulations in the contract, given that
between parties these are not contrary to law
- Obligations arising from contracts have the force of law - a party may not remove himself from the fulfilment of the
between the contracting parties contract without the consent of the other party
- the Court may not relieve any party from the contract unless
provided by law or in the stipulation
Elements - Even if the contract is foolish, unwise or disastrous, it still must be
1. Essential elements upheld if entered into with all the required legal formalities and
- Without which, there can be no contract with full awareness.
a. Consent
b. Object
c. Causa 2. Mutuality
2. Natural elements Article 1308
- Presumed to exist unless the contrary is stipulated The contract must bind both contracting parties; its validity or
3. Accidental elements
compliance cannot be left to the will of one of them.
- Will only exist when they are stipulated
- Also the fixing of the price can never be left to the discretion of
the contracting parties
- Acceptance by the other is required to perfect the sale
Art. 1473
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Contracts || General Provisions || Characteristics
EXCEPTION: 2. Strangers are adversely affected by a contract in which they

- The determination of the performance may be left to a 3 person rd did not intervene
whose decision shall not be binding UNTIL the decision has - Insolvency law states that the creditors are bound by the
been made known to both contracting parties contracts of the majority
- If the obligation is inequitable, the determination is not - In collective labor contracts/bargains
obligatory - In negotiorum gestio, the owner is bound by the contracts
- In such a case, the courts shall decide what is equitable entered by the gestor
under the circumstances - In contracts creating real rights, third persons who come
Arts. 1309 and 1310 into possession of the object of the contract, are bound
thereby, subject to the provisions of the Mortgage Law
and Land Registration Law
3. Relativity - In contracts creating status, the resulting status must be
- GENERAL RULE: respected while the contract is in force (marriage,
- No one may contract in the name of another without incorporation, etc.)
being authorized by the latter, or unless he has by law a 3. But creditors may rescind the contracts intended to defraud
right to represent him Art. 1317 them although they did not intervene therein. Art. 1313
- Contracts take effect between the parties, their assigns 4. Strangers must respect the effects of the contract on the
and heirs contracting parties
- Heir is not liable beyond the value of the property he 5. In case of conflicting rights, the one who contracted/acted
inherited with knowledge of the prior rights of another, is deemed in
- EXCEPTIONS: bad faith, and is not protected by law.
- When the rights and obligations arising from the contract
are not transmissible by their nature, stipulation or law
Art. 1311
4. Consensuality
Article 1315
Rules on strangers: Contracts are perfected by mere consent, and from that moment the
1. Strangers may enforce the contract in their favour parties are bound not only to the fulfillment of what has been
- When stipulated (pour autrui)
expressly stipulated but also to all the consequences which, according
- When the statute allows the creditor to sue on his
debtors contract (accion directa), like: to their nature, may be in keeping with good faith, usage and law.
i. Lessors v. Sublessee
Exceptions to the General Rule above:
ii. Laborers of a contractor suing the owner of the
work Art. 1729 - When the law requires some other certain formality in addition to
consent to make it binding
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Contracts || General Provisions || Parties 5. Freedom
- E.g. Real contracts (deposit, pledge, commodatum) needs Special Disqualifications

delivery to perfect them
5. Freedom Article 1491
The following persons cannot acquire by purchase, even at a public
Article 1306
or judicial auction, either in person or through the mediation of
The contracting parties may establish such stipulations, clauses, terms
another:
and conditions as they may deem convenient, provided they are
(1) The guardian, the property of the person or persons who may
not contrary to law, morals, good customs, public order, or public
be under his guardianship;
policy. (2) Agents, the property whose administration or sale may have
been entrusted to them, unless the consent of the principal
has been given;
Parties (3) Executors and administrators, the property of the estate under
administration;
Auto-Contracts
(4) Public officers and employees, the property of the State or of
- Contracts that are entered into by the same person acting in
any subdivision thereof, or of any government-owned or
different capacities or patrimonies
controlled corporation, or institution, the administration of
- These are generally valid
which has been intrusted to them; this provision shall apply to
- Existence of the contract is not dependent on how many
judges and government experts who, in any manner
persons there are but the number of parties.
whatsoever, take part in the sale;
Freedom to Contract (5) Justices, judges, prosecuting attorneys, clerks of superior and
- See Art. 1306 above inferior courts, and other officers and employees connected
with the administration of justice, the property and rights in
litigation or levied upon an execution before the court within
whose jurisdiction or territory they exercise their respective
functions; this prohibition includes the act of acquiring by
assignment and shall apply to lawyers, with respect to the
property and rights which may be the object of any litigation
in which they may take part by virtue of their profession.
(6) Any others specially disqualified by law.
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Contracts || General Provisions || Parties What they may not stipulate
b. Pactum leonina
Article 1782
Persons who are prohibited from giving each other any donation or Article 1799
advantage cannot enter into universal partnership. A stipulation which excludes one or more partners from any share in
the profits or losses is void.
Article 87 Family Code
- One party bearing a lions share of the profits/losses
Every donation or grant of gratuitous advantage, direct or indirect,
between the spouses during the marriage shall be void, except c. Pactum de non alienado
moderate gifts which the spouses may give each other on the
Article 2130
occasion of any family rejoicing. The prohibition shall also apply to
A stipulation forbidding the owner from alienating the immovable
persons living together as husband and wife without a valid marriage.
mortgaged shall be void.
Article 1490 - Inability to alienate owned immovable
The husband and the wife cannot sell property to each other,
2. Contrary to morals
except:
- Universal or community notion of right and wrong
(1) When a separation of property was agreed upon in the 3. Contrary to good customs
marriage settlements; or - Societal understanding of what they want or do not want
(2) When there has been a judicial separation or property under 4. Contrary to public order
Article 191. - Consideration of the public weal, peace, safety and
health of the community
What they may not stipulate 5. Contrary to public policy
1. Contrary to Law - A contract is contrary to public policy if it has a tendency
a. Pactum commissorium to injure the public, is against the public good, or
Article 2088 contravenes some established interest of society, or
tends clearly to undermine the security of tenure
The creditor cannot appropriate the things given by way of pledge or
(G ABRIEL V . M ONTE DE P IEDAD )
mortgage, or dispose of them. Any stipulation to the contrary is
null and void.
- Automatic foreclosure of a mortgage or pledge
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Contracts || General Provisions || Classification According to Subject Matter
Classification According to perfection

According to Subject Matter 1. By mere consent
1. Things/Goods 2. By the delivery of the object
2. Services
According to its relation to other contracts, degree of
According to Name dependence
1. Nominate 1. Preparatory
- Contracts that have a particular name (Deed of Absolute 2. Principal
Sale, etc.) 3. Accessory
2. Innominate
- Contracts not falling under any of the special provisions According to Form
of law 1. Common / Informal
Article 1307 2. Special / Formal
Innominate contracts shall be regulated by the stipulations of the
parties, by the provisions of Titles I and II of this Book, by the rules According to purpose
governing the most analogous nominate contracts, and by the 1. Transfer of Ownership
2. Conveyance of Use
customs of the place.
3. Rendition of Service
According to the nature of the vinculum,
Do ut des I give and you give nature of the obligation produced
Do ut facias I give and you do 1. Unilateral
Facio ut des I do and you give 2. Bilateral
Facio ut facias I do and you do 3. Reciprocal
According to Cause
1. Onerous
2. Gratuitous / Lucrative
According to Risk
1. Commutative
2. Aleatory
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Contracts || General Provisions || Stages of Contracts Stipulations in favor of third persons (stipulation pour autrui)
Stages of Contracts -
Stranger needs to communicate his acceptance to the obligor
1. Preparation before its revocation
- Negotiation period, ending at the time when the parties - Must be conferred clearly and deliberately
agree - A mere incidental benefit/interest is not sufficient
2. Perfection - The stipulation in favour of the stranger must only be a part of
- Starts when the parties agree or give their consent to the the contract
details / terms - No relation of agency exists between any of the parties and the
3. Consummation stranger (Manresa)
- A contract is consummated when all the obligations Requisites of a stipulation pour autrui
therein are complied with, or when certain conditions 1. The stipulation is only party of the contract
give rise to its death 2. The favorable stipulation is not conditioned or compensated by
any kind of obligation
Differences between a contract, perfected promise and 3. Neither contracting parties have legal representation nor
an imperfect promise (policitation) authorization of the third person
Contract Perfect Imperfect 4. Benefit was clearly and deliberately conferred
Consent is given An offer but lacking A mere invitation to 5. Third person communicated his acceptance before revocation
6. Possession of the object of the contract by third persons
by both parties consent (terms are clear) offer (advertisement)
Article 1312
With respect to third persons In contracts creating real rights, third persons who come into
Stipulations in favor of third persons (stipulation pour possession of the object of the contract are bound thereby, subject
autrui) to the provisions of the Mortgage Law and the Land Registration
Laws.
Article 1311 (2)
If a contract should contain some stipulation in favor of a third
person, he may demand its fulfillment provided he communicated
his acceptance to the obligor before its revocation. A mere
incidental benefit or interest of a person is not sufficient. The
contracting parties must have clearly and deliberately conferred a
favor upon a third person.
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Contracts || Essential Requisites of Contracts || Interference by Third Persons Creditors of the Contracting parties
Creditors of the Contracting parties Chapter 2:

