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College of Law
Law 101: Obligations and Contracts
Course Outline1
Contact Information:
rodolfowagajr@yahoo.com
+639178130772
Attendance Requirement:
Assessment:
Textbook:
30%
30%
40%
1. General Provisions
Definition (Article 1156, Civil Code)
Elements
Active Subject
Passive Subject
Object or Prestation
Efficient Cause or Juridical Tie
Natural Obligations
Definition (Art. 1423, CC)
Examples (Arts 1424 to 1430)
Difference between Natural and Civil Obligation (Art. 1423)
Distinguished from Moral Obligations
Villaroel v. Estrada, 71 Phil. 140 (1940)
Fisher v. Robb, 69 Phil 101 (1939)
Conversion to Civil Obligation
By novation
By ratification
Sources of Obligations (Art. 1157)
Law (Art. 1158)
Contracts (Art. 1159, 1305)
1
From Outline of Prof. Mary Rose S. Tan
Compensation morae
Central Bank v. Court of Appeals, 139 SCRA 46 (1985)
Fraud or dolo (Art. 1171) Dolo incidente and dolo causante
Woodhouse v. Halili, 93 Phil. 526 (1953)
Geraldez v. Court of Appeals (1994)
Negligence (Art. 1172, 1173)
- culpa v. dolo
- culpa aquiliano v. culpa contractual
- standard of care required
Gutierrez v. Gutierrez, 56 Phil. 177 (1932)
Vasquez v. Borja, 74 Phil. 560 (1944)
De Guia v. Manila Electric Corporation, 40 Phil. 706 (1920)
US v. Barias, 23 Phil 434 (1912)
Sarmiento v. Sps. Cabrido, 401 SCRA 122 (2003)
Crisostomo v. Court of Appeals, 409 SCRA 528 (2003)
Contravention of the tenor (Art. 1172)
Chaves v. Gonzales, 32 SCRA 547 (1970)
Telefast v. Castro, 158 SCRA 445 (1988)
Arrieta v. NARIC, 10 SCRA 79 (1964)
Magat v. Medialdea, 206 Phil 341 (1983)
Remedies in case of breach
1. Performance
Specific performance (art. 1165; Section 10, Rule 39, Rules of Court)
Substituted performance
- in an obligation to give generic thing (Art. 1165, par. 2)
- undoing of poor work in an obligation to do (Art. 1167)
Chaves v. Gonzales, 32 SCRA 547 (1970)
Tanguilig v. Court of Appeals, 266 SCRA 78 (1997)
- undoing in an obligation not to do (Art. 1168)
2. Rescission (Art. 1191-1192)
3. Damages (Art. 1170)
Subsidiary Remedies of Creditor
1. Accion Subrogatoria (Art. 1177)
Kinds of Conditions
a. As to the effect on the obligation (Art. 1181)
Gonzales v. Heirs of Tomas and Paula, supra
i. Suspensive Condition or Condition Precedent
Retroactive effect when condition is fulfilled (Art. 1187)
Coronel v. Court of Appeals and Alcaraz, 263 SCRA 15 (1996)
Sps. Nameal and Lourdes Bonrostro v. Sps. Juan and Constancia Luna, G.R. No. 172346,
July 24, 2013
Rights of the creditor and debtor before fulfillment of the condition (Art. 1188)
ii. Resolutory Condition or Condition Subsequent
Parks v. Province of Tarlac, 49 Phil. 142 (1927)
Central Philippine University v. Court of Appeals, 245 SCRA 511 (1995)
Quijada v. Court of Appeals, 299 SCRA 695 (1998)
b.
i.
Rules in case of loss, deterioration or improvement pending the happening of the condition (Art.
