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OBLIGATIONS AND CONTRACTS
Title 1
OBLIGATIONS
Chapter 1
GENERAL PROVISIONS
Art. 1156
Definition of Obligation
a juridical necessity to give, to do or not to do.
a juridical relation whereby a person (called the creditor)
may demand from another (called the debtor) the
observance of a determinate conduct (the giving, doing, or
not doing), and in case of breach, may demand satisfaction
from the assets of the latter. ( Arias Ramos, p. 74)
Judicial necessity because non-compliance can result in
judicial or legal sanction.
Elements of Obligation:
1) an active subject (obligee or creditor): the possessor
of a right; he in whose favor the obligation is
constituted;
2) a passive subject (obligor or debtor): he who has the
duty of giving, doing or not doing;
3) the object or prestation: the subject matter of the
obligation; it may consist of giving a thing, or doing or
not doing a certain act; and
4) the efficient cause (vinculum or juridical tie): the
reason why the obligation exists.
Kinds of Obligations
1) From the viewpoint of sanction
a) civil obligation (perfect obligation) : defined in Art.
1156, Civil Code, and sanctioned by judicial
process
b) natural obligation: the duty not to recover what
has voluntarily been paid although payment was
no longer required
: it is sanctioned by law, but only because
conscience had originally motivated the
payment
Example:
Knowing that it already prescribed, a debtor
still paid his debt to the creditor.
c) moral obligation: sanctioned by conscience or
morality, or the laws of the church.
Example:
the duty of a catholic to hear mass on
Sundays
2) From the viewpoint of subject matter
a) real obligation: the obligation to give
b) personal obligation: to obligation to do or not to
do
3) From the affirmativeness and negativeness of the
obligation
a) positive or affirmative obligation: the obligation to
give or to do
b) negative obligation: the obligation not to give or
not to do
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4) From the persons obliged
a) unilateral: when only one of the parties is bound
b) bilateral: where both parties are or may be bound
i) reciprocal: the performance of one is
dependent upon the performance of the
other
ii) non-reciprocal: the performance of one
is not dependent on the performance
by the other
Article 1157 in Articles 1158-62
Art. 1157
Sources of Obligation
1) Law,
2) Contracts,
3) Quasi-contracts,
4) Acts or omissions punishable by law, and
5) Quasi delicts.
Art. 1158: law
Obligations derived from law are
1) not presumed but must be expressly determined
in this Code or other special laws;
2) regulated by the precepts of law which
establishes them; and as to what not has been
foreseen, by the provisions of this book.
Art. 1159: contracts
Obligations arising from contracts:
1) have the force of law between the parties; and
meaning that neither party may unilaterally and upon his
own exclusive volition, escape his obligations under the
contract, unless the other party assented thereto, or unless
for causes sufficient in law and pronounced adequate by a
competent tribunal. (p. 81)
2) should be complied with in good faith.
Compliance in good faith means that we must interpret
not by the letter that killeth but by the spirit that giveth life.
(p. 81)
Principle of Privity of Contracts: The terms of the contract
cannot be extended to third parties or those not included
in the contract.
Article 1160: quasi-contracts
Obligations derived from quasi-contract shall be subject to
the provisions of Chapter 1, Title XVII, of this Book.
Definition of Quasi-contract: that juridical relation resulting
from a lawful, voluntary, and unilateral act, and which has
for its purpose the payment of indemnity to the end that no
one shall be unjustly enriched or benefited at the expense
of another. (Art. 2142, Civil Code)
Kinds of Quasi-contract
1) Negotiorium gestio (unauthorized management):
takes place when a person voluntarily takes
charge of anothers abandoned business or
property without the owners authority;
Reimbursement should be made to the gestor for
necessary and useful expenses.
2) Solutio Indebiti (undue payment) : takes place
when something is received when there is no
right to demand it, and it was unduly delivered by
mistake.
The recipient has the duty to return what was received.

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Art. 1161: Ex Delicto or Ex Maleficio
Rules that govern:
1) pertinent provisions of the Revised Penal Code and
other penal laws, subject to the provisions of Art.
2177, Civil Code;
2) Chapter 2, Preliminary Title, on Human Relations of
the Civil Code;
3) Title 18 of Book IV of the Civil Code (on damages).
Art. 1162: Ex Quasi-Delicts or Ex Quasi-Maleficio
Rules that govern:
1) Chapter 2, Title 17, Book IV, Civil Code
2) Special laws.
Definition of Quasi-delict: a fault or act of negligence (or
omission of care), which causes damages to another, there
being no pre-existing contractual relations between the
parties.
Definition of Negligence: the omission of that diligence
which is required by the circumstances of person, place
and time (Art. 1173)
Requirements before a Person can be held Liable for a
Quasi Delict
1) There must be fault or negligence attributable to the
person charged;
2) There must be damage or injury;
3) There must be a direct relation of cause and effect
between the fault or negligence on the one hand and
the damage or injury on the other hand (proximate
cause).
Proximate cause is that adequate and efficient cause,
which in the natural order of events, necessarily produces
the damages or injury complained of. (p. 102)
Chapter 2
NATURE AND EFFECT OF OBLIGATIONS
Art. 1163: The obligation of every person to take care of a
DETERMINATE/SPECIFIC THING with proper diligence of a
GOOD FATHER OF A FAMILY.
Art. 1164: Nature of the rights of the creditor
The creditor has the rights to the fruits of the thing
from the time the obligation to deliver it arises. However, he
shall acquire no real right over it until the same has been
delivered to him.
PERSONAL RIGHT jus in personam or jus ad rem
Power demandable by one person of another
(obligation to give, to do or not to do)
REAL RIGHT jus in rem
A power over a specific thing and it is binding on the
whole world.
KINDS OF DELIVERY
A. ACTUAL OR TRADITION physically, the
property changes hands
B. CONSTRUCTIVE DELIVERY where the
physical transfer is implied
1. Traditio Simbolica (symbolical tradition)
as when the keys to the bodega are given
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2. Tradition Longa Manu (delivery by mere
consent or the pointing out of the object)
like pointing out to the car, which is the
object of a sale.
3. Tradition Brevi Manu (delivery by short
hand) a possessor of a thing not as an
owner, becomes the possessor as owner
like when a tenant already in possession
buys the house he is renting.
4. Tradition Constitutum Possessorium
opposite of Brevi Manu the delivery
whereby a possessor of a thing as an owner
retains possession no longer of a thing as
an owner but in some other capacity.
5. Tradition by the Execution of Legal Forms
and Solemnities like the execution of a
public instrument selling land.
WHEN DOES AN OBLIGATION TO DELIVER ARISE?
IT DEPENDS!
A. If there is no term or condition, then
from the perfection of the contract
B. If there is a term or a condition, then
from the moment the term arrives or
the condition happens.
Art. 1165
DELAY in this article means LEGAL DELAY or DEFAULT
a. ORDINARY DELAY - merely the non-
performance at the stipulated time
b. LEGAL DELAY or DEFAULT that delay which
amounts to a virtual non-fulfillment of the obligation. AS A
RULE, to put a debtor in default, there must be a JUDICIAL or
EXTRAJUDICIAL DEMAND or fulfillment
WHEN THE DEBTOR FAILS TO COMPLY WITH HIS
OBLIGATION, THE CREDITOR CAN:
1. Demand specific performance or compliance
a. If the thing is determinate compel obligor
to deliver the thing
b. If the thing is generic demand obligor to
comply with his obligation you cannot
compel him to deliver a specific thing.
2. Demand rescission or cancellation
3. Demand Damages
FORTUITOUS EVENTS CANNOT EXEMPT ONE FROM
COMPLIANCE IF:
1. The obligor defaults
2. The obligor is guilty of Bad Faith (for having
promised to deliver to two or more persons who
do not have the same interest).
EXAMPLE:
Jaypee is obliged to give Jaboom his car on Dec. 7,
1991. If on that said day, Jaypee does not deliver, he is in
ordinary delay. If on Dec. 8, 1991, an earthquake destroys the
car, he is not liable because the obligation is extinguished.
Art. 1166
ACCESSORIES those joined to or included in the
principal for the latters better use, perfection or enjoyment.
(Example: keys to a house, jack of a car)

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ACCESSIONS additions to improvements upon a thing
(Examples: whatever is built, planted or sown on a parcel
of land).
If there is a stipulation to said effect, accessions and
accessories do not have to be included.
Art. 1167: The Obligation TO DO
If DEBTOR fails to Do something, CREDITOR can:
Have the obligation performed by himself or another at
the debtors expense (only if another can do the
performance)
Obtain Damages only if personal or special, or if
others or the creditor cant do it
Specific performance is not a remedy in personal
obligations, otherwise, this may amount to involuntary
servitude, which is prohibited under our Constitution
When a Thing May be Ordered Undone:
If poorly made performance by another and
damages may be demanded
If the obligation is a negative one provided the
undoing is possible
Art. 1168
When the obligation consists in not doing, and the
obligor does what has been forbidden him, it shall also be
undone at his expense.
Art 1169
Those obliged to deliver or to do something incur in
delay from the time the obligee judicially or extra-judicially
demands from them the fulfillment of their obligation.
However, the demand from the creditor shall not be
necessary in order that delay may exist:
a. When the obligation or the law expressly so declares.
b. When from the nature and the circumstances of the
obligation it appears that the designation of the time
when the thing is to be delivered to the service is to be
rendered was a controlling motive for the
establishment of the contract
c. When demand would be useless, as when the obligor
has rendered it beyond his power to perform
In reciprocal obligations, neither party incurs in delay if the
other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. From the
moment one of the parties fulfills his obligation, delay by
the other begins.
Extra-judicial demands may be written or oral-but best if
written because it can be presented as evidence.
AS A RULE-to put a debtor in default, DEMAND is needed.
Demand is not Needed to Put Debtor in Default When:
a. When the law so provides
b. When the obligation expressly so provides
c. When the fixing of the time was the controlling motive
for the establishment of the contract
d. When demand would be useless
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e. When the obligor has expressly acknowledged that he
really is in default
Kinds of Default
a. Mora Solvendi- default on the part of the debtor
b. Mora Accipiende- default on the part of the creditor
c. Compensatio Morae- when in a reciprocal obligation
both parties are in default, here it is as if neither is in
default
BUT IN THE PHILIPPINE LAW, THIS IS NO LONGER SO
because it is expressly provided that in reciprocal
obligations, neither party incurs default if the other does not
comply with what is incumbent upon him. Even if there
were (written) demands from both sides, there is no default
when neither has done his obligation.
It is only when one party fulfills his obligation, delay by the
other begins (assuming that there is no date set in the
contract for his performance).
Art 1170
Those who in the performance of their obligation are
guilty of fraud, negligence or delay and those who in any
manner contravene the tenor thereof are liable for damages.
Grounds for Liability in the Performance of Obligations
a. Fraud-use of deceit or other machinations to
intentionally evade the fulfillment of the obligation
-This type of fraud is applicable in obligations only-it is
different from CAUSAL OR INCIDENTAL fraud (fraud
that exists between parties when there is no pre-
existing contractual relations or obligations between
them).
b. Negligence-fault-0no intent
c. Default
d. Violation of the terms of Obligation (unless excused in
proper cases by fortuitous events)
The Following do not Exempt from the Fulfillment of the
Obligation
a. Increase in the cost of the performance
b. Poverty
c. War between the subject of the neutral country and
the subject of a country at war, as long as the
substantial compliance can still be done.
Those liable under this Article should pay damages, only if
prejudice or damage was caused.
Kinds of Damages
a. Moral-for moral and physical anguish
b. Exemplary-corrective or to set an example
c. Nominal-to vindicate a right-when no other kind of
damages may be recovered
d. Temperate-when the exact amount of damages cannot
be determined
e. Actual-actual losses as well as unrealized profits
f. Liquidated predetermined beforehand by agreement.
Art 1171
Responsibility arising from fraud is demandable in all
obligations. Any waiver of an action for future fraud is void.