Article 1313 Essential Requisites of Contracts
Creditors are protected in cases of contracts intended to defraud
Article 1318
them.
There is no contract unless the following requisites concur:
- Presumption of fraudulent alienation when the debtor alienates (1) Consent of the contracting parties;
his properties, leaving less than his current indebtedness Art. (2) Object certain which is the subject matter of the contract;
1387 (3) Cause of the obligation which is established.
- Creditor may ask for rescission of contracts through accion
pauliana Art. 1171 & 1381
Consent
Requisites of Consent
Interference by Third Persons 1. Must be manifested by the concurrence of the offer and
Article 1314 acceptance
Any third person who induces another to violate his contract shall be 2. Necessary legal capacities of the parties
3. The consent must be intelligent, free, spontaneous and real
liable for damages to the other contracting party.
1. Must be manifested by the concurrence of the offer and
- But the liability of the third person must not be greater than that
acceptance
of the party to the contract (D AYWALT V . R ECOLETOS )
- Malice is not essential to hold the third person liable.
OFFER
Requisites of Tortuous Interference Article 1319 (1)
1. Existence of a valid contract Consent is manifested by the meeting of the offer and the acceptance
2. Knowledge by a third person of the existing contract upon the thing and the cause which are to constitute the contract.
3. Interference by the third person is without legal justification
The offer must be certain and the acceptance absolute. A qualified
acceptance constitutes a counter-offer.
- DEFINITE: The parties understand the terms being offered

- INTENTIONAL: Offer is given with the intent to enter into the
contract (statements in jest not binding)
- COMPLETE: The cause and the object are both present in the
offer, such that it would be binding upon acceptance
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Contracts || Essential Requisites of Contracts || Consent Requisites of Consent

The person making the offer may fix the time, place, and manner Advertisements for bidders are simply invitations to make
of acceptance, all of which must be complied with. proposals, and the advertiser is not bound to accept the highest or
lowest bidder, unless the contrary appears.
Article 1322
An offer made through an agent is accepted from the time
ACCEPTANCE
acceptance is communicated to him.
Article 1319 (1)
- Offers through agents are valid Consent is manifested by the meeting of the offer and the acceptance
upon the thing and the cause which are to constitute the contract.
Article 1323 The offer must be certain and the acceptance absolute. A qualified
An offer becomes ineffective upon the death, civil interdiction, acceptance constitutes a counter-offer.
insanity, or insolvency of either party before acceptance is conveyed.
Requisites of Acceptance
Circumstances when offer becomes ineffective 1. Unqualified and Unconditional
1. Upon rejection by the offeree - Must conform with the terms of the offer
2. Upon incapacity by either parties 2. Communicated to the offeror and learned by him
a. Death
b. Civil interdiction Kinds of Acceptance
c. Insanity 1. Qualified
d. Insolvency - Counteroffer or Conditional Acceptance
3. Upon counter-offer (qualified / conditional acceptance) 2. Express
4. Upon lapse of the time stated in the offer 3. Implied
5. Upon revocation of the offer before learning of the acceptance - By executing an act that is required by the offer that
6. Upon supervening illegality before acceptance would signify acceptance
Examples of Imperfect Promise (authors perspective)
Article 1325
Unless it appears otherwise, business advertisements of things for
sale are not definite offers, but mere invitations to make an offer.
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Contract of Option
Article 1319 (2)
- A kind of preparatory contract, where the offeror grants the
Acceptance made by letter or telegram does not bind the offeror
offeree the power to decide whether or not to accept the offer to
except from the time it came to his knowledge. The contract, in
enter into a principal contract, within a particular period and
such a case, is presumed to have been entered into in the place manner of acceptance.
where the offer was made. - Consideration is important only insofar as the ability of the
offeror to withdraw the offer
Theories when a contract is perfected
1. Manifestation Theory 2. Necessary legal capacities of the parties
- The contract is perfected from the moment the Who cannot give consent?
acceptance is declared or made
Article 1244 (1)
2. Expedition Theory
- The contract is perfected from the moment the offeree The following cannot give consent to a contract:
transmits the notification of acceptance to the offeror (1) Unemancipated minors;
3. Reception Theory (2) Insane or demented persons, and deaf-mutes who do not
- The contract is perfected from the moment that the know how to write.
notification of acceptance is in the hands of the offeror
4. Cognition Theory
Article 1329
- The contract is perfected from the moment the
The incapacity declared in Article 1327 is subject to the modifications
acceptance comes to the knowledge of the offeror.
(Philippines) determined by law, and is understood to be without prejudice to
special disqualifications established in the laws.
Period of Acceptance
- Civil Interdiction only allows transactions inter vivos Art. 34
Article 1324 RPC
When the offeror has allowed the offeree a certain period to accept, - Undischarged Insolvents cannot make payments Sec. 24
Insolvency Law
the offer may be withdrawn at any time before acceptance by
- Husband and Wife cannot donate or sell property to each other
communicating such withdrawal, except when the option is founded
EXCEPT moderate gifts Art. 87 FC
upon a consideration, as something paid or promised. - Those prohibited by law to purchase:
- Guardians WRT property of his ward
- Offer must be accepted within the period, or else, acceptance
- Agents WRT property of the principal
becomes a counter-offer
- Executors and Administrators WRT property under
- If there is no period fixed by the offeror, acceptance should be
administration
made immediately within a reasonable tacit period
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- Public Officers WRT property of the State under their Kinds of Vices of Consent
administration 1. Mistake or Error
- Justices, judges, prosecutors, clerks of courts, lawyers 2. Violence and Intimidation
WRT property attached or in litigation 3. Undue Influence
Art. 1491 4. Fraud or dolo
5. Misrepresentation
When offer and/or acceptance is made:
- During a lucid interval VALID Mistake or Error
- In a state of drunkenness VOIDABLE
- During a hypnotic spell VOIDABLE Article 1331
In order that mistake may invalidate consent, it should refer to the
Other instances where minors consent is Valid substance of the thing which is the object of the contract, or to
- Contracts for necessaries, enforceable against those who are duty those conditions which have principally moved one or both parties
bound to support the minor to enter into the contract.
- When a minor is in estoppel to urge his minority, through his
misrepresentation, provided the other party is not negligent.
Mistake as to the identity or qualifications of one of the parties will
3. The consent must be intelligent, free, spontaneous and real vitiate consent only when such identity or qualifications have been
the principal cause of the contract.
Article 1330
A contract where consent is given through mistake, violence, A simple mistake of account shall give rise to its correction.
intimidation, undue influence, or fraud is voidable.
- The inadvertent and excusable disregard of a circumstance
material to the contract
VICES OF CONSENT Requisites of Mistake/Error to vitiate consent

Vices of consent consist in circumstances affecting adversely the 1. Not intentional nor negligent
determination of a party to enter into a contract, and rendering the 2. Excusable, without failure to take advantage of the opportunity
contract subject to annulment. to ascertain the truth
3. Mistake of Fact, not of Law
4. Past or Present, but non-realization of expectation is not error
5. Must refer to factors inducing consent (Material to the contract)
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Kinds of Mistake/Error EXCEPT:

1. Mistake of Fact
Article 1334
a. Error in substantia
As to substance of the object Mutual error as to the legal effect of an agreement when the real
I wanted a rooster, I consented to a hen purpose of the parties is frustrated, may vitiate consent.
b. Error in corpore
Mutual Error of Law
As to identity of the object
I wanted horse A, I consented to horse B - This is different from failure to express correctly the common
c. Error in negotio intention
As to nature of the transaction
I wanted to lease, I consented to sell Requisites of Mutual Error of Law
d. Error in qualitate 1. Error must be as to the legal effect of an agreement
As to principal qualities of the object 2. Must be mutual
I wanted a black horse; I consented to a gray horse 3. Real purpose is frustrated
e. Error in quantitate
As to quantity, as distinguished from a simple
mistake of account, which is correctable Article 1332
I wanted 30 ha, I consented to 10 ha vis--vis mistake in When one of the parties is unable to read, or if the contract is in a
computations language not understood by him, and mistake or fraud is alleged,
f. Error in persona the person enforcing the contract must show that the terms thereof
As to identity or qualifications of one of the
have been fully explained to the former.
parties
I wanted experienced painters, I consented to amateur
- Must allege first that there was mistake/fraud through the
painters
contracting partys inability to read / understand the language of
g. As to principal conditions of the contract
the contract
- Burden of proof = the person enforcing
2. Error of Law
Article 3
Ignorance of the law excuses no one from compliance therewith.
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Article 1333 Duress:

There is no mistake if the party alleging it knew the doubt, - The degree of constrain/danger INFLICTED (violence) or
THREATENED & IMPENDING (intimidation) sufficient to
contingency or risk affecting the object of the contract.
overcome the mind and will of an ordinary person
- Seriousness is measured objectively (degree of harm) and
- There is inexcusable mistake when the following are present:
subjectively (effect on a persons mind and will depending on his
o The contracting party alleging the error knew of the
personal circumstances and relation to the other party)
mistake, or had doubts and did not exercise ordinary
diligent examination of the facts Violence:
o Knowledge of the contingency or risk affecting the object - Physical Force
of the contract - Must be external and inflicted upon the person
- But the courts will also consider the subjective aspect of the - Requisites:
case, e.g. intellectual capacity of the party who made the mistake o Serious or Irresistible force
o Party has no other course but to submit
o Such force is the determining cause in giving of the
Violence or Intimidation
consent
Article 1335
There is violence when in order to wrest consent, serious or irresistible Intimidation:
force is employed. - Moral force or compulsion
- Internal, operating within the mind and will of the party, forcing
the party to choose between the injury and the contract
There is intimidation when one of the contracting parties is
- Requisites:
compelled by a reasonable and well-grounded fear of an imminent
o Reasonable and well-grounded fear
and grave evil upon his person or property, or upon the person or o Imminent and serious injury to the person/property of:
property of his spouse, descendants or ascendants, to give his The party
consent. His spouse
His descendants/ascendants, legit/illegitimate
To determine the degree of intimidation, the age, sex and condition o Threat must constitute an actionable wrong
(unjust/unlawful)
of the person shall be borne in mind.
o Intimidation must be the determining cause of the
contract
A threat to enforce one's claim through competent authority, if the * The author of the threat must have the
claim is just or legal, does not vitiate consent. capacity/ability/means to inflict the injury, and such injury
must be a greater evil than the choosing of the contract
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Effect of Violence or Intimidation Circumstances to be considered

