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San Beda College - Manila

First Meeting: December 10, 2015


7. What is a contract?
1. What is the purpose of studying the General
Provisions on Obligations / Arts. 1156 – 1162 of
the NCC? 1305. A contract is a meeting of minds between two
persons whereby one binds himself, with the respect to
To know the existence of an obligation and in case of the other, to give something or to render some service.
breach or non-fulfillment, to know the possible remedial
measure for compensation.
8. What are the essential elements of a contract?
2. What is an obligation? a. Consent of the Contracting Parties
b. Object of the Contract
1156. An obligation is a juridical necessity to give, to do or c. Cause of the Obligation
not to do.
9. When does consent exist?

3. What are the kinds of obligations?


1319. Consent is manifested by the meeting of the offer
a. Civil Obligations – those that give a right of action to and the acceptance upon the thing and the cause which
compel their performance. are to constitute the contract. The offer must be certain
and the acceptance absolute. A qualified acceptance
b. Natural Obligations – those not being based on constitutes a counter-offer.
positive law but on equity and natural law, do not
grant a right of action to enforce their performance by 10. What is an agreement?
the obligor, authorize the retention of what has been
delivered or rendered. (1423) An agreement is an informal arrangement between two
or more parties that is not enforceable by law.

4. Does the definition of an obligation in Art. 1156 11. A and B are lovers. They decided to go on a date
covers the two kinds of obligations? this Sunday at 11am. B was late. Can A sue B for
breach of contract?

No, the definition of an obligation in Art. 1156 does not


cover the two kinds of obligations. An obligation according Option 1: It shall depend whether or not the agreement
to Art. 1156 is a juridical necessity, only Civil Obligations really resulted into a contract.
has juridical necessity. Option 2: Since there is no law in this particular case,
there is no cause of action.
5. What are the sources of obligation? 12. What is a Quasi-Contract?
2142. Certain lawful, voluntary and unilateral acts give
1157. Obligations arise from: rise to the juridical relation of a quasi-contract to the end
(1) Law; that no one shall be unjustly enriched or benefitted at the
expense of another.
(2) Contracts;
13. Distinguish a Quasi-Contract from a Contract.
(3) Quasi-Contracts;
Quasi-Contract Contract
(4) Acts or Omissions punished by law; Created by law to avoid Created by the meeting of
unjust enrichment minds of two or more
(5) Quasi-Delicts
persons
Unilateral Acts Bilateral Acts
6. What are the essential requisites of an No meeting of minds Meeting of minds is required
Obligation?
14. What are the 3 General Concepts on Quasi-
a. Passive Subject – debtor or obligor Contracts?
b. Active Subject – creditor or obligee
c. Juridical Tie – efficient cause a. Negotiorum Gestio (Officious Management) 2144
d. Object or Prestation – subject matter of the b. Solutio Indebiti (Payment not Due) 2154
obligation c. Other Quasi-Contracts (Support given by Strangers)

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15. What are Acts and Omissions punished by law?
a. When the offender is an imbecile or an insane person;
These are felonies / crimes defined and punished in the b. When the offender is under 15 years of age;
Revised Penal Code or in Special Penal Laws. c. When the offender acts under the compulsion of an
irresistible force;
16. What is the Dual Character of Crimes? d. When the offender acts under the impulse of an
uncontrollable fear;
a. Offense against the State because of the disturbance e. When the offender in order to avoid an evil or injury
of social order. does not act;
Others:
b. Offense against a Private Person injured by the crime.
f. Quasi-Delicts
g. Accessories who are exempt from criminal liability. —
Concept: It is one single act resulting to two separate The penalties prescribed for accessories shall not be
obligations. (Civil and Criminal Obligations) imposed upon those who are such with respect to
Criminal Obligation – To pay fine or serve imprisonment their spouses, ascendants, descendants, legitimate,
or other sanctions natural, and adopted brothers and sisters, or relatives
by affinity within the same degrees, with the single
Ex. A city ordinance prohibiting all persons from urinating exception of accessories falling within the provisions
along the streets of Pasig. In case of a violation, there will of paragraph 1 of the next preceding. (Art. 20, RPC)
be fine.
20. What are included in the Civil Liability of Crimes?
Penal – There is a fine in case of violation.
Civil Obligation – To restitute the thing or property / to Restitution – of the thing itself must be made whenever
repair damaged thing or property / to indemnify damages possible even when found in the possession of a third
to the victim and to his family. person except when acquired by such person in any
manner and under the requirements which by law, bar an
17. What is the concept of Civil Liability?
action for its recovery. (Art. 105, RPC)
GR: Every person criminally liable for a felony is also
Ex. In carnapping, the carnapper has a civil liability to
civilly liable. (Art. 100, RPC)
return the carnapped car to the victim.
ER:
Reparation – the Court shall determine the amount of
1. Victimless Crimes damage, taking into consideration the price of the thing,
2. Flight to Enemy Country and its special sentimental value to the injured party. (Art.
106, RPC)
18. When is a person criminally liable only?
Ex. In reckless imprudence resulting to damage to
property, the accused’s civil liability includes the payment
Treason, Rebellion, Espionage, Contempt, Gambling, for its repair.
Illegal Possession of Firearms and others, either because
Indemnification – includes not only those caused to the
there is no thing to be restituted, no damage to be
injured party but also those suffered by his family or by a
compensated or there is no private person injured by the
third person by reason of the crime. (Art. 107, RPC)
crime.
Ex. In Homicide, the accused must indemnify the victim’s
family.
19. When is a person civilly liable only?
21. What is quasi-delict?
The following do not incur criminal liability. (Art. 11, RPC)
2176. Whoever by act or omission causes damage to
a. Self-defense
another, there being fault or negligence, is obliged to pay
b. Defense of Relatives
for the damage done. Such fault or negligence, if there is
c. Defense of Stranger
no pre-existing contractual relation between the parties is
d. Avoidance of Greater Evil
called a quasi-delict.
e. Fulfillment of Duty
f. Obedience to a Lawful Order 22. What are the elements to make a person liable for
a Quasi-Delict?
The presence of exempting circumstances will exempt the
perpetrator from criminal liability but not from civil liability.
a. There is an act or omission;
(Art. 12, RPC)
b. Such act or omission causes damage or injury;

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c. There is no contributory negligence on the part of the To know if there is a cause of action based on a violation
injured party; of an obligation required or unrequired of a positive law.
d. The act or omission is the proximate cause of the
damage or injury to the injured party; 6. Illustrate the Similarities and Differences of Civil,
e. There is no pre-existing contract between the parties. Natural and Moral Obligations.

Civil Natural Moral


23. Distinguish a Quasi-delict from a Delict. Obligation Obligation Obligation
Quasi-Delict Delict Based on Natural Law
Presence of a Absence of a Positive Law
There is only negligence. There is intent or Positive Law
negligence.
The purpose is The purpose is
indemnification. punishment. 7. Illustrate the Differences of Natural and Moral
Affects private interest. Affects public interest. Obligations

Natural Obligation Moral Obligation


Civil Liability Criminal and Civil Liability In case of voluntary In case of voluntary
fulfillment, it creates a fulfillment, it remains as
Can Compromise Cannot Compromise civil obligation that would moral obligation
be based on PL and
Fault or negligence is Guilt must be proved enforceable at COL
proved by preponderance beyond reasonable
of evidence. doubt.
8. Give an example of a moral obligation.

Second Meeting: January 7, 2016 Kim gave $20 to Kanye, a mendicant. Kanye accepted it
and insulted Kim by saying, your so cheap. Kim cannot
1. What is the concept of OBLICON as a law ask Kanye for the return of the $20.
subject?
It is a purely, moral and voluntary act which does not give
It is a supplemental law to all other laws regarding how an any cause of action.
obligation can be fulfilled.
9. What is Prescription?
2. What is the etymology of the word “obligation”?
It is a mode of acquiring or losing ownership and or rights
Oble – Latin for around of action through lapse of time.
Ex. Orbit, Oblong 10. What are the types of Prescription?
a. Acquisitive – You acquire ownership or rights of
To – Latin to bind action through the lapse of time.
3. Illustrate the Similarities and Differences of a
Natural Obligation and a Civil Obligation b. Extinctive – You lose ownership or rights of action
through the lapse of time.

11. What is the concept of Voluntary Fulfillment in


Natural Civil Natural Obligations?
Obligation Obligation
In NO, the debtor cannot be compelled thru Court Action
Source Equity and Positive Law but if Debtor voluntary fulfills the obligation, it creates a
Natural Law CO. The creditor has now a legal right to retain it and the
Enforceability Not enforceable Enforceable in debtor cannot get it back.
in COL COL
Similarity Based on Natural Law 12. What are the requisites of VF?
4. When is Natural Law considered as Positive Law? According to Tolentino, the requisites of VF are the ff:
When the natural law is formalized into a legislative 1. Payment or fulfillment of the obligation is based on
enactment. When it can be considered as a basis for any debtor’s own volition and that he was not forced or
right or obligation of any member of the community. intimidated.
Ex. Constituion, Eos, Administrative Orders 2. Debtor must have knowledge that he has performed
5. Why is it important to determine whether the an obligation not enforceable in COL.
wrong committed is based on positive law?

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13. Give an example of the obligation expressed Art. E. There must be a Juridical or Legal tie.
1424. 20. Enumerate the Juridical or Legal ties of
obligations?
D owes C the sum of $10,000.00 under written contract.
After 10 years, the debt of D prescribes for failure of C to Obligations arise from:
file the necessary action for the recovery of the same.
Law;
If D, knowing of the prescription, voluntarily pays C, he
cannot recover anymore what he has paid. He has the Contracts;
moral duty to pay his debt. Quasi-Contracts;
14. Give an example of the obligation expressed Art. Acts or Omissions punished by law; and
1425.
Quasi-Delicts.
D owes C the sum of $10,000.00 under written contract.
After 10 years, the debt of D prescribes for failure of C to ***According to the Sagrado Orden v. NACOCO Doctrine,
file the necessary action for the recovery of the same. the list in Art. 1157 is exclusive.***
T pays C after the debt has prescribed without the Note: If the obligation do arise from this enumeration, then
knowledge or consent of D, but D nevertheless it must be a Natural or Moral Obligation.
reimburses T, D cannot recover what he has paid.
15. In the above example, what if D does not
reimburse T? THIRD MEETING: January 14, 2016

D should reimburse T as provided by Art. 1236: Whoever 1. How can one conceive an obligation?
pays for another may demand from the debtor what he
A person can conceive an obligation by fulfilling its
has paid, except that if he paid without the knowledge or
requisites which include a passive subject, an active
against the will of the debtor, he can recover insofar as
subject, an object and the most important which is a
the payment has been beneficial to the debtor.
juridical tie.
16. Are the provisions in 1427 to 1430 still applicable?
2. When does a law create an obligation?
No, the age of majority is now at the age of 18 years. All
The law creates an obligation when it is a
laws in conflict with such are repealed by RA 6809.
Mandatory Statute. Mandatory statute is a statute
which commands either positively that something be
done, or performed in a particular way, or negatively
17. What are the requirements for a party to be that something be not done, leaving the person
creditor? concerned no choice on the matter except to obey.