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Art 1172
Responsibility arising from negligence in the
performance of every kind of obligation is also demandable, but
such liability may be regulated by the courts, according to the
circumstances.
Art 1173
The fault or negligence of the obligor consists in that
omission of the diligence which is required by the nature of the
obligation and corresponds with the circumstances of the
person, of the time and of the place. When negligence shows
bad faith, the provisions of Articles 1171 and 2201 paragraph 2,
shall apply.
Kinds of Diligence Under the Civil Code
a. That agreed upon by the parties
b. In the absence of that agreed upon by the parties, that
required by law
c. In the absence of that required by law, that expected
of a good father of a family.
Art 1174
General Rule for Fortuitous Events-No liability for a
fortuitous event (that which could not be foreseen, or which
even if foreseen, was inevitable)
Exceptions ton the General Rule-the debtor is responsible
for a fortuitous event when;
a. Expressly declared by the law
b. Expressly declared by the stipulation or contract
c. The nature of the obligation requires the assumption
of risk (Doctrine of Created Risk)
Fortuitous Event = caso fortuito= act of God= force
majeure= unavoidable accident
Essential Characteristics of a fortuitous Event
a. The cause must be independent to the will of the
debtor (freedom from participation or aggravation)
b. Impossibility of foreseeing or impossibility of avoiding
it, even if foreseen
c. The occurrence must be such as to render it
impossible for the debtor to fulfill his obligation in a
normal manner.
Art 1175
Usurious transactions shall be governed by special
laws.
Usury-contracting for or receiving something in excess of
the amount allowed by the law for the loan or use of
money, goods, chattels (estate inheritance, personal
property) or credit
Art 1176
The receipt of the principal by the creditor without
reservation with respect to the interest, shall give rise to the
presumption that said interest has been paid.
The condition not to do an impossible thing shall be
considered as not having been agreed upon:
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a. If condition is to do an impossible of illegal
thing=condition and obligation are void
b. If the condition is negative/not to do the
impossible=just disregard the condition but the
obligation remain
c. If the obligation is negative/not to do= both condition
and obligation are valid
Art 1184
The condition that some event will happen at a
determinate time shall extinguish the obligation as soon as the
time expires or if it has become indubitable that the event will
not take place.
If the period is not fixed in the contract, the court,
considering the parties intentions, should determine what
period was really intended.
Art 1185
The condition that some event will not happen at a
determinate time shall ender the obligation effective from the
moment the time indicated has elapsed, or if it has become
evident that the event cannot occur.
If no time has been fixed, the condition shall be
deemed fulfilled at such time as may have been contemplated,
bearing in mind the nature of the obligation.
This article refers to negative conditions.
Art 1186
The condition shall be deemed fulfilled when the
obligor voluntarily prevents its fulfillment (Doctrine of
Constructive Fulfillment)
This Article deals with Constructive or Presumes
Fulfillment.
Reason for the article: One must not profit by his own fault.
Requisites:
a. Voluntarily made-intent to prevent must be present
b. Actually prevents-intention without prevention or
prevention without intention is not sufficient
Art 1187
The effects of a conditional obligation to give, once the
condition has been fulfilled, shall retroact to the day of the
constitution of the obligation. Nevertheless, when the obligation
imposes reciprocal prestations upon the parties, the fruits and
interests during the pendency of the condition shall be deemed
to have been mutually compensated. If the obligation is
unilateral, the debtor shall appropriate the fruits and interests
received, unless from the nature and circumstances of the
obligation it should be inferred that the intention of the person
constituting the same was different.
Art 1188
The creditor may, before the fulfillment of the
condition, bring the appropriate actions fro the preservation of
his rights.
The debtor may recover what during the same time he
has paid by mistake in case of suspensive condition.

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Art 1189
When the conditions have been imposed with the
intention of suspending the efficacy of an obligation to give, the
following rules shall be observed in case of the improvement,
loss or deterioration of the thing during the pendency of the
condition:
a. If the thing is lost without the fault of the debtor, the
obligation shall be extinguished
b. If the thing is lost through the fault of the debtor, he
shall be obliged to pay damages, it is understood that
the thing is lost when it perishes, or goes out of
commerce, or disappears in such a way that its
existence is unknown or cannot be recovered.
c. When the thing deteriorates without the fault of the
debtor, the impairment is to be borne by the creditor
d. If it deteriorates through the fault of the debtor, the
creditor may choose from the rescission of the
obligation and its fulfillment, with indemnity for
damages in either case
e. If the thing is improved by its nature or by time, the
improvement shall inure to the benefit of the creditor
f. If it is improved at the expense of the debtor, he shall
have no other right than that granted to the
usufractuary.
Effects of Partial Loss-It may be partial loss:
a. That would amount to a loss important enough to be
considered a complete loss (this will be determined by
the courts)
b. That would merely be considered a deterioration of
the thing, in which case the rules on deterioration
should apply
Art 1190
When the condition have for their purpose the
extinguishments of an obligation to give, the parties, upon
fulfillment of said conditions, shall return to each other what they
have received.
Effects When Resolutory Condition is Fulfilled:
a. The obligation is extinguished
b. Because the obligation has been extinguished and
considered to have had no effect, the parties should
restore to each other want they have received
c. Aside from the actual things received, the fruits of the
interests thereon should also be returned after
deducting of course the expenses made for their
production, gathering and preservation
d. The rule on Art 1189 will apply to whoever has the
duty to return in case of the loss, deterioration or
improvement of the thing
e. The courts are given power to determine the
retroactivity of the fulfillment of resolutory conditions.
Art 1191
The power to rescind obligations is implied in
reciprocal ones in case one of the obligors should not comply
with what is incumbent upon him.
The injured party may choose between the fulfillment
if the latter should become impossible.
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The court shall decree the rescission claimed, unless
there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights
of third persons who have acquired the thing, in accordance with
Articles 1385 and 1388 and the Mortgage Law.
To rescind=to cancel/revoke
Rescission may be judicial or extra-judicial (but best to be
judicial)
Effect of Rescission-mutual restitution
This article speaks of reciprocal obligations
Characteristics of the Right to Rescind of Resolve
a. It only exists in reciprocal obligations
b. It can be demandable only if the plaintiff is ready, will
and able to comply with his own obligation, and the
other is not
The Right to Rescind is not Absolute
a. trivial causes for slight breaches will not case
rescission
b. If there be a just cause for fixing the period within
which the debtor can comply, the court will not decree
rescission
c. If e property is now in the hands of an innocent 3 rd
party who has lawful possession of the same
Judicial approval for rescission is needed when there has
already been delivery of the object (unless there is a
voluntary returning)
Judicial approval is not needed when there has been no
delivery yet
Choice by the Injured Party
a. Fulfillment or specific performance with damages or
b. Rescission plus damages
Art 1192
In case both parties have committed a breach of the
obligation. The liability of the first infractor shall be equitably
tempered by the courts. If it cannot be determined which of the
parties first violated the contract, the same shall be deemed
extinguished, and each shall bear his own damages.
Breach of the second infractor provides mitigating effect to
the liability of the first infractor because of this, the courts
shall temper/regulate/lessen the liability of the first infractor.
Section 2 Obligations with a Period
Art 1193
Obligations for whose fulfillment a day certain has
been fixed, shall be demandable only when that day comes.
Obligations with resolutory period take the effect at
once, but terminate upon arrival of the day certain.
A day certain is understood to be that which must
necessarily some, although it may not be known when.
If the uncertainty consists in whether the day will come
or not, the obligation is conditional and it shall be regulated by
the rules of the preceding Section.

6 SAINT LOUIS UNIVERSITY BAR OPERATIONS
Period ids a certain length of time which determines the
effectively or the extinguishment of the obligation (it must
surely come)
Different Kinds of Periods or Terms
a. Definite-exact date or time is known or given
b. Indefinite-something will surely happen but the date is
unknown
c. Legal-period granted under the provision of the law
d. Conventional or Voluntary-period agreed upon or
stipulated by the parties
e. Judicial-period is fixed by the courts for the
performance of an obligation or for its termination
f. Ex Die- a period with suspensive effect- the obligation
begins upon the arrival of the period
g. In Diem-a period with a resolutory effect- the
obligation terminates upon the arrival of the period
Requisites for a Valid Period or Term
a. It must refer to the future
b. It must be certain, but can be extended
c. It must be physically or legally impossible, otherwise
the obligation is void.
Art 1194
In case of loss, deterioration or improvement of the
thing before the arrival of the day certain, the rules in Art 1189
shall be observed.
Art 1195
Anything paid or delivered before the arrival of the
period, the obligor being unaware of the period or believing that
the obligation has become due and demandable, may be
recovered, with fruits and interests.
Art 1196
Whenever in an obligation a period is designated, it is
presumed to have been established for the benefit of both the
creditor and the debtor, unless from the tenor of the same or
other circumstances it should appear that the period has been
established in favor of one or of the other.
General Rule: Term is for the benefit of the debtor or
creditor. Meaning, the debtor cannot prematurely pay and
the creditor cannot demand prematurely.
This Article applies only to a contract with a period they
fixed themselves.
Art 1197
If the obligation does not fix a period, but from its
nature and the circumstances it can be inferred that a period
was intended, the courts may fix the duration thereof.
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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Art 1198
The debtor shall lose every right to make use of the
period:
a. When after the obligation has been contracted, he
becomes insolvent, unless he gives a guaranty or
security for the debt
b. When he does not furnish to the creditor the
guarantees or securities which he has promised
c. When by his own acts he has impaired said
guaranties and securities after their establishment,
and when through a fortuitous event they disappear,
unless he immediately gives new ones equally
satisfactory
d. When the debtor violates any undertaking, in
consideration of which the creditor agreed to the
period
e. When the debtor attempts to abscond.
The debtor shall lose every right to make use of the period-
it means that the term is extinguished and the creditor can
demand fulfillment at once.
Art 1199
A person alternatively bound by different prestations
shall completely perform one of them.
The creditor cannot be compelled to receive part of
one and part of the other undertaking.
Art 1200
The right of choice belongs to the debtor, unless if as
been expressly granted to the creditor.
The debtor shall have no right to choose from those
prestations which are impossible, unlawful, or which could not
have been the object of the obligation.
General Rule-In the absence of any stipulations, the right if
choice belongs to the debtor.
Limitation on the Debtors Choice- the debtor shall have no
right to choose prestations which are:
a. Impossible
b. Unlawful
c. Which could not have been the object of the obligation
Art 1201
The choice shall produce no effect except from the
time it has been communicated.
The choice may be communicated orally or in writing,
expressly or impliedly.
Once notice has been made that a choice has been done,
the obligation becomes a simple obligation to do or to
deliver the object selected.
An election once made is binding on the person who
makes it, and he will not therefore be permitted to renounce
his choice and take an alternative which was first open to
him.
Requisites for Making the Choice:

7 SAINT LOUIS UNIVERSITY BAR OPERATIONS
a. Made properly so that the creditor or his agent will
actually know
b. Made with full knowledge that a selection is indeed
being made
c. Made voluntarily and freely
d. Made in due time-that is before or upon maturity
e. Made to all the proper persons
f. Made without conditions unless agreed to by the
creditor
g. May be waived expressly or impliedly
Art 1202
The debtor shall lose the right of choice when among
the prestations whereby he is alternatively bound, only one is
practicable.
Art 1203
If through the creditors acts the debtor cannot make a
choice according to the terms of the obligation, the latter may
rescind the contract with damages.
The debtor may:
a. Rescind the obligation plus collect damages
b. Perform other prestation(s)
Observe that the contract is not automatically rescinded.
Art 1204
The creditor shall have a right to indemnity for
damages when, through the fault of the debtor, all the things
which are alternatively the object of the obligation have been
lost, or the compliance of the obligation has become impossible.
The indemnity shall be fixed taking as a basis the vale
of the last thing which disappeared, or that of the services which
last become impossible.
Art 1205
When the choice has been expressly given to the
creditor, the obligation shall cease to be alternative from the
day the selection has been communicated to the debtor.
Until then the responsibility of the debtor shall be governed
by the following rules:
a. If one of the things is lost through a fortuitous event,
he shall perform the obligation by delivering that which
the creditor should choose from among the remainder,
or that which remains if only one subsists
b. If the lose of one of the things occurs through the fault
of the debtor, the creditor may claim any of those
subsisting, or the price of that which, through the fault
of the former has disappeared, with a right to
damages
c. If all the things are lost through the fault of the debtor,
the choice by the creditor shall fall upon the price of
any of them, also with indemnity for damages.
Art 1206
When only one prestation has been agreed upon the
obligor may render another in substitution, the obligation is
called facultative.
Prepared by the CIVIL LAW SECTION Chief NORBERT OBEDOZA Assistant Chief JOHN PAUL MARTIN Members LIWLIWA AGBAYANI,
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Facultative Obligation- one where only one prestation
has been agreed upon but the obligor may render another in
substitution.
Section 4 Joint and Solidary Obligation
Art 1207
Joint Obligations- each obligor answers only for a part of the
whole liability and to each obligee belongs only a part of the
correlative (equivalent) rights
Solidary / Joint and Several Obligations- the relationship
between the active and the passive subjects is so close that
each of the former or of the latter may demand the fulfillment of
or must comply to the whole obligation.
General Rule: When there are two or more debtors or two or
more creditors the obligation is joint.
Exceptions:
a. When there is a stipulation to the contract that the
obligation is solidary
b. When the object of the obligation requires liability to
be solidary
c. When the law declares the obligation to be solidary
Art 1208
Liability of Partners:
a. If it arises out of contracts the liability is joint or pro-
rata
b. If it arises out of a crime or quasi-delict, the liability is
solidary together with the partnership
Art 1209
If the division is impossible, the rights of the creditors
may be prejudiced only by their collective acts, and the debt can
be enforced only by proceeding against all the debtors.
Characteristics
a. The obligation is joint but since the object is
indivisible, the creditor may proceed against all the
joint debtors for compliance is possible only if all the
joint debtors would act together
b. Demand must therefore be made on all the joint
debtors if anyone of the debtors does not comply with
his monetary obligation for damages
c. If any of the debtors shall be insolvent, the others shall
not be liable for his share
d. If there be joint creditors, delivery must be made to all,
and not merely to one, unless that one be specifically
authorized by others
e. Each joint creditor is allowed to renounce his
proportionate credit
Art 1210

8 SAINT LOUIS UNIVERSITY BAR OPERATIONS
The indivisibility of an obligation does not necessarily
give rise to solidarity. Nor does solidarity of itself imply
indivisibility.
Indivisibility- refers to the subject matter
Solidarity- refers to the tie between the parties
Art 1211
Different Ways by Which Two Debtors may be Bound:
a. Uniform-when the debtors are bound by the same
stipulations and clauses
b. Otherwise-where the obligor, though liable for the
same prestation are nevertheless not subject to the
same secondary stipulations and clauses
Art 1213 A solidary creditor cannot assign his rights without
the consent of the others.
Art 1214 The debtor may pay any one of the creditors: but if
any demand has been made by any one of them, payment must
be made to him.
Art 1215
The creditor who may have expected any of these
acts, as well as he who has collects the debt, shall be liable to
the others for the share in the obligation corresponding to them.
Novation- the modification of an Obligation by changing its
object or principal conditions, or by substituting the person of the
debtor or by subrogating a third person in the rights of the
creditor
Compensation- that which takes place when 2 persons in their
own right are creditors and debtors of each other.
Compensation may be Total or Partial depending upon the
amount involved
Confusion or Merger- That which takes place when the
characters of the creditor and debtor are merged in the same
person
Remission or Waiver- that act of liberality whereby the creditor
condones the obligation of the debtor, that where the creditor
tells the debtor to forget the whole thing
Payment- one of the ways by which the obligation is
extinguished and consists in the delivery of the thing or the
rendition of the service which is the object of the obligation.
Art 1218 Payment by a solidary debtor shall not entitle him to
reimbursement from his co-debtors if such payment is made
after the obligation has prescribed or become illegal.
Art 1220 The remission of the whole obligation, obtained by
one of the solidary debtors, does not entitle him from
reimbursement from his co-debtors.
Art 1221
If the thing has been lost or the prestation has become
impossible without the fault of the solidary debtors, the
obligation shall be extinguished.
Prepared by the CIVIL LAW SECTION Chief NORBERT OBEDOZA Assistant Chief JOHN PAUL MARTIN Members LIWLIWA AGBAYANI,
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If there was fault on the part of any one of them, all
shall be responsible to the creditor, for the price and the
payment of damages and interest, without prejudice to their
action against the guilty or negligent debtor.
A solidary obligation implies mutual agency and
mutual confidence.
Art 1222
A solidary debtor may, in actions filed by the creditor,
avail himself of all defenses which are derived from the nature of
the obligation and of those which are personal to him, or pertain
to his own share. With respect to those which personally belong
to the others, he may avail himself thereof only as regards that
part of the debt for which the latter are responsible.
Kinds of Defense
a. Those derived from the nature of the obligation
- Lack of consideration or cause
- Absolute simulation-as when the contract is totally
fictitious
- Illegal consideration
- Extinguishment of the obligation-as when the whole debt
has been paid, remitted, etc.
- Non-fulfillment of the suspensive condition
- Statute of frauds
- When all the debtors were incapacitated to give consent-
such as unemancipated minors, insane, etc.
- When there are Vices of Consent/Vitiated Consent on the
part of all the debtors
b. Those personal to the debtor sued
c. Those personal to the other
Section 5 Divisible and Indivisible Obligations
Art 1223
The divisibility of the indivisibility of the things that are
the object of obligations in which there is only one debtor and
only one creditor does not alter or modify the provisions of
Chapter 2 of this Title.
Divisible Obligations-one capable of partial performance
Indivisible Obligations- one not capable of partial performance
Classes of Kinds of Indivisibility
a. Conventional- by common agreement
b. Natural or Absolute- because of the nature of the
undertaking
c. Legal- if so provided by law
Kinds of Division
a. Quantitative- depends on quantity
b. Qualitative- depends on quality, irrespective of
quantity
c. Intellectual or Moral- one that exists only in the mind,
and nor in physical reality

9 SAINT LOUIS UNIVERSITY BAR OPERATIONS
Art 1224
A joint indivisible obligation give rise to indemnity for
damages from the time anyone of the debtors does not comply
with his undertaking. The debtors who may have been ready to
fulfill their promises shall nor contribute to the indemnity beyond
the corresponding portion of the price of the thing or of the value
of the service in which the obligation consists.
Effect of Non Compliance- the obligation is converted to a
monetary one for indemnity.
Art 1225
For the purpose of the preceding articles, obligations
to give definite and those which are not susceptible of partial
performance shall be deemed to be indivisible.
In obligations not to do, divisibility or indivisibility shall
be determined by the character of the prestation in each
particular case.
Obligations that are Deemed Indivisible:
a. Obligations to give definite things
b. Those which are not susceptible of partial
performance
c. Even if the thing is physically divisible, it may be
indivisible if so provided by law
d. Even if the thing is physically divisible, it may be
indivisible if such was the intention of the parties
concerned
Obligations that are Deemed Divisible
a. When the object of the obligation is the execution of a
certain number of days of work
b. When the object of the obligation is the
accomplishment of work by metric units
c. When the purpose of the obligation is to pay a certain
amount in installment
d. When the object of the obligation is the
accomplishment of work susceptible of partial
performance
The character of the prestation or obligation will determine
the divisibility or indivisibility of obligation not to do.
Section 6 Obligations with a Penal Clause
Art 1226
In obligation with a penal clause, the penalty shall
substitute the indemnity fro damages and the payment of
interest in case of non-compliance, if there is no stipulation to
the contrary. Nevertheless, damages shall be paid if the obligor
refuses to pay the penalty or is guilty of fraud in the fulfillment of
the obligation.
Principal Purpose of the Penal Clause- to insure the
performance of the obligation and also to substitute for damages
and the payment of interest in case of non-compliance.
Exceptions to the General Rule:
Prepared by the CIVIL LAW SECTION Chief NORBERT OBEDOZA Assistant Chief JOHN PAUL MARTIN Members LIWLIWA AGBAYANI,
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a. When there is express stipulation to the effect that
damages or interest may still be recovered, despite
the presence of the penalty clause
b. When the debtor refuses to pay the penalty imposed
in the obligation
c. When the debtor is guilty of fraud in the fulfillment of
the obligation
Art 1227
The debtor cannot exempt himself from the
performance of the obligation by paying the penalty, save in the
case where this right has been expressly reserved for him.
Neither can the creditor demand the fulfillment of the obligation
and the satisfaction of the penalty at the same time, unless this
right has been clearly granted to him. However, if after the
creditor has decided to require the fulfillment of the obligation,
the performance thereof should become impossible without his
fault, the penalty may be enforced.
IF the debtor can just pay the penalty, the fulfillment of the
obligation will be considered an alternative one.
Art 1228 Proof of actual damages suffered by the creditor is
not necessary in order that the penalty may be demanded.
Art 1229
The judge shall equitably reduce the penalty when the
principal obligation has been partly or irregularly complied with
by the debtor. Even if there has been no performance, the
penalty may also be reduced by the courts if it is iniquitous or
unconscionable.
When Penalty may be Reduced by Court;
a. When the obligation has been partly complied with by
the debtor
b. When the obligation has been irregularly complied
with by the debtor
c. When the penalty is iniquitous or unconscionable,
even if there has been no performance at all
It is thus clear that the penal clause cannot be enforced if
a. The breach is the fault of the creditor
b. A fortuitous event intervened, unless the debtor
expressly agreed on his liability in case of fortuitous
events
c. The debtor is not yet in default
Art 1230 The nullity of the penal clause does not carry with it
that of the principal obligation.
The nullity of the principal obligation carries with it that
of the penal clause.
CHAPTER FOUR
Extinguishment of Obligation
General Provisions
Art 1231 Obligations are extinguished:
a. By payment or performance
b. By the loss of the thing due
c. By the condonation or remission of the debt