- Confidential relations
Article 1336
- Family relations
Violence or intimidation shall annul the obligation, although it may - Spiritual relations
have been employed by a third person who did not take part in the - Other relations
contract. - Suffering from any infirmity (mental weakness, ignorance or
financial distress)
- There is a degree of disparity in bargaining position (M ARTINES V .
Undue Influence H ONGKONG B ANK )
Article 1337 Undue Influence Intimidation

There is undue influence when a person takes improper advantage No unjust/unlawful act Act must be unlawful/unjust
of his power over the will of another, depriving the latter of a
Moral coercion
reasonable freedom of choice. The following circumstances shall be
considered: the confidential, family, spiritual and other relations Fraud or Dolo
between the parties, or the fact that the person alleged to have been Article 1338
unduly influenced was suffering from mental weakness, or was There is fraud when, through insidious words or machinations of
ignorant or in financial distress. one of the contracting parties, the other is induced to enter into a
contract which, without them, he would not have agreed to.
Undue Influence
- Any improper means employed by a party because of his
relationship to another, that deprived the latter of reasonable
Requisites of Fraud
freedom of choice
1. Misrepresentation or concealment of a fact
- Interferes with the independence of the party, necessary for the
2. Intention to defraud
determination of the advantages and disadvantages of the
3. A statement that is untrue
contract
4. Knowledge of the falsehood
5. Reliance upon the false statement
6. Materiality of the statement to the consent
7. Commission by one party only
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Kinds of Fraud Mere expression of an opinion

1. Dolo causante
Article 1341
o Party would have not consented, if not for the fraud
2. Dolo incidente A mere expression of an opinion does not signify fraud, unless made
o Party would have still agreed, but to different terms by an expert and the other party has relied on the former's special
knowledge.
Failure to disclose facts; duty to reveal them
GENERAL RULE:
Article 1339 - Opinions do not constitute fraud
Failure to disclose facts, when there is a duty to reveal them, as when UNLESS:
the parties are bound by confidential relations, constitutes fraud. - IF MADE BY AN EXPERT, and the other party relied on the expert
opinion, then it constitutes fraud
-
- +GENERALLY, concealment/silence does not constitute fraud Effects of Fraud
- There must either be:
o A confidential relation (that leads to the duty to disclose) Article 1344
o A plain duty to disclose/reveal facts In order that fraud may make a contract voidable, it should be
o According to good faith and usages of commerce the
serious and should not have been employed by both contracting
communication should have been made
parties.
Usual exaggerations in trade; opportunity to know the facts

Incidental fraud only obliges the person employing it to pay
Article 1340 damages.
The usual exaggerations in trade, when the other party had an
- Dolo causante
opportunity to know the facts, are not in themselves fraudulent.
o VOIDABLE
- Dolo incidente
o INDEMNITY FOR DAMAGES
- Tolerated Fraud / Lawful misrepresentation (dolus bonus) as long
as there is no malice/bad faith
- Caveat emptor (Let the buyer beware) Burden of Proof
o Principle stating the importance of the buyers diligence - GENERALLY, to the one alleging the fraud
- If the facts were being prevented from examination, then there
would be fraud Error v. Fraud
- Fraud is error induced
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Misrepresentation Simulation of Contracts

By a Third Person - Entering into a contractual relation, with the intent to deceive
third persons of the validity of a juridical act.
Article 1342 - The parties usually conceal their true intent, thus producing either
Misrepresentation by a third person does not vitiate consent, unless a void or correctable contract.
such misrepresentation has created substantial mistake and the
same is mutual. Requisites of Simulation
1. Declaration different from the true will
GENERAL RULE:
2. Agreement of the parties to create the appearance of a valid act
- Fraud by third person does not vitiate consent 3. Purpose of deceiving third persons
UNLESS:
- If 3rd person connives, he becomes an accomplice (Contract is Kinds of Simulated Contracts
VOIDABLE)
- If 3rd person leads them to commit mutual error (Contract is Article 1345
VOIDABLE) Simulation of a contract may be absolute or relative. The former
takes place when the parties do not intend to be bound at all; the
Made in good faith latter, when the parties conceal their true agreement.
Article 1343 ABSOLUTE SIMULATION
Misrepresentation made in good faith is not fraudulent but may - No real transaction was intended
constitute error. o Thus no meeting of the minds because there is no
consent
- Contract is VOID
Active/Passive
- Applicable to legal capacity especially age RELATIVE SIMULATION
- Active Misrepresentation = intent is manifested through
- The real intent of the contracting parties is hidden/distorted
actions or use of words
O There is a meeting of the minds, but the true intent is
- Passive Misrepresentation = knew of the misrepresentation but
not shown on the contract (paper)
concealed the fact from the other
- Contract is VOID but the hidden contract is VALID if:
O The essential requisites are present
O It does not injure a third person
O It is not contrary to law, morals, good customs, public
order or public policy
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Contracts || Essential Requisites of Contracts || Object of Contracts Requisites
All things not intransmissible

Article 1346
- Personal rights are intransmissible
An absolutely simulated or fictitious contract is void. A relative
simulation, when it does not prejudice a third person and is not
All services not contrary to law, morals, good customs, public order and
intended for any purpose contrary to law, morals, good customs,
public policy
public order or public policy binds the parties to their real agreement.
What may not be the objects of contracts

- Future inheritance may be the subject of contracts only if they
Object of Contracts are provided by law Art. 1347
- The thing or service which is the subject-matter of a contract o Partition inter vivos by the decedent - Art. 1030
o Marriage settlements
Requisites - Impossible things or services Art. 1348
o Impossibility must be actual and contemporaneous
Article 1349
Not temporary impossibility
The object of every contract must be determinate as to its kind. The
Before perfection of contract
fact that the quantity is not determinate shall not be an obstacle to
the existence of the contract, provided it is possible to determine Cause of Contracts
the same, without the need of a new contract between the parties. Article 1350
In onerous contracts the cause is understood to be, for each
What may be the objects of contracts? contracting party, the prestation or promise of a thing or service by the
The thing, right or service must be: other; in remuneratory ones, the service or benefit which is
1. Lawful remunerated; and in contracts of pure beneficence, the mere
2. Actual/Possible
liberality of the benefactor.
3. Transmissible (within the commerce of men)
4. Determinate/Determinable Cause
- The Why? of a contract
All things not outside the commerce of men - The essential reason for entering into a contract
- All those things that are not restricted by law or stipulation from
alienation or free exchange
- Future things can be the subject of contracts, as they may be Article 1351
made, raised or acquired by the obligor after the perfection of The particular motives of the parties in entering into a contract are
the contract. different from the cause thereof.
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Contracts || Essential Requisites of Contracts || Cause of Contracts Defective Causes and their Effects
Cause Motive Defective Causes and their Effects

Objective, intrinsic and juridical Psychological, personal and
Article 1352
reason for the existence of the individual purpose for entering a
Contracts without cause, or with unlawful cause, produce no effect
contract contract
whatever. The cause is unlawful if it is contrary to law, morals, good
Controlling motive / essential Particular motive / reason
customs, public order or public policy.
reason
Necessarily known to both parties Not necessarily known to both - Existence of cause is only important at the perfection of the
parties contract
o UNLESS required to be present through the whole
GENERAL RULE:
obligation by law
- Motive does not affect the validity of the contract.
- Cause for principal contracts are also the cause in accessory
EXCEPTIONS:
contracts
1. When the motive of a debtor in alienating property is to defraud
his creditors, alienation is rescissible
2. When the motive of a person in giving his consent is to avoid a Article 1353
threatened injury, in case of intimidation the contract is The statement of a false cause in contracts shall render them void, if
voidable. it should not be proved that they were founded upon another cause
3. When the motive of a person induced him to act on the basis of which is true and lawful.
fraud or misrepresentation by the other party, the contract is
likewise voidable. - If there is a real cause behind the false cause, contract will be
VALID
Requisites of Causa
1. Present
Article 1355
2. Lawful
3. True Except in cases specified by law, lesion or inadequacy of cause shall
not invalidate a contract, unless there has been fraud, mistake or
undue influence.
Article 1354
Although the cause is not stated in the contract, it is presumed that
it exists and is lawful, unless the debtor proves the contrary.
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Contracts || Form of Contracts || General Rule: Defective Causes and their Effects
Effect of Illegality of Contract / Causa on the Parties Chapter 3:

One Party is Innocent Form of Contracts
- He cannot be compelled to perform General Rule:
- He may recover what he has given
- Guilty party may not enforce or recover Article 1356
Contracts shall be obligatory, in whatever form they may have been
Both Parties are guilty entered into, provided all the essential requisites for their validity
- If the act constitutes a crime, both parties shall have no action are present.
against each other (in pari delicto)
- Neither may demand performance or recover what they have - Spiritual System of the Spanish Civil Code
given - Obligatory = valid between the parties
Arts. 1411 and 1412

Exception:
Article 1356
However, when the law requires that a contract be in some form
in order that it may be valid or enforceable, or that a contract be
proved in a certain way, that requirement is absolute and
indispensable. In such cases, the right of the parties stated in the
following article cannot be exercised.
Kinds of Formalities required by Law

Article 1357
If the law requires a document or other special form, as in the acts
and contracts enumerated in the following article, the contracting
parties may compel each other to observe that form, once the
contract has been perfected. This right may be exercised
simultaneously with the action upon the contract.
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Contracts || Form of Contracts || Kinds of Formalities required by Law Defective Causes and their Effects
For Validity (Ad esentia / Ad solemnitatem)

