D.

PRESCRIPTION PRESCRIPTION is a mode by which one acquires ownership and other real rights thru lapse of time; also a means by which one loses ownership, rights & actions; retroactive from the moment period began to run; founded on grounds of public policy; regarded as a statue of repose. KINDS: 1. Acquisitive General Requisites A. Capacity to acquire by prescription B. Thing capable of acquisition by prescription C. Possession of thing under certain condition D. Lapse of time provided by law 2. Extinctive- also called as limitation of actions Morales v CFI, 97 SCRA 872, 1980 Who may acquire by prescription 1. Person who is capable of acquiring property by other legal modes 2. STATE 3. Minors- through guardians or personally  Against whom prescription run 1. Minors & incapacitated person who have guardian 2. Absentees who have administrators 3. Persons living abroad who have administrators

4. Juridical persons except the state with regard to property not patrimonial in character 5. Between husband & wife 6. Between parents & children ( during minority/ insanity) 7. Between guardian & ward ( during guardianship) 8. Between co-heirs/ co owners 9. Between owner of property & person in possession of property in concept of holder PRESCRIPTION DOES NOT RUN 1. Between husband and wife, even though there be a separation of property agreed upon in the marriage settlements or by judicial decree 2. Between parents and children, during the minority or insanity of the latter 3. Between guardian and ward during the continuance of the guardianship Things subject to prescription: all things within the commerce of men 1. Private property 2. Patrimonial property of the State Things not subject to prescription 1. 2. 3. 4. Public domain Intransmissible rights Movables possessed through a crime Registered land

Renunciation of Prescription y Persons with capacity to alienate may renounce prescription already obtained but not the right to prescribe in the future May be express or tacit

Prescription is deemed to have been tacitly renounced; renunciation results from the acts w/c imply abandonment of right acquired Creditors & persons interested in making prescription effective may avail it themselves not withstanding express or tacit renunciation

PRESCRIPTION OF OWNERSHIP & OTHER REAL RIGHTS Kinds of Acquisitive prescription 1. Ordinary (1) Possession in good faith (2) Just title (3) Within time fixed by law a. 4 years for movables b. 8 years for immovables (4) In concept of an owner (5) Public, peaceful, uninterrupted 2. Extra ordinary (1) Just title is proved (2) Within time fixed by law a. 10 years for movables b. 30 years for immovables (3) In concept of an owner (4) Public, peaceful, uninterrupted GOOD FAITH y Reasonable belief that person who transferred the thing is the owner & could validly transmit ownership Must exist throughout the entire period required for prescription y

Titulo Colorado- such title where there was a mode of transferring ownership but something is wrong because the grantor is not the owner Titulo putativo- a person believes he has obtained title but he has not because there was no mode of acquiring ownership, as when one is in possession of a thing in the mistaken belief that it had been bequeathed to him Title must be one which would have been sufficient to transfer ownership if grantor had been the owner Through one of the modes of transferring ownership but there is vice/defect in capacity of grantor to transmit ownership

IN CONCEPT OF OWNER y y Possession not by mere tolerance of owner but adverse to that of the owner Claim that he owns the property

PUBLIC, PEACEFUL & UNINTERRUPTED y y y Must be known to the owner of the thing Acquired & maintained w/o violence Uninterrupted ( no act of deprivation by others) in the enjoyment of property

INTERRUPTION 1. Natural A. Through any cause, possession ceases for more than 1 year B. If 1 year or less- as if no interruption 2. Civil

JUST TITLE (TRUE & VALID)- must be proved & never presumed; only Titulo Colorado is required

A. Produced by judicial summons; EXCEPT: a. Void for lack of legal solemnities b. Plaintiff desists from complaint/ allows proceedings to lapse c. Possessor is absolved from complaint y Express or tacit renunciation y Possession in wartime

RULES IN PERIOD: y

COMPUTATION

OF

Present possessor may tack his possession to that of his grantor or predecessor in interest Present possessor presumed to be in continuous possession even with intervening time unless contrary is proved First day excluded, last day included