1189-1190)
Heirs of Timoteo Moreno v. Mactan Cebu International Airport Authority, 413 SCRA 502
(2003)
1. Definition of loss, deterioration and improvement
2. Effect of loss or deterioration
Without debtors fault
With debtors fault
3. Effect of improvement
By nature or time
Due to debtors effort and expanse
Effect of prevention of the fulfillment of the condition by the obligor (Art. 1186)
Herrera v. Leviste, 135 SCRA 129 (1985)
Carlos Lim, et al. v. Development Bank of the Philippines, G.R. No. 177050, July 1, 2013
iii. Reciprocal Obligations
a. Concept
b. Alternative remedies of injured parties on case of breach
i. Action for specific performance
Effect when fulfillment no longer possible
ii. Action for rescission
Requisites
How made
Effects
Song Fo v. Hawaiian Philippines, 47 Phil. 821 (1925)
Boysaw v. Interphil Promotions, 148 SCRA 365 (1987)
University of the Philippines v. de los Angeles, 35 SCRA 365 (1989)
De Erquiaga v. Court of Appeals, 178 SCRA 1 (1989)
Angeles v. Calasanz, 135 SCRA 323 (1985)
James G. Ong v. Court of Appeals, 310 SCRA 1 (1999)
Iringan v. Court of Appeals, 366 SCRA 41 (2001)
Visayan Saw Mill v. Court of Appeals and RJ Trading, 219 SCRA 378 (1993)
Deiparine v. Court of Appeals and Trinidad, 221 SCRA 503 (2003)
Grace Park Engineering Co. Inc v. Dimaporo, 107 SCRA 266 (1981)
Roque v. Lapuz, 96 SCRA 741 (1980)
Suria v. Intermediate Appellate Court, 151 SCRA 661 (1987)
(Art 1786, 1788, 1484-86, Republic Act No. 6552)
iv. Obligations with a Period
a. Compare Period/Term v. Condition
b. Kinds of Period
i.
ii.
iii.
iv.
As to effect
Suspensive (Art. 1193, par. 1)
Resolutory (Art. 1193, par. 2)
As to expression
Express
Implied
As to definiteness
Definite
Indefinite
As to source
Voluntary
Legal
Judicial
c. Rules in case of loss, deterioration or improvement before arrival of the period (Art. 1194
and 1189)
d. Effect of Payment in Advance (Art. 1195, 1197, par. 3)
e. Benefit of Period (Art 1196)
i.
ii.
iii.
d.
e.
f.
Joint Obligations
i. Concept
Requisites
Words used to indicate joint obligations
ii. Presumption (Art. 1207, 1208)
iii. Effects (Art. 1207, 1208)
Extent of liability to debtor
Extent of right of creditor
In case of novations, compensation, confusion (Art. 1277) or remission
b.
Solidary Obligations
i. Concept
Requisites
Words to indicate solidary obligations
ii. Kinds
As to source (Art. 1208)
o Legal (Art. 1915, 1945, 2194, Art. 119 of RPC)
o Conventional
o Real
As to parties bound
o Active
o Passive
o Mixed
As to uniformity
o Uniform
o Varied/non-uniform (Art. 1211)
o Common debtor
! Right to demand (Art. 1214-1216; 1217, par. 1)
! In case of novation, compensation, confusion, remission by a
creditor (Art. 1215, par. 1)
o Solidary co-creditors
! In case of novation, compensation, confusion, remission by a cocreditor (Art. 1215, par. 2)
! Prejudicial acts prohibited (Art. 1212)
! Assignment of rights not allowed (Art. 1213)
Solidary debtor in relation to:
o Common creditor
! Obligation to perform (Art. 1207)
! In case of novation, compensation, confusion, remission by a
creditor (Art. 1215, par. 1)
o Solidary co-debtor
! In case of payment by co-debtor (Art. 1217-1220)
! In case of fortuitous event (Art. 1221)
Jaucian v. Querol, 38 Phil. 718 (1918)
Rehabilitation Finance Corporation v. Court of Appeals, Official Gazette No. 6, p. 2467
Quiombing v. Court of Appeals, 189 SCRA 325 (1990)
Inciong v. Court of Appeals, 257 SCRA 578 (1996)
iv. Defenses Available to a Solidary Debtor Against the Creditor (Art. 1222)
Types
o Those derived from the nature of the obligations
o Personal defenses
o Defenses pertaining to his shares
o Those personally belonging to the other co-debtors
Effects
Ynchausti v. Yulo, supra.
