BUS 124

Atty. Jilliane Joyce R. De Dumo

NATURE AND EFFECT
OF OBLIGATIONS
1. Preserve the thing (diligence of a good
father of a family, or another standard of
care as stipulated or required by law)
2. Deliver the fruits
3. Deliver the accessions and accessories
4. Deliver the thing itself
5. Answer for damages in case of non-
fulfillment or breach
1. Deliver a thing itself which is of the same
quality intended by the parties (rule of
medium quality)
2. Answer for damages in case of fraud,
negligence, delay, or contravention of tenor
1. S sold his horse to B for P15,000, to be
delivered on December 15. While still in
possession of S, the horse gave birth to a
colt. Who is entitled to the colt?

2. S sold his horse to B for P15,000. no date or

condition was stipulated for delivery of the
horse. While still in possession of S, the
horse gave birth to a colt. Who is entitled to
the colt?
 To have the obligation performed by himself
or by another, unless personal considerations
are involved, at the debtor’s expense
 If done in contravention in terms or poorly
done, to be ordered undone if still possible
 Recover damages
Liable for
A. In mora solvendi
 Breach of obligation
 Damages
 Interest
 Fortuitous event
B. In mora accipiendi
 Breach of obligation
 Damages
 Bears risk of loss of thing
 Debtor released from paying interest
 Debtor released through consignation
C. In compensatio morae
 No default
When demand not necessary for delay
 Obligation provides (“with no need for
demand”)
 Law provides (taxes)
 Demand useless (death of horse)
 Performance by party in reciprocal obligations
 Waiver of past fraud v. future fraud

 S promised to deliver 120 cavans of rice of a

particular brand to B. S delivers a different
brand of rice. Can B enter into an agreement
with S waiving his right to file action in court
against S for such fraud?
 Waiver of past negligence v. future negligence
 Standard of care
◦ Agreed by parties
◦ Required by law (e.g. extraordinary diligence for
common carriers)
◦ Good father of a family
1. Performance
2. Rescission
3. Damages
“natural and probable consequences of breach of
the obligation, and which the parties have
foreseen or could have reasonably foreseen at the
time the obligation was constituted.”
A. Judicial rescission (Art. 1191)
 Resort to courts
 Power of court to fix period and temper
obligation of first infractor (Art. 1192)
 Cannot apply if subject matter in hands of third
person who acted in good faith
 Needs substantial violation

B. Extrajudicial rescission
 Expressly stipulated
◦ Exception: where no performance yet by both parties
and one party is willing and ready to comply
 Written notice to other party
1. S agreed to sell and deliver 1,000 kilos of sugar
for P30,000 to C. On the designated date of
delivery, S did not deliver the sugar, so that C
brought from another for P40,000. The breach
of obligation caused C to suffer a heart attack,
for which he was hospitalized. He incurred
medical expenses of P50,000.

 How much is the damages due if S acted in good

faith?
 If in bad faith?
EXTINGUISHMENT OF
OBLIGATIONS
 Death of party, in case of personal
obligations
 Mutual desistance or withdrawal
 Arrival of resolutory period
 Compromise
 Impossibility of fulfillment
 Fortuitous events
1. X agreed to paint the house of Y using the
Welcoat brand. X painted the house using
the brand Wellmade. Y accepted the
performance, knowing full well that the
paint used was Wellmade. Is the obligation
deemed fully complied with?
2. D owes C the sum of P1,000. S, a stranger to
the obligation, offers to pay C.

1. If S pays the obligation without the

knowledge or against the will of D the full
amount of P1,000
2. If S pays the obligation without the
knowledge or against the will of D the full
amount of P1,000, but D already paid P400
3. If S pays the obligation with the knowledge
of D
3. D borrowed from C P1,000. G is the
guarantor. Without the knowledge or
consent of D, S paid C P1,000.

 Can S claim reimbursement from D?

 If D cannot pay S, can he proceed against G?
4. S agreed to sell B a TV set. S, a minor,
delivers a TV set to S. Can the parents of S
recover the TV set?
5. S promised to deliver to B a horse.

 If S delivers a thoroughbred horse, will it

extinguish the obligation?
 If S delivers a horse for calesa?
 If S delivers a sickly horse?
6. D is indebted to C for P5,000.

 If the P5,000 is due today, can D compel C to

accept P4,000 in partial payment?
 If P4,000 is due today and P1,000 tomorrow,
can D compel C to accept P4,000 in partial
payment?
 If the obligation is P5,000 plus share in profit
of a business, what can C demand?
7. D owes C P5,000 due today. D pays by
check.

 Is the obligation extinguished?

 If the check becomes stale and the issuing
bank insolvent, can C demand from D the
payment of the obligation?
8. D owes C the following:
 P1,000 payable on June 20
 A specific radio worth P2,000 to be delivered on June
20
 P1,500 payable on July 15

 If D pays P1,500 on June 20, can C accept?

