Chapter 2

NATURE AND EFFECT OF OBLIGATIONS

Duties of debtor in obligation to give (REAL obligation) determinate thing and

corresponding right of creditor

1. Debtor: To preserve the thing pending delivery

Art. 1163. Every person obliged to give something is also obliged to take care of it
with the proper diligence of a good father of a family, unless the law or the
stipulation of the parties requires another standard of care.

(2) Diligence Needed - Ordinary diligence/diligence of a reasonably prudent man.

(To know more read: Art. 1173 CC) - That which is required by the nature of the obligation and
corresponds with the circumstances of person, time, and place. (Art. 1173, Civil Code).

NOTE: If the law or contract does not state the diligence which is to be observed in
the performance, that which is expected of a good father of a family shall be required

However, if the law or contract provides for a different standard of care, said law or
stipulation must prevail. (Art.1163, Civil Code).
[Example of a case where the law requires extraordinary care (not merely that of a prudent
man):
“A common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with a due
regard for all the circumstances.” (Art. 1755, Civil Code).]

Question:

Can one stipulate for absolute exemption from

liability for any fault or negligence?

No. for being contrary to public policy.

2. Debtor: To deliver the thing itself

Creditor: (in case of non performance)
To compel delivery
To recover damages in case of FNDC (fraud, negligence, delay, contravention of
tenor of obligation.

Obligation in case of fortuitous event:

1. For generic thing: obligation is not extinguish “genus nunquam perit” (genus
never perishes). (see Arts. 1174, 1263.)
 2. For specific thing: extinguished by a fortuitous event or act of God.
Exceptions:

The 3rd paragraph of Art. 1165 gives two instances when event does not excuse
compliance: a fortuitous

(a) if the obligor “delays” (This is really default or “mora.”)

(b) if the obligor is guilty of BAD FAITH (for having promised
to deliver the same thing to two or more persons who do
not have the same interest — as when one is not the agent
merely of the other)

3. To deliver the fruit of the thing

The creditor has a right 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.

Different kinds of fruits

1. Natural fruits are the spontaneous products of the soil, and the young and other products of
animals, e.g., grass; all trees and plants on lands produced without the intervention of
human labor.
2. Industrial fruits are those produced by lands of any kind cultivation or labor, e.g., sugar
cane; vegetables; rice; and all products of lands brought about by reason of human labor
3. Civil fruits are those derived by virtue of a juridical relation, e.g., rents of buildings, price of
leases of lands and other property and the amount of perpetual or life annuities or other
similar income.

When Creditor Is Entitled to the Fruits

 He has only personal right (right enforceable against the debtor) from the
time the obligation to deliver arises
 He has real right (demandable against anyone) from the time the thing is
actuall delivered
Example: rent

Kinds of Delivery
Delivery may be either actual or constructive.

(a) Actual delivery (or tradition) — where physically, the property changes hands.
(b) Constructive delivery — that where the physical transfer is implied.

This may be done by:

1) traditio simbolica (symbolical tradition) — (as when the keys of a bodega are given)

2) traditio longa manu (delivery by mere consent or the pointing out of the object)
(Etymologically, “the extending of the hand.”) Example: pointing out the car, which is the
object of the sale.
3) traditio brevi manu — (delivery by the short hand; that kind of delivery whereby a
possessor of a thing not as an owner, becomes the possessor as owner)
(Example: when a tenant already in possession buys the house he is renting).

4) traditio constitutum possessorium — the opposite of brevi manu; thus, the delivery
whereby a possessor of a thing as an owner, retains possession no longer
as an owner, but in some other capacity (like a house owner, who sells a house, but remains
in possession as tenant of the same house).
5) tradition by the execution of legal forms and solemnities (like the execution of a public
instrument selling land).

4. To deliver its accessions and accessories

Accessions are the fruits of, or additions to, or improvements

upon, a thing (the principal), e.g., house or trees on a land; rents of a
building; airconditioner in a car; profi ts or dividends accruing from
shares of stocks

Accessories are things joined to, or included with, the principal

thing for the latter’s embellishment, better use, or completion, e.g.,
key of a house; frame of a picture; bracelet of a watch; machinery in a
factory; bow of a violin

 Accession and accessories are deemed included in the delivery of the principal, even
if not stipulated (accessory follow the principal)
 It must be expressly excluded in the contract to be excluded

5. To pay damages in case of breach of contract (FNDC)

ART. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay,
and those who in any manner contravene the tenor thereof, are liable for damages.

 Fraud (deceit or dolo) – deliberate and intentional evasion of normal compliance of

obligation, it denotes bad faith, not mere error in judgment
o incidental fraud (dolo incidente) committed in the performance of an
obligation already existing because of contract (result damages), not causal
fraud (fraud employed to induce another to enter into contract) (result
contract voidable for vitiated consent)
example: delivery of rolex, but it turned out counterfeited

o Art. 1171. Responsibility arising from fraud is demandable in all obligations.