10
d. By the confusion or merger of the rights of creditor
and debtor
e. By compensation
f. By novation
Other causes of extinguishment of obligation, such as
annulment, rescission, fulfillment of a resolutory condition, and
prescription, are governed elsewhere in this code.
Still other causes:
a. Death of a party in case the obligation is a personal
one
b. Resolutory term
c. Change of civil status
d. Compromises
e. Mutual dissent
f. Impossibility of fulfillment
g. Fortuitous event
Section 1 Payment or Performance
Art 1232 Payment means not only the delivery of money but
also the performance in any other manner, of an obligation.
Art 1233 a debt shall not be understood to have been paid
unless the thing or service in which the obligation consists has
been completely delivered or rendered, as the case may be.
Requisites for a valid payment under this Article:
a. The very thing or service contemplated must be
paid
b. Fulfillment must be complete
Art 1235 When the obligee accepts the performance, knowing
its incompleteness of irregularity, and without expressing any
protest or objection, the obligation is deemed fully complied
with.
Art 1236
Creditor may accept payment from a stranger:
a. if there is a stipulation allowing this
b. or if said third person has an interest in the fulfillment
of the obligation
The third person may pay:
a. With the knowledge and consent of the debtor- here,
the payor/said 3rd person is entitled to Reimbursement
and Subrogation to such rights as guaranty, penalty
clause, or mortgage
b. Without the debtors knowledge or against his will
here, the payor is not entitled to subrogation: he is
allowed only Beneficial reimbursement
Instances when recovery can be had from the creditor and not
from the innocent debtor:
a. When the debt has prescribed
b. When the debt had been completely remitted
c. When debt has already been paid
d. When legal compensation had already taken place
Art 1237 Whoever pays on behalf of the debtor without the
knowledge or against the will of the later, cannot compel the
creditor to subrogate him in his rights, such as those arising
from a mortgage, guaranty, or penalty.
Art 1238 Payment made by a third person who does not
intend to be reimbursed by the debtor is deemed to be a
Prepared by the CIVIL LAW SECTION Chief NORBERT OBEDOZA Assistant Chief JOHN PAUL MARTIN Members LIWLIWA AGBAYANI,
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donation, which requires the debtors consent. But the payment
is in any case valid as to the creditor who has accepted it.
Art 1239 In obligations to give, payment made by one who
does not have the free disposal of the thing due and capacity to
alienate it shall not be valid without prejudice to the provisions of
Art 1427 under the Title on Natural Obligations
General Rule- if the person paying has no capacity to give:
a. Payment is not valid-if accepted
b. Creditor cannot even be compelled to accept it
c. The remedy of consignation
Exception- When a minor between 18 and 21 years of age, who
has entered into a contract without the consent of the parents or
guardian voluntarily pays a sum of money or delivers a fungible
thing in the fulfillment of an obligation, there shall be no right to
recover from the same from the obligee who has spent or
consumed it in good faith.
Art 1240 - Payment shall be made to the person in whose
favor the obligation has been constituted, or his successor in
interest, or any person authorized to receive it.
If the recipient was not authorized, the payment is generally
not valid.
Art 1241 Payment to a third parson who is incapacitated to
administer his property shall be valid if he has kept the thing
delivered, or insofar as the payment has been beneficial to him.
Payment made to a third person shall also be valid
insofar as it has redounded to the benefit of the creditor. Such
benefit to the creditor need not be proven in the following case:
a. If after the payment, the third
person acquires the rights of the
creditor
b. If the creditor ratifies the payment
to the third person
c. If by the creditors conduct, the
debtor has been led to believe that
the third person had authority to
receive the payment
Examples When Benefit to the Creditor is Presumed:
a. If after payment, the third person acquires
the creditors rights-as when the creditor
is indebted to the third person
b. If the creditor ratifies the payment to the
third person-like if Meralco, a few days
after its unauthorized collector had
collected form you, tells you that the
payment to him is all right. Here, the
defect is cured.
c. If by the creditors conduct, the debtor
has been led to make the payment-like
when the impostor agent had been given
by the Meralco the usual uniform for
collectors.
Art 1242 Payment made in good faith to any person in
possession of the credit shall release the debtor.
Requisites:
a. Payment by the payor must be made in good faith
(this is presumed, but payee may be in good or bad
faith)

11
b. The payee must be in possession of the credit itself
(not merely the document evidencing credit)
Art 1243- Payment made to the creditor by the debtor after the
latter has been judicially ordered to retain the debt shall not be
valid.
Garnishment:
a. Takes place when the debtor of a debtor is ordered
not to pay the latter so that preference would be given
to the latters consent
b. The preceding by which a debtors credit is subjected
to the payment of his own debt to another
Interpleader- the technical name of an action in which a certain
person is in possession of certain property wants claimants to
litigate among themselves for the same.
Injunction- a judicial process by virtue of which a person is
generally entered to refrain from doing something. It is called
Preliminary Injunction is the prohibition is during the pendency
of certain proceedings
Art 1244 The debtor of a thing cannot compel the creditor to
receive different one, although the latter may be of the same
value as, or more valuable that which is due.
In obligation to do or not to do, an act of forbearance cannot be
substituted by another act or forbearance against the obligees
will.
Instances when Art 1244 does not apply:
A. In case of facultative obligations
In case there is another agreement resulting in either
a. dation in payment or
b. novation
Art 1245 Dation in payment, whereby property is alienated to
the creditor in satisfaction of a debt in money, shall be governed
by the law on sales.
Dation in Payment- that mode of extinguishing an obligation
whereby the debtor alienates in favor of the creditor property for
the satisfaction of monetary debt.
Sale vs. Dation in Payment
a. Sale -there is no pre-existing credit
-This gives rise to obligations
-The cause or consideration here is the
Price (from the point of view of the seller) or
the object (from the point of view of the
buyer)
-There is greater freedom in the
determination of the price
The giving of the price may generally and
the obligation of the buyer
b. Dation in Payment
-There is a pre-existing credit
-This extinguishes obligations
The cause or consideration here, from the
viewpoint of the debtor is the extinguishment
of his debt, and from the point of view of the
creditor, it is the acquisition of the object
offered in credit
Prepared by the CIVIL LAW SECTION Chief NORBERT OBEDOZA Assistant Chief JOHN PAUL MARTIN Members LIWLIWA AGBAYANI,
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-There is less freedom in determining the
price
The giving of the object in lieu if the credit
may extinguish completely or only partially
the credit (depending on the agreement)
Conditions in which dation in payment would be valid:
a. If the creditor consents, for a sale presupposes the
consent of both parties.
b. If the dation in payment will not prejudice the other
creditors for this might lead to debtor to connive with
one creditor in defrauding the other creditors.
c. If the debtor is not judicially declared insolvent, for
here, his property is supposed to be administered by
the assignee.
In dation, it is not always necessary that all the property of
the debtor will be given to satisfy the credit.
Art 1246 When the obligation consists in the delivery of an
indeterminate or generic thing, whose quality and circumstances
have not been stated, the creditor cannot demand a thing of
superior quality. Neither can the debtor deliver a thing of inferior
quality. The purpose of the obligation and other circumstances
shall be taken into consideration.
If the contract does not specify the quality:
a. The creditor cannot demand a thing of superior
quality- but if he desires, he may demand and accept
one of inferior quality.
b. The debtor cannot deliver a thing of inferior quality-
but if he so desires, he may deliver one of superior
quality- provided it is not of a different kind.
Art 1248 Unless there is an express stipulation to that effect,
the creditor cannot be compelled partially to receive the
prestations in which the obligation consists. Neither may the
debtor be required to make partial payments.
However, when the debt is in part liquidated and on
part unliquidated, the creditor may demand and the debtor may
effect the payment of the former without waiting for the
liquidation lf the latter.
Exceptions when Partial Performance is Allowed:
a. When there is stipulation to this effect
b. When the different prestations are subject to different
conditions or different terms (e.g. like a debt payable
in installment)
c. When a debt is in part liquidated and in part
unliquidated, in which case performance of the
liquidated part may be insisted upon by either by the
debtor or creditor.
d. When a joint debtor pays his share or the creditor
demands the same
e. When a solidary debtor pays only the part
demandable because the rest are not yet demandable
on account on their being subject to different terms
and conditions
f. In case of compensation, which one debt is larger
than the other, it follows that a balance is left.
Art 1249
 CIVIL LAW REVIEWER
12 SAINT LOUIS UNIVERSITY BAR OPERATIONS

That payments of debts in money shall be made in the

currency stipulated, and if it is not possible to deliver such Requisites for application:
currency, then in the currency which is legal tender in the a. There must be 2 or more debts
Philippines. b. The debts must be of the same kind
c. The debts are owed by the same debtor in favor
In the meantime, the action derived from the original obligation of the same creditor
shall be held in abeyance. d. All the debts must be due

Legal tender- it is that which a debtor may compel the creditor to General rule: it is the debtor who is given the right to select
accept in payment of a debt. which of his debt he is paying.

Stipulation of another currency: Exception:

a. Under the first paragraph of this Article, payment may d. If there was a valid prior but
be either: contrary agreement, the debtor
In the currency stipulated cannot choose
Or if it is not possible to deliver such currency, then in e. The debtor cannot choose to pay
Philippine legal tender part of the principal ahead of the
interest unless the creditor
Art 1250 consents.

In case an extraordinary inflation or deflation of the How application for payment is made:
currency stipulated should supervene, the value of the currency a. The debtor makes a designation
at the time of the establishment of the obligation shall b the b. If not, the creditor makes it, by so stating in the
basis of payment, unless there is an agreement to the contrary. receipt that he issues, unless there is cause for
Inflation it is a sharp sudden increase of money or credit or invalidating the contract
both without a corresponding increase in business transaction c. If neither the debtor nor the creditor has made
the application, or if the application is not valid,
* Under this article, the basis of payment is the value at then application is made by operation of law.
the time the obligation was constituted or incurred, unless there
is an agreement to the contrary. If the creditor makes the application
without the knowledge and consent of
Art 1251 - Payment shall be made in the place designated in the the debtor, the application is not valid.
obligation. Once the application has been made, it
may not be revoked, unless both
There being no express stipulation and if the parties agree. Even if both parties
undertaking is to deliver a thing, the payment shall be made agree, however, still the revocation or
wherever the thing might be at the moment the obligation was change in the application will not be
constituted. allowed if third persons would be
prejudiced.
In any other case, the place of payment shall be the Application must be made at the time
domicile of the debtor. If the debtor changes his domicile in bad when payment by the debtor is made,
faith, or after he has incurred in delay, the additional expenses not afterwards.
shall be borne by him.
Art. 1253
Where payment must be made:
a. If there is stipulation in the place designated If the debt produces interest, payment of the principal
b. If there is no stipulation: shall not be deemed to have been made until the interest has
- If it is an obligation to deliver a been covered.
determinate thing, then on the place
where the thing might be at the time the Interest must be paid first the debtor cannot insist
obligation was constituted; that his payment be credited to the principal instead of
- If the obligation is for any other thing, the interest. However, if the creditor agrees, that is ala
delivery must be made to the domicile right.
of the debtor. Effect if payment is credited to the principal
reduction of the principal would of course result in the
Subsection 1 Application of Payments decrease of the total interest collectible.
Art. 1252
What interest I supposed to be paid:
d. Interest by way of compensation
4 special forms of payment:
e. Interest by way of damages due to default
a. Application or imputation of payments
b. Dation in payment
Art. 1254
c. Assignment in favor of creditors/cessation
d. Tender of payment and consignation
Rules in case no application for payment has been voluntarily
made
Application of payment the designation of the debt to which
should be applied a payment made by a debtor who owes
several debts in favor of the same creditor
Prepared by the CIVIL LAW SECTION Chief NORBERT OBEDOZA Assistant Chief JOHN PAUL MARTIN Members LIWLIWA AGBAYANI,
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a. Apply it to the most onerous/heavy/burdensome- -Requires more than 1 creditor

(in case the due and demandable debts are of
different natures)
b. If the debts are of the same nature and burden,
application shall be made to all proportionately.
1.If the debtor makes the application, the payment
should be credited to the first debt. The debtor cannot
insist that the creditor accept it for the second debt for
insofar as the second debt is concerned, it is only a
partial payment. And under the law, a creditor cannot
generally be compelled to receive partial payment
3. If no application has been made, the law steps in,
and application will be made, not equally but
proportionately.
Requires the consent of all the creditors
-Requires full or partial insolvency
Does not transfer ownership
Not an act of novation
Art 1256
Tender of Payment- the act of offering the creditor what is due
him together with a demand that the creditor accept the same.
Consignation-the act of depositing the thing due with the court
or judicial authorities whenever the creditor cannot accept or
refuses to accept payment. It generally requires a prior tender
of payment. It releases the debtor of his debt.