 If D pays P1,000 on June 20, can C accept?
 If D pays P1,800 on June 20 as payment for the sum
of money and specific radio, can C accept?
 If D pays P1,500 on June 20; C accepts, issuing a
receipt that the payment be applied to the July 15
debt, but D objects, arguing that it should be applied
to the June 20 debt.
9. D owes C P1,000, with 10% interest. D pays
C P1,000. Is the obligation extinguished?
 Interest-bearing v. non-interest bearing debt
 Of two interest-bearing debts, one with
higher rate interest
 Sole debtor v. solidary debtors
 Debts secured by mortgages or pledges v.
unsecured debts
 Obligations with penalty clauses
Dacion Cession
1 creditor Several creditors
- Insolvent debtor
- All properties of debtor
Creditor becomes owner Only right to sell and
apply the proceeds to the
credits proportionately
Act of novation -
10. D owes C a sum of money. D pays the
obligation on the due date, but C refuses. Is
consignation necessary?

11. D entered into a contract with C. D is given

the right to cancel the contract upon payment
of P1,000 to C. Is consignation necessary?
1. S promised to deliver 100 cavans of rice to B. The
rice were lost in flood. Is S still liable?

2. S promised to deliver 100 cavans of rice from the

harvest made by him. The harvest was destroyed
due to flood. Is S still liable?

3. D borrowed the car of C. On due date, D said that

the car was stolen and he was not at fault. Is D still
liable?

4. D borrowed the car of C. On due date, D’s house

was burned and the cark was parked inside. Is D
still liable?
5. D agreed to construct a commercial building
for C. The local government refused to issue
a building permit due to a local legislation. Is
D still liable?
1. D delivers to C his diamond ring in pledge
to guarantee the payment of a loan. If the
ring is found in the possession of D, what
can be concluded?
1. X and Y are heirs of Z. In his will, Z gave to X a
parcel of land in usufruct for 10 years. The naked
ownership was given however given to Y. Later, Y
sold his interest in the land to X. Is there confusion
or merger?

2. D borrowed money from C. As security, D

mortgaged his land. Later, D sold the land to C. Is
there confusion or merger?

3. A, B and C are jointly liable to D in the amount of

P1,000, evidenced by a promissory note. D
indorsed the note to E, who, in turn, indorsed it to
A. Is there confusion or merger?
1. A owes B P,1000. B owes A P1,000 in his capacity as
guardian or administrator. Can there be compensation?

2. A owes B, C, and D (partners in partnership P) P1,000. P

owes A P1,000. Can there be compensation?

3. A (stockholder) owes B (corporation) for amounts A

collected as treasurer of B. Can there be compensation?

4. A owes B P1,000 in his capacity as administrator of his

father’s estate. B owes A P1,000 representing his debt to
A’s father. Can there be compensation?
5. A owes B P1,000. B owes A an electric stove worth P1,000.
Can there be compensation?

6. A owes B any horse. B owes A any horse. Can there be

compensation?

7. A owes B P1,000. B owes A P1,000 or a cow. Can there be

compensation?

8. A owes B P1,000 due today. B owes A P1,000 due next

month. Can there be compensation?

9. A owes B P1,000. B owes A the share of profits in his

business, the amount of which is not yet known. Can
there be compensation?
10. A owes B P1,000. A however failed to pay.
In anger, B damaged the property of A to
the extent of P800. Can there be
compensation?

11. D owes C P1,000. Later, D, through fraud,

was able to make C signed a promissory
note that C is indebted to D for the same
amount. Can there be compensation?
12. A owes B P3,000. B owes A P1,000.

 Can compensation take place?

 If A agrees to B assigning his rights to C, how
much can C collect?
 If A agrees to B assigning his rights to C but
reserved his right to compensation, how
much can C collect?
13. A owes B P1,000 due January 1.
B owes A P2,000 due January 2.
A owes B P1,000 due on January 4.
A assigns his rights to C on January 3. A
notified B but he did not give his consent.

 How much can C collect from B?

 If B only finds out about the assignment on
January 5, how much can C collect from B?
14. A obliged himself to deliver 500 sacks of
rice in Davao. B is also bound to deliver
100 sacks of rice in Bulacan. The expenses
for transporting rice to Davao is P4,000
and to Bulacan is P1,000. A claims
compensation. How much is A liable to B?
15. A owes B P1,000. B in turn owes A the
amount of P1,000 representing the value of
a ring deposited by A with B, which B failed
to return. Can there be compensation?

16. B is the father of A, a minor, who under the

law is entitled to be supported by B. Now A
owes B P1,000. Can there be compensation?
1. S agreed to deliver a car to B. Later, they
agreed that S would deliver a truck to B. Is
there novation?

2. S agreed to construct a house on a certain

parcel of land of B. Later, S agreed to
construct an apartment on the same parcel
of land. The area of the land can only
accommodate either a house or an
apartment. Is there novation?
3. A owes B P2,000, with interest at 14%. B
owes C P280. It was agreed that A would pay
the interest of P280 to C. Later, A and B
agreed that A would deliver a TV et to B in
payment of the loan. Does A still owe C the
interest?

4. S agreed to deliver prohibited drugs to B.

Later, S agreed to pay P100,000 instead of
delivering drugs to B. What is the existing
obligation?
5. A and B are joint debtors of C for the
amount of P1,000. Without the knowledge
of A, B pays the debt of P1,000. Is there
subrogation?
 Nacar v. Gallery Frames, G.R. No. 189871,
13 August 2013
 Art. 1176, Civil Code – presumptions on
interest