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OBLIGATIONS Indivisible It is not susceptible of partial compliance

Art. 1156 An obligation is a juridical necessity to give, to do or not and must always be wholly complied
to do. with.
Conjunctive There are two or more conditions that
Natural obligations – based on equity and natural law, cannot be must all be complied with.
enforced in court Alternative There are two or more conditions but
compliance or the happening of one is
Requisites: sufficient.
(1) Vinculum juris or juridical tie – efficient cause Express The condition is stated either orally or in
established by the various sources of obligation writing.
(2) Object – prestation or conduct (to give, to do, or not to Implied The condition is not stated but is
do) deemed attached.
(3) Subject-Persons – active (oblige) and passive (obligor)
subjects Kinds of Obligations:
Pure Obligations – one to which no condition or period is
Sources of obligation: attached
(1) Law
(2) Contracts Obligations with a Period – if an interval of time is provided for,
(3) Quasi-contracts which either suspends the demandability of an obligation or will
(4) Delict terminate existing obligation
(5) Quasi-delicts
Alternative Obligations – there are two or more prestations but
Modes of Breaching the Obligation: the debtor is obliged to completely perform only one
(1) Fraud, (2) Negligence, (3) Delay or (4) any manner than
contravenes the tenor thereof Facultative Obligations – only one prestation was agreed upon
and due but the debtor may render another in substitution
Fortuitous Event (Art. 1174)
An event which could not be foreseen or which, through foreseen, Alternative Facultative
is inevitable. 1. There are two or 1. There is only one
more prestations prestation
 When there is liability even if there is Fortuitous that are due
Event: 2. Debtor can choose 2. Debtor has only one
(1) The obligor or debtor delays any choice, but with a
(2) Obligor or debtor promised to same thing to right to substitute
two or more persons who do not have the 3. Debtor in certain 3. Loss of the
same interest
cases may be liable substitute due to
(3) When there is stipulation or agreement that
for damages if the the debtor’s fault
the obligor will not be excused even if the
choice is with the will not make the
cause is fortuitous event
creditor and loss of debtor liable
(4) There is assumption of risk any alternative is
(5) Thing to be delivered is generic
due to the debtor’s
(6) Obligor is also at fault fault
4. Choice is generally 4. The option to
Kinds of Conditions
with the debtor but substitute is always
it can be given to with the debtor
Suspensive The happening of the condition or event
the creditor and a
gives rise to the obligation or acquisition third person
of rights.
Resolutory The happening of the condition or event
Extinguishment of Obligations:
extinguishes obligations/rights.
(1) Payment or performance
Potestative The happening or performance depends (2) Loss of the thing due
upon the will of a party. (3) Condonation or remission of the debt
Casual The happening or fulfillment depends on (4) Confusion or merger of the rights of creditor or debtor
chance or will of a third person. (5) Compensation
Mixed Fulfillment depends partly on chance or (6) Novation
the will of third person and partly on the (7) Annulment
will of one party. (8) Rescission
Possible By its very nature, it can be fulfilled or it (9) Fulfillment of a resolutory condition
is not against law, public policy or good (10) Prescription
customs. (11) Death whenever personal obligations are involved
Impossible By its nature it cannot be realized or it is (12) Expiration of a resolutory period
against law, good customs or public (13) Compromise
policy. (14) Impossibility of performance
Positive Something is to be done or an act shall (15) Fortuitous event
be performed.
Negative It is required that something will not be
done or an act will be omitted.
Divisible It can be partially complied with.
CONTRACTS Can be Cannot Can Can Cannot
Art. 1305 A contract is a meeting of minds between two persons ratified?
whereby one binds himself, with respect to the other, to give Who can Contracti Contractin Contracting Contracting
something or to render some service. assail the ng party g parties parties only parties and
contract? and third only third persons
persons whose
Stages who are interests are
Negotiation  Perfection  Consummation prejudice affected
Kinds of Contracts: Prescripti 4 years 4 years No Action for
 As to how perfected: ve period prescriptive declaration
- Consensual period is that the
- Formal provided for contract is
because the void is
- Real
same is not imprescriptab
 As to whether or not there is defect: applicable. le.
- Valid Prescription
- Voidable cannot cure
- Unenforceable the defect.
- Rescissible How Directly Directly or Directly or Directly or
- Void contract collaterally collaterally collaterally
 As to degree of independence or dependence: can be
- Principal
- Accessory
Badges of Fraud:
- Preparatory
(1) A property was transferred by gratuitous title and the
 As to whether or not obligations are fulfilled:
transferor did not reserve sufficient property to pay all
- Executor
his debts contracted before donation
- Executed
(2) Transfer by onerous or gratuitous title after a judgment
 As to whether or not a name is given by law:
was rendered by a court against the transferor
- Nominate
(3) The fact that the consideration of the conveyance is
- Innominate
fictitious or is inadequate
 As to the nature of consideration:
(4) A transfer made by a debtor after suit has begun and
- Gratuitous while it is pending against him
- Onerous
(5) A sale upon credit by an insolvent debtor
- Remuneratory (6) Evidence of large indebtednesss or complete insolvency
(7) The transfer of all or nearly all of his property by the
Basic characteristics of contracts: debtor, especially when he is insolvent or greatly
- Autonomy
embarrassed financially
- Mutuality (8) The fact that the transfer is made between father and
- Relativity
son, when there are present other circumstances
- Obligatoriness
(9) The failure of the vendee to take exclusive possession of
all the property
Essential Requisites of contracts:
(1) Consent of the contracting parties
(2) Object certain which is the subject matter of the
(3) Cause of the obligation which is established