Section 2 In tender of payment and consignation, to extinguish

the debtors obligation, one must comply with the
Payment by Cession requisites provided in Arts 1256-1258.

Art 1255 Art 1257 In order that the consignation of the thing due may
release the obligor, it must first be announced to the persons
interested in the fulfillment of the obligation.
Cession or assignment in favor of creditors- it is a process by
which a debtor transfers all the properties not subject to
The consignation shall be ineffectual if it is not made
execution in favor of his creditors so that the properties not
strictly in consonance with the provisions which regulate
subject to execution in favor of his creditors so that the latter
payment.
may sell them, and thus apply the proceeds to their credits.
Essential Requisites for Consignation:
Kinds or Classes of Assignment
a. Existence of a valid debt
a. Legal- the majority of creditors must agree; governed
b. Valid prior tender, unless tender is excused
by the insolvency law
c. Prior notice of consignation (before deposit0
b. Voluntary-all creditors must agree; this is referred to in
d. Actual consignation (deposit)
Art 1255
e. Subsequent notice of consignation
Requisites for Voluntary Assignment:
Art 1258 Consignation shall be made by depositing the thing
a. More than 1 debt
due at the disposal of judicial authority, before whom the tender
b. More then 1 creditor
of payment shall be proved, in a proper case, and the
c. Complete or partial insolvency of debtor
announcement of the consignation in other cases.
d. Abandonment of all debtors property not exempt from
execution in favor of creditors (unless exemption is
Art 1259 The expenses of consignation, when properly made
validly waived by the debtor)
shall be charged against the creditor.
e. Acceptance on consent on the part of the creditors (for
it cannot be imposed upon an unwilling creditor)
Art 1260 Once the consignation has been duly made, the
debtor may ask the judge to order the cancellation of the
Effect of Voluntary Assignment
obligation.
a. The creditor do not become the owners; they are
merely assignees with authority
Before the creditor has accepted the consignation, or
b. The debtor is released up to the amount of the net
before a judicial declaration that the consignation has been
proceeds of the sale, unless there is stipulation to the
properly made, the debtor may withdraw the thing or the sum
contrary. The balance remains collectible.
deposited, allowing the obligation to remain in force.
c. Creditor will collect credits in the order of preference
agreed upon, or in default of agreement, in the order
If the consignation is duly (properly) made:
ordinarily established by law.
a. The debtor may ask the judge to order the
cancellation of the obligation
Cession Distinguished from Dation in Payment
b. The running of interest is suspended
a. Dation in Payment
c. Before the creditor accepts, or before the judge
-Does not affect all the properties
declares that consignation has been made, the
-Does not require plurality of creditors
obligation remains
-Only the specific or concerned creditors consent is
required
When debtor may withdraw the thing or sum consignated:
-May take place during the solvency of the debtor
a. As a matter of right
Transfers ownership upon delivery
1. Before the creditor has accepted the
-This is really an act of novation
consignation
b. Cession
-In general, affects all the properties of the debtor
Prepared by the CIVIL LAW SECTION Chief NORBERT OBEDOZA Assistant Chief JOHN PAUL MARTIN Members LIWLIWA AGBAYANI,
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14
2. Or before there is a judicial declaration that
the consignation had been properly made-
obligation and accessory stipulation remain
b. As a matter of privilege
When after consignation had been properly made, the
creditor authorizes the debtor to withdraw the thing.
Art 1261 If the consideration having made, the creditor should
authorize the debtor to withdraw the same, he shall lose every
preference which he may have over the thing. The co-debtors,
guarantors and sureties shall be released.
Section 2 Loss of the Thing due
Loss- under this section, loss includes impossibility of
performance
When is there a loss?
a. When the object perishes (physically it is destroyed)
b. When it goes out of commerce
c. When it disappears in such a way that:
Its existence is unknown
Or it cannot be recovered
Impossibility of Performance includes:
a. Physical impossibility
b. Legal impossibility- which is either
Directly caused-when prohibited by law
Indirectly caused- when the debtor is required to enter
a military draft
c. Moral impossibility- impracticability
Art 1262
An obligation which consists in the delivery of a
determinate thing shall be extinguished it should be lost or
destroyed without the fault of the debtor, and before he has
incurred in delay.
2 Kinds of Obligations To Give
a. Obligation to give a Generic Thing- obligation is not
extinguished by loss or by fortuitous event because
genus never perishes
b. Obligation to give a Specific Thing
Effect of Loss on an Obligation to Deliver a Specific Thing
General Rule: the obligation is extinguished
Exceptions:
a. If the debtor is at fault
b. When the debtor is made liable for a fortuitous event
because:
Of a previous law
Of a contract stipulation
The nature of the obligation requires the assumption
of risk on the part of the debtor
Prepared by the CIVIL LAW SECTION Chief NORBERT OBEDOZA Assistant Chief JOHN PAUL MARTIN Members LIWLIWA AGBAYANI,
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Examples of instances when the law requires liability even in the
case of a fortuitous event:
a. When the debtor is in default
b. When the debtor has promised to deliver the same
thing to 2 or more parties who do not have the same
interest
c. When the obligation arises from a crime
d. When the borrower of an object has lent the thing to
another who is not a member of his own household
e. When the thing loaned has been delivered with
appraisal of the value, unless there is a stipulation
exempting the borrower from responsibility in case of
a fortuitous event
f. When the payee in solutio indebiti is in bad faith
Art 1263 In an obligation to deliver a generic thing, the loss or
destruction of anything of the same kind does not extinguish the
obligation.
Exceptions:
a. If the generic thing is delimited
b. If the generic thing has already been segregated or
set aside in which case, it has become specific.
Art 1264 The courts shall determine whether, under the
circumstances, the partial loss of the obligation is so important
as to extinguish the obligation.
Art 1265 Whenever the thing is lost in the possession of the
debtor, it shall be presumed that the loss was due to his fault,
unless there is proof to the contrary, and without prejudice to the
provisions of Article 1165. This presumption does not apple in
case of earthquake, flood, storm or other natural calamity.
In a case filed by the creditor, he doesnt have to
prove that the debtor was at fault, because it is
already presumed.
When presumption does not apply:
In case of earthquake, flood, storm or other natural
calamity.
Art 1266 The debtor in obligations to do shall also be released
when the prestation becomes legally or physically impossible
without the fault of the obligor.
This Article refers to a case when compliance of a
personal obligation becomes, without the debtors
fault:
a. A legal impossibility
b. Or a physical impossibility
The impossibility must be after the constitution of the
obligation.
If the act is subjectively impossible (for the debtor
himself), but otherwise objectively possible (for all
others), usually the obligation subsists, unless
personal considerations are involved such as when
only a particular company is prohibited by law to
furnish work on a certain day.
Art 1267
This Article refers to Moral Impossibility or
Impracticability due to change of certain conditions

15
(rebus sic stantibus) also referred to as the Doctrine
of the Frustration of the Commercial
Object/frustration of Enterprise
Real Obligations (to give) are not included in this
Article
General Rule- Impossibility of performance releases
the obligor
Requisites for Art. 1267:
a. The service must become so difficult that it was
manifestly beyond the contemplation of BOTH parties.
The difficulty could not possibly have been anticipated
or foreseen.
b. One of the parties must ask for relief
c. The object must be a future service with future
unusual change in conditions.
Art 1268
This Article gives one instance where a fortuitous
event does not extinguish the obligation.
Exception: When the creditor is in Mora Accipiende
(default on the part of the creditor)
Art 1269 The obligation having been extinguished by the loss
of the thing, the creditor shall have all the rights of action which
the debtor may have against third persons by reason of the loss.
Section 3 Condonation of Remission of the Debt
Art 1270 Condonation or remission is essentially gratuitous
and requires the acceptance of the obligor. It may be made
expressly or impliedly.
Remission or Condonation- it is the gratuitous abandonment by
the creditor of his rights.
Essential Requisites for Remission:
a. There must be an agreement since acceptance of the
offer is required.
b. The parties must be capacitated and must consent.
c. There must be subject matter.
d. The cause of consideration must be liberality
e. The obligation remitted must have been demandable
at the time of remission.
f. The remission must not be in officious.
g. Formalities of a donation are required in the case of
an express remission.
h. Waivers or remissions are not to be presumed
generally.
Classes of Remission:
a. As regards its effect or extent:
Total
Partial-only a portion is remitted or the remission may
refer only to the accessory obligations
b. As regards its date of effectivity:
inter vivos- during life
mortis causa- after death
c. As regards its form:
*Implied or Tacit- required no formality
Express of Formal- requires formalities of a donation if inter
vivos; of a will or cordial if mortis causa
Effect if Remission is not Accepted by the Debtor- This
would not be remission. If the creditor does not really
Prepared by the CIVIL LAW SECTION Chief NORBERT OBEDOZA Assistant Chief JOHN PAUL MARTIN Members LIWLIWA AGBAYANI,
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collect within the statute of limitations, the debt may
be said to have been extinguished by prescription.
Art 1271 The delivery of a private document evidencing a
credit, made voluntarily by the creditor to the debtor, implies the
renunciation of the action the former had against the latter.
Art 1271 tantamount to an implied Remission
Art 1272 Whenever the private document in which the debt
appears is found in the possession of the debtor, it shall be
presumed that the creditor delivered it voluntarily, unless the
contrary is proved.
Art 1273 The renunciation of the principal debt shall
extinguish the accessory obligation; but the waiver of the latter
shall leave the former in force.
Art 1274 It is presumed that the accessory obligation of
pledge has been remitted when the thing pledged, after its
delivery to the creditor, is found in the possession of the debtor,
or of a third person who owns the thing.
In a contract of pledge, delivery is mandatory so that
the contract is perfected.
Section 4 Confusion or Merger of Rights
Art 1275 The obligation is extinguished from the time the
characters of creditors and debtors are merged in the same
person.
Merger or Confusion It is the meeting in one person the
qualities of a creditor and debtor with respect to the same
obligation.
Requisites of a Valid Merger:
a. It should take place between the principal debtor and
creditor.
b. The merger must be clear and definite.
c. The very obligation involved must be the same or
identical.
Art 1276 Merger which takes place in the person of the
principal debtor or creditor benefits the guarantors. Confusion
which takes place in the person of any of the latter does not
extinguish the obligation.
Art 1277 Confusion does not extinguish a joint obligation
except as regards the share corresponding to the creditor or
debtor in whom the two characters concur.
In joint obligations, the debts are distinct and separate
from each other.
Section 5 Compensation
Art 1278 Compensation shall take place when two persons, in
their own right, are creditors and debtors of each other.
Compensation vs. Payment