A. Civil / Juridical Personality The test generally employed to determine whether a


B. Legal Capacity and Capacity to Act statute is mandatory or directory is to ascertain the
consequences that will follow in case what the statute
18. What are the kinds of Objects of Obligation / requires is not done or what it forbids is performed.
Prestations?
3. When is a law ambiguous?
A. To give A law is ambiguous if it is susceptible to two or more
B. To do interpretations.
C. Not to do
19. What are the requirements of a valid prestation? 4. In case of doubt, how do can one interpret
whether a law establishes an obligation?
A. It must not be contrary to Law, morals, good
It is resolved against the existence of the obligation.
customs, public order and public policy.
Obligations derived from law are not presumed.
B. It must be determinate or at least determinable.
C. It must be possible. 5. If a law was passed requiring older brothers to
support their younger brothers. Can a younger
D. ****It must be subject to pecuniary / monetary sister ask support from her older brother?
value.
No, there is no cause of action. The law cannot be
There are prestations that cannot be equated of presumed, it has to be expressed.
monetary value. (ex. Restoring an object, life of
persons.. etc)

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6. If a law clearly creates an obligation, it maybe  Force
possible that it did not provide a manner on how  Intimidation
it is to be fulfilled. Can there be an obligation  Violence
arising from law?  Undue Influence
Yes. OBLICON principles are of supplementary 12. What are the requisites of a valid offer?
nature in innominate contracts / laws. a. The offer must be definite. The prestation is clear.

b. The offer must be complete in all aspects that the


7. What are the concepts of Obligations arising offeree does not need to know any more essential
from Contracts? information regarding it.

 The stipulations in the contracts are considered Example:


as the Law between the parties which must be Do you want to buy this car?
complied in good faith. (Vinculum)
The offer is definite but it is not complete in all other
 The Meeting of Minds of the parties can be in aspects (price, color, engine number, location, brand, etc).
writing or orally done. There is no juridical tie establish, the law required
completeness for a valid offer.

8. Illustrate the Differences between Obligations 13. What are the requisites of a valid acceptance?
arising from Law and Obligations arising from
Contracts.
a. It must be unconditional
b. It must be free from qualifications

 There must be no deviation from the offer, otherwise it


Obligations arising Obligations arising from will constitute a counter offer.
from Law Contracts
Example of a counter offer:
Expressed Expressed or Implied
Kimmy offered Kanye to buy her brand new HUMMER
2016 model with plate number: MSL 644, color HOT
a. The Parent’s a. Contract of Carriage PINK, engine number: 0929123456, etc., for Php 5, 000,
obligation to support their b. Contract of Sale 000. 00 cash to be paid tomorrow. Kanye accepted the
Children c. Contract of Lease offer but with a condition that he will pay it next month.
b. A worker’s 14. Kumares Toni, Mariel and Bianca stipulated in a
obligation to pay taxes to
contract that they would exchange husbands
the Government
every weekend. Bianca breached their agreement
c. The Police’s because she said that Toni’s husband was not
obligation to render aid or good in bed. Is there a cause of action for breach
protection to any person of contract?
in case of danger to life or
property No, while the law allows the contracting parties the
freedom to stipulate the terms and conditions of their
contracts, it is not without limitations. The contracting
9. When is an agreement a contract? parties may establish such stipulations, clauses, terms
Only agreements that complies with the requisites of a and conditions as they may convenient provided they are
contract (Consent, Object & Cause) and that can be not contrary to law, morals, good customs, public order
enforced in Courts of Law are considered as a contract or public policy.

10. When is there Consent?


There is consent when there is a meeting of minds 15. Illustrate the Similarities and Differences of a
between the parties as when the offeror makes an offer Contract and a Quasi-Contract?
and such offer is accepted by the offeree. Quasi-Contract Contract
a. Offer – The offeror makes an offer Similarities
b. Acceptance – The Offeree makes an acceptance These are Lawful and Voluntary Acts
Differences
11. What are the vices in consent? Created by law to avoid Created by the meeting of

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unjust enrichment minds of two or more These are specific peculiar circumstances which give rise
persons to a juridical relation between the parties on the ground
Unilateral Acts Bilateral Acts that no one shall be unjustly enriched or benefitted at the
No meeting of minds Meeting of minds is required expense of another.
Ex. Giving Support to a child because his parents are
16. Discuss the concept of Negotiorum Gestio. neglectful of his needs. Once a person gives support to
the neglected child, he can ask for reimbursement of the
In this case, a property is neglected or abandoned by the support given from the neglectful parents.
owner and is taken care by an unauthorized person.
2. What is the purpose of studying the Nature and
Gestor / Officious Manager – “Pakilamero” / excessively Effect of Obligations / Arts. 1163 – 1178 of the
informal NCC?
Passive Subject – Gestor / OM To know how to fulfill an obligation according to law.
Active Subject – Owner / Beneficiary 3. What happens if the debtor fulfills the obligation?
Prestation – To do / to give The creditor must accept it and he must release the
debtor from the juridical tie. If fails to accept it, the creditor
***The law creates the cause of action where the is guilty of delay (Mora Accipiendi). Thus, debtor can ask
beneficiary pays the gestor the necessary expenses and him for damages.
just compensation for the NG. ***
4. What are the kinds of Obligations based on their
17. Requisites of Negotiorum Gestio prestations?
a. There is a Property / Business; A. Real Obligation – to give
b. Which is abandoned / neglected;
c. There is taking of possession in order to manage or a.1. Specific – Real obligation to give a specific thing.
administer such;
d. Which is unauthorized either expressly or impliedly; a.2. Generic – Real obligation to give a generic thing.
e. It is a voluntary act and that the OM has knowledge
**This is based on the nature of the thing delivered***
that it is for the benefit of the owner.
B. Personal Obligation – To do or not to do

18. Bruno owns a farm that he has not seen for 10 b.1. Positive – Personal Obligation to do.
years. He realizes that it needed cultivation to
improve its productivity. Bruno did not know b.2. Negative – Personal Obligation not to do.
about the boundary of his property, he extended
his cultivation work to the property of Mars, his
neighbor. Both properties increased its cost / 5. Differentiate a Generic thing from a Specific thing.
selling price because of Bruno’s cultivation
work. Bruno realized that he extended his Generic Thing Specific Thing
cultivation work to Mars. Can Bruno institute an Meaning Referred based on Separated from its
action against Mars to pay him the necessary its class or genus
expenses incurred in cultivating his land? class or genus Distinctively Unique
Example Ex. To deliver a Ex. To deliver a 500
Yes, the Cause of Action would be that of Solutio bottle of ml Nature Spring
Indebiti. water Green Mineral Water,
touched and drank by
Unlike in NG, there is no voluntariness and that Bruno Dean Ulan last
was unaware that he was performing the cultivation work January 21, 2016
for Mars.
Principal 1246. When the 1244. The debtor of a
19. Give the requisites of Solutio Indebiti. Obligation obligation consists in thing cannot compel
a. Something is delivered; the delivery of a the creditor to receive
b. The Recipient has no right to receive it; generic a different one,
c. The delivery is through mistake. thing, whose quality although the latter
and circumstances may be of the same
Fourth Meeting: January 21, 2016 have value as or more
not been stated, the valuable that which is
1. What are Other Quasi-Contracts? creditor cannot due.
demand
a thing of superior

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quality. Neither can was about to pay Martin, when Paloma, a thief,
the stole the money from Coco. Can Coco use the
debtor deliver a defense that he was robbed by a thief in order not
thing of to be in default of payment?
inferior quality. The
purpose of the No. Money is a generic thing. Genus never perishes.
obligation and other
circumstances shall
be
taken into
consideration. 9. Iggy owes Azalea Php 50,000.
Supplemet The law does not Art. 1163. Every
al require the debtor to person obliged to a.) Can Azalea accept only Php 25, 000 from Iggy?
Obligation exercise give something is
DOAGFOAF also obliged to take No. A part of Art. 1246 provides ― …. Neither can the
because the genus care of it with the debtor deliver a thing of inferior quality……‖ In this case,
of the thing never proper diligence of a Azalea cannot accept Php 25, 000 from Iggy.
perishes. good father of a
family, unless the law
or the stipulation of b.) Can Azalea accept Php 100, 000 from Iggy?
the parties requires
another standard of Yes. A part of Art. 1246 provides ―….the creditor cannot
care. demand a thing of superior quality…‖ The law is clear, it
Grounds Default, Fraud, Default, Fraud, does not prohibit the creditor from accepting payment /
for Negligence and Any Negligence, Any delivery of superior quality.
Damages other manner that other manner that Note: There three ways in which the creditor can accept a
Contravenes the Contravenes the generic thing as to its quality: of superior quality, agreed
Tenor of the Tenor of the quality or lawful quality (not inferior, not superior).
Obligations Obligations and
Fortuitous Events Fifth Meeting: January 23, 2016
(Genus of the thing
never perishes) 1. What is the concept of Standard of Care?
Delivery of Substitution is The obligation to give
We are all performed to adopt a standard of care in all
its allowed. a determinate thing
acts. Care as not to cause damage or injury to others.
Accessions includes that of
and delivering all of its If the obligor fails to exercise the required standard of care
Accessorie accessions and in his obligation, then he risks the obligation and may lead
s accessories, even to its extinguishment. He is thus also liable to pay for
though they may not damages.
have been
mentioned. In order to retain that standard of care expected of the
debtor the law requires DOAGFOAF pending delivery.

6. What is the criterion to determine if a thing is Purpose: To ensure the efficacy of the performance of the
generic or specific? obligation.

What is the result if you separate it from its class? Ex. Selena and Demi entered into a contract wherein
Selena would deliver to Demi her Hermes bag for $ 50,
If the thing that is intended to be delivered is lost before 000 on February 14, 2016. Selena is obliged to take care
the delivery then it is specific. The obligation is thus of that bag with DOAGFOAF pending the delivery of the
extinguished. object of the obligation, otherwise, she will be liable for
damages.
If not, then it is generic, because genus never perishes.
2. What are the kinds of Standards of Care?
7. How many ways can a debtor fulfill his obligation
to deliver a determinate thing? a. Extra-ordinary care / Utmost Diligence
One. To deliver exactly what was agreed upon by the It is that extreme care and caution which very prudent and
parties. thoughtful persons use in securing and preserving their
8. Coco owes Martin Php 50, 000 which he must pay own property.
on December 25, 2015. On Christmas Eve, Coco
Ex. Common Carrier and Banks

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b. Industrial – Those produced by lands of any kind


b. Diligence of a Good Father of a Family through cultivation or labor.
 Standard of care that is expected of a prudent man in Ex. Rice, Corn, Garlic
the exercise of his own property.
Ex. Liza and Bart entered into a contract wherein she c. Civil – Those derived by virtue of juridical relation.
would deliver 100 pcs. of Marge’s Donuts to Homer
on his Birthday on July 14, 2016 for $ 5, 000. No Ex. Rents of building, Price of Leases of Land, Life
standard of care was agreed upon by the parties. annuities, Savings

According to 1173, ―If the law or contract does not


state the diligence which is to be observed in the 7. What are Accessories?
performance, that which is expected of a good father
of a family shall be required.‖ Things attached to the principal for embellishment, full use
or enhancement of its value.
c. Simple Diligence Ex. Mugs, whoopers, stereo, microwave and sauna in a
car.
Slight Care which every prudent man takes of his own
property of a similar nature. 8. Peeta told Katniss that he is selling his only
sports car for $ 500, 000. Katniss saw the bargain,
Ex. Watch your car boy thus she bought it. Peeta did not stipulate nor
Basis of these Standards of Care: Absence of the duty inform Katniss that the selling price did not
of the obligor to take care of the thing, the obligation to include the sports car’s accessories and
delivery would be illusory. accessions. At the time of the delivery, Rue, a car
mechanic, will remove the sports car’s
3. What is Negligence? accessories and accessions. Can Katniss go to
Court and demand that the accessions and
The absence of diligence required by virtue of the time, accessories be not remove from the sports car?
place, person and circumstances.
4. What is the Principle of Accession?
Yes. Katniss can go to Court and demand that the
GR: The presumption is that whoever is the owner of the accessions and accessories of the sports car be not
principal thing, is also the owner of its accessions and removed from it because the law provides that the
accessories. obligation to deliver a determinate thing include that of
delivering all its accessions and accessories, even
ER: (1) When the parties expressly provided for its though they may not have been mentioned.
exclusion
9. When does the obligation to deliver the thing and
(2) When before the birth of the contract, the seller its fruits arise?
detaches its accessories and / or accessions.
5. When is there ownership?  Depends upon the nature of the obligation.