Vices of consent: (1) mistake, (2) violence, (3) intimidation, (4)

undue influence, or (5) fraud

Effect: Contract is voidable

Defective Contracts:
Rescissibl Voidable Unenforcea Void
e ble
Defect (1)Lesion, (1)Incapaci (1)In excess (1) Absence
or (2) ty or (2) or without of requisites
Transfer Consent is authority, or (2) Illicit
in fraud vitiated by (2) violation nature
of fraud, of Statute of
creditors, violence, Frauds or
or (3) intimidatio (3)
Transfer n, undue Incapacity
by influence of both
insolvent parties
due date
Effect Binding Valid and Cannot be No effect is
and binding enforced produced
enforceab until unless
le unless annulled ratified or
rescinded waived
Art. 440 It is a fiduciary relationship by virtue of which a person Art. 1458 By the contract of sale, one of the contracting parties
(Trustor) reposes to another (Trustee) his confidence as regards obligates himself to transfer the ownership and to deliver a
property for benefit a person referred to as the beneficiary. determinate thing, and the other to pay therfor a price certain in
money or its equivalent.
a) Express trusts – created by the intention of the trustor Characteristics:
or of the parties - Nominate
- no particular words are required, it being - Principal
sufficient that a trust is clearly intended - Consensual
b) Implied trusts – by operation of law - Reciprocal
(1) Resulting Trust – raided by implication of law and - Onerous
presumed to have been contemplated by the - Commutative
(2) Constructive Trust – the parties do not intend, Distinguished from other contracts:
expressly or impliedly to create a trust but it is  Contract to sell
created by force of law by reason of the demands - The transfer of ownership in a contract to sell is subject
of equity and justice to a suspensive condition which is usually full payment
of the purchase price
 Agency to sell
- The agent, person to whom the thing is delivered, does
not become the owner and he holds it merely as a
fiduciary; the agent does not pay the price but is bound
to remit whatever he may receive from a third person
who is the buyer
 Contract for a Piece of Work
- Whether the thing transferred is one not in existence
and which never would have existed but for the order of
the party desiring to acquire it
 Option contract
- The prospective buyer is given the right to purchase the
thing to be sold

Right of First Refusal

This agreement gives the first priority to whom the right is given
(prospective buyer) to purchase the property should the owner
decide to sell the same; the owner should offer the property first
to such person.

Obligations of the Vendor: to transfer ownership of and deliver,

as well as warrant the thing which is the object of the sale.

Implied warranties of seller:

(1) Warranty against eviction
(2) Warranty against hidden defects
(3) Warranty of quality or fitness

Obligations of the Vendee: to accept delivery, and to pay the

price of the thing sold at the time and place stipulated in the

In a contract of sale of personal property on installment basis, the
vendor may exercise any of the following alternative remedies:
(1) Exact fulfillment of the obligation, should the vendee fail
to pay
(2) Cancel the sale, should the vendee’s failure to pay cover
two or more installments; or
(3) Foreclose the chattel mortgage

Applies to contracts of sale of real estate on installment
payments, including residential condominium apartments.
Extinguishment of Sale: LEASE
(1) Same cases as obligations Art. 1642 The contract of lease may be of things, or of work and
(2) Conventional Redemption service.
- Sale Con Pacto De Retro
- By express agreement, the seller is given the Characteristics:
right to repurchase the thing sold - Consensual
(3) Legal Redemption - Purpose is use
- Right to be subrogated, upon the same terms - Temporary
and conditions stipulated in the contract, in
the place of one who acquires a thing by Obligations of LESSOR:
purchase or dation in payment, or by any 1) Deliver the thing object of contract in a condition as to
other transaction whereby ownership is render it fit for the use intended
transmitted by onerous title 2) Make necessary repairs to keep it suitable for the use to
which it has been devoted
3) Maintain the lessee in peaceful and adequate
enjoyment of the lease for entire duration
4) Responsible for warranty against eviction
5) Responsible against hidden defects
6) Not to alter the form of the thing as to impair the use to
which the thing was devoted