16
a. While payment must be complete and indivisible as a
rule, in compensation, partial extinguishment is always
permitted.
b. While payment involves action or delivery, true/legal
compensation takes place by operation of law.
Compensation vs. Merger/Confusion
a. As to the number of persons
Confusion- there is only 1 person in whom is merged
the qualities of creditor and debtor
Compensation there must be 2 persons who are
mutually creditor and debtor of each other.
b. As to the number of obligations:
Confusion- there can only be 1
Compensation-there must be 2
Classes of Compensation
a. According to its effect or extent
Total-both obligations are completely extinguished
because they are of the same amount
Partial- when a balance remains
b. According to its origin or cause
Legal- takes place by operation of law
Voluntary or Conventional- due to the agreement of
both parties
Judicial- also called set off
Facultative- one of the parties has the choice of
claiming the compensation or of opposing it.
Art 1279
The requisites enumerated under Art 1279 are those
for LEGAL compensation. VOLUNTARY
compensation in general requires no requisite except
that the agreement be voluntarily and validly entered
into.
Negative Requisites for Legal Compensation
a. Over either of the debts must there be any retention or
controversy commenced by third persons and
communicated in due time to the debtor. (There can
be no legal compensation when ones claim against
another is still the subject of court litigation)
b. There must have been no waiver of the compensation
c. The compensation of the debts must not have been
prohibited by law
Art 1280 Notwithstanding the provisions of the preceding
article, the guarantor may set up compensation as regards what
the creditor may owe the principal debtor.
Art 1281 Compensation may be total or partial. When the two
debts are of the same amount, there is total compensation.
Art 1282 The parties may agree upon the compensation of
debts whish are not yet due.
This applies to conventional or voluntary
compensation.
Requisites in Art 1279 do NOT apply.
Prepared by the CIVIL LAW SECTION Chief NORBERT OBEDOZA Assistant Chief JOHN PAUL MARTIN Members LIWLIWA AGBAYANI,
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Art 1283 If one of the parties to a suit over an obligation has a
claim for damages against the other, the former may set it off by
proving his right to said damages and the amount thereof.
All the requisites mentioned in Art 1279 must be
present, except at the time of the pleading, the claim
need not yet be liquidated.
Art 1284 When one or both debts are rescissible or voidable,
they may be compensated against each other before they are
judicially rescinded or avoided.
Rescissible or voidable debts are valid until rescinded
or voided, hence, compensation is allowed.
Art 1285
The 3 Cases covered by Art 1285
a. The assignment may be made with the consent of the
debtor
EFFECT: Compensation cannot be set up- because there
has been consent and therefore a waiver
EXCEPTION: If the right to the compensation (that has
already taken place) is reserved.
b. The assignment may be made with the knowledge but
without the consent (or against the will) of the debtor
EFFECT: Compensation can be set up regarding debts
previous to the cession or assignment. This refers to debts
maturing before the assignment (that is, before the notice)
hence here, legal compensation has already taken place.
c. The assignment may be made without the knowledge
of the debtor.
EFFECT: Debtor can set up compensation as a defense for
all debts maturing PRIOR to his knowledge of the
assignment (whether the debts matured before or after the
assignment)
Art 1286 Compensation takes place by operation of law, even
though the debts may be payable at different places, but there
shall be an indemnity for expenses of exchange or
transportation to the place of payment.
Art 1287 Compensation shall not be proper when one of the
debts arises from a depositum or from the obligation of a
depository or of a bailee in commodatum.
This Article speaks of instances when legal
compensation cannot take place, such as:
a. When one debt arises from a depositum (not bank
deposit for this is really a loan)- It is the depository
who cannot claim compensation. The depositor is
allowed to so claim.
b. When one debt arises from the obligations of a
depository
c. When one debt arises from the obligations of a bailee
in commodatum (the borrower of property who pays
nothing for the loan)- the lender may claim
compensation, the borrower is not allowed to do so.
Obligations of the Depository
a. He is obliged to keep the thing safely and to return it
when required, to the depositor, or to his heirs and
successors, or to the person who may have been
designated in the contract.
b. Unless there is a stipulation to the contrary, the
depositary cannot deposit the thing to a third person

17
c. If a deposit with a third person is allowed, the
depositary is liable for the loss of he deposited the
thing with a person who is manifestly careless or unfit.
d. The depositary is responsible for the negligence of his
employees
e. The depositary cannot make use of the thing
deposited without the express permission of the
depositor. Otherwise, he shall be liable for damages.
However, when the preservation of the thing requires
its use, it must be used only for that purpose.
Art 1288- Neither shall there be compensation if one of the
debts consists of civil liability arising from a penal offense.
Art 1289 If the person shall have against him, several debts
which are susceptible of compensation, the rules on the
application of payment shall apply to the order of the
compensation.
Art 1290 When all the requisites mentioned in Article 1279 are
present, compensation takes effect by operation of law, and
extinguishes both debts to the concurrent amount, even though
the creditors and debtors are not aware of the compensation.
Art 1291
Novation- the substitution or change of an obligation by
another, which extinguishes or modifies the first, either changing
its object or principal condition, or substituting another in place
of the debtor, or subrogating third person in the right of the
creditor.
Kinds of Novation:
A. According to its Object or Purpose:
1. Real or Objective- changing the object or principal
conditions of the obligation
2. Personal or Subjective -change of persons
a. Expromission or Delegacion- substituting the
person of the debtor
b. Subrogating a third person in the rights of the
creditor- may be
b1.Conventional Subrogation- by agreement
b2.Legal Subrogation- by operation of law
b3. Mixed- change of object or parties
B. According to the form of the constitution
1. Express- it is declared in unequivocal terms
2. Implied- when the 2 obligations are essentially incompatible
with each other.
C. According to its extent of effect
1. Total or extensive novation when the old obligation is
completely extinguished
2. Partial or Modificatory also called imperfect or improper
the old obligation is merely modified, thus, it still remains in
force insofar as it has been modified.
Requisites for Novation:
a. The existence of a valid OLD obligation
Prepared by the CIVIL LAW SECTION Chief NORBERT OBEDOZA Assistant Chief JOHN PAUL MARTIN Members LIWLIWA AGBAYANI,
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b. The intent to extinguish or modify the old obligation by
a substantial difference (the
extinguishment/modification itself is a result of
novation)
c. The capacity and consent of all the parties (except in
the case of expromision, where the old debtor does
not participate)
d. The validity of the new obligation
Art 1292 In order that an obligation may be extinguished by
another which substitute the same, it is imperative that it be so
declared in unequivocal terms, or that the old and the new
obligation be on every point incompatible with each other.
How implied Novation may be Made- it is done by making
Substantial Changes in:
a. The object or subject matter of the contract (e.g.
delivery of a car instead of a diamond ring)
b. The cause or consideration of the contract (e.g. upward
changes in price)
a. The principal terms of the contract (e.g.
reduction of the term or period originally
stipulated)
Art 1293
2 Kinds if Personal or Subjective Novation:
a. Passive- change in the debtor
b. Active- change in the creditor
Art 1293 speaks of Passive subjective Novation-
which may be in the form of:
a. Expromission- initiative comes from a third person
c. Delegacion- initiative comes from the debtor, for it is
he who delegates another to pay the debt, and thus,
he excuses himself. The 3 parties, the old debtor, the
new debtor and the creditor, must agree.
Art 1294 If the substitution is without the knowledge or against
the will of the debtor, the new debtors insolvency or non-
fulfillment of the obligation shall not give rise to any liability on
the part of the original debtor.
Requisites for Expromision:
a. The initiative must come from a third person-who will be new
debtor
b. the new debtor and the creditor must consent
c. the old debtor must be excused or released from his
obligation (The old debtors knowledge/consent is not required
Art 1295 The insolvency of the debtor, who has been
proposed by the original debtor and accepted by the creditor,
shall not revive the action of the latter against the original
obligor, except when said insolvency was already existing and of
public knowledge or known to the debtor, when he delegated his
debts.
Requisites for Delegacion:
a. The initiative comes from the old debtor
b. All the parties concerned must consent or agree
 CIVIL LAW REVIEWER
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Art 1296
Accessory obligations or stipulations made in favor of
third persons remain unless said third persons have
their consent to the novation.
Art 1297 If the new obligation is void, the original one shall
subsist unless the parties intend that the former relation should
be extinguished in any event.
Other factors:
a. If the new obligation is subject to a condition and said
condition does not materialize, the old obligation subsists.
If the new obligation was intended, but the new contract was
never perfected fro lack of the necessary consent, the old
obligation continues.
Subrogation- the transfer to a third person of all the rights
appertaining to the creditor, including the right to proceed
against guarantors, or possessors of mortgages, subject to any
legal provision or any modification that may be agreed.
Kinds of Subrogation:
From the viewpoint of Cause of Origin
a. Conventional or Voluntary Subrogation- requires an
agreement and the consent of the original parties and
of the creditor.
b. Legal Subrogation- takes place by operation of law
From the viewpoint of extent
a. Total Subrogation
b. Partial Subrogation- there would now be 2 or more
creditors