When the object of the obligation together with its a.) Law, quasi-contracts, delicts and quasi-delicts
accessions and accessories is physically delivered to the  The obligation to deliver arises from the time
creditor by the debtor. designated by the provisions of the NCC, RPC, or
special laws creating or regulating them.
6. What are Accessions?
Fruits that are attached artificially or naturally to the b.) Contracts
principal object of the obligation.  The obligation to deliver arises from the time of the
perfection of the contract or stipulation of parties.
Kinds of Fruits
As to its fruits.
a. Natural – Those spontaneous products of the soil, the
young and other products of animals produced GR: All the fruits shall pertain to the creditor /
without intervention of human labor. buyer from the constitution or perfection of the
obligation.
Ex. Grass, trees, flowers, 101 Dalmatians
ERS:
Note: A human baby is not a natural fruit.

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i. Subject to a suspensive condition, it arises b.) The debtor can no longer performs the obligation.
from the happening of the condition;
2. What are the instances when the debtor is liable
ii. Subject to a suspensive term or period, it for damages? Discuss each.
arises upon the lapse of the term;
a.) Delay – there is default in the fulfillment of an
obligation with regard to time.
iii. If there is a contrary stipulation of the parties
with respect to the time when the thing or Kinds of Delay:
fruits shall be delivered.
1. Mora Solvendi – Delay of Debtor to perform the
Note: It is concluded that the Perfection of a obligation
Contract is not simultaneous to delivery. 2. Mora Accipiendi – Delay of the Creditor to accept the
delivery of the thing which is the object of the
10. Pia and Atom entered into a contract wherein Pia obligation
would deliver her only female 11 – month old 3. Compensatio Morae – Delay of the parties in
Dalmatian named Tigra to Atom on Valentine’s reciprocal obligations
Day next year. Pending the delivery, Tigra gave
birth to 101 puppies. Who is the owner of the Ex. Contract of Sale
puppies?
When is it possible for one of the parties to incur in
Pia has a right to own the puppies. According to Art. delay in CM?
1164, ―the creditor has a right to the fruits of the thing When an obligation is due and demandable and one of
from the time the obligation to deliver arises. the parties performs the obligation. There is no longer
However, he shall acquire no real right over it until the need for a demand, the other party is automatically at
same has been delivered to him.‖ Since the delivery default.
will be on February 14 next year, then Pia has still a
right to own all of the fruits of Tigra pending its Legal Delay Requisites
delivery to Atom.
Requisites:
Sixth Meeting: February 18, 2016
1.) The obligation is already due and demandable;
1. In an obligation to deliver a generic thing, what is
the remedy available to the creditor in case of 2.) The debtor does not perform the obligation;
non-fulfillment of the obligation by debtor? (Art.
3.) The creditor makes a judicial or an extra-judicial
1165 (2))
demand.
The creditor can ask a third person to fulfill the obligation
NOTE: According to the SC, demand should be made
at the expense of the debtor.
after the obligation had been due and demandable,
For instance, Mariah and Carey entered into a contract, otherwise, it is just a reminder.
wherein Carey would deliver to Mariah 100 cavans of
Ex. Peter owed Pan P 1,000 payable tomorrow. If Pan
mangoes on February 20, 2016.On that date, Carey failed
demands for the payment today, it will just constitute a
to deliver such. Mariah can ask Fantasia, a supplier of
reminder for Peter to pay his debt tomorrow.
mango, to deliver the same to her at the expense of
Carey. Instances in order for a Debtor to incur delay without
Demand:
1. When it is provided by the law.
NOTES:
Ex. Payment of income taxes should be made on
 In the case above, Mariah has a cause of action for or before April 15.
damages and performance. In the meantime, she can
go to another supplier for the fulfillment of the said 2. When it is stipulated by the parties.
obligation. Ex. Credit Card Bills

 This provision is not applicable to the delivery of a 3. When time is an important motive.
determinate thing. Ex. The making and the delivery of a Wedding
Gown for a Wedding

 Requisites for application of Art. 1165 (2): 4. When demand would be useless as when the debtor
a.) There is proof of demand; and that has expressed his inability to perform such.

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Ex. Insolvency of the debtor in a contract of loan the obligation
Parties There is a pre- No contractual
NOTE: The SC said that it must be expressly stated in the existing relation
law or in the contract stipulations of the parties that contractual
demand is NOT necessary. relation
Why does the law still need a demand, when there is a Source Breach of Negligent act or
clear stipulation when the obligation is to be fulfilled? Contract omission
Proof for Existence of a Negligence of the
There is a presumption that the debtor in good faith, Recovery contract and defendant
cannot comply due to a fortuitous event which he cannot evidence of its
control. breach
Due Diligence in the Diligence in the
When does the FE defense can no longer be
diligence selection and selection and
applicable?
as supervision of supervision of
In obligations to deliver a generic thing like money. Defense employees is not employees is
available available
b.) Fraud – It is the conscious proposition to evade the
performance of an obligation. It cannot cover cases of
mistake or error of judgment in good faith. Ex. In a vehicular accident involving a taxi, the passenger
and a pedestrian was injured. What is the liability of the
taxi driver and the operator? Assuming this is a case of
Fraud in 1338 & 1344 Fraud in 1171 negligence.
Dependent of Fraud Independent of Fraud
Obligation is created Obligation is performed Passenger - Since there exists a contract of carriage, then
because of fraud with fraud it is culpa contractual.
No pre-existing obligation There is a pre-existing Pedestrian – Since there is no existing contract, then it is
(Thru fraud, the obligation obligation culpa aquiliana.
becomes existent)
No COA for performance, There is a COA for
just damages damages and fraud and d.) Contravention of the Tenor of the Obligation
creditor can still ask for
performance 3. Discuss the concept of a Fortuitous Event.
It is an event which could not have been foreseen or
Dolo Causante Dolo Incidente which though foreseen was inevitable.
Art. 1338 Art. 1344
Kinds of FE
Those deceptions or Those which are not
Acts of God Acts of Man
misrepresentations of a serious in character and
serious character without which the other Absolutely independent Events which arise from
employed by one party party would still have from human intervention legitimate or illegitimate
and without which the entered into the contract. acts of persons other
other party would not than the obligor
have entered into the Rains, Typhoons, Floods Riots, Wars, Robbery
contract.
Fraud is essential in Fraud is accidentally
consent employed
Nullifies the contract Does not nullify the
Creditor can ask for contract
damages Creditor can ask for Seventh Meeting: February 20, 2016
damages

1. Discuss Art. 1176.


c.) Negligence – The failure of the debtor to care for the
object of the obligation with the standard of care This law embraces two concepts of disputable
required by the parties or by law. presumptions.
Kinds of Negligence 1.) The presumption that payment of principal includes
Culpa Culpa Aquiliana that of the payment of the interest.
Contractual
Nature Incident to the Substantive and
performance of Independent

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2.) The presumption that the payment of latest debt Since Kendall accepted it, the law under Art. 1235 of the
results to the payment of the arrears. NCC, considers it that she waived her right to ask for the
 Applicable to payment of rentals. payment of the balance. Thus, the whole obligation is
extinguished.
Can the creditor still change his mind?
Yes, because it is disputable. However, he must show 3. Art. 1178. Rights are generally transmissible,
that such payment did not cover the interest of the except:
principal or the arrears of the other debts.
Three provisions related to Art. 1176: a. Where they are not transmissible by nature
Ex. It is not possible that a married man transfers
a. Art.1431. Estoppel – Through estoppel an admission his right to sexual intercourse with his wife to
or representation is rendered conclusive upon the another person.
person making it, and cannot be denied or disproved
as against the person relying thereon. b. Where there is a stipulation that they are not
transmissible
Ex. Miriam allowed Santiago to lease her condo
Ex. Dean Ulan told his class that there would be no unit with a prohibition that the latter cannot
classes on Saturday. On Saturday, he asked Kuya sublease such.
Jerome to proctor and facilitate a quiz for the class,
however, the students of that class was not in the c. Where they are not transmissible by operation of
classroom. Dean Ulan cannot hold them liable for boycott, law
he is estopped since he did not inform anyone from the Ex. The right of a compulsory heir to his legitime
class of the change. cannot be transferred to another person.

b. Art. 1956. No interest shall be due unless it has FINAL TERM


been expressly stipulated in writing.
Eighth Meeting: March 10, 2016

Ex. Bonnie entered into a loan agreement with Tyler. It is Topic: Chapter 3 (Different Kinds of Obligations)
stipulated that Bonnie shall pay Php 100,000 to Tyler on
June 4, 2016. Tyler orally asked that Bonnie also pay 10% 1. What are the different kinds of obligations?
interest and was heard by people around them. On June Discuss each.
4, 2016, Bonnie only paid Php 100,000 to Tyler. Can Tyler a. As to Event
go to court bringing witnesses of their loan agreement to  Pure
enforce the 10% interest?  Conditional
 Period / Term

b. As to Prestation
No, Art. 1956 is a mandatory law.  Alternative
 Faculative

c. As to the Relationship of Parties


c. Art. 1235. When the obligee accepts the
 Joint
performance, knowing its incompleteness or
 Solidary
irregularity and without expressing any protest or
objection, the obligation is deemed fully complied
d. As to Divisibility
with.
 Divisible
It creates a conclusive presumption based on estoppel  Indivisible
that an incomplete payment / performance of an obligation
which is accepted by the creditor is satisfied. The creditor e. With a Penal Clause
cannot ask any more for its rectification.
2. What is a Pure Obligation?
2. Gigi borrowed from Kendall $ 1,000, 000 at 10%
interest. Gigi only paid $ 500, 000 when the An obligation that is immediately demandable.
obligation became due. Kendall accepted it
Ex. I will give you $ 50, 000.
without reservation of such right to ask Gigi for
the balance. After one week, Kendall demands 3. What do you mean by “immediately
Gigi the balance of the debt. Decide. demandable”?