- Action to compel observance of form will not lie
Article 1358
- Without the document evidencing the contract, the following
The following must appear in a public document: contracts or obligations will not be valid and binding between the
(1) Acts and contracts which have for their object the creation, parties
transmission, modification or extinguishment of real
rights over immovable property; sales of real property or of Art. 748 Donation of movable
an interest therein a governed by Articles 1403, No. 2, and Art. 749 Donation of immovable
1405; Art. 1874 Sale of piece of land through an agent
(2) The cession, repudiation or renunciation of hereditary Art. 2134 Contract of antichresis
rights or of those of the conjugal partnership of gains; Art. 1744 Limiting liability of carriers
(3) The power to administer property, or any other power Art. 1771 Partnership: contribution of immovable property &
which has for its object an act appearing or which should real rights
appear in a public document, or should prejudice a third Art. 1773 Partnership: Inventory of immovable property
person; Art. 1956 Interest for using someone elses money
(4) The cession of actions or rights proceeding from an act Art. 2140 Chattel mortgage
appearing in a public document.
All other contracts where the amount involved exceeds five 1. To affect third persons
hundred pesos must appear in writing, even a private one. But sales - The following must be in public instruments:
of goods, chattels or things in action are governed by Articles, 1403, o Acts and contracts who have for their object the creation,
No. 2 and 1405. transmission, modification or extinguishment of real
rights over immovable property
o Sales of real property or of an interest therein
o The cession, repudiation and renunciation of hereditary
rights or those of the CPG
o Power to administer property
o Cession of actions or rights proceeding from an act
appearing in a public document
o Those contracts where the amount involved exceeds 500
pesos, private writing is enough
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Contracts || Reformation of Instruments || Requisites Defective Causes and their Effects
2. To prove existence (Ad probationem)

Chapter 4:
- Those required for the purpose of proving the existence of the
contract, such as those under the Statute of Frauds in Art 1403 Reformation of Instruments
Comparative Table - Concept: Reformation is the remedy in equity, where a written
Formal Real Contracts Unenforceable All Others instrument is made to conform/express the real intention of the
Contracts Contracts parties when there was some error or mistake in creating the
Not binding Not binding Binding on parties Binding even if instrument
until formality is until delivered even if oral oral
- Rationale: It would be unjust and inequitable to allow the
enforcement of a written instrument which does not reflect the
observed
real meeting of the minds of the parties
Not enforceable Not enforceable Not enforceable Can be
- What is reformed is not the contract but the written
by action if if there is no without memorandum enforced
instrument
formality is not delivery in writing UNLESS no between
observed timely objection was parties Requisites
made
Article 1359
Cannot sue to Unnecessary to Cannot sue to compel Can sue to
When, there having been a meeting of the minds of the parties to a
compel sue to compel observance of form if compel
observance of observance of objection was properly observance of contract, their true intention is not expressed in the instrument
form form if delivered made form purporting to embody the agreement, by reason of mistake, fraud,
inequitable conduct or accident, one of the parties may ask for the
reformation of the instrument to the end that such true intention may
be expressed.
If mistake, fraud, inequitable conduct, or accident has prevented
a meeting of the minds of the parties, the proper remedy is not
reformation of the instrument but annulment of the contract.
1. Meeting of the minds upon the contract

2. True intention not expressed in the instrument
3. Failure to express is due to mistake, fraud, inequitable conduct
or accident
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Contracts || Reformation of Instruments || Cases where No Reformation is Allowed Defective Causes and their Effects
Mistake Relative Simulation

When a mutual mistake of the parties causes the failure of the If two parties agree upon the mortgage or pledge of real or
instrument to disclose their real agreement, said instrument may be personal property, but the instrument states that the property is
reformed. sold absolutely or with a right of repurchase, reformation of the
instrument is proper.
- Mutual mistake
- Unilateral mistake is also accepted, if the other acted with fraud
Recap of Causes of Reformation
Fraud and Inequitable Conduct
1. Mutual Mistake
Article 1362 o Mutual
If one party was mistaken and the other acted fraudulently or o Mistake of fact
inequitably in such a way that the instrument does not show their o Clear and convincing proof
true intention, the former may ask for the reformation of the o Failure to express true intention
2. Unilateral Mistake
instrument.
o One party is mistaken
- Active Fraud o Other party defrauded actively/passively
3. Mistake by 3rd persons
o Only through ignorance, lack of skill, negligence or bad
Article 1363
faith of drafter, typist or clerk
When one party was mistaken and the other knew or believed that
4. Others specified by law
the instrument did not state their real agreement, but concealed that
fact from the former, the instrument may be reformed. Cases where No Reformation is Allowed
- Passive Fraud Article 1366
There shall be no reformation in the following cases:
Accident (1) Simple donations inter vivos wherein no condition is
Article 1364 imposed;
(2) Wills;
When through the ignorance, lack of skill, negligence or bad faith
(3) When the real agreement is void.
on the part of the person drafting the instrument or of the clerk or
typist, the instrument does not express the true intention of the
parties, the courts may order that the instrument be reformed.
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Contracts || Interpretation of Contracts || Implied Ratification Defective Causes and their Effects
Simple donations Chapter 5:

- RATIONALE: Acts of liberality cannot be compelled
Wills Interpretation of Contracts
- RATIONALE: A free and personal act, which is revocable by (Compare with Rules on Statutory Construction)
testator, which cannot be compelled. Moreso if the testator
already died
Real Agreement is void Primacy of Intention
- RATIONALE: No contract to reform Article 1370
Oral Contracts If the terms of a contract are clear and leave no doubt upon the
- RATIONALE: No written instrument to reform intention of the contracting parties, the literal meaning of its
Implied Ratification stipulations shall control.
Article 1367
If the words appear to be contrary to the evident intention of the
When one of the parties has brought an action to enforce the
parties, the latter shall prevail over the former.
instrument, he cannot subsequently ask for its reformation.
- Principle of estoppel Article 1372

However general the terms of a contract may be, they shall not be
Who may Ask for Reformation
understood to comprehend things that are distinct and cases
Article 1368 that are different from those upon which the parties intended to
Reformation may be ordered at the instance of either party or his agree.
successors in interest, if the mistake was mutual; otherwise, upon
petition of the injured party, or his heirs and assigns. - Intent of the parties must always come first
o This intent must be literally derived from the word of the
- If mistake is mutual: contract, if they may be clear and leaves no doubt
o Either party or successors-in-interest o Absence of averment or proof of mistake is needed
- Else, innocent party
Procedure of Reformation
Article 1369
The procedure for the reformation of instrument shall be governed
by rules of court to be promulgated by the Supreme Court.
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Contracts || Interpretation of Contracts || How to Determine Intention Doubtful Clauses
How to Determine Intention When it contains ambiguities and omission of stipulations

In order to judge the intention of the contracting parties, their The usage or custom of the place shall be borne in mind in the
contemporaneous and subsequent acts shall be principally interpretation of the ambiguities of a contract, and shall fill the
considered. omission of stipulations which are ordinarily established.
- Take note the usage and customs of the place With respect to the party who caused the obscurity
Article 1377
How to Interpret a Contract The interpretation of obscure words or stipulations in a contract shall
Doubtful Clauses not favor the party who caused the obscurity.
When it contains stipulations that admit several meanings
Article 1373 When it is absolutely impossible to settle doubts by the rules above
If some stipulation of any contract should admit of several meanings,
Article 1378
it shall be understood as bearing that import which is most
When it is absolutely impossible to settle doubts by the rules
adequate to render it effectual.
established in the preceding articles, and the doubts refer to
incidental circumstances of a gratuitous contract, the least
When it contains various stipulations, some of which are doubtful transmission of rights and interests shall prevail. If the contract is
onerous, the doubt shall be settled in favor of the greatest
Article 1374
reciprocity of interests.
The various stipulations of a contract shall be interpreted together,
attributing to the doubtful ones that sense which may result from all
If the doubts are cast upon the principal object of the contract in
of them taken jointly.
such a way that it cannot be known what may have been the intention
or will of the parties, the contract shall be null and void.
When it contains words that have different significations
Incidental circumstances
Article 1375 - Gratuitous Contracts
Words which may have different significations shall be understood in o Least transmission of rights and interests
that which is most in keeping with the nature and object of the - Onerous Contracts
o Greatest reciprocity of interests
contract.
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Contracts || Interpretation of Contracts || How to Interpret a Contract Doubtful Clauses
When the doubts are cast upon the principal object so that the Section 14. Peculiar signification of terms. The terms of a writing are
intention cannot be known presumed to have been used in their primary and general acceptation,
- Contract shall be null and void but evidence is admissible to show that they have a local, technical, or
Article 1379 otherwise peculiar signification, and were so used and understood in the
The principles of interpretation stated in Rule 123 of the Rules of particular instance, in which case the agreement must be construed
Court shall likewise be observed in the construction of contracts. accordingly. (12)
Rule 130 (Old Rule 123) Section 15. Written words control printed. When an instrument
4. Interpretation of Documents consists partly of written words and partly of a printed form, and the two
are inconsistent, the former controls the latter. (13)
Section 10. Interpretation of a writing according to its legal meaning.
The language of a writing is to be interpreted according to the legal Section 16. Experts and interpreters to be used in explaining certain
meaning it bears in the place of its execution, unless the parties intended writings. When the characters in which an instrument is written are
otherwise. (8) difficult to be deciphered, or the language is not understood by the
court, the evidence of persons skilled in deciphering the characters, or
Section 11. Instrument construed so as to give effect to all provisions.
In the construction of an instrument, where there are several provisions who understand the language, is admissible to declare the characters or
the meaning of the language. (14)
or particulars, such a construction is, if possible, to be adopted as will
give effect to all. (9) Section 17. Of Two constructions, which preferred. When the terms of
Section 12. Interpretation according to intention; general and particular an agreement have been intended in a different sense by the different
parties to it, that sense is to prevail against either party in which he
provisions. In the construction of an instrument, the intention of the
parties is to be pursued; and when a general and a particular provision supposed the other understood it, and when different constructions of a
are inconsistent, the latter is paramount to the former. So a particular provision are otherwise equally proper, that is to be taken which is the
intent will control a general one that is inconsistent with it. (10) most favorable to the party in whose favor the provision was made. (15)
Section 13. Interpretation according to circumstances. For the proper Section 18. Construction in favor of natural right. When an instrument
construction of an instrument, the circumstances under which it was is equally susceptible of two interpretations, one in favor of natural right
and the other against it, the former is to be adopted. (16)
made, including the situation of the subject thereof and of the parties to
it, may be shown, so that the judge may be placed in the position of
those who language he is to interpret. (11) Section 19. Interpretation according to usage. An instrument may be
construed according to usage, in order to determine its true character.
(17)
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Contracts || Rescissible Contracts || Kinds of Rescissible Contracts Doubtful Clauses
1. Lesion Proper (pecuniary injury)