Rule if New Obligation is Merely Voidable; Legal subrogation is not presumed, except in cases
a. The old obligation is novated because a voidable obligation is expressly mentioned in the law.
valid until it is annulled Conventional subrogation must be clearly established,
b. If the new obligation is annulled, the old obligation subsists, otherwise, it is as id no subrogation has taken place.
and whatever novation has taken place will naturally have to be
set aside Art 1301 Conventional subrogation of a third person requires
the consent of the original parties and of the third person.
Art 1298 - Effect if the Old Obligation was Void
Note: Generally, the debtor losses the right to present against
a. if the old obligation is VOID, there is no valid novation the new creditor any defense which he, the debtor, could have
b. if the obligation was VOIDABLE and has already been set up against the old creditor.
annulled, there is no more obligation. Thus, the novation is also
void.
Distinctions between Conventional Subrogation and
Assignment of Credit
If the old obligation was VODABLE, and has NOT YET
a. Conventional Subrogation
been annulled, there MAY BE a valid novation,
- Extinguishes the obligation and creates
provided that:
a new one
a. Annulment may be claimed only by the debtor or
- This requires debtors consent
b. When ratification validates acts which are voidable
- The defect of the old obligation may be
cured in such a way that the new
Rule if the Old Obligation was Extinguished by Loss
obligation becomes entirely valid
a. If the loss was purely because of a fortuitous
b. Assignment of Credit
event, without liability on the part of the debtor,
- Mere transfer of the same right or credit
the novation is VOID for there would be NO
(the transfer die not extinguish the
obligation to novate.
credit)
b. If the loss made the debtor liable, there is still an
- This does not require the debtors
existing monetary obligation the may be the subject of
consent
novation.
- The defect in the credit or right is not
cured simply by assigning the same
A prescribed obligation may be the subject of novation
because unless the defense of prescription is set up An assignment of a savings deposit in a bank is not a
by the debtor, the obligation continues, since this
withdrawal but a sort of subrogation, with the account
failure amount to a WAIVER.
being continued in the name of the assignee.
Effect on a Voidable Obligation of Novation by Expromision
Art 1302 This Article speaks of Legal Subrogation.
a. The debtor is no doubt released from his obligation to
the creditor for the substitution was not done through
Art 1303
his initiative.
b. But when the new debtor, after payment, sues the old
Effects of Total Subrogation
debtor for Beneficial reimbursement, the old debtor
The credit and all appurtenant rights, either against
can set up whatever defenses he could have set
the debtor, or against third persons, are transferred (thus, in a
against the creditor.
sense the obligation subsists, that is, it has not yet been
extinguished or paid).
Art 1299 If the original obligation was subject to a suspensive
or resolutory condition, the new obligation shall be under the
Art 1304
same condition, unless it is otherwise stipulated.
Partial Subrogation
Art 1300
Here, there are the creditors

Prepared by the CIVIL LAW SECTION Chief NORBERT OBEDOZA Assistant Chief JOHN PAUL MARTIN Members LIWLIWA AGBAYANI,
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a. The old creditor, who still remains a creditor as to the 2. Executory one where the prestations are
balance (because partial payment has been made to to be complied with at some future time
him)
b. The new creditor who is a creditor to the extent of h. According to subject matter
what he had paid the creditor. 1. Contracts involving things
2. Contracts involving rights or credit
3. Contracts involving services

CONTRACTS i. According to obligations imposed and required by law

1. Ordinary
Art 1305 2. Institutional-like contract of marriage

j. According to the evidence required for its proof

ELEMENTS OF A CONTRACT 1. Those requiring merely oral or parol
evidence
a. Essential Elements 2. Those requiring written proof
1.Consent
2.Subject Matter k. According to the number of persons actually and
3.Cause or Consideration physically entering into the contracts
1. Ordinary two parties are represented by
b. Natural Elements- presumed to exist, unless the different persons
contrary is stipulated 2. Auto Contracts where only one person
represents two opposite parties, but in
Ex. Warrants against eviction and against hidden different capacities
defects
l. According to the number of persons who participated
c. Accidental Elements existence of such is dependent in the drafting of the contract
on the agreement of the parties. 1. Ordinary
2. Contract of Adherence
Classification of Contracts
a. According to perfection or formation m. According to the nature of the contract
1. Consensual 1. Personal
2. Real-perfected by delivery 2. Impersonal
3. Formal or Solemn
STAGES OF A CONTRACT
b. According to cause of equivalence of the value of a. Preparation
prestations: b. Perfection
1. Onerous c. Consummation (or death or termination)
2. Gratuitous or Lucrative
3. Remunerative Basic Principles or Characteristics of a Contract
a. Freedom to stipulate
c. According to Importance or dependence of one upon b. Obligatory force and compliance in good faith
another c. Perfection by mere consent
1. Principal can stand alone d. Both parties are mutually bound
2. Accessory depends upon the existence of e. Relativity
another contract
3. Preparatory here, the parties do not
consider the contract as an end by itself, but Art 1306 Freedom or autonomy of contract
as a means thru which future transaction or
contracts may be made
Ex. Agency, partnership Art 1307
d. According to the parties obligated
1. Unilateral Four Kinds of Innominate Contracts
2. Bilateral a. Du ut des (I give that you may give)
b. Do ut facias (I give that you may do)
e. According to their Name or Designation c. Facio ut des (I do that you may give)
1. Nominate d. Facio ut facias (I do that you may do)
2. Innominate

f. According to the risk of fulfillment Art 1308-1310

1. Commutative
2. Alienatory MUTUALITY OF CONTRACTS
The validity or fulfillment of a contract cannot be left to
g. According to the time of performance or fulfillment the will of one of the contracting parties.
1. Executed- one completed at the time the The validity or fulfillment may be left to the will of a
contract is entered into third person.
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The validity or fulfillment may be left to chance. Art 1319

Definition of Consent
-Art 1319,first paragraph
Art 1311
Requisite of Consent
This principle stresses the Principle of Relativity. a. There must be two or more parties
Contracts are generally effective only between the b. The parties must be capable or incapacitated
parties, their assigns and their heirs. c. There must be no vitiation of consent
d. There must be no conflict between what was
Exceptions: expressly declared and what was really intended
a. Where the obligation arising from the contract are not e. The intent must be declared properly
transmissible by their nature, by stipulation, or by
provision of law. Requisites for the meeting of minds
b. Where there is stipulation pour atrui (a stipulation in a. An offer that must be certain
favor of a third party) b. And an acceptance must be unqualified and absolute
c. Where a third person induces another to violate his
contract Concurrence of offer and acceptance (Art 1319-26)
d. Where, in some cases, third persons may be Legal capacity of contracting parties (Art 1327-29)
adversely affected by a contract where they did not Characteristics of Consent (Art 1330-46)
participate.
e. Where the law authorizes the creditor to sue on a
contract entered into by his debtor. Art 1320
Forms of Acceptance
Art 1312
A real right binds the property over which it is Art 1322
exercised.
Acceptance of an Offer made thru an agent
Exception to the general rule that a contract binds only
the parties.
Art 1323
Art 1313 Other instances when the offer becomes ineffective
a. When the offeree expressly or impliedly rejects the
Right of defrauded creditor.
offer
b. When the offer is accepted with qualification or
condition
Art 1314
c. When before acceptance is communicated, the
Requisites before a third person in this article can be held for subject matter becomes illegal or impossible
damages d. When the period of time given to the offeree within
a. Existence of a valid contract which he must signify his acceptance has already
b. Knowledge on the part of the third person of the lapsed
existence of the contract e. When the offer is rejected in due tome
c. Interference by the third person without legal
justification or excuse
Art 1324
Option Contract
Art 1315-1316
Option- it is a contract granting a person the privilege to buy or
Perfection of contracts not to buy certain objects at anytime within the agreed period at
a fixed price

Art 1317 Perfection of Option

Requisites for a Person to Contract in the Name of Another When there is a meeting of minds on the option
a. He must be duly authorized (expressly or impliedly)
b. Or he must have by law a right to represent him Art 1325-1326
c. Or the contract must be subsequently ratified If the advertisement contains all the specific particular
needed in a contract, it is a definite offer.
If important details are left out, the advertisement is
Art 1318 not a definite offer, but a mere invitation to make an offer.
Requisites of Contracts
a. Consent (Art 1319-46) Art 1327 in relation to Art 1329
b. Object (Art 1347-1349) Who cannot give consent.
c. Cause (Art 1350-55)
Art 1328
Voidable contracts by reason of incapacity

Art 1330
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This article enumerates causes or vices of consent. e. The threat must be an unjust act, an actionable wrong

Art 1331 in relation to Art 1333 Art 1337

Mistake Requisites for undue influence to vitiate consent
It is a false belief about something. a. Improper advantage
b. Power over the will of another
Requisites for mistake to vitiate consent c. Deprivation of the latters will of a reasonable freedom
a. Object of the contract of choice
b. The condition which principally proved or induced one
of the parties Art 1338-1341
c. Identify or qualifications, but only if such was the Kinds of Fraud
principal cause of the contract. a. Fraud in the celebration of the contract
d. The error must be excusable 1. Dolo Causante or causal
e. The error must be a mistake of fact fraud (Art 1338)
2. Dolo Incidente of incidental
Kinds of Mistake fraud
a. Mistake as to the object
1. Mistake as the identity of the thing b. Fraud in the performance of the obligations stipulated
2. Mistake as to the substance of the thing in the contract
3. Mistake as to the conditions of the thing
4. Mistake as to the quantity of the thing Requisites of Dolo Causante
a. The fraud must be material and serious
b. Mistake as to person b. The fraud must have been employed by one
1. Mistake must be either with regards to the of the contracting parties, because if both
identify or with regard to the qualification of committed fraud, the contract would remain
one of the contracting parties valid
2. Such identity or qualification must have c. There must be a deliberate intent to deceive
been the principal consideration for the to induce
celebration of the contract d. The other party must have relied on the
untrue statement, and must himself not be
guilty of negligence in ascertaining the truth
Art 1332
Burden of proof in case of mistake Art 1342-1344
Speaks about misrepresentation
Art 1333
Effect of knowledge of risk Art 1345-1346
Simulation
Art 1334
Simulation of a Contract defined
Mistake of Law It is the process of intentionally deceiving others by
Is that which arises from an ignorance of some producing the appearance of a contract that really
provision of law, or from an erroneous interpretation of its does not exist (absolute simulation)
meaning, or from an erroneous conclusion as to the legal effect Or which is different from the true agreement relative
of the agreement, on the part of one of the parties. simulation.

Requisites: Kinds
a. There must be mutual error a. Absolute; Effect; the contract is void
b. The error must refer to the legal effect of the b. Relative; Effect; the parties are bound to the real
agreement or true agreement except-
c. The real purpose of the parties is frustrated a. If the contract should prejudice third
persons
Art 1335-1336 b. Or if the purpose is contrary to law,
Violation refer to physical coercion morals, public order, policy or good
Intimidation refers to moral coercion customs

Requisites for violence to vitiate consent Requisites

a. Employment of serious or irresistible force a. An outward declaration of will difference from the will
b. It must have been the reason why the contract was of the parties
entered into b. The false appearance must have been intended by
mutual agreement
Requisites for intimidation to vitiate consent c. The purpose is to deceive third persons
a. Reasonable and well-grounded fear
b. Of an imminent and grave evil Art 1347-1349
c. Upon his person, property, or upon the person of Objects (Subject Matter) of a contract
property of his spouse, descendents or ascendants - A thing or a service
d. It must have been the reason why the contract was
entered into Requisites
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a. The thing or service must be within the commerce of e. However, although the provisions of Art 1357 in
man connection with those of Art 1358, do not operate
b. Must be transmissible against the validity of the contract nor the validity of
c. Must not be contrary to law, morals, good customs, the acts voluntarily performed by the parties for the
public order, or public policy fulfillment thereof, yet from the moments when any of
d. Must not be impossible the contracting parties invokes said provisions, it is
e. Must be determinate as to its kind or determinate evident that under them the execution of the required
without the need of a new contract or agreement document must precede the determination of the other
obligations derived from the contract
CAUSE OF CONTRACTS
Art 1350
Cause defined
-It is the essential and impelling reason why a party CHAPTER 4
assumes an obligation
REFORMATION OF INSTRUMENT
Art 1351
Motive is the purely personal or private reason which a party Reformation is that remedy by means of which a written
has in entering into a contract instrument is amended or rectified so as to express or
conform to the real agreement or intention of the parties
Motive vs. Cause when by reason of mistake, fraud, or inequitable contract,
Motive or accident the instrument fails to express such agreement
a. May vary although he enters into the same kind of or intention.
contract
b. May be unknown to the other
c. The presence of motive Requisites for reformation
a. There is a meeting of minds of the parties to the
Cause contract
a. Always the same b. The written instrument does not express the true
b. Always known agreement or intention of the parties
c. Cannot cure the absence of cause c. The failure to express the true intentions is due to
mistake, fraud, inequitable conduct or accident
Art 1352-1355 d. The facts upon which relief by way of reformation of
Requisites for cause the instrument is sought are put in issue by the
a. It must be present pleadings
b. It must be true e. There is clear and convincing evidence of the mistake,
c. It must be lawful fraud, inequitable conduct, or accident