TACKING PERIOD y y y There must be privity between previous & present possessor Possible when there is succession of rights If character of possession different: predecessor in bad faith possessor in good faith- use extraordinary prescription

PRESCRIPTION OF ACTIONS PRESCRIPTIVE ACTIONS PERIOD 30 yrs 1. Action over immovables- from time possession is lost 10 yrs 1. Mortgage action 2. Action upon written contract 3. Action upon obligation created by law 4. Action upon judgment 8 yrs 1. Action to recover movables from time possession is lost 6 yrs 1. Action upon an oral contract 2. Action upon a quasi- contract 4 yrs 1. Upon injury to rights of plaintiff 2. Upon a quasidelict 1 yr 1. Forcible entry and unlawful detainer 2. Defamation 5 yrs Others where period are not fixed by law

Rights not extinguished by prescription 1. 2. 3. 4. Demand right of way Abate public/ private nuisance Declare contract void Recover property subject to expressed trust 5. Probate of a will 6. Quiet title

E. OBLIGATION I. DEFINITION OBLIGATION: A JURIDICAL NECESSITY TO GIVE, TO DO OR NOT TO DO

quasi-delicts) and may arise either from bilateral or unilateral acts of persons. NOTE: The form in which the obligation is manifested is sometimes added as a fifth element. This element, however, cannot be considered as essential as there is no particular form required to make obligations binding, except in rare cases.

II. ELEMENTS OF AN OBLIGATION ARTS. 1156 1162 ELEMENTS OF AN OBLIGATION: (PAVO) y ACTIVE SUBJECT (obligee/ creditor): one in whose favor the obligation is constituted; person entitled to demand; PASSIVE SUBJECT (obligor/ debtor): one who has the duty of giving, doing or not doing; person bound to the fulfilment; OBJECT/ SUBJECT MATTER: the prestation or conduct which has to be observed by the debtor/ obligor. It is not a thing but a particular conduct of the debtor.

III. DIFFERENT KINDS OF PRESTATIONS a. To give b. To do c. To not do- consists in abstaining from some act, includes not to give, both being negative obligations IV. CLASSIFICATIONS OF OBLIGATIONS 1. Viewpoint of Sanction a. Civil obligations- give a right of action to compel their performance b. Natural obligations- not based on positive law but on equity and natural law, do not grant a right of action to enforce their performance, but after voluntary fulfilment by the obligor, they authorize retention of what has been delivered or rendered by reason thereof. c. Moral obligations- those that cannot be enforced by action but which are binding on the party who makes it in conscience and natural law. 2. Viewpoint of Performance a. Positive obligation- to give; to do. b. Negative obligation- not to do. 3. Viewpoint of subject Matter

REQUISITES OF A VALID PRESTATION: a. b. c. d. y Licit Possible Determinate/ determinable Must have pecuniary value Vinculum Juris/ Legal tie: the efficient cause or the juridicial tie between two subjects by reason of which the debtor is bound in favor of the creditor to perform the obligation. It can be established by various sources of obligations ( law, contract, quasi-contracts, delicts and

a. Personal obligation b. Real obligation I. Determinate or Specific II. Generic III. Limited Generic 4. Viewpoint of Person Obliged a. Unilateral- only one party is bound b. Bilateral- both parties are bound Difference Between a Civil and Natural Obligation

y CIVIL OBLIGATION Art. 1156 Based on positive law Enforceable by court action NATURAL OBLIGATION Arts. 1423-1430 Based on equity and natural justice Cannot be compeled by cour action but depends exclusively upon the good conscience of the debtor

The law cannot exists as a source of obligations, unless the acts to which its principles may be applied exist. Once the acts or facts exist, the obligations arising thereform by virtue of the express provisions of the law are entirely independent of the agreement of the parties. And such obligations and their correlative rights are governed by the law by which they are created. It must be expressly or impliedly set forth and cannot be presumed.