Any waiver of an action for future fraud is void.
 Negligence (fault or culpa) - It is any voluntary act or omission, there being no
malice, which prevents the normal fulfillment of an obligation.

o 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.

o Kinds of Culpa Classifi ed According to the Source of the Obligation

 (a) culpa contractual (contractual negligence — or that which results in a breach of
a contract).
(b) culpa aquiliana (civil negligence or tort or quasi-delict).
(c) culpa criminal (criminal negligence — or that which results in the commission of
a crime or a delict)

 Delay (mora) -

o 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 by the creditor shall not be necessary in order that delay
may exist:

(1) When the obligation (e.g. “the loan is due and demandable on January 1, 2020
without a need of a demand”) or the law (e.g. payment of taxes) expressly so declares;
or
(2) 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 or the service is to be
rendered was a controlling motive for the establishment of the contract (time is of
the essence) (eg. Obligation to deliver weeding cake); or
(3) When demand would be useless, as when the obligor has rendered it beyond
his power to perform (eg. .

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.

Types of delay
(1) Ordinary delay is merely the failure to perform an obligation on time.
(2) Legal delay or default or mora is the failure to perform an obligation on time
which failure, constitutes a breach of the obligation.

Delay presupposes that the obligation is not only due and demandable but also
demand has been actually made either judicial or extra-judicial.

Kinds of delay (mora).

They are:
(1) Mora solvendi (debtor) or the delay on the part of the debtor to fulfill his obligation (to give or to
do) by reason of a cause imputable to him;
(2) Mora accipiendi (creditor) or the delay on the part of the creditor without justifiable reason to
accept the performance of the obligation; and
(3) Compensatio morae or the delay of the obligors in reciprocal obligations (like in sale), i.e., the
delay of the obligor cancels the delay of the obligee, and vice versa.

 Contravention of the terms of the obligation - This is the violation of the terms and
conditions stipulated in the obligation. Must not be due to fortuitous event.

Duties of debtor in obligation to do (PERSONAL obligation) and

corresponding right of creditor
Debtor:
1. To do the obligation
2. To shoulder the cost of execution if he fails to do it (substituted performance)
3. To undo what has been poorly done (substituted performance)
4. To shoulder the cost to undone in case of negative personal obligation (substituted
performance)

Fortuitous event

ART. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by
stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be
responsible for those events which could not be foreseen, or which, though foreseen, were inevitable.

General Rule for Fortuitous Events

No liability for a fortuitous event (caso fortuito) (that which could not be foreseen, or which
even if foreseen, was inevitable).

What is Caso Fortuito - is any extraordinary event which cannot be foreseen, or which, though
foreseen, is inevitable. In other words, it is an event which is either impossible to foresee or
impossible to avoid.

Elements:
1. the cause must be independent of the will of the debtor (freedom from
PARTICIPATION or AGGRAVATION)
2. impossibility of foreseeing or impossibility of avoiding it, even if foreseen;
3. the occurrence must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner
4. must be the sole cause not just proximate cause

Rule as to liability:

G.R. No liability for a fortuitous event (caso fortuito)

Exceptions — The debtor is responsible for a fortuitous event in the following cases:

(a) When expressly declared by the law [such as when the possessor is in BAD faith (Art. 552,
Civil Code) or is in default. (Art. 1165, Civil Code).]
(b) When expressly declared by stipulation or contract [such as when the contract says: “If
there be a fortuitous event that would cause delay in the delivery of padlocks, an extension
must be sought,otherwise, damages can be asked.”
(c ) When the nature of the obligation requires the assumption of risk (the doctrine of
CREATED RISK) [Example: When a carrier transports dynamite, and because of an
accidental tire blow-out it injures nearby property, the carrier would, be responsible. This
is because of the nature of carrying dynamite. Upon the other hand, injuries caused by a
tire blow-out of a perfectly new tire, or at least a still good one, when no explosives or
dangerous things were being carried, are due to an unavoidable accident, and the owner of
the car would not be liable.

Remedies of the Creditor in case of breach

On top of action for specific performance, or substituted performance, and damages;

1. Rescission (resolution in reciprocal obligations) (in case of reciprocal obligation)

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

1. the fulfillment and
2. the rescission of the obligation,
3. with the payment of damages in either case.

He may also seek rescission, even after he has chosen fulfi llment, if the latter should
become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing
the fi xing 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.

Kinds of obligation according to the person obliged

Unilateral
Bilateral
a. Reciprocal
b. Non reciprocal

“The power to rescind,” here is not based on injury to economic interest of the injured party
but rather on the breach of faith by the defendant, which breach is violative of the
reciprocity between the parties.

2. Accion Subrogatoria (subsidiary remedy)

ART. 1177. The creditors, after having pursued the property in possession of the debtor to
satisfy their claims, may exercise all the rights and bring all the actions of the latter for the
same purpose, save those which are inherent in his person; they may also impugn the acts
which the debtor may have done to defraud them.

accion subrogatoria (subrogatory action) — i.e., exercise all rights and actions except those inherent in the
person (likeparental authority, right to revoke donations on ground of ingratitude, hold office, carry out an
agency).
 3. Accion Pauliana (subsidiary remedy)

ART. 1177. The creditors, after having pursued the property in possession of the debtor to
satisfy their claims, may exercise all the rights and bring all the actions of the latter for the
same purpose, save those which are inherent in his person; they may also impugn the acts
which the debtor may have done to defraud them.

accion pauliana (impugn or rescind acts or contracts done by the debtor to defraud the creditors).

Transmissibility of right

Art. 1178. subject to the laws, all rights acquired in virtue of an obligation are
transmissible, if there has been no stipulation to the contrary.

(a) General rule — Rights are transmissible.

(b) Exceptions
1) if the law provides otherwise;
2) if the contract provides otherwise;
3) if the obligation is purely personal.