Reformation vs. Annulment

CHAPTER 3 In reformation, there has been a meeting of the minds
of the parties, hence, a contract exists while in annulment, there
FORM OF CONTRACTS has been none, the consent of one of the parties being vitiated
by mistake, etc.
Art 1356
Meaning of form of contracts
-Refers to the manner in which a contract is executed Art 1360-69
or manifested
Art 1360
Rules regarding from of contracts (Art 1356) Rule in case of conflict
Art 1357-1358
Principles regarding formalities for the efficacy of a contract Art 1366
a. Art 1357 and Art 1358 do not require the execution of Instances when reformation is not allowed
a contract either in a public or private instrument in
order to validate enforce it but only to ensure its
efficacy, so after its existence has been admitted, the CHAPTER 5
party bound may be compelled to execute the
necessary document INTERPRETATION OF A CONTRACT
b. Even where the contract has not been reduced to the
required form, it is still valid and binding as far as the Art 1370
parties are concerned Definition of interpretation of contract
c. From the moment one of the contracting parties -Is the determination of the meaning of the terms or
invokes the provisions of Art 1357 and 1358by means words used by the parties in their contract
of a proper action, the effect is to place the existence
of the contract in issue, which must be resolved by the Art 1371-79 (provisions)
ordinary rules of evidence
d. Art 1357 does not require that the action to compel the Kinds of defective contracts
execution of the necessary document must precede a. Rescissible (Art 1380-89)
the action upon the contract
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b. Voidable (Art 1390-1402) d. Susceptible of ratification

c. Unenforceable (Art 1403-1408) e. The causes of annulment
d. Void or Inexistent (Art 1409-1422) The causes of rescission

Art 1381 in relation to Art 1382 Rescissible

Meaning of rescissible contracts a. Defect is extrinsic
-Those validly agreed upon because all the essential b. Contract is not rescissible id there is no damage or
elements exists but in some cases established by law, the prejudice
remedy of rescission is granted in the interest of equity c. Rescissibility of the contract is based on equity
d. Not susceptible of ratification
Requisites of rescission e. Are different form
a. The contracts must be validly agreed upon
b. There must be lesion or pecuniary prejudice to one of
the parties or to a third person Art 1390
c. The rescission must be based upon a case especially Voidable contracts
provided by law
d. There must be no other legal remedy to obtain Art 1391
reparation of the damages Prescription
e. The party asking for rescission must be able to return
what he is obliged to restore by reason of the contract
f. The object of the contract must not legally Art 1392-96
g. The object of the contract must not legally be in the
possession of third persons who did not act in bad Concept of Ratification
faith -By virtue of which efficacy is given to a contract which
h. The period for filing the action of rescission must have suffers from a vice of curable nullity
not prescribed
Requisites for ratification
Meaning of Rescission a. The contract should be tainted with a vice which is
-Remedy granted by law to the contracting parties and susceptible of being cured
sometimes even to third persons in order to secure reparation of b. The confirmation should be effected by the person
damages caused by them by a valid contract, by means of the who is entitled to do so under the law
restoration of things to their condition in which they were prior to c. It should be effected with knowledge of the vice or
the celebration of the said contract. defect of the contract
d. The cause of the nullity or defect should have already
disappeared
Art 1385
Effects of rescission Art 1397 in relation to Art 1391
-Who and when may an action for annulment of
contract be instituted
Art 1324
Prescription Art 1398-99

Effects of annulment
VOIDABLE CONTRACTS Art 1400-02
- Effect pf failure to make restitution
Definition -Where loss is due to fault of plaintiff
-Are those which possess all the essential requisites -Where loss is due to fault of defendant
of a valid contract but one of the parties is incapable of giving -Where loss is due to fortuitous event
consent, or consent is vitiated by mistake, violence, intimidation,
undue influence, or fraud
CHAPTER 8
Characteristics
a. Their defect consist in the vitiation of consent of one of UNENFORCEABLE CONTRACTS
the contracting parties
b. They are binding until they are annulled by competent
court Meaning of unenforceable contracts
c. They are susceptible of convalidation by ratification or -Those that san not be enforced in court or sued upon
by prescription by reason of defects provided by law until and unless they are
ratified according to law.
Voidable vs. Rescissible Contracts
Kinds:
Voidable a. Those entered into in the name of another by one
a. Defect is intrinsic without or acting in excess of authority
b. Contract is voidable even if there is no damage or b. Those that do not comply with the statute of fraud
prejudice c. Those where both parties are incapacitated of giving
c. Annulability of the contract is based on law consent
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Art 1404-1408 (provisions)

Unauthorized contracts
-Those entered into in the name of another person by
one who has been given no authority or legal representation on
who has acted beyond his powers. CHAPTER 9

Characteristics of Unenforceable Contracts VOID OR INEXISTENT CONTRACTS

a. They can not be enforced by a proper action in court
b. They are susceptible of ratification Void Contracts
c. They can not be assailed by third persons -Those, which of certain defects generally produce no
effect at all
Unenforceable vs. Rescissible
a. An unenforceable contract cannot be enforced by a Inexistent Contracts
proper action in court, while a rescissible contract can -Refer to agreements which lack one or some or all
be enforced, unless it is rescinded the elements or do not comply with the formalities which are
b. The causes for the unenforceable character of the essential for the existence of a contract
former are different from the causes fro the rescissible
character of the latter Characteristics of a Void or Inexistent Contracts
c. The former is susceptible of ratification, while the latter a. Generally, it produces no effect
is not b. It cannot be ratified
d. The former cannot be assailed by third persons, while c. The right to set up the defense of legality cannot be
the latter may be assailed by third persons who are waived
prejudiced d. The action or defense for the declaration of its
inexistence does not prescribe
Unenforceable vs. Voidable e. The defense of illegality is not available to third
a. An unenforceable contract cannot be enforced by a persons whose interests are not directly affected
proper action in court, while a voidable contract can f. It cannot give rise to a valid contract
be enforced, unless it is annulled
b. The causes for the unenforceable character of the Art 1410
former are different from the causes for the voidable -Imprescriptibility of void or inexistent contract
character of the latter
Art 1411-1412
STATUTE OF FRAUDS Where both parties are in pari delicto
a. The parties shall have no action against each other
Purpose b. Both shall be prosecuted
-Not only to prevent fraud but also to guard against c. The things or the price of the contract, as the effects of
the mistakes of honest men by requiring that certain agreement the crime shall be confiscated in favor of the
specified must be in writing. government
Application Where only one party is guilty
a. Not applicable in actions which are neither for -The rule in paragraph 1 of Art 1411 applies only to the
damages because of a violation of a contract, nor for guilty party or the more guilty party
the specific performance thereof Exceptions to the principle of pari delicto
b. Applicable only to executory contracts and not to Art 1413-1419
contracts which are totally or partially performed
c. Not applicable where the contract is admittedly Art 1420-22 (provisions)
expressly, or impliedly by the failure to deny
specifically its existence, no further evidence thereof
being required in such case.
d. Applicable only to the agreements enumerated therein NATURAL OBLIGATIONS
e. Not applicable where a writing does not express the
true agreement of the parties Art 1423
f. It does not declare the contracts infringing it are void -Defines Natural Obligations
but merely unenforceable
g. The defense of the statute of frauds may be waived Civil vs. Natural Obligations
h. The defense of the statute of frauds is personal to the
parties and cannot be enforced by strangers to the Civil
contract a. Arise from la, contracts, quasi-contracts, and quasi-
delicts
Effect of Non-Compliance b. Give a right of action to compel their performance
-The contract or agreement is unenforceable by action
Natural
Ratification of Unenforceable Contracts a. Based not on positive law but on equity and natural
Either by: a. the failure of object to the presentation of oral law
existence to prove the same b. Do not grant such right of action to enforce their
c. The acceptance of benefits under them performance

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25
TITLE IV
ESTOPPEL
Art 1431
Definition of Estoppel
-Condition or state by virtue of which admission or
representation is rendered conclusive upon the person making it
and cannot be denied or disproved as against the person relying
thereon
Art 1432
Adoption of the principle
Art 1433
Kinds of Estoppel
A. Estoppel in Pais (equitable estoppel)
-That which arises one y his acts, representations, or
admission, or by his silence when he ought to speak out,
intentionally or through culpable negligence, induces another to
believe certain facts to exist and such, other rightfully relies and
acts on such belief, as a consequence of which he would be
prejudice if the former is permitted to deny the existence of such
facts
Kinds
a. Estoppel by conduct or by acceptance of benefits
b. Estoppel by representation or concealment
c. Estoppel by silence
d. Estoppel by omission
e. Estoppel by laches
Requisites
a. As related to the party being estopped
a. Conduct which amounts to a false
representations or concealment of material
facts, or at least which is calculated to
convey the impression that the facts are
otherwise than, and inconsistent with those
which the party subsequently attempts to
assert;
b. The intention or at least the expectation, that
such conduct shall be acted upon, or
influence, the other party or other person;
and
c. Knowledge, actual or constructive, of the
real facts
b. As related to the party claiming the estoppel
a. Ignorance or lack of knowledge and of the
means of knowledge of the truth as to the
facts in question
b. Reliance in good faith, upon the conduct or
statement of the party to be estopped; and
c. Action or inaction based thereon of such a
character as to chance the position or status
of the party claiming the estopped, to his
injury, detriment, or prejudiced
B. Estopped by deed or by record
-Types of technical estoppel
Kinds
a. Estoppel by deed proper
b. Estoppel by judgment as a court record
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Estoppel by Laches
Definition of Laches
-Failure or neglect, for an unreasonable and
unexplained length of time, to do that which by exercising due
diligence, one could or should have done earlier; it is negligence
or omission to assert a right within a reasonable time,
warranting a presumption that the party entitled to assert it
either has abandoned it or declined to assert on
Requisites
a. Conduct on the part of the defendant, or of one under
whom he claims, giving rise to the situation of which
complaint is made
b. Delay in asserting the complainants right, the
complainant having had knowledge or notice of the
defendants conduct and having been afforded an
opportunity to sue; actual knowledge of the omission
of the adverse act is not necessary, it being enough
that such knowledge may be imputed to the
complainant because of circumstances of which he
was cognizant;
c. Lack lf knowledge or notice on the part of the
defendant that the complainant would assert the right
on which he bases his suit;
d. Injury or prejudice to the defendant in the event of
relief is accorded to the complainant, or the suit is not
held to be barred
Laches vs. Prescription
Laches
a. Concerned with the effect of delay
b. Principally a question of inequity of permitting a claim
to the enforced
c. Not statutory
d. Applies in equity
e. Not based on fixed time
Prescription
a. Concerned with the fact of delay
b. Question of matte of time
c. Statutory
d. Applies at law
e. Based on fixed time