Defective Contracts
o Includes 1381 (1) and (2)
- Rescissible Contracts o The injury occurs from the disparity between the purchase
- Voidable / Annullable Contracts price and the actual value of the subject property
- Unenforceable Contracts The difference must be more than of the actual
- Void / Inexistent Contracts value
2. Accion Pauliana (In fraud of creditors)

Chapter 6: o Happens when a debtor fraudulently alienates property to
Rescissible Contracts another in order to prevent his creditor from claiming any
- These are contracts that are valid, but may be rescinded as they properties from him
have injured or caused damage to a party or to a third person
- The rescissible contract remains valid until the action of rescission Requisites of Accion Pauliana
is exercised 1. Debtor has a credit prior to the alienation
2. Debtor made a subsequent contract to transfer property to a
3rd person
Kinds of Rescissible Contracts 3. Creditor has no other remedy left but to rescind the debtors
Article 1381 contract with the 3rd person
4. Act being impugned is fraudulent
The following contracts are rescissible:
5. Both the debtor and the 3rd person acted with bad faith
(1) Those which are entered into by guardians whenever the
wards whom they represent suffer lesion by more than one-
GENERAL RULE:
fourth of the value of the things which are the object thereof;
o Credit is prior to the alienation
(2) Those agreed upon in representation of absentees, if the
latter suffer the lesion stated in the preceding number;
EXCEPTION:
(3) Those undertaken in fraud of creditors when the latter
O Credit is after alienation but entitled to accion pauliana
cannot in any other manner collect the claims due them;
because of some prior right like:
(4) Those which refer to things under litigation if they have
There were already claims after the alienation that
been entered into by the defendant without the knowledge
were acknowledged by the debtor to have existed
and approval of the litigants or of competent judicial
before alienation
authority;
Rights that were subrogated to another after
(5) All other contracts specially declared by law to be subject to
alienation, which had claims prior to alienation
rescission.
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Contracts || Rescissible Contracts || Characteristics of Rescissible Contracts Differences of Arts. 1191 & 1380
Characteristics of Rescissible Contracts Differences of Arts. 1191 & 1380

1. Their defect consists in injury or damage either to one of the Resolution (1191) Rescission (1380)
contracting parties or to third persons. Only by a contracting party Party suffering from lesion / third
2. They are valid before rescission party prejudiced
3. They can only be attacked directly NOT collaterally
Non-performance of obligation Various reasons of equity, mainly
4. They can only be attacked by either of the contracting parties or
economic injury
by an injured/defrauded third person
5. They can be convalidated only by prescription, NOT by Court determines sufficiency of Only needs to satisfy the
ratification reason (Slight or Casual Breach) requisites. No need to measure
sufficiency of reason
Rescission
Only to reciprocal obligations Unilateral or reciprocal obligations
Article 1380 Principal Remedy Subsidiary Remedy
Contracts validly agreed upon may be rescinded in the cases
established by law.
Requisites of Rescission
- Remedy granted by law to contracting parties and injured third 1. Contract is Rescissible
persons 2. Party asking for rescission has No other legal means to obtain
- This is to secure reparation of damages caused by fraudulent acts reparation
- Goal is to return the parties to their original condition before 3. He is Able to return whatever he may be obliged to restore if
entering the contract rescission is granted
- Concept of equity is enforced by setting aside fraudulent 4. The object of the contract has not passed legally to the
acts/contracts possession of a 3rd person in Good faith
5. The action for rescission is brought within the Prescriptive
period of 4 years
[ RNA GP ]
1. Contract is Rescissible
Article 1382
Payments made in a state of insolvency for obligations to whose
fulfillment the debtor could not be compelled at the time they were
effected, are also rescissible.
- Should fall under Arts. 1381 and 1382

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Contracts || Rescissible Contracts || Rescission Effect of Rescission
2. Party asking for rescission has no other legal means to obtain 4. The object of the contract has not passed legally to the
reparation possession of a 3rd person in good faith

The action for rescission is subsidiary; it cannot be instituted except Neither shall rescission take place when the things which are the
when the party suffering damage has no other legal means to object of the contract are legally in the possession of third persons who
obtain reparation for the same. did not act in bad faith.
5. The action for rescission is brought within the prescriptive period

Who may sue for rescission (plaintiff)
of 4 years
- Party injured (creditor in cases of accion pauliana)
- Representatives and heirs or successors-in-interest of party Article 1389
injured The action to claim rescission must be commenced within four years.
- Creditors of the injured party in subrogation of the latter Art.
1177
For persons under guardianship and for absentees, the period of
four years shall not begin until the termination of the former's
Against whom (defendant)
- Author of the injury and his successors-in-interest incapacity, or until the domicile of the latter is known.
- Against acquirers in bad faith, but must implead the author of the
- Period is counted from the celebration of the contract
injury
3. He is able to return whatever he may be obliged to restore if Effect of Rescission

rescission is granted
Article 1385 (3)
Article 1385 (1) In this case, indemnity for damages may be demanded from the
Rescission creates the obligation to return the things which were person causing the loss.
the object of the contract, together with their fruits, and the price
GENERAL RULE:
with its interest; consequently, it can be carried out only when he
Return to status quo (to how things were before the contract)
-
who demands rescission can return whatever he may be obliged to
o Includes the fruits and the price with interest
restore. EXCEPTION:
- If return is impossible, indemnity for damages
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Contracts || Rescissible Contracts || Rescission Extent of Rescission
Extent of Rescission
Article 1384 Presumptions based on facts (Badges of Fraud)
Rescission shall be only to the extent necessary to cover the Fraud is shown by: (O RIA V . M AC M ICKING )
damages caused. 1. Fictitious or inadequate consideration
2. Transfer after suit is filed and while it is pending
3. Sale upon credit by an insolvent debtor
4. Proof of large indebtedness or complete insolvency
Presumptions of Fraud 5. Transfer of all or nearly all of the property, especially where the
Article 1387 debtor is financially embarrassed
All contracts by virtue of which the debtor alienates property by 6. Transfer between father and son, where other circumstances
above are also present
gratuitous title are presumed to have been entered into in fraud of
7. Failure of the vendee to take exclusive possession of the property
creditors, when the donor did not reserve sufficient property to
8. Gross disparity between the price and the real value
pay all debts contracted before the donation.
Liability for acquiring in bad faith the things alienated in