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The debtor is given a reasonable period / opportunity to 8. What is the remedy of the creditor when the
fulfill the obligation which depends upon the character of debtor binds himself to pay when his means
the obligation. permit him to do so?
4. What are obligations immediately demandable? The obligation shall be deemed to be one with a period.
a. Pure Obligations (1179 (1)) The creditor can ask the Courts to determine such period
b. Obligations with Resolutory Conditions (1179 (2)) as may under circumstances be contemplated by the
c. Obligations with Resolutory Periods (1193 (2)) parties.
d. Obligations to do an Impossible Thing (1183 (2))
9. Can a condition be for a past event?
5. Differentiate a Term from a Condition No, a condition must be a future and uncertain fact or
Term Condition event upon which an obligation is subordinated or made
It is the interval time which It is an event which is to depend on.
future and certain future and uncertain Ex. Sarah will give Geronimo $50, 000, if the latter can
Necessarily comes, The condition may or may prove that Jose Rizal went back to the Catholic Church
although it may not be not happen before he was executed in Luneta Park. The event is
known when future and uncertain because if Geronimo can prove such
Influences the time of the Influences the very fact through his research then he can get the money.
demandability or existence of the obligation
extinguishment of an itself 10. What are the kinds of Conditional Obligations
obligation based on how they are fulfilled?
Does not have a Has retroactive effects
retroactive effect unless a.) Postestive Condition – One whose fulfillment
otherwise provided depends upon the will of either one of the parties
When it is left exclusively When it is left to the to the obligation.
upon the will of the debtor, exclusive will of the debtor,
the existence of the the very existence of the  Fulfillment is dependent upon the will of the
obligation is not affected obligation is affected debtor
Ex. Death of man Ex. Winning a case
Arrival of a particular day Adjudication of a Property Ex. I will give you $50, 000 if I sing you a
song.

6. Differentiate a Suspensive Term from a  Fulfillment is dependent upon the will of the
Suspensive Condition. creditor
Suspensive Term Suspensive Condition Ex. I will you $50,000 if you sing me a
Juridical tie is created on Juridical tie is suspended song.
the constitution of the on the constitution of the
obligation obligation b.) Casual Condition – One whose fulfillment
There is a personal right There is no personal right depends exclusively upon chance and / or upon
pending the fulfillment of pending the fulfillment of the will of a third person.
the obligation the obligation Ex. If Dean Jara sings me a song, I will give you
Ex. D promises C to deliver Ex. D promises to deliver $ $ 50,000.
$ 50, 000 on Mar 15, 2017 50,000 to C, if C marries X If I win the lotto, I will give $50,000.

c.) Mixed Condition – One whose fulfillment


7. Differentiate a Resolutory Term from a
depends jointly upon the will of either one of the
Resolutory Condition.
parties to the obligation and upon the chance /
Resolutory Term Resolutory Condition will of a third person.
Obligation is demandable A future and uncertain
at once, although it is event upon the happening Ex. I will give you $50,000, if I sing you a song, if
terminated upon the arrival or fulfillment of which rights Dean Ulan sings me a song and if I win the lotto.
of a day certain are already acquired by
virtue of the obligation are 11. Why are potestative conditions that depends
extinguished or lost. solely upon the will of the debtor VOID?
Ex. A grants B the use and Ex. A grants B the use of This is because to allow conditions whose fulfillment
enjoyment of his house for his house until he finishes depends exclusively upon the will of the debtor would be
10 years studying law. equivalent to sanctioning obligations which are illusory. A

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debtor would not fulfill a condition that will create an only car to Dayang- Upin, if the latter will jump
obligation for him. Dayang. over the moon.
Ex. I will give you $50,00, if I sing you a song. Even if I did
sing a song to you, there is no COA since the law 15. What are the instances when an Impossible
declares it as void. Condition is valid and capable of fulfillment?
Exceptions: a. If there is a pre-existing obligation.
a. If the condition is resolutory and potestative the
obligation is valid even if the fulfillment of the Ex. I will pay you my debt if hell freezes over. The
condition is made to depend upon the sole will of condition is void but the obligation is valid.
the debtor.
b. If it is a divisible obligation.
Ex. I will give you $50,000 every day until I sing a Ex. I will give you this car if you kill VP Vinay (invalid)
song to you. and marry Pres. Penoy.
b. If there is a pre-existing obligation/
c. If it is a Donation.
Ex. I borrowed from you $50, 000. The condition
is dependent upon me. I will pay you back if I Ex. I will donate to you my house and lot, if you jump
decide to sing a song. over the moon.

12. What are the kinds of Potestative Conditions? Ninth Meeting: March 17, 2016
1. Discuss Positive and Negative Conditions.
a. Simple – presupposes not only a manifestation of will
but also the realization of an external act of a 3 rd Positive Conditions – Condition is fulfilled by doing an act
party. as provided under Art. 1184.
Ex. I will give $50,000, if Mr. Roboto eats a live octopus. Ex. D promise to deliver to C his car, if C marries X by
2016.
b. Pure – if it depends solely and exclusively upon the
will of the debtor, it is void for debtor cannot fulfill an Negative Conditions – Condition is fulfilled by avoiding to
obligation arising from his own choice. But it is valid if act as provided under Art. 1185.
it depends on the will of the creditor.
Ex. D promise to deliver to C his car, if C does not marry
Ex. I will you give $50,000, if I decide to eat a live X by 2016.
octopus.
NOTE: If the condition is fulfilled and the promisor does
13. Differentiate the two below: not fulfill his promise, there is a COA to file a case against
the promisor.
a. I will give you $50,000 if I decide to sell my house.

 This is a Pure Potestative Condition which is


void because the condition is fulfilled when the D promise to deliver to C his lot, if he marries X this
debtor decides to sell his house. 2016.
Condition Term
b. I will give you $50,000 if I sell my house. In conditional obligations In obligations with a term,
there is no juridical tie there is already a juridical
 This is a Simple Potestative Condition which is (1188). tie (1164). Thus, C has a
valid because it partially dependent upon the will personal right over the lot.
of a third person who will buy the house. Remedy: Annotation – Remedy: Legal Action and
Public notice to anybody those provided by law.
14. Differentiate a Possible Condition from an who acquires the said lot
Impossible Condition. pending the condition is
considered as a person
Possible Condition Impossible Condition who acted in bad faith.
When an obligation is When an obligation is not
capable of realization capable of realization NOTE: D may be allowed
according to law, good either to its nature or to remove the annotation if
customs and public policy. according to law, good it is certain that the
customs or public policy. condition will not happen
Ex. Dayang will sell her Ex. Ipin will give $50,000 to (1184).

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Ex. X died or after 2016 the 2.) In same example, what if the Horse grown
condition was not fulfilled wings and was able to fly.

 It inures to the benefit of Red.


2. On March 10, 2016, Bangus promised to deliver  Blue grants usufructuary to Red.
his only car to Tilapia, if Tilapia marries Imelda on
or before March 10, 2017. On March 15, 2016, 4. What is a Tacit Resolutory Condition? Discuss.
Bangus promised to deliver his only car to
Pompano, if Pompano marries Imelda on or before  It is based on equity and fair play and applied to
March 15, 2016. On June 1, 2016, Pompano reciprocal obligations.
married Imelda. Who has a better right Pompano
or Tilapia? Tacit – Implied as part of all Reciprocal Obligations;

Tilapia has a better right as provided for under Art. 1187 Condition – Not being able to perform the obligation
because he has the oldest right. incumbent upon a party is the event;

3. Discuss the effects of Loss, Deterioration or Resolutory – It results to the extinguishment of the
Improvement under Art. 1189. obligation of the debtor and creditor.

A. When Applicable? Ex. Peter sold to Piper his only van for P 500, 000. If
Piper does not deliver P 500, 000 to Peter, then Peter
 Obligations to Give a Determinate Thing will not deliver his car to him. Thus, the obligation is
 Obligations subject to a Resolutory Term / cancelled.
Condition Can the injured party automatically cancel the
 Obligations subject to a Suspensive Term / obligation?
Condition
No, there must be a judicial decree to rescind the
B. When is a thing LOST? contract provided that the breach is substantial.
However, if the breach is partial, the courts may fix a
 When it perishes period for its performance.

Ex. When a powerful lightning stroke at the 5. To whom does the period be established for?
object of the obligation There is a presumption under Art. 1196 that the period is
established for the benefit of both parties.
 When it goes out of commerce
Ex.
Ex. When it involves a public property (Mayon
Volcano) Agpalo lend money to Cruz payable on Feb 16, 2017.
Yesterday, Cruz won the lotto, can Agpalo compel Cruz to
pay today? No. The period must be followed.
 When it disappears in such a way that its Ponce de Leon v. Syjuco
existence is unknown or cannot be recovered
Other benefits of the period to the creditor includes
Ex. The object of the obligation was thrown interest and tax avoidance.
accidentally to the sea.
6. Differentiate the following:
C. Situations Gemini promised to pay Gemini promised to pay
Libra, P 500, 000 on Feb Libra, P 500, 000 on or
1.) Blue promised to deliver his horse to Red, if 17, 2017. before Feb 17, 2017.
the latter marries Green. Pending the delivery, Favorable to both parties. Favorable to debtor.
the horse got injured.

a. If with fault of Blue – He cannot compel Red 7. When does the debtor loses right to make a
to accept the horse. However, Red can period?
rescind the obligation and ask for damages or
he can still ask for its fulfillment and ask for a. When after the obligation has been contracted, he
damages. becomes insolvent, unless he gives a guaranty or
security for the debt;
b. If without the fault of Blue – He can compel
Red to accept the horse. b. When he does not furnish to the creditor the
guaranties or securities which he has promised;

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Ex. Half mouse, Half horse

c. When by his own acts he has impaired said


guaranties or securities after the establishment 5. Those which are due and demandable as whose
and when through a FE the disappear unless he period is dependent upon the choice of the
immediately give new ones equally satisfactory; creditor.
Ex. Although, it is not due and demandable, the
d. When the debtor violates any undertaking in creditor can ask for the delivery of the mouse.
consideration of which the creditor agreed to the
period; When the choice is made, does it have to be
communicated?

e. When the debtor attempts to abscond. Yes, otherwise the obligation will not be d & d. Once
communicated, the alternative obligation turns into a
8. Discuss Sec. 3. simple obligation.
a.) Alternative Obligations – there are several
Can you incur delay in alternative obligations?
prestations but you do not need to perform all of
it. No, since alternative obligations are not d & d.

a.1. Simple – there is only one prestation. 9. Do you incur delay on the following:
Ex. I will give you this. a.) Personal Negative Obligation – No
Ex. You cannot be delayed on an obligation not to
a.2. Complex – there are several prestations. smoke
Ex. I will give you this, that, and those.
b.) Obligation with a Negative Condition – Yes
b.) Faculative Obligations – there is one prestation Ex. I promise to give you P 50,000, if you do not
but it can substituted. sing a song.