Remedies of Lessee:
(1) Judicial rescission plus damages
(2) Claim for damages only

Rights of LESSEE:
1) Demand delivery of the thing leased
2) To be in peaceful and adequate enjoyment of the lease
for the entire duration of the contract
3) Sub-lease the property unless there is stipulation to the
4) Choose between proportional reduction of rent and
rescission of the lease if the thing is partially destroyed
by fortuitous event
5) Suspend payment in case lessor fails to make necessary
repairs or maintain the lessee in peaceful and adequate
enjoyment of the property leased
6) Terminate the lease if the leased dwelling place or
building intended for habitation is in a condition that
brings imminent and serious danger

Obligations of LESSEE:
1) Pay the price of the lease
2) Use the thing as diligent father of a family devoting it for
the use stipulated
3) Pay expenses for the deed of lease
4) Notify owner of need of urgent repairs
5) Tolerate the works of the lessor for urgent repairs
6) Notify any usurpation or untoward act of third persons
7) Return thing leased at termination of lease except for
ordinary wear and tear
8) Liable for loss or deterioration due to his own fault or
9) Liable for any deterioration caused by the members of
his household and by guests and visitors

The lessee cannot assign the lease without the consent of the
lessor, unless there is a stipulation to the contract.
- There is novation by substitution of the lessee
in an assignment of lease
A lessee can sublease the property in whole or in party that he is Art. 1767 Partnership is a contract whereby two or more persons
leasing if there is no express prohibition in the contract. bind themselves to contribute money, property or industry to a
common fund, with the intention of dividing the profits among
Obligations of Sublessee: themselves.
1) The sublessee is bound to the lessor for all acts which
refer to the use and preservation of the thing leased in Rights of Partners:
the manner stipulated between the lessor and the 1) Participate in management
lessee 2) Share in profits
2) The sublessee is subsidiarily liable to the lessor for any 3) Compensation
rent due from the lessee. 4) Reimbursement
5) Return of advances
When lease is extinguished: Expiration of the period of lease, and 6) Return of capital
if the thing is totally destroyed by a fortuitous event 7) To information
8) To an accounting
Implied New Lease or Tacita reconduccion refers to the right of
the lessee to continue enjoying the material or de facto Property rights of a partner: (1) his rights in specific property, (2)
possession of the thing leased within a period of time fixed by law. his interest in the partnership, and (3) his right to participate in
During its existence, the lessee can prevent the lessor from the management.
evicting him from the disputed premises.
Dissolution, Winding Up, Termination
(1) Term of the original contract of lease has expired Dissolution – the change in relation of the partners caused by any
(2) Lessor has not given the lessee a notice to vacate partner ceasing to be associated in the carrying on of the business
(3) Lessee continued enjoying the thing leased for 15
days with the acquiescence of the lessor After dissolution, the ff acts are binding: to wind up affairs, and
contracts with creditor without notice of dissolution

Winding Up – the process of liquidating the partnership’s assets

and distributing the proceeds to satisfy claims against the

Priority of distribution of assets:

(1) Creditors other than partners
(2) Partners other than for capital or profits
(3) Partners in respect of capital
(4) Partners in respect of profits
Art. 1868 By the contract of agency, a person binds himself to
render some service or to do something in representation or on
behalf of another, with the consent or authority of the latter.

Elements of Agency:
- Consent, express or implied
- Object is the execution of a juridical act in relation to a
third person
- Agent acts as a representative and not for himself
- Agent acts within the scope of his authority

Kinds of Agency:
1. Express v. Implied
a) Express
b) Implied – agency is presumed from the acts of the
principal, from his silence or lack of action, or his
failure to repudiate the agency, knowing that
another person is acting on his behalf without
2. Verbal v. Formal
a) Oral
b) Formal – law requires specific form
3. Contractual v. Legal
a) Contractual Agency – created through agreement
by the parties
b) Legal Agency – created by law

Special Power of Attorney

1) To make such payments not usually acts of
2) To effect novations
3) To compromise, submit questions to arbitration, to
renounce the right to appeal from a judgment, to waive
objections to the venue of an action or to abandon a
prescription already acquired
4) To waive any obligation gratuitously
5) Enter into any contract by which the ownership of an
immovable is transmitted or acquire
6) Make gifts, except customary ones for charity
7) To loan or borrow money, unless urgent and
indispensable for the preservation of things under
8) Lease any real property to another person for more than
a year
9) To bind the principal in a contract of partnership
10) To obligate the principal as a guarantor or surety
11) To create or convery real rights over immovable
12) To accept or repudiate an inheritance
13) To ratify or recognize obligations contracted before the
14) Any other act of strict dominion