Alienations by onerous title are also presumed fraudulent when
fraud of creditors
made by persons against whom some judgment has been issued. The
decision or attachment need not refer to the property alienated, Article 1388
and need not have been obtained by the party seeking the rescission. Whoever acquires in bad faith the things alienated in fraud of
creditors, shall indemnify the latter for damages suffered by them
In addition to these presumptions, the design to defraud creditors on account of the alienation, whenever, due to any cause, it should
may be proved in any other manner recognized by the law of be impossible for him to return them.
evidence.
If there are two or more alienations, the first acquirer shall be liable
first, and so on successively.
Presumptions set by law
- Gratuitous Transfers
o When the donor does not leave sufficient property to
satisfy debts
- Onerous Transfers
o When a conveyance is made after an issuance of a writ of
attachment / judgement (regardless of finality)
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Contracts || Voidable or Annullable Contracts || Kinds of Voidable/Annullable Contracts Annulment v. Rescission
Chapter 7: Annulment
Annulment v. Rescission
Voidable or Annullable Contracts Voidable Contracts Rescissible Contracts
Kinds of Voidable/Annullable Contracts Intrinsic Defect, where the Extrinsic Defect, where the contract
contract has in itself an produced pecuniary damage to
Article 1390
inefficiency another
The following contracts are voidable or annullable, even though there
Requires ratification to be cured Needs no ratification to be
may have been no damage to the contracting parties:
(1) Those where one of the parties is incapable of giving effective
consent to a contract; Based on a vice of consent w/c The elements of a contract are
(2) Those where the consent is vitiated by mistake, violence, invalidates it complete
intimidation, undue influence or fraud. Annulment is a sanction based Rescission is a remedy based on
These contracts are binding, unless they are annulled by a proper on law equity
action in court. They are susceptible of ratification. Demanded by only the parties May be demanded by a third
to a contract person affected
Annulment v. Nullity Public interest predominates Private interest predominates
Void ab initio Voidable
May be invoked by any person May only be invoked by the party
Grounds for Annulment
interested whose consent was vitiated 1. Incapacity
Cannot be cured Can be cured 2. Vice of Consent
Due to violation of a public policy Due to vice of consent a. Violence
Void from the start Valid until annulled b. Intimidation
c. Undue Influence
d. Mistake
Characteristics of Voidable/Annullable Contracts e. Fraud
1. Their defect consists in the vitiation of consent of one of the [ VIU MF ]
contracting parties
2. They are binding until they are annulled by a competent court
3. They are susceptible of convalidation by ratification or by
prescription
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Contracts || Voidable or Annullable Contracts || Annulment Who may or may not institute action for annulment
Who may or may not institute action for annulment Effect of Annulment
The action for the annulment of contracts may be instituted by all An obligation having been annulled, the contracting parties shall
who are thereby obliged principally or subsidiarily. However, restore to each other the things which have been the subject matter
persons who are capable cannot allege the incapacity of those with of the contract, with their fruits, and the price with its interest,
whom they contracted; nor can those who exerted intimidation, except in cases provided by law.
violence, or undue influence, or employed fraud, or caused mistake
base their action upon these flaws of the contract. In obligations to render service, the value thereof shall be the basis
for damages.
Who May institute an action
- Party (principal or subsidiary) whose consent was vitiated
Article 1402
As long as one of the contracting parties does not restore what in
Who May Not institute an action
virtue of the decree of annulment he is bound to return, the other
- The party who caused the defect
cannot be compelled to comply with what is incumbent upon him.
- Capable parties cannot allege the incapacity of those with whom
they contracted
- Third person who is a stranger to the contract. UNLESS he can
Mutual Restitution
prove that the contract prejudiced his rights with respect to one
of the contracting parties, he may ask for annulment e.g. GENERAL RULES
guarantors and sureties (S INGSONG V . I SABELA S AWMILL ) If the contract has not yet been performed, the parties are
-
released from their obligations
- Restore to each other the thing with its fruits and the price with
Prescription
interest
Article 1391 EXCEPTIONS
The action for annulment shall be brought within four years. - Principle of unjust enrichment
This period shall begin: o Compensation for services rendered and enjoyed during
-In cases of intimidation, violence or undue influence, from the the validity of the contract
time the defect of the consent ceases.
- In case of mistake or fraud, from the time of the discovery of
the same.
And when the action refers to contracts entered into by minors or
other incapacitated persons, from the time the guardianship ceases.
`_______________________________________________________________
Contracts || Voidable or Annullable Contracts || Ratification of Voidable/Annullable Contracts Extinguishment of the Action
Article 1399 Ratification of Voidable/Annullable Contracts

When the defect of the contract consists in the incapacity of one of Requisites of Ratification of Voidable/Annullable Contracts
the parties, the incapacitated person is not obliged to make any 1. The contract is voidable
restitution except insofar as he has been benefited by the thing or 2. Ratification is made with knowledge of the cause for nullity
3. At the time of ratification, the cause of nullity has already ceased
price received by him.
to exist
Forms of Ratification of Voidable/Annullable Contracts
Article 1400
Whenever the person obliged by the decree of annulment to return Express or Tacit
the thing cannot do so because it has been lost through his fault, Article 1393
he shall return the fruits received and the value of the thing at the Ratification may be effected expressly or tacitly. It is understood
time of the loss, with interest from the same date. that there is a tacit ratification if, with knowledge of the reason
- If lost through a fortuitous event, only the fruits received need be which renders the contract voidable and such reason having ceased,
restored (Manresa) the person who has a right to invoke it should execute an act which
necessarily implies an intention to waive his right.
Extinguishment of the Action
- Tacit ratification:
Article 1392 o Silence or acquiescence
Ratification extinguishes the action to annul a voidable contract. o Acts showing approval/adoption of contract
o Acceptance of benefits flowing from the contract
Article 1401
By the parties themselves or by the guardian in behalf of an
The action for annulment of contracts shall be extinguished when the
incapacitated party
thing which is the object thereof is lost through the fraud or fault
of the person who has a right to institute the proceedings.
Article 1394
Ratification may be effected by the guardian of the incapacitated
- Ratification
If the right of actioncures the defect
is based uponinthetheincapacity
contract of any one of the person.
- Prescription bars the action for annulment
contracting parties, the loss of the thing shall not be an obstacle to
- Loss of the thing received by the plaintiff due to his fault = Article 1395
the success of thetoaction,
tantamount waivingunless
of hissaid
rightloss took place
to annul through
the contract as the
he is
fraud incapable
or fault of of
thereturning
plaintiff. the item anymore Ratification does not require the conformity of the contracting
party who has no right to bring the action for annulment.
o If it is lost through a fortuitous event, action still prospers,
and he is liable to return only the fruits received (Manresa)
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Contracts || Unenforceable Contracts || Characteristics of Unenforceable Contracts Effects of Ratification of Voidable/Annullable Contracts
Effects of Ratification of Voidable/Annullable Contracts Chapter 8:

Action to annul is extinguished Unenforceable Contracts
Article 1392 - Contracts that are valid but because of statutory defects do not
confer any action to enforce the same until and unless they are
Ratification extinguishes the action to annul a voidable contract.
ratified in the manner prescribed by law
Contract is cleansed retroactively from all its defects Characteristics of Unenforceable Contracts
1. They cannot be enforced by a proper action in court
Article 1396 2. They are susceptible of ratification
Ratification cleanses the contract from all its defects from the 3. They cannot be assailed by third persons
moment it was constituted. 4. Defect is not curable by prescription (no prescription)
Unenforceable Contracts Rescissible and Voidable Contracts

Valid but cannot be enforced Valid until annulled
through court action
Ratifiable
Kinds of Unenforceable Contracts

Article 1403
The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who
has been given no authority or legal representation, or who
has acted beyond his powers;
(2) Those that do not comply with the Statute of Frauds as set
forth in this number. In the following cases an agreement
hereafter made shall be unenforceable by action, unless the
same, or some note or memorandum, thereof, be in writing,
and subscribed by the party charged, or by his agent; evidence,
therefore, of the agreement cannot be received without the
writing, or a secondary evidence of its contents:
(3) Those where both parties are incapable of giving consent to
a contract.
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Contracts || Unenforceable Contracts || Kinds of Unenforceable Contracts Unauthorized contracts
Unauthorized contracts (d) An agreement for the sale of goods, chattels or things in
action, at a price not less than five hundred pesos, unless the
Article 1404
buyer accept and receive part of such goods and chattels, or
Unauthorized contracts are governed by Article 1317 and the the evidences, or some of them, of such things in action or
principles of agency in Title X of this Book. pay at the time some part of the purchase money; but when
a sale is made by auction and entry is made by the
- The said contract shall not bind the principal Art. 1317
auctioneer in his sales book, at the time of the sale, of the
- The agent shall be liable if the principal does not ratify the
amount and kind of property sold, terms of sale, price,
contract - Art. 1897 and 1898 (Agency)
names of the purchasers and person on whose account the
Contracts covered by the Statute of Frauds sale is made, it is a sufficient memorandum;
- The Statute of Frauds came from Rule 123, Sec. 21 of the old (e) An agreement of the leasing for a longer period than one
Rules of Court year, or for the sale of real property or of an interest therein;
(f) A representation as to the credit of a third person.
Purpose of the Statute
- The Statute of Frauds aims to prevent certain types of contracts
to be proved by parol evidence because of their sensitivity. a) Agreements that are covered by (a) should be wholly executory
- To prevent fraud and perjury through intentional (all parts are still subject to execution; no partial performance
misrepresentations or injustice because of faulty unassisted yet)
memory of witnesses o If there is partial performance, they are then outside the
ambit of the Statute
Article 1403 (2) b) Test: Is there a principal debtor (other than the defendant)
In the following cases an agreement hereafter made shall be liable?
unenforceable by action, unless the same, or some note or o If there is, the statute applies
memorandum, thereof, be in writing, and subscribed by the party o If the credit is given exclusively because of the
defendants promise, the statute cannot be invoked
charged, or by his agent; evidence, therefore, of the agreement
(R EISS V . M EMIJE )
cannot be received without the writing, or a secondary evidence c) Includes marriage settlements and donation propter nuptias
of its contents: d) Things in action = movables but not susceptible of possession
(a) An agreement that by its terms is not to be performed (credits, interest in property, etc.)
within a year from the making thereof; e) Sale of land through an agent is void Art. 1874
(b) A special promise to answer for the debt, default, or
miscarriage of another;
(c) An agreement made in consideration of marriage, other
than a mutual promise to marry;
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Contracts || Void or Inexistent Contracts || Characteristics of Void/Inexistent Contracts Contracts executed by parties who are both incapable of giving
consent to a contract
How to ratify unenforceable contracts under the statute of frauds? Chapter 9:

Article 1405
Void or Inexistent Contracts
Contracts infringing the Statute of Frauds, referred to in No. 2 of
Article 1403, are ratified by the failure to object to the presentation Characteristics of Void/Inexistent Contracts
of oral evidence to prove the same, or by the acceptance of benefit 1. Void from the beginning
under them. 2. Produce no effect whatsoever
3. Cannot be ratified
- Express (in writing)
Kinds of Void/Inexistent Contracts
- Implied
o Failure to object to the presentation of oral evidence Article 1409
o Acceptance of benefit therein The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law,
morals, good customs, public order or public policy;
Right of parties to a contract is enforceable but requires a public (2) Those which are absolutely simulated or fictitious;
document (3) Those whose cause or object did not exist at the time of the
transaction;
Article 1406
(4) Those whose object is outside the commerce of men;
When a contract is enforceable under the Statute of Frauds, and a
(5) Those which contemplate an impossible service;
public document is necessary for its registration in the Registry of (6) Those where the intention of the parties relative to the
Deeds, the parties may avail themselves of the right under Article 1357. principal object of the contract cannot be ascertained;
(7) Those expressly prohibited or declared void by law.
Contracts executed by parties who are both incapable of
giving consent to a contract These contracts cannot be ratified. Neither can the right to set up
Article 1407 the defense of illegality be waived.
In a contract where both parties are incapable of giving consent,
express or implied ratification by the parent, or guardian, as the - Contracts defective for want of consent
- Contracts defective for want of object or causa
case may be, of one of the contracting parties shall give the contract
- Contracts that are illegal
the same effect as if only one of them were incapacitated.
o Prohibited to protect public interest
- Contracts expressly prohibited
Article 1408is made by the parents or guardians, as the case may
If ratification o Prohibited to protect private interest
be, of both contracting
Unenforceable contractsparties,
cannot the
be assailed
contractby
shall
third
bepersons.
validated from - Contracts declared void by law
the inception.
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Contracts || Void or Inexistent Contracts || Kinds of Void/Inexistent Contracts In pari delicto rules
In pari delicto rules Comparison of Rules