To whom does the right to choose the prestation c.) Alternative Obligation – No. Since the choice is
belong? not yet communicated.
d.) Obligations to do – No, the law recognizes the
GR: Debtor
right of the person to do or not to do an act. The
ERS: Creditor or a third person creditor can nevertheless, ask for its performance
and damages under Art. 1167.
Limitations of the Right of Choice:
Tenth Meeting: April 7, 2016
1. It must not be Impossible.
Ex. To give Mayon Volcano 1.) What is the presumption in collective obligations?
GR: Presumed to be Joint Obligations
2. It must not be unlawful.
Ex. To give a dog, horse, cat, my husband ERS:
a.) When stipulated by the parties
Ex. Jointly and Severally liable, in solidum and liable
3. It must not have been the object of the obligation
solidary

Those undertaking which are not included among those b.) When the law required solidarity
from the debtor may select or to those which are not yet Ex. Mother and Father to support Children
due and demandable at the time the selection is made or Liability of Principals, Accomplices and
to those which by reason of accident or some other Accessories
cause, have acquired a new character distinct or different In a felony
from that contemplated by the parties when the obligation c.) When the nature of the obligation requires solidarity
was constituted. Ex. Liability of ER to EE in Quasi-Delicts

Ex. The horse became d & d on Feb 15, the dog 2.) What is a joint obligation?
became d & d on Feb 16, the cat became d & d on Feb 17
and the mouse will be d & d on Dec 31, next year. Thus,  Each of the creditors is entitled to demand the
debtor can only deliver the horse, dog or cat. payment of only a proportionate part of the credit,
while each of the debtors is liable for the payment of
only a proportionate part of the debt.
4. He cannot choose part of one and part of another.

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 Several obligations are reduced into one document.
5.) What are the kinds of Solidary Obligation?
3.) What are the kinds of joint obligations? a.) Passive – the concurrence of two or more debtors
liable to one creditor.
a.) Joint Divisible Obligations Ex.
 Each creditor can demand only for the payment of his
proportionate share of credit, while each debtor can b.) Active – the concurrence of two or more creditors to
be held liable only for the payment of his one debtor.
proportionate share of the debt. Ex.

Ex. c.) Mixed – Among debtors and creditors.


Ex.

 If there is a breach of the obligation by reason of the 6.) What is the effect of various conditions or periods in
act of one of the debtors, the damages due to its solidary obligations? Discuss and give an example.
breach must be borne by him alone.
 The relationship of solidarity is not destroyed by
Ex. the fact that the obligation of one debtor is
conditional, with a term or pure, debtors are still
bound.

 Prestation can be divided among the parties Debtors Requirement to be Creditors


subjected to the
Ex. Sum of Money obligation of P 900,000
1D Jan 15, 2017 1C
b.) Joint Indivisible Obligations 2D X dies 2C
 If there are two or more debtors, the fulfillment of or 3D Y marries 3C
compliance with the obligation requires the
concurrence of all of the debtors, although each for
On January 15, 2017, how much can the creditors compel
his own share.
the debtors to pay?
Ex.
1D’s share can only be collected for P 300, 000.
Against whom can the creditors enforced the obligation.
 If there are two or more creditors, the concurrence of
Answer 1: Since Solidarity exists amongst the debtors,
collective act of all the creditors, although each for his
any of them can pay the P 300, 000.
own share is also necessary for the enforcement of
the obligation. Answer 2: Enforcement may be made to 1D and 2D only
since it is subject to period and there already existed a
Ex.
legal tie between the parties. 3D’s obligation, on the other
hand, is subject to a condition, thus, there is no legal tie
created.
 Prestation cannot be divided among the parties.
7.) In solidary obligations, what are the effects of the
Ex. A live horse. creditor’s acts and the debtor’s acts within their
respective parties? (1212 & 1215)
NOTE: The failure to accept by one of the creditors JIO
becomes JDO. Parties will then settle the value of the If beneficial, it is valid.
prestation equally.
Ex. Effort of 1C to collect the whole debt.
If Jhong is to deliver P If Ryan and Bang are to
900, 000 to Kong. deliver P 900, 000 to Vice If prejudicial, it is void.
Ganda.
Ex. 1C condones the debt of 2D, it is void. 1C must now
Joint Indivisible Obligation Joint Divisible Obligation reimburse the parts of 2C and 3C’s debt from 2D.
8.) What is the effect of assignment of rights in solidary
4.) What is a Solidary Obligation? obligations? (1213)
 Each debtor may be liable for the debt of other
debtors. GR: A solidary creditor CANNOT assign his rights without
 Each creditor can ask for the payment of debts for the consent of others solidary creditors.
other creditors.

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ER: If the assignment would be made to another solidary 13.) What is the presumption of law? (1248)
creditor.
GR: Obligations are presumed to be INDIVISIBLE
Rationale: Solidarity is based on trust and confidence
since the solidary creditors know each other. ER:

9.) What is the effect of demand by a creditor? (1214 & a.) When stipulated by the parties;
1216) b.) When the law requires;
c.) When the nature of the obligation requires.
GR: Payment shall be made only to the creditor who
made the demand and no other. 14.) What are the effects of Divisible and Indivisible
Obligations? (1223 – 1224)
ER: In the absence of any judicial or extra-judicial
demand, payment may be made by the debtor to any one GR: Debtor may not be required to make partial payments
of the solidary creditors. Creditor cannot be compelled partially to receive
prestation
ERS:
Ex. Debt of P 900, 000
1.) When the obligation expressly stipulates the
1D 1C – On Jan 1, 17, 1C demanded the contrary;
payment 2.) When different prestations constituting the objects
2D 2C of the obligation are subject to different terms and
conditions;
3D 3C – On the evening of Jan 1, 17, 3C 3.) When the obligation is in part liquidated and part
received un liquidated.

the payment of P 900, 000 from 3D and 15.) What are Obligations with a Penal Clause? (1226)
runaway
The Penal Clause or the Penalty is an accessory
obligation attached to the principal obligation by virtue of
which the debtor is bound to pay a stipulated indemnity or
Wrong payment does not extinguish the obligation, the
to perform a stipulated prestation in case of breach of
debtors are still liable for their obligation.
obligation.
10.) In solidary obligations, what is the effect of
16.) What are the functions of a Penal Clause?
insolvency of one of the debtors? (1219)
a. To insure the performance of the obligation;
1D, 2D and 3D are indebted in the amount of P 900, 000 b. To liquidate the amount of the damages to be
to 1C, 2C and 3C. 3D is insolvent, what is the recourse of awarded to the injured party in case of breach of
action? the principal obligation;
c. To punish the obligor in case of breach of the
In case of insolvency, the other debtors shall shoulder principal obligation.
proportionately the part of the insolvent debtor. Thus. 1D
and 2D must pay P 450, 000 each to the creditors. Tenth Meeting: April 14, 2016

11.) What are the defenses available to a solidary debtor? 1.) What are the MAJOR modes of Extinguishing
(1222) Obligations?
A. Personal Defenses – relative to him or to his own a. Payment / Contracting parties intend
share Performance to extinguish the obligation
Ex. Minority and Insanity b. Loss of the thing due Modes that cause the
c. Condonation / extinguishment of the
B. Real Defenses – derived from the very nature of Remission of debt obligation after its
the obligation d. Confusion or Merger of constitution and not
Ex. Fraud, Mistake and Prescription Rights intended by the contracting
e. Compensation parties.
12.) What are Divisible and Indivisible obligations? f. Novation

Divisible Obligations – those which have as their object a


prestation which is susceptible of partial performance Note: The enumeration is not exclusive.
without the essence of the obligation being changed.
2.) Questions on payment. (What, How, Who, to Whom
Indivisible Obligations – those which have their object a and Where)
prestation which is not susceptible of partial performance.
What is payment?

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Payment is not only the delivery of money but also the Who should pay / perform the obligation?
performance, in any other manner of an obligation.
a. Debtor
How is payment effected?
b. Debtor’s legal representative
a.) To give – when the debtor has completely delivered
the thing which he has obligated himself to deliver.
c. Any third person constituted / identified by the parties
b.) To do – when the debtor has completely rendered the
service which he has obligated himself to render. d. A third person who has an interest in the obligation
Test: WON the continued existence of the obligation is
c.) Not to do – when the debtor has completely refrained troublesome for him?
from doing that which he has obligated himself not to
do. Ex. Compulsory heirs – if parents do not pay their
debts, their successional rights are decreased.
Guarantor – guarantees the capacity of the
principal party to pay.
EXS:
Note: Solidary debtors and sureties are not included since
 When the obligation has been substantially performed they are principal debtors. However, a joint debtor may be
in good faith. (1234) included.
Deficiency is Insignificant Example
A will buy 10,000 pcs of dressed chickens worth Php e. All other persons not enumerated
500,000 from B. B only delivered 9,000 pcs of dressed Rules on Payment / Performance by a Third person
chickens to A due to a chicken epidemic. A may refuse to
accept the performance of B but if B proves such is due to GR: The creditor is not bound to accept payment or
a legal excuse then he can compel A to receive it. performance by a third person.
Requisites of Substantial Performance EXS:
a. Debtor is in good faith;  When there a stipulation to the contrary.
b. There is deficiency in the performance of the
obligation;  When it is made by a third person, who has an
c. The deficiency is insignificant / not substantial. interest in the fulfillment of the obligation.

 When the debtor accepts the performance, knowing A.) With knowledge and consent of debtor – third
of its incompleteness or irregularity and without person can recover the whole amount.
expressing any protest or objection. (1235 & 1176)
B.) Without the knowledge and consent of debtor or
Effect of Estoppel – once accepted, the obligation is against the will of the debtor – third person can
extinguished. However, the creditor must know of such recover only insofar as the payment had been
defect or irregularity. beneficial to debtor.
How is payment effected PROPERLY? To whom payment should be made?
a. Identity – only the prestation agreed upon must be 1. Creditor
complied with.
2. Creditor’s successor / interest
Exception to Identity: Facultative Obligation and Ex. Debtor paid 50K to Creditor’s son. It is considered
Dacion en Pago as improper payment.
b. Integrity – the thing or service in which the obligation 3. Any person authorized to receive it
consists must be completely delivered or rendered. Ex. Payment of MERALCO bills is done through
bayad centers not to MVP.
Ex. If debtor gives 30K for 50K debt, creditor may not
accept the payment of his obligation. The legal tie is 4. Payment made to possessor in credit provided that is
not yet extinguish. was made in good faith
 A person appears to have the right to assert the
c. Indivisibility – Payment or performance must be payment
indivisible. (Presumption of indivisibility as provided in
1248)

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5. Payment made to a third person, provided that is has 1.) How is a contract defined in Art. 1308?
redounded to the benefit of the creditor.
Ex. A owes B 50K. B owes C 50K. With the consent A contract is a meeting of minds between two parties
of B, A paid 50K to C. whereby one binds himself with respect to the other to
give something or to render some service.
Note: Payment made to an incapacitated person is
voidable. Why is this definition defective?