Alipio v. Court of Appeals, 341 SCRA 441 (2000)
c.
Divisible Obligations
i. Concept
ii. Effects (Art. 1223, 1233)
b.
Indivisible obligations
i. Concept: distinguished from solidary obligations
ii. Kinds
Natural (Art. 1225, par. 1)
Legal (Art. 1225, par. 3)
Conventional (Art. 1225, par. 3)
iii. Presumptions of divisibility and indivisibility (Art. 1225)
iv. Divisibility and indivisibility in obligations not to do (Art. 1225, par. 3)
v. Effects (Art. 1223, 1224)
vi. Cessation of Indivisibility
viii.
As to effect
o Subsidiary
o Complimentary
As to source
o Conventional
o Legal
As to purpose
o Punitive
o Reparatory
Creditor cannot demand both performance and penalty at the same time (Art.
1227)
12
Requisites
Tender of Payment
Concept
Requisites
Consignation
Concept and Purpose
Requisites
o When tender and refusal not required (Art. 1256, par. 2)
o Two notice requirement (Art. 1257, par. 1; Art. 1258, par. 2); Effects of noncompliance
Effects (Art. 1260, par. 1)
o Withdrawal by debtor before acceptance by creditor or approval of court (Art.
1260, par.2)
o Withdrawal by debtor after proper consignation (Art. 1261)
! With creditor approval
! Without creditor approval
Expenses of Consignation
Sps. Nameal and Lourdes Bonrostro v. Sps. Juan and Constancia Luna, G.R. No. 172346,
July 24, 2013
De Guzman v. Court of Appeals, 144 SCRA 693 (1986)
Soco v. Militante, 123 SCRA 160 (1983)
13
14
Legal Compensation
Requisites (Art. 1279-1280): Due distinguished from demandable
15
vi. Novation
Concept (Art. 1291)
Change in debtor
Change in object
Change in third person who is surrogated
Change in creditor with its consent or at its instance is not novation
Kinds
As to form: express or implied
As to origin: conventional or legal
As to object
Objective or real
Subjective or personal
Mixed
Requisites (Art. 1292)
Millar v. Court of Appeals, 38 SCRA 642 (1971)
Dormitorio V. Fernandez, 72 SCRA 388 (1976)
Magdalena Estate v. Rodriguez, 18 SCRA 967 (1966)
Reyes v. Secretary of Justice, 264 SCRA 35 ( 1996)
Cochingyan v RB Surety and Insurance, 151 SCRA 339 (1987)
Broadway Centrum Condominium Corporation v. Tropical Hut, 224-SCRA 302 (1993)
Molino v. Security Diners International, 363 SCRA 358 (2001)
Garcia v. Llamas, 417 SCRA 292 (2003)
California Bus Lines v. State Investment, 418 SCRA 297 (2003)
Babst v. Court of Appeals, 350 SCRA 341 (2001)
Effects (Art. 1296)
Effects of the Status of the Original and New Obligation
i.
ii.
iii.
16
Objective Novation
Subjective Novation
i.
By change of debtor
Expromision
o Requisites (Art. 1293)
o Effects (Art. 1294)
Delegacion
o Requisites (Art. 1293)
o Effects (Art. 1295)
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C. Characteristics
1.
Exceptions:
i. When it is inequitable (Art. 1310)
ii. Special disqualifications:
Art. 87, Family Code
Articles 1490 and 1491
Article 1782
iii.
Contrary to Morals
Contrary to good customs
Contrary to public order
Contrary to public policy
18
Daywalt v. La Corporacion de los Padres Agustinos Recoletos, et. al., 39 Phil. 587 (1919)
So Ping Bun v. Court of Appeals, 314 SCRA 751 (1999)
Lagon v. Court of Appeals, 453 SCRA 616 (2005)
2.