Article 1411 Both Parties guilty One Party is guilty
When the nullity proceeds from the illegality of the cause or Criminal - No action against each - Innocent party to
Offense other claim what he has
object of the contract, and the act constitutes a criminal offense,
- Both to be prosecuted given
both parties being in pari delicto, they shall have no action against - Innocent party not
Non-Criminal - Neither may recover
each other, and both shall be prosecuted. Moreover, the provisions of - Neither may ask for bound to comply
Offense
the Penal Code relative to the disposal of effects or instruments of a performance
crime shall be applicable to the things or the price of the contract.
Purpose is illegal
This rule shall be applicable when only one of the parties is guilty;
but the innocent one may claim what he has given, and shall not be Article 1414
bound to comply with his promise. When money is paid or property delivered for an illegal purpose,
the contract may be repudiated by one of the parties before the
Article 1412 purpose has been accomplished, or before any damage has been
If the act in which the unlawful or forbidden cause consists does not caused to a third person. In such case, the courts may, if the public
constitute a criminal offense, the following rules shall be observed: interest will thus be subserved, allow the party repudiating the
(1) When the fault is on the part of both contracting parties, contract to recover the money or property.
neither may recover what he has given by virtue of the contract,
or demand the performance of the other's undertaking; Article 1415
(2) When only one of the contracting parties is at fault, he Where one of the parties to an illegal contract is incapable of
cannot recover what he has given by reason of the contract, or giving consent, the courts may, if the interest of justice so demands
ask for the fulfillment of what has been promised him. The allow recovery of money or property delivered by the
other, who is not at fault, may demand the return of what he
incapacitated person.
has given without any obligation to comply his promise.
Not illegal per se but prohibited
Article 1416
When the agreement is not illegal per se but is merely prohibited,
and the prohibition by the law is designated for the protection of
the plaintiff, he may, if public policy is thereby enhanced, recover
what he has paid or delivered.
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Contracts || Void or Inexistent Contracts || Right to set up defense Amount paid exceeds the maximum allowed by law
Amount paid exceeds the maximum allowed by law Right to set up defense
When the price of any article or commodity is determined by These contracts cannot be ratified. Neither can the right to set up
statute, or by authority of law, any person paying any amount in the defense of illegality be waived.
excess of the maximum price allowed may recover such excess.
When a laborer undertakes to work longer

Action/Defense for the declaration of the inexistence
Article 1418 of the contract
When the law fixes, or authorizes the fixing of the maximum Article 1410
number of hours of labor, and a contract is entered into whereby a The action or defense for the declaration of the inexistence of a
laborer undertakes to work longer than the maximum thus fixed, he contract does not prescribe.
may demand additional compensation for service rendered beyond the
time limit. Article 1421
When a laborer accepts lower wages than set by law The defense of illegality of contract is not available to third
persons whose interests are not directly affected.
Article 1419
When the law sets, or authorizes the setting of a minimum wage
for laborers, and a contract is agreed upon by which a laborer accepts
a lower wage, he shall be entitled to recover the deficiency.
When the contract is divisible

Article 1420
In case of a divisible contract, if the illegal terms can be separated
from the legal ones, the latter may be enforced.
When the contract is a result of a previous illegal contract

Article 1421
A contract which is the direct result of a previous illegal contract,
is also void and inexistent.
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Natural Obligations || General Provisions || Definition When the contract is a result of a previous illegal contract
Natural
Natural Obligation Moral Obligation
There is a juridical tie No juridical tie
Performance of debtor is a Act is pure liberality
Obligations
legal fulfillment of obligation
There are positive laws that Morals govern the obligation
still govern them
General Provisions Examples
Definition Article 1424
Article 1423 When a right to sue upon a civil obligation has lapsed by
Obligations are civil or natural. Civil obligations give a right of extinctive prescription, the obligor who voluntarily performs the
action to compel their performance. Natural obligations, not being contract cannot recover what he has delivered or the value of the
based on positive law but on equity and natural law, do not grant a service he has rendered.
right of action to enforce their performance, but after voluntary
fulfillment by the obligor, they authorize the retention of what has Article 1425
been delivered or rendered by reason thereof. Some natural When without the knowledge or against the will of the debtor, a
obligations are set forth in the following articles. third person pays a debt which the obligor is not legally bound to
pay because the action thereon has prescribed, but the debtor later
Requisites of a Natural Obligation
voluntarily reimburses the third person, the obligor cannot recover
1. Juridical tie between two people
what he has paid.
2. The tie is created by equity and natural justice
Comparison Tables Article 1426

Natural Obligation Civil Obligation When a minor between eighteen and twenty-one years of age who
Enforceability Enforceable only by good Enforceable before the has entered into a contract without the consent of the parent or
conscience of debtor courts guardian, after the annulment of the contract voluntarily returns
Source Equity and Natural Justice Positive Law the whole thing or price received, notwithstanding the fact the he has
not been benefited thereby, there is no right to demand the thing or
price thus returned.
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Natural Obligations || General Provisions || Conversion to Civil Obligation When the contract is a result of a previous illegal contract
Article 1427 Conversion to Civil Obligation

When a minor between eighteen and twenty-one years of age, who GENERAL RULE:
has entered into a contract without the consent of the parent or - Partial fulfillment of a natural obligation does not make it a civil
guardian, voluntarily pays a sum of money or delivers a fungible obligation
- Voluntary acts of a debtor are not recoverable
thing in fulfillment of the obligation, there shall be no right to recover
the same from the obligee who has spent or consumed it in good faith.
EXCEPTIONS:
- If the parties novated the natural obligation to make it civil
Article 1428 - If the other party returns the thing given or pays for the value of
When, after an action to enforce a civil obligation has failed the the service rendered (Ratification)
defendant voluntarily performs the obligation, he cannot demand
the return of what he has delivered or the payment of the value of the
service he has rendered.
Article 1429
When a testate or intestate heir voluntarily pays a debt of the
decedent exceeding the value of the property which he received
by will or by the law of intestacy from the estate of the deceased, the
payment is valid and cannot be rescinded by the payer.
Article 1430
When a will is declared void because it has not been executed in
accordance with the formalities required by law, but one of the
+intestate heirs, after the settlement of the debts of the deceased,
pays a legacy in compliance with a clause in the defective will, the

payment is effective and irrevocable.
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Estoppel || General Provisions || Definition When the contract is a result of a previous illegal contract
Estoppel v. Fraud
Estoppel - Estoppel prevents an injury from happening by barring a person

from asserting a misrepresentation
- Fraud is in itself an injury, as one has acted upon a
General Provisions misrepresentation of another
Definition
Estoppel by Record
Article 1431 - Preclusion to deny the truth of matters set forth in a record,
Through estoppel an admission or representation is rendered whether judicial or legislative, and also to deny the facts
conclusive upon the person making it, and cannot be denied or adjudicated by a court of competent jurisdiction
disproved as against the person relying thereon.
Estoppel by Deed
- Estoppel is a bar that prevents a person from denying or asserting - Bar which precludes on party to a deed (instrument) and his
anything to the contrary, based on law, of what has been privies from asserting as against the other party and his privies
established as the truth either by acts of the person or by any right or title in derogation of the deed, or from denying the
law/judgement truth of any material facts asserted in it
- It aims to prevent the possible damage/injury that the
admission/representation can cause by imposing silence Estoppel in pais
- Based on equity, moral justice and natural rights
- Because of something which he has done or omitted to do, a
Kinds of Estoppel party is denied the right to plead or prove an otherwise important
act
Article 1433
Estoppel may be in pais or by deed.
Estoppel by misrepresentation Art. 1437
1. Technical Estoppel Estoppel by acceptance of benefit Art. 1438
a. By record (Res judicata)
b. By deed Promissory estoppel
2. Equitable estoppel / Estoppel in pais - Am. Jur concept that states that an estoppel may arise from
making of a promise, even though without consideration, if it was
Persons Bound intended that the promise should be relied upon and in fact it
Article 1439 was relied upon, and if a refusal to enforce it would be virtually
Estoppel is effective only as between the parties thereto or their to sanction the perpetuation of fraud or would result in other
successors in interest. injustice.
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Estoppel || General Provisions || Cases where Estoppel Applies When the contract is a result of a previous illegal contract
Estoppel by laches Article 1437