Where payment should be made? a. It only overs consensual contracts, it does not cover
formal and real contracts.
GR: Place designated in the obligation
 Consensual Contracts – perfected by consent
No designation / determinate thing – wherever the thing  Formal Contracts – Those that require a particular
might be at the time the obligation was constituted. form aside from the COC.
Other cases – Domicile of Debtor  Real Contracts – Those whose validity depends
upon the delivery of the object of the contract
aside from the COC.
Ex. Deposit (Contract of Loan) – Warehouse
3.) What is dation in payment? Receipts Contracts
b. It does not cover reciprocal contracts, only unilateral
When debtor presents to creditor a thing in lieu of
ones.
payment of a sum of money. The law considers it a
c. It may be entered upon to extinguish an existing
Contract of Sale.
obligation.
Ex. Alea owes Kim P5,000. Alea offers her brand new air- d. It is applicable to two persons only, however, it can be
conditioner unit as payment of her debt to Kim. Kim made applicable to two parties in one person.
agrees.
Parties to a Contract:
4.) What is the rule on monetary obligations?
GR: 2 parties are required in a contract
GR: Pay using legal tender of the Philippines. (RA 529)
EXS:
EXS: (RA 4100)
a. When a person in his capacity as representative
 Loans and investments made by foreign of another contracts with himself;
governments
 High priority economic projects b. When as a representative of a different persons,
 Foregin exchange transactions by banks he brings his principals by contracting with
 Import-Export and International Banking himself, unless there is conflict of interests or
Investments when the law expressly prohibits it in specific
cases.
Legal Tender – It includes all notes and coins issued by
the BSP to which a debtor may compel creditor to accept 2.) What are the stages of the life of a contract?
payment using Philippine Peso no matter what the
obligation may be. a. Conception Stage (Preparatory)
 The period of negotiation and bargaining ending at
11th Meeting: Make-up Class on April 22, 2016
the moment of the agreement of the parties. There
Absent si Alea Kim is no juridical tie yet.

Quiz questions: b. Executory Stage (Perfection / Birth)


 The moment when the parties come to agree on
a. What are the requisites of novation? the terms of the contract. Juridical tie is created.
b. What are the requisites of novation according to the  A contract is executory when there is a
SC? concurrence of the offer and acceptance.
c. Clark and Kent entered into an obligation which is
voidable, they created a new one, is the old c. Executed Stage (Consummation / Death)
obligation extinguished by way of novation?  Fulfillment or performance of the terms agreed
d. Is an extension of time in a contract of loan upon in the contract.
considered as a novation, what are the
presumptions? Note: In MIAA v. Verayo, it was held that a
provision in the lease contract that gave the tenant
the option to renew the contract which should be
12th Meeting: April 22, 2016 asserted expressly and communicated to the

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landlord before the expiration of the contract of
lease is valid. d. Relativity
4. How can an agreement result into a contract? GR: Contracts take effect only between the parties, their
assignees and heirs.
Conditions:
a. COC is present;
b. Characteristics of a contract are present.
Characteristics of a Contract (AMOR) EXS:
a. Autonomy (1306) a. When rights are not transmissible by law, as
agreed by the parties and by nature.
GR: Contracting parties may establish such agreements
as they may convenient. b. Successional Rights – The heirs’ liability would
ER: only be limited to a certain portion in the ―mana.‖

Contract of Adhesion – Where only one of the contracting Instances when the scope of relativity of contracts are
parties has the right to stipulate the conditions of the expanded:
contract, the other party accepts or rejects it. There is no 1. When the parties transfer to a third person the rights
proposal. they acquire under the contract either favorably
Limitations: (acquire new rights) or unfavorable (incur debt).

i. It must not be contrary to law, morals, good Ex. Spongebob is indebted to Patrick in the
customs, public order and public policy. amount of $ 10, 000 with interest at 6% per
annum provided that Spongebob will give 50% of
ii. Police Power – Constitutional policies based on his debt to Mr. Crabs, as the beneficiary of
the non-impairment clause and Parens Patriae. Patrick.

2. When it is stipulated by the parties.


b. Mutuality (1308 & 1182)
 The validity of the contract cannot be left to the will 3. When the third person exercises the subrogatory
of one of the contracting parties. action / accion pauliana (rescission of a contract
entered because of Fraud)
 It is agreed by both parties.
Remedies of Creditor (Chronological Order)
When is mutuality required? a. Payment by Cession
b. Rescissible Action
1.) To determine whether the contract should be valid?
c. Subrogatory Action
2.) To determine whether the contract should be
4. In Suspension of Payments and Composition under
enforced?
the Insolvency Law
Ex. Potestative Obligations dependent upon the
5. In Labor Contract of CBAs
debtor are VOID.
NOTE: In CBAs, the union can require the company
EXS: If the parties delegates such rights to a third
to pay for its union dues.
person / such is unfair to the other party.
Note: In Cabangkalan Sugar Estates v. Pacheco, it was 6. Contracts creating Real Rights (1312)
held that when there is a provision in a contract of lease
that allows the tenant to determine when he wants to 7. Negotiorum Gestio (2150 – 2151)
continue or stop the lease agreement is void and is
contrary to public policy and is unfair to the landlord.
Unlike MIAA v. Verayo, there is no period, there is no 8. Interference on Contracts by Third Parties (1314)
original term.
 Applies in executory contracts where one of the
c. Obligatory Force parties do not perform his obligation because of a
 Once a contract is perfected, it shall be of tortious interferer.
obligatory force upon both of the contracting
parties. As held in Bingbang v. CA the requisites are the ff:

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1. The existence of a valid contract; Art. 1893. In the cases mentioned in Nos. 1 and 2 of the
2. Knowledge on the part of the third person of the preceding article, the principal may furthermore bring an
existence of the contract; action against the substitute with respect to the
3. Inference by the third person without legal obligations which the latter has contracted under the
justification or excuse. substitution.
Example: S (Seller) and B (Buyer) entered into a contract
of Sale. A influences S not to proceed with the sale. S 13. Art. 1608
agrees. There is thus a breach of contract.
Art. 1608. The vendor may bring his action against every
What is the cause of action of B? possessor whose right is derived from the vendee, even if
in the second contract no mention should have been
A. If with legal justification such as when A has a made of the right to repurchase, without prejudice to the
financial / economic interest in the sale, then S is only provisions of the Mortgage Law and the Land Registration
liable for the damages incurred by B. Law with respect to third persons. (1510)
B. If without legal justification such as to annoy and 14. Art. 1729
anger B, then S and A are liable for the damages
incurred by B. Art. 1729. Those who put their labor upon or furnish
materials for a piece of work undertaken by the contractor
What is the relationship / division of liability between S have an action against the owner up to the amount owing
and A? from the latter to the contractor at the time the claim is
made. However, the following shall not prejudice the
A. If a Civil Contract – it is JOINT. laborers, employees and furnishers of materials:
B. If a Commercial Contract – it is SOLIDARY. (1) Payments made by the owner to the contractor before
they are due;
How do you know that a contract is civil or commercial? (2) Renunciation by the contractor of any amount due him
from the owner.
Civil – WON the single transaction precipitated by the
parties is not into an activity requiring profit? This article is subject to the provisions of special laws.
Commercial – WON one or both of the parties are into an 13th Meeting: April 23, 2016
activity regularly for profit?
1. What are the essential elements of a contract?
9. Art. 1336: Violence and Intimidation
 Third party who cause such is liable for damages. a. Cause of the Contracting Parties;
b. Object of the Contract;
10. Art. 1652 c. Cause of the Obligation.
Art. 1652. The sublessee is subsidiarily liable to the lessor Note: Absence of any one of the elements results into an
for any rent due from the lessee. However, the sublessee invalid / inexistent contract.
shall not be responsible beyond the amount of rent due
from him, in accordance with the terms of the sublease, at 2. Discuss Consent.
the time of the extrajudicial demand by the lessor.  It is the concurrence of the wills of the contracting
parties with respect to the object and cause which will
Payments of rent in advance by the sublessee shall be constitute the contract.
deemed not to have been made, so far as the lessor's
claim is concerned, unless said payments were effected in When is there Consent?
virtue of the custom of the place There is consent when there is a meeting of minds
11. Art. 1179 between the parties as when the offeror makes an offer
and such offer is accepted by the offeree.
Art. 1179. Every obligation whose performance does not
depend upon a future or uncertain event, or upon a past a. Offer – The offeror makes an offer
event unknown to the parties, is demandable at once.
What are the requisites of a valid offer?
Every obligation which contains a resolutory condition
shall also be demandable, without prejudice to the effects  The offer must be definite. The prestation is
of the happening of the event clear. It sufficiently describes the object in
order that offerree knows what type of contract
12. Art. 1893 it is.

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 The offer must be complete in all aspects that the offeree accepts the offer but proposes to an
the offeree does not need to know any more additional contract.
essential information regarding it.
Ex. Nina proposes to Kyla her feeding lot. Kyla agrees, if
 It must be directed to the offeree or to the she can have all of the cattles in the said lot.
public. 5. Seller offered to buyer his lot.
S: I am willing to entertain the purchase of the lot
 There must be an intention to bind the parties subject to conditions, A, B, and C.
once the offer is accepted.
B: I am willing to entertain the purchase of the lot
Note: When the offeree is led to believe that subject to conditions, A, B, C and D.
there is seriousness to be bound, there will
--- S accepted the amplified acceptance of B ---
exist a juridical tie. However, if the offer is
made in jest, there is no juridical tie. S’s contention: There is a JT.
B’s contention: There is no JT.
b. Acceptance – The Offeree makes an acceptance Decide.
What are the requisites of a valid acceptance? The SC ruled in favor of B, the tenor of acceptance did
not make an unconditional offer. It was merely a
 It must be unconditional
manifestation of the possibility of considering the
acceptance as shown expressly by the word ―entertain.‖
 It must be free from qualifications
6. How do you determine the moment of the
 It must be absolute perfection of the contract?