3.
b.
Acceptance
Must be absolute (Art. 1319)
Kinds:
o Express (Art. 1320)
o Implied (Art. 1320)
o Qualified (Art. 1319)
Termination of Offer
d.
Perfection of Contract
Four theories when contract is perfected:
o Manifestation theory
o Expedition Theory
o Reception Theory
o Cognition Theory (Art. 1319 [2])
Minors, insane or demented persons, and deaf-mutes who do not know how to write (Art.
1327)
When offer or acceptance is made during a lucid interval, intoxication, during hypnotic spell
(Art 1328)
Corporations (Sections 23 and 36, Corporation Code)
3. Vices of Consent: Consent must be Intelligent, Free, Spontaneous and Real (Art. 1330 to 1346)
a) Mistake or Error
i. Mistake of Fact
As to substance of object
As to principal conditions
As to identify or qualifications of the parties
As to quantity, ad distinguished from simple mistake of account
Heirs of William Sevilla v. Sevilla, 402 SCRA 501 (2003)
Andres v. Manufacturers Hanover and Trust, 177 SCRA 618
Spouses Theis v. Court of Appeals, 268 SCRA 167 (1997)
20
ii.
iii.
iii.
Active or Passive
22
Rodolfo G. Cruz and Esperanza Ibias vs. Atty. Delfin Gruspe, G. R. No. 191431, March 13,
2013.
B. Exception: When the law requires the contract to be in a specific form in order for it to be valid
or enforceable (Art. 1356)
Kind of formalities required by law:
1. For validity (Articles 748, 749, 1874, 2134, 1771, 1773
2. To make it effective as to third parties (Articles 1357 and 1358)
3. For purposes of proving existence of contract (Statute of Frauds in Art. 1403)
23
In onerous contracts
g. When doubts are cast upon the principal object so that the true intention cannot be
known (Art. 1378)
2.
V. Reformation of Instruments
A. Requisites (Art. 1359)
1.
2.
3.
Rescissible Contracts
1. Kinds (Art. 1381)
2. Characteristics
a. The defect consists in injury or damage either to one of the contradicting parties to a
third person
b. Contract is valid before rescission
c. Attack may only be direct on, not collaterally
d. Attack maybe done by contracting party or by a third person who is injured or defrauded
e. Validated only by prescription and not by ratification
3. Definition (Art. 1380): Distinguished from Rescission in Art. 1191 (Resolution)
Universal Food Corporation v. Court of Appeals, 33 SCRA 1 (1970)
24
Spouses Cannu v. Sps. Galang, G.R. No. 139523, May 26, 2005
Iringan v. Court of Appeals, G.R. No. 129107, September 26, 2001
Rivera v. del Rosario, G.R. No. 144934, January 15, 2004
Equatorial Realty v. Mayfair Theatre, G.R. No. 133879, November 21, 2001
4. Requisites
a. Contract is rescissible
b.
Party asking for rescission has no other legal means to obtain reparation (Art. 1383)
Union Insurance Society of Canton v. Court of Appeals, G.R. No. 100319, August 8, 1996
c.
He is able to return what he may be obliged to restore if rescission is granted (Art. 1385)
25
Cadwallader & Co. v. Smith Bell & Co., 7 Phil 461 (1907)
Velarde et al. v. Court of Appeals, 361 SCRA 56 (2001)
Ines v. Court of Appeals, 247 SCRA 312 (1995)
Arra Realty Corporation v. Guarantee Development Corporation, 438 SCRA 441 (2004)
A. When one of the parties is incapacitated (Art. 1399)
Katipunan v. Katipunan, 375 SCRA 199 (2002)
B. When the thing is lost through the fault of the party obliged to return the same (Art.
1400)
f.
4. Ratification
a.
Requisites
A. Contract is voidable
B. Ratification is made with knowledge that contract is voidable
C. At the time of ratification, the cause for nullity has already ceased to exist
b.