- A person knowingly takes no step to enforce his rights to enforce
When in a contract between third persons concerning immovable
them, for an unreasonable and unexplained length of time
property, one of them is misled by a person with respect to the
ownership or real right over the real estate, the latter is precluded
Estoppel by silence
from asserting his legal title or interest therein, provided all these
- Silence or inaction with some element of turpitude or negligence
when there is a duty to say or do something prevent that person requisites are present:
from saying or doing that act. (1) There must be fraudulent representation or wrongful
concealment of facts known to the party estopped;
Cases where Estoppel Applies (2) The party precluded must intend that the other should act
upon the facts as misrepresented;
Article 1434
(3) The party misled must have been unaware of the true facts;
When a person who is not the owner of a thing sells or alienates
and
and delivers it, and later the seller or grantor acquires title (4) The party defrauded must have acted in accordance with
thereto, such title passes by operation of law to the buyer or grantee. the misrepresentation.
Article 1435
If a person in representation of another sells or alienates a thing, Article 1438
the former cannot subsequently set up his own title as against the One who has allowed another to assume apparent ownership of
buyer or grantee. personal property for the purpose of making any transfer of it,
cannot, if he received the sum for which a pledge has been
Article 1436 constituted, set up his own title to defeat the pledge of the property,
A lessee or a bailee is estopped from asserting title to the thing made by the other to a pledgee who received the same in good faith
leased or received, as against the lessor or bailor. and for value.
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Trusts || General Provisions || Definition of Trusts Express Trusts
Kinds of Trusts
Trusts Article 1441
Trusts are either express or implied. Express trusts are created by
Chapter 1: the intention of the trustor or of the parties. Implied trusts come into
being by operation of law.
General Provisions
1. Express Trusts
Definition of Trusts
2. Implied Trusts
- A fiduciary relationship between the trustor and trustee where the
a. Resulting Trusts
latter holds a property with the obligation of dealing with the
Carrying out an actual or presumed intent of the
property to benefit another person.
parties, where the express trust fails
- In trusts, there exist a beneficial title and a legal title
b. Constructive Trusts
Governing Rules Regardless of intention, a trust is created in order
to prevent fraud, oppression or unjust enrichment
Article 1442 of another (e.g. mistake in delivery)
The principles of the general law of trusts, insofar as they are not
in conflict with this Code, the Code of Commerce, the Rules of Court Express Trusts
and special laws are hereby adopted.
Proof Required
Parties to a Trust Article 1443
Article 1440 No express trusts concerning an immovable or any interest
A person who establishes a trust is called the trustor; one in whom therein may be proved by parol evidence.
confidence is reposed as regards property for the benefit of
another person is known as the trustee; and the person for whose Form of Express Trusts
benefit the trust has been created is referred to as the beneficiary.
Article 1444
No particular words are required for the creation of an express
trust, it being sufficient that a trust is clearly intended.
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Trusts || General Provisions || Kinds of Trusts Implied Trusts
Want of Trustee Examples

No trust shall fail because the trustee appointed declines the There is an implied trust when property is sold, and the legal estate
designation, unless the contrary should appear in the instrument is granted to one party but the price is paid by another for the
constituting the trust. purpose of having the beneficial interest of the property. The
former is the trustee, while the latter is the beneficiary. However, if the
Acceptance by the Beneficiary
person to whom the title is conveyed is a child, legitimate or
Article 1446 illegitimate, of the one paying the price of the sale, no trust is
Acceptance by the beneficiary is necessary. Nevertheless, if the implied by law, it being disputably presumed that there is a gift in favor
trust imposes no onerous condition upon the beneficiary, his of the child.
acceptance shall be presumed, if there is no proof to the contrary.
Article 1449
Implied Trusts There is also an implied trust when a donation is made to a person
How established but it appears that although the legal estate is transmitted to the
donee, he nevertheless is either to have no beneficial interest or only
Article 1441
a part thereof.
Implied trusts come into being by operation of law.
Article 1450
How Proved If the price of a sale of property is loaned or paid by one person
Article 1457 for the benefit of another and the conveyance is made to the
An implied trust may be proved by oral evidence. lender or payor to secure the payment of the debt, a trust arises
by operation of law in favor of the person to whom the money is
loaned or for whom its is paid. The latter may redeem the property
and compel a conveyance thereof to him.
Article 1451
When land passes by succession to any person and he causes the
legal title to be put in the name of another, a trust is established
by implication of law for the benefit of the true owner.
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Trusts || General Provisions || Kinds of Trusts Implied Trusts

If two or more persons agree to purchase property and by If an absolute conveyance of property is made in order to secure
common consent the legal title is taken in the name of one of the performance of an obligation of the grantor toward the
them for the benefit of all, a trust is created by force of law in favor of grantee, a trust by virtue of law is established. If the fulfillment of
the others in proportion to the interest of each. the obligation is offered by the grantor when it becomes due, he
may demand the reconveyance of the property to him.
Article 1453
When property is conveyed to a person in reliance upon his Article 1455
declared intention to hold it for, or transfer it to another or the When any trustee, guardian or other person holding a fiduciary
grantor, there is an implied trust in favor of the person whose benefit relationship uses trust funds for the purchase of property and
is contemplated. causes the conveyance to be made to him or to a third person, a
trust is established by operation of law in favor of the person to whom
the funds belong.
Article 1456
If property is acquired through mistake or fraud, the person
obtaining it is, by force of law, considered a trustee of an implied trust
for the benefit of the person from whom the property comes.
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Defective Contracts Tables || ||
Defective Contracts Tables

Rescissible Voidable/Annullable Unenforceable Void/Inexistent
Effect on Valid until Rescinded Valid until Annulled Valid but unenforceable Void ab initio
Contract
How to assail? Judicial or Extrajudicial action Direct and collateral attack By using its status as a A direct action to declare its
for rescission on its validity defense nullity
Who can assail? Injured party, their heirs, Those who are obliged Party using the status as a Injured party or an interested
assigns and interested third principally and is injured defense third person
persons
When to assail? Within 4 years (gaining Within 4 years (gaining Anytime a party attempts to Imprescriptible
majority, knowledge of majorty, cessation of vice of enforce the contract
domicile, knowledge of consent)
fraud)
How to cure? By ratification or prescription By ratification or prescription By ratification or prescription None
Also by acceptance
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Special Thanks || Bibliography ||
Memory guide for quizzes
Special Thanks quiz 10 coverage art 1347-1359, 1366-1369, 1403, 1771, 1773, 1874,
2134, 748-749
Bibliography quiz 11 coverage art 1191, 1370-1378, 1380, 1381, 1383-1389
Digests of A2016
quiz 12 coverage art 1390-1394, 1396-1407
Civil Code of the Philippines, 1949
quiz 13 coverage art 1345-1346, 1409-1412, 1414-1430
Reyes, Jose B. L., and Ricardo C. Puno. 1958. An Outline of Philippine
quiz 14 coverage art 1431, 1433-1445, 1448-1457
Civil Law. Quezon City: Central Book Supply, Inc.
Santos, Karichi E. 2009. "Karichi Notes." Quezon City.
Tolentino, Arturo M. 1990. Commentaries and Jurisprudence on the Civil
Code of the Philippines. Manila: Central Book Supply, Inc.
Special Mentions
- Cristobal, Enad, Espaola, Macariola, Marin, Nuez, Sevilla and
Tiangco as copyreaders, additional information and moral
support :)
`_______________________________________________________________

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Obligations and Contracts

Professor E.A. Labitag

Other Quasi Contracts Help when in an accident / seriously ill

Funeral Expenses Property saved during a calamity

Article 2165 Article 2168

Support to orphans, insane, indigents Government undertaking necessary work

Article 2166 Article 2169

Finders of Lost personal property Acts or Omissions punishable by Law

Paying the debts of another

Article 2173 Quasi-Delicts

Article 2174 Article 2176

Article 218 (FC) Classifications of Obligations

Difference between Civil and Criminal Action against employers

Article 1244 (1) Article 442

A Generic Thing Modes of Breach

Fraud Dolo Causante Dolo Incidente Culpa Aquiliana Culpa Contractual

Delay Mora Solvendi

Mora Accipiendi Remedies of Creditor in Case of Breach

Action for Undoing (Not To Do)

This is understood to be without prejudice to the rights of third

Accion Pauliana Other Specific Remedies

Extinguishment of Liability in Case of Breach Due to Article 552

Exceptions to the rule on extinguishment of liability PD 1685

Fulfillment of Obligations Chapter 3:

Article 1189 Article 1190

Reciprocal Obligations Concept

Effects of Rescission Article 1788

Differences of Arts. 1191 & 1380

Article 1486 Obligation with a Period

Obligations with a resolutory period take effect at once, but

Kinds of Period/Term Rules in case of Loss, Deterioration, or Improvement

GENERAL RULE: When debtor loses right to make use of period

Presumption When Court may Fix a Period

Alternative Obligations Effect of Notice of Choice

Article 1204 Article 1205

Facultative Obligation Joint and Solidary Obligations

Alternative Obligations Facultative Obligations Presumption

Article 1208 Extent of right of creditor

Solidary Obligations Article 1915

Solidary Debtor in relation to: Article 1219

Defenses available to a solidary debtor against the creditor Indivisibility Solidarity

Possible Defenses based on nature: Effects

Divisible and Indivisible Obligations Indivisible Obligations

Article 1233 Article 1225 (3)

Obligations with a Penal Clause

Demandability of Penalty Debtor not exempt from Performance

Article 1226 (2) Article 1227

Article 1226 (1)

Proof of actual damages suffered by the creditor is not necessary in

Extinguishment of Obligations 1. Payor Who can pay

Rules on Capacity of Payor Rules on Capacity of Payee

R.A. 8183 (1996)

Article 1244 (2) In obligations to PAY INTEREST

4. Integrity How payment is to be paid Requisites of Substantial Performance

No Partial payment is allowed Art. 1248

5. Time When payment is to be made Application of Payments

7. Costs Expenses of making the payment

Rules on Application of Payment Payment by Cession / Assignment

Effects of Non-Compliance Withdrawal by Debtor after proper consignation

Withdrawal by Debtor before proper consignation - Generally applies to determinate things

Kinds of Loss Effects of Loss

Presumptions In Obligations to Give a Generic Thing

- Provided that there was no fault/negligence on the debtors part

Actions against 3rd Persons Effects of Impossibility