 It is directed to the offeror a. Face to Face / Telephone / CP – agreement of


parties (shake hands, signature.. etc)
 It is made with the intention to be bound
b. Social Media
 It made within a reasonable time

REPUBLIC ACT NO. 8792 June 14, 2000


NOTE: There must be no deviation from the offer,
otherwise it will constitute a counter offer.
Requisites of Consent AN ACT PROVIDING FOR THE RECOGNITION AND
USE OF ELECTRONIC COMMERCIAL AND NON-
1. The concurrence must be manifested by the COMMERCIAL TRANSACTIONS AND DOCUMENTS,
concurrence of the offer and the acceptance; PENALTIES FOR UNLAWFUL USE THEREOF, AND
FOR OTHER PURPOSES
2. The contracting parties must possess the necessary
legal capacity;
3. The consent must be intelligent, free, spontaneous
CHAPTER III.
and real.
COMMUNICATION OF ELECTRONIC DATA
3. What is a complex offer? MESSAGES OR ELECTRONIC DOCUMENTS
An offer to enter into several contracts at the same time.
WON the establishment of a Juridical Tie requires Section 16. Formation of Validity of Electronic Contracts.
acceptance?
It will depend upon the agreement of the parties (take all
or leave it) or the nature of the offer (If you buy a (1) Except as otherwise agreed by the parties, an offer,
house, you also buy its lot). the acceptance of an offer and such other elements
required under existing laws for the formation of contracts
4. What is an Amplified Acceptance? may be expressed in, demonstrated and proved by means
of electronic data messages or electronic documents and
Acceptance where there is a deviation from the original
no contract shall be denied validity or enforceability on the
tenor. It will not prevent the perfection of the contract with
sole ground that it is in the form of an electronic data
regards the original stipulation of the parties. In this case,

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message or electronic document, or that any or all of the withdrawal, except when the option is founded upon a
elements required under existing laws for the formation of consideration, as something paid or promised.
contracts is expressed, demonstrated and proved by
means of electronic data messages or electronic Art. 1262. An obligation which consists in the delivery of
documents. a determinate thing shall be extinguished if it should be
lost or destroyed without the fault of the debtor, and
(2) Electronic transactions made through networking before he has incurred in delay.
among banks, or linkages thereof with other entities or
networks, and vice versa, shall be deemed consummated When by law or stipulation, the obligor is liable even for
upon the actual dispensing of cash or the debit of one fortuitous events, the loss of the thing does not
account and the corresponding credit to another, whether extinguish the obligation, and he shall be responsible for
such transaction is initiated by the depositor or by an damages. The same rule applies when the nature of the
authorized collecting party: Provided, that the obligation of obligation requires the assumption of risk.
one bank, entity, or person similarly situated to another 9. What is the rule on the withdrawal of offer by the
arising therefrom shall be considered absolute and shall offeror?
not be subjected to the process of preference of credits.
GR: The offeror may withdraw the offer as long as he
has no knowledge of the acceptance of the offeree.
c. Correspondence (1319)
ERS: 1.) Option Contract – Buyer pays for a
Manifestatio Expedition Reception Cognition consideration of a period whether to accept an object or
n Theory Theory Theory not.
Theory
Perfection is Perfection is Perfection is Perfection is 2.) Art. 19. Abuse of Rights
at the at the at the at the
moment the moment the moment the moment the Option Contract Contract of Sale
offeree offeree offeror have offeror has It is only the seller who is Both parties are required to
manifests his transmits the in his hands knowledge of required to sell. sell and buy.
intention to notification the the No Juridical Tie. There is a juridical tie.
accept. of acceptance acceptance
acceptance of the of the
to offeror. offeree. offeree. Option Money Earnest Money
One Step: Two Steps: Three Steps: Four Steps: Not a partial payment of a Partial Payment of
Manifestation Manifestatio Manifestation Manifestation purchase price purchase price
n & , Expedition , Expedition, No juridical tie. There is a juridical tie.
Expedition & Reception Reception &
(Letter is (Letter is Cognition Quiz:
placed in received by
mail box) Offeror) 1. What are complex offers? When is there partial
Applicable in US Courts German Applicable in acceptance in complex offers? (3)
Commercial Courts Civil
Contracts Contracts 2. A in QC offered B in Davao, through a letter his
house and lot. B received the letter and manifested
his acceptance, when he was about to send the his
7. How is acceptance made? letter of acceptance. A sold his house to C. Is A
An acceptance may be express or implied (1320). liable for B? (6)

8. What are the modes to extinguish the offer


made? 3. What are the requisites of Pour Atrui?

Art. 1321. The person making the offer may fix the time, a. The contracting parties by their stipulation must have
place, and manner of acceptance, all of which must be clearly and deliberately conferred a favor upon a
complied with. third person;
Art. 1323. An offer becomes ineffective upon the death,
b. The third person must have communicated his
civil interdiction, insanity, or insolvency of either party
acceptance to the obligor, before its revocation by
before acceptance is conveyed.
the obligee or the original parties;
Art. 1324. When the offerer has allowed the offeree a
certain period to accept, the offer may be withdrawn at
any time before acceptance by communicating such c. The stipulation in favor of the third person should be
a part, not the whole of the contract;

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A c. Rescission (Accion Pauliana)
d. The favorable stipulation should not be conditioned
or compensated by any kind of obligation whatever; Acts of Ownership Acts of Management &
Administration
Disposition of immovable Disposition of personal and
e. Neither of the contracting parties bears the legal properties of ward with movable properties of ward
representation or authorization of the third party for judicial approval for his support
otherwise, the rules on agency will apply.
14th Meeting: April 28, 2016 (Last Meeting) Can an heir suffer lesion?

1. What are Rescissible Contracts? Yes, lesion must be equal to or more than ¼ of his
 Valid contracts that can be terminated on legal legitime. If his legitime is lessened because of lesion, he
grounds can ask for a rescission.
 Rescission is principally based on some economic
B. Contracts of Fraud
damage (lesion) as a result of the inequitable
conduct by one party Types of Frauds:

2. What is Lesion? i. Contracts in Fraud of Creditors


- Rescission is a subsidiary remedy
Lesion refers to a loss from another’s failure to perform a
contract. It is the injury suffered by one who did not ii. Contracts referring to Things under Litigation
receive the equivalent value of what was bargained for. - Rescission is a primary remedy

iii. Contracts by an Insolvent Debtor


3. Differentiate Rescission from Resolution.
- Rescission is a subsidiary remedy
Rescission Resolution
Action may be instituted by Action may only be Ex. On Jan 13, 2015, Alea Kim owed P 5, 000 to
a contracting Party or a instituted by a contracting Michelle payable on June 5, 2015. On Jan 15,
Third Person party 2015, Alea Kim owed P 5, 000 to Bona payable
There are several causes Only one ground – failure on May 5, 2016. On June 10, 2015, Alea Kim paid
for rescission of one of the parties to her undue debt to Bona. Alea Kim is now
comply with what is insolvent. What is Michelle’s remedy?
incumbent upon him
Courts cannot grant an Courts can grant an According to Dean Ulan, the creditor who has a
extension of time for extension of time for better right is the one who FIRST claims the
performance of the performance of the obligation or files the action.
obligation obligation provided that
there is just cause Note: Art. 1381 (3) in relation to Art. 1198 (2) is
Any contract whether Only bilateral contracts applicable only when such obligation is subject to
unilateral or bilateral may may be resolved a condition.
be rescinded
C. Special Cases of Rescission

4. What are the causes of rescission? Discuss. Art. 1198 (4)

A. Those entered by guardian / representative wherein Art. 1526 (4)


the ward / absentee suffers lesion by more then 1 / 4 Art. 1534
of the value of the property. In case of an heir he must
suffer at 1/ 4 of the value of the property. Art. 1539

- Rescission cannot take place however when the Art. 1556


contract has been judicially approved
5. What are the Limitations in Actions of
Ex. Marvin, guardian of minor Gaye, sold Gaye’s house Rescission?
and lot worth 2M for 1M to Charlie. a.) It must not cover acts of ownership;
b.) It is a supplemental action;
Remedies of Gaye: c.) Thing which is the object of the contract must be in
the possession of a third person who did not act in
a. Enforcement of his right (If Marvin is solvent enough,
bad faith;
he can pay for the lesion)
d.) He must be able to return thing or property.
b. Payment by Cession (Immovable first)

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Note: Rescissible Contracts are not subject to
Ratification. The intrinsic defect may be waived by a 3 rd b. Those where the consent is vitiated by mistake,
person or the contracting parties. violence, intimidation, undue influence or fraud.
6. What are Badges of Fraud? 10. When should an action for annulment be filed?
A. Alienation by gratuitous title WITHIN the prescriptive period of four (4) years counted
1. Debts are contracted prior to the donation or from the time:
alienation by onerous title. Maturity of debts is not a (a) the defect of the consent ceases in case of
requirement intimidation, violence or undue influence
2. There is no reservation of sufficient property to (b)
pay all debts contracted before the donation or alienation
(c)
Ex. Debtor Sheldon sold his last car of land to Amy, his entered into by incapacitated persons
girlfriend, in order to make it appear to his creditor that
he is already insolvent. 11. Who may ask for annulment?
B. Alienation by onerous title 
contract
1. The alienation made during the pendency of a suit 
presupposes a judgment, or a writ of attachment 
2. The attachment need not refer to the property (Annulment is a remedy granted by law, for reason of
alienated public interest, for the declaration of the inefficacy of a
3. The attachment need not to have been obtained contract based on a defect or vice in the consent of one
by the party seeking rescission of the contracting parties in order to restore them to
their original position before the contract was executed)
Ex. Drake, vendee, knew at the time of conveyance, that
it was Rihanna’s last property pending in court. 12. What are the effects of Annulment?

7. What is the Prescriptive Period in Rescission? (a) IN EXECUTORY CONTRACTS - the parties are
excused from their obligations.
• The action to rescind prescribes in four years
• The period begins to run after the aggrieved party
has unsuccessfully exhausted all possible legal remedies (b) IN EXECUTED CONTRACTS - mutual
to enforce the obligation or recover losses, and from the restitution
time—
1. The incapacity of persons under guardianship
terminates, in cases of persons under guardianship the service + interest

2. The absentee learns of the contract, in cases of Note: Special rule on restitution when the annulment is
absentees grounded on incapacity – The incapacitated party is
required to restore only to the extent of his beneficial
3. The fraud is discovered, for contracts entered in interest. In other words, if he did not derive any benefit
fraud of creditors from the thing or price received by him, he is NOT
obliged to restore.
4. Of the knowledge of the transaction, for contracts
entered with respect to things under litigation without 13. What is the effect of the loss of the object of the
approval contract on the action for annulment?

8. What is a voidable contract? (a) If with FAULT on the part of the DEFENDANT
his obligation is converted into an indemnity for
It is a contract which possesses all the essential requisites damages.
of a valid contract, but one of the parties is incapable of
giving consent, or consent is vitiated by mistake, violence, Indemnity = (value of the thing at the time of the loss) +
intimidation, undue influence, or fraud. (interest on said value also computed from the time of
the loss) + (fruits received from the thing reckoned from
9. What are the kinds of Voidable Contracts? the time the thing was given to him to the time of its
loss). (Art. 1400)
a. Those where one of the parties is incapable of
giving consent to the contract;