Forms
A. Express or tacit (Art. 1393)
B. By the parties themselves or by the guardian in behalf of an incapacitated party (Art.
1394)
c.
Effects
A. Action to annul is extinguished (Art. 1392)
26
C.
Unenforceable Contracts
1. Characteristics
a.
Valid but cannot be enforced by a proper action in court
b.
Can be ratified
c.
Cannot be assailed by third persons
2. Kinds (Art. 1403)
a.
b.
Asia Production Co. Inc. v. Judge Pano, 205 SCRA 458 (1992)
Western Mindanao Co. v. Medalle, 79 SCRA 702 (1977)
Limketkai & Sons v. Court of Appeals, 250 SCRA 523 (1995)
Babao v. Perez, 102 Phil. 756 (1957)
Reiss v. Memije, 15 Phil. 350 (1910)
Villanueva v. Court of Appeals, 267 SCRA 89 (1997)
B. How Ratified (Art. 1405)
Philippine National Bank v. Philippine Vegetable Oil Co., 49 Phil. 857 (1927)
Carbonnell v. Poncio et al, 103 Phil 655 (1958)
First Philippine International Bank v. Court of Appeals, 252 SCRA 259
C. Right of the parties when a contract is enforceable but a public document is
necessary for its registration (Art. 1406)
c.
D.
27
2. Kinds
a.
Void Contracts
A. Those whose cause, object or purpose is contrary to law, morals, good customs,
public order or public policy
When the act constitutes a criminal offense (Art. 1411)
When the act is unlawful but does not constitute a criminal offense (Art. 1412)
o In pari delicto rule
Menchavez v. Teves, 449 SCRA 380 (2005)
Angel v. Aledo and Modales, 420 SCRA 645 (2004)
When the purpose is illegal and money is paid or property delivered therefore
(Art. 1414)
When the contract is illegal and one of the parties is incapable of giving consent
(Art. 1415)
Liguez v. Court of Appeals, 102 SCRA 577 (1957)
Rellosa v. Gaw Cheen Hum, 93 Phil 827 (1953)
When the agreement is not per sel illegal but prohibited (Art. 1416)
Philippine Banking Corporation v. Lui She, 21 SCRA 52 (1967)
Frenzel v. Catito, 406 SCRA 55 (2003)
Acabal and Nicolas v. Acabal, 454 SCRA 555 (2005)
When the amount paid exceed the maximum fixed by law (Art. 1417)
When by virtue of a contract a labourer undertakes to work longer than the
maximum number of hours of worked fixed by law (Art. 1418)
When the contract is divisible (Art. 1420)
When the contract is the direct result of a previous illegal contract (Art. 1422)
B. Those whose object is outside the commerce of man
C. Those which contemplate an impossible service
D. Those where the intention of the parties relative to the principal object of the
contract cannot be ascertained
E. Those expressly prohibited by law
b.
Inexistent Contracts
A. Those which are absolutely simulated or fictitious (Articles 1345 to 1346)
Dr. Lorna C. Formaran v. Dr. Glenda B. Ong and Solomon S. Ong, G.R. No. 186264, July 8,
2013
28
B. Those whose cause or object did not exist at the time of the transaction
3. No waiver of Defense of Illegality (Art. 1409)
4. Action or Defense for the Declaration of the Inexistence of a Contract
Estoppel
1.
Kinds
a. Technical estoppel
i. By record
ii. By deed (Art. 1433)
b. Equitable estoppel or estoppel in pais (Art. 1433)
3.
Manila Lodge No. 761 Benevolent and Protective Order of the Elks v. Court of Appeals, 73
SCRA 169 (1976)
4.
Trusts
1. Definition (Art. 1442)
2. Parties (Art. 1440)
a. Trustor
b. Trustee
c. Beneficiary or cestui que trust
Salao v. Salao, 70 SCRA 168 (1976)
3.
b.
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