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(b) If with FAULT on the part of the PLAINTIFF the right is because the court will not receive evidence of the
to annul is extinguished. existence of the agreement without the writing, or a
secondary evidence of its contents.
Note: the same rule applies even if the action for
annulment is grounded on incapacity. (Art. 1401, Note: The failure to execute the contract in writing does
par. 2) NOT render the contract VOID. The contract is VALID,
but it is UNENFORCEABLE, unless ratified.
(c) If due to a FORTUITOUS EVENT
 The Statute of Frauds seeks to prevent the
applies when the loss is commission of injustice due to faulty memory, and to
with his fault. guard against intentional misrepresentation.
Rationale: The defendant is considered a possessor in Illustrative Example: Marian verbally agreed to sell her
bad faith who bears the loss even in case of a fortuitous car to Dingdong for P950,000.00. The parties agreed that
event. delivery of the car as well as payment of the purchase
annul can be maintained, BUT price will be effected on October 21, 2015. On October
the defendant cannot be compelled to restore what he 21, 2015, Marian refused to honor the verbal agreement,
had received if the plaintiff can himself no longer restore and turned down Dingdong’s demands for her to deliver
what he is bound to return after the contract is annulled. the car nor his tender of the P950,000.00 purchase price.
Dingdong then filed an action in court for specific
Exception : But if the plaintiff was incapacitated at the performance to enforce their verbal contract of sale.
time the contract was perfected, the defendant must In this case, if the lawyer of Marian objects, Dingdong will
restore what he has received despite the plaintiff’s inability not be allowed by the court to present oral or testimonial
to restore what he is bound to return under the annulled evidence to prove the existence of their verbal contract of
contract. sale. This is because a verbal contract of sale of personal
property where the consideration exceeds P500.00 must
14. What are Unenforceable Contracts?
be in writing in order to be enforceable even between the
 An unenforceable contract is one which cannot be
parties [Art. 1403(2)(d)].
enforced in court or sued upon unless it is first ratified.
Once ratified, it can have the effect of a valid contract.
In one sense, therefore, it may be called a ―validable‖
contract. 17. What are the contracts covered by the Statute of
 Frauds which are required to appear in writing in
are valid and binding until annulled or rescinded, an order to be enforceable:
unenforceable contract is not enforceable, or cannot
take effect even as between the parties to the  An agreement which is to be executed after
contract unless it is ratified. one (1) year from the date of perfection of the
15. What are the kinds of unenforceable contracts? contract.
 Example: On October 1, 2014, Sally entered into
 Unauthorized or disauthorized contracts. [Art. 1317 a contract with Brian for the sale of her car to him.
& 1403(1)] Delivery of the car and payment of the purchase price was
set on October 5, 2015. This contract must be in writing
 Those that fail to comply with the Statute of Frauds. to be enforceable because the execution or
[Art. 1403(2)] consummation of the contract is set on a date more than a
year from the perfection of the contract.
 Those where both parties are incapable of giving
consent.
 A special promise to answer for the debt,
16. What is the nature and purpose of the Statute of default or miscarriage of another.
Frauds?  Example: Dennis borrowed money from Carina
with Gorio as guarantor. As guarantor, Gorio obliges
The Statute of Frauds, found in Article 1403, No. 2 of the himself to answer for the obligation to Carina, if Dennis is
New Civil Code, is a law which requires that all the not able to pay the debt on maturity date. This promise of
agreements enumerated therein [letters (a) to (f)] must be Gorio to answer for the default of Dennis must be in
in writing, and signed by the party obliged under the writing, so that Gorio can be held liable by Carina if
contract (passive subject) against whom the contract will Dennis fails to pay his obligation on due date.
be enforced. Hence, if there is no note or memorandum
(i.e., writing as evidence of the agreement) of the
specified agreements, said agreements cannot be  An agreement made by reason of marriage
enforced by the other party (active subject) in court. This other than a mutual promise to marry.

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 Example: Martin agrees to build a house for  An agreement for the sale of real property
Wilma worth P10M if she will marry him. If Wilma or of an interest therein. [Art. 1403(2)(e)]
subsequently marries Martin, she cannot oblige Martin to
make good his promise to build a house for her if their  Example: Isko and Bernie entered into a verbal
agreement was not made in writing. contract for the sale of a parcel of land. Delivery and
payment was set on October 30, 2015. On October 30, if
NOTE : However, a mutual promise to marry is Isko changes his mind about the sale, Bernie cannot sue
enforceable even if merely orally entered into. At any Isko to compel the latter to perform his obligation under
rate, enforceability will be limited only to claiming the contract of sale which was not put in writing; hence,
damages for non-performance of the promise, but NOT to unenforceable.
compel the other party to proceed with the marriage. This
is because nobody can be compelled to marry against his
will. It will make the consent defective, and the marriage  NOTE, however, that under Article 1874
voidable. of the Civil Code, ―when the sale of a piece of
land or any interest therein is through an agent,
the authority of the latter shall be in writing;
 An agreement for the sale of personal otherwise, the sale shall be void.‖
property where the consideration is P500 or more,
unless there has been partial delivery or payment.
[Art. 1403(2)(d)]  A representation as to the credit of a third
person.
 Example: Delfino is applying for a loan with Cielo.
 Example: Sylvia and Barry entered into a verbal
Before she releases the money, Cielo asks Ramiro about
contract for the sale of a pair of silver earrings for
the credit standing of Delfino. Ramiro orally assures Cielo
P500.00. Delivery and payment was set on October 30,
that Delfino is solvent, and has good credit reputation. On
2015.
the basis of this representation, Cielo extends a loan to
 IF on due date Sylvia does not deliver, Barry Delfino. However, it turns out that Ramiro made a false
cannot compel her to do so even if he is willing to pay representation as to Delfino’s credit standing because
because the contract falls under the Statute of Frauds, Delfino defaulted in his obligation to Cielo on due date. In
and must be in writing to be enforceable between the this case, if the representation of Ramiro as to Delfino’s
parties. credit standing was not made in writing, Cielo cannot hold
Ramiro liable for damages for such misrepresentation.
18. What are some basic principles governing the
 ASSUME THAT on due date Sylvia makes, Statute of Frauds?
and Barry accepts, delivery of the silver earrings. Later,
Sylvia files an action to compel Barry to pay the purchase
price of P500.00. This time, Barry will be obliged to pay. a) It applies only to executory contracts. It does
Barry cannot set up the defense that Sylvia cannot not apply to totally or partially executed
enforce their agreement for not having been made in contracts.
writing. This is because there has already been delivery
b) The defense under the Statute of Frauds may
of the object of the contract, and by accepting the
be waived by ratification. (Art. 1405)
earrings, Barry in effect admits the existence of the
agreement. c) It is exclusive. It applies only to the
agreements or contracts enumerated under
Article 1403 (2).
 An agreement for the lease of real property
d) The Statute of Frauds is a personal defense
where the term is more than one year. [Art.
(Art. 1408). Just as strangers cannot attack the
1403(2)(e)]
validity of voidable contracts, so also can they
 Example: On January 15, 2015, Orly agreed to not attack a contract because of its
lease his building to Tirso for a period of two (2) years unenforceability. The defense that a contract
starting February 15, 2015, until February 14, 2017. On does not comply with the Statute of Frauds can
February 15, 2015, if Orly does not allow Tirso to take be set up and is available only to the contracting
possession of the leased property as agreed upon, Tirso parties and their heirs.
cannot legally compel Orly to do so if their lease contract
is not in writing. Examples of the Principles :

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a. & b.  Soledad verbally sells to Basilio a parcel of a. Void Contracts – Those where all of the requisites of
land for P2M. The contract is unenforceable under a contract are present but the cause, object or
Article 1403(2)(e), which requires that the sale of real purpose is contrary to law, morals, good customs,
property must be in writing. However, if Basilio pays public order or public policy or the contract itself is
the price of the sale, and Soledad accepts it, she prohibited or declared void by law.
cannot refuse to deliver the land because there was
already partial performance of the contract. Since b. Inexistent Contracts – Those where one or some or
Soledad has accepted benefits under the contract, the all of those requisites which are essential for the
contract is no longer executory (but is now partially validity of a contract are absolutely lacking.
executed or consummated); hence, the Statute of
Frauds will not apply. Soleded is deemed to have 20. What is Pari Delicto?
ratified the contract under Article 1405. With the
ratification, the contract now becomes enforceable. In Pari delicto defined.  Pari delicto simply means equal
the same manner, if Soledad delivers the land to fault.
Basilio, and he accepts delivery, the contract  The term is used with reference to the general
becomes enforceable, because there is already rule that illegal transactions or contracts are not legally
partial execution (or consummation) of the contract. enforceable. It is a universal doctrine which holds that no
action arises, in equity or in law, from an illegal contract.
(c)  A loan of P1,000.00 does not have to be in Where the parties are in pari delicto, no suit can be
writing to be enforceable because the contract of loan is maintained for specific performance under the contract, or
not one of those enumerated in the Statute. Hence, an to recover the property agreed to be sold or delivered, or
oral loan for P1,000.00 is valid and enforceable. (See the the money agreed to be paid, or damages for its violation.
last paragraph of Article 1358) No affirmative relief of any kind will be given to one
against the other.

(d)  Olivia is the owner of a house leased by Tiago. Exceptions; where pari delicto may not apply:
During the term of the lease, Olivia verbally sold the
house to Braulio. Braulio had not yet occupied the house The Court may allow a party to recover money or property
nor given the purchase price for the sale. Now, despite in the following cases, when the interest of justice or
Braulio’s demand as new owner of the house, Tiago public interest demands:
refuses to remit his monthly rental payments to Braulio.
Tiago argues that the contract of sale between Olivia and 1. If an agreement has been repudiated before it has
Braulio, having been verbally made, is not enforceable accomplished its purpose or before it causes damage to a
under Article 1403(2)(e). This argument of Tiago is not third person
valid. The defense under the Statute of Frauds is a 2. If the party who gave consent is proven to be
personal defense, and can be raised or set up only by the incapacitated
parties to the contract contended to be unenforceable for
not having been made in writing. Therefore, Tiago who is 3. If the agreement is not illegal per se but merely
not a party to the contract of sale cannot set up the prohibited, and the prohibition is designed for the
defense under the Statute of Frauds. protection of the plaintiff
NOTE: In this case, Braulio may set up the defense Quiz
under the Statute of Frauds. It becomes apparent,
however, that instead of assailing the unenforceability of 1.) What are requisites for Rescission based on
the contract of sale, Braulio has executed acts of Lesion and Fraud?
ratification by exercising acts of ownership over the house
In case of Lesion:
as manifested by his collection of the rentals from its
tenant. The same can be said of Olivia who, under the a. The contract must have been entered into by a
facts, has offered no objection to Braulio’s acts of guardian in behalf of his ward or by a legal
dominion by demanding rents on the property from the representative in behalf of the absentee;
tenant Tiago.
b. The ward or absentee must have suffered lesion of
19. What are Void and Inexistent Contracts?
more than ¼ of the value of the property which is the
These are the contracts which have absolutely no force object of the contract;
and effect, and are inexistent from the beginning. It is as
if they have never been entered into, and they cannot be
validated either by time or ratification. The maxim is ―NO c. The contract must have been entered into without
CONTRACT AT ALL‖. judicial approval;

28 |R e v i e w e r b y M i c h e l l e S A N D I E G O L a v i s t a
San Beda College - Manila
d. There must be no other legal means / remedy for
obtaining reparation for lesion;

e. The person bringing the action must be able to return


whatever he may be obliged to restore;

f. The object of the contract must not be legally in the


possession of a third person who did not act in bad
faith.
In case of Fraud:
a. There must be a contract between the creditor and
the debtor. It must have been inexistent before a
new contract;

b. It was sold with fraud / with the intention to commit


fraud;

c. The creditor cannot in any legal manner collect the


credit;

d. The object of the contract must not be in possession


of a third person who did not act in bad faith.

2.) What is the Prescriptive Period in Voidable


Contracts?
• Valid until annulled, unless any defect is cured by
ratification, which can be claimed within four years

1. Incapacitated in giving consent - From


the time guardianship ceases
2. Vitiated consent (by mistake, violence, intimidation,
violence or undue influence, from the time such defects
cease intimidation, influence, or fraud undue - For
mistake of fraud, upon discovery of the same.
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