IV. 1. 2. 3. 4. 5.

SOURCES OF OBLIGATION

Law Contracts Quasi-contracts; Acts or omissions punished by law; and Quasi-delicts

NOTE: The list is exclusive (Sagrado Orden v. Nacoco, G.R. No. L-37756, June 30, 1952). However, some writers expressly recognize that a UNILATERAL PROMISE can give rise to obligations ( Tolentino, Volume IV, p. 62). 1. LAW (OBLIGATION EX LEGE)

2. CONTRACTS (OBLIGATION EX CONTRACTU) y A juridical conventions manifested in legal form, by virtue of which one or more persons bind themselves in favor another, or others, or reciprocally, to the fulfilment of a prestation to give, to do, or not to do. (Sanchez Roman) y Obligations arising from contracts have the force of law between the contracting parties and should be compelled with in good faith. (Art. 1159) y The terms of the contracts determine the respective obligations of the parties. y If the terms of the contract are clear and leave no doubt upon the contracting parties intention, such terms should be applied in their literal meaning. y Neither party may unilaterally evade his obligation in the contract, unless the contract authorizes it or the other party assents. y Parties may freely enter into any stipulations provided they are not contrary to law, morals, good customs, public order or public policy.

3. QUASI-CONTRACTS ( OBLIGATION EX QUASI-CONTRACTU) y Juridical relations resulting from lawful, voluntary and unilateral acts, which has for its purpose, the payment of indemnity to the end that no one shall be unjustly enriched or benefited at the expense of another. y Distinguished from other Sources (LUV) a. The act giving rise to a quasi contract must be LAWFUL distinguishing it from delict; b. The act must be VOLUNTARY distinguishing it from a quasi-delict which is based on fault or negligence; c. The act must be UNILATERAL distinguishing it from contract which is based on agreement. (Tolentino, Volume IV, p. 68)

4. DELICTS ( OBLIGATION EX MALEFICIO OR EX DELICTO) y Article 100 of the Revised of the Penal Code- Every person criminally liable for a felony is also civilly liable. y The civil liability springs out and is dependent upon the facts which, if true, will constitute a crime. y Such civil liability is a necessary consequence of criminal responsibility, and is to be declared and generally enforced in the criminal proceeding except where the injured party reserves his right to avail himself of it in a distinct civil action or in cases where an independent civil action is allowed by law. GOVERNING RULES: 1. Articles 100-113 of the RPC and other penal laws subject to Art 2177 Civil Code (quasi-delict); 2. Chapter 2, Preliminary title, on Human Relations( Civil code) 3. Title 18 of book IV of the Civil Code on damages SCOPE OF CIVIL LIABILITY 1. Restitution 2. Reparation for damage caused 3. Indemnity for Consequential damages EFFECTS OF ACQUITTAL IN CRIMINAL CASE GENERAL RULE: The acquittal of the accused in the criminal case does not prejudice the civil action, in which the

KINDS OF QUASI CONTRACT a. Negotiorum Gestio: is the voluntary management of the property or affairs of another without the knowledge or consent of the latter. (Art. 2144) b. Solutio Indebiti: is the juridical relation, which is created when something is received when there is no right to demand it and it was unduly delivered through mistake. (Art. 2145) The requisites are: c. There is no right to receive the thing delivered; d. The thing was delivered through mistake. e. Other cases (Art. 2164-2175)

offended party may still be able to recover damages by a preponderance of evidence. EXCEPTION: Where the judgment of acquittal contained a declaration that no negligence can be attributed to the accused and that the fact from which the civil action might arise did not exist CRIMES WITHOUT CIVIL LIABILITY 1. 2. 3. 4. Contempt Insults to persons in authority Gambling Violations of traffic regulations (De Leon, 2003 ed., p.23)

injury; or that the fault or negligence be the cause of the damage or injury. DISTINCT FROM A CRIME: An injured party or his heirs has the choice between an action to enforce civil liability arising from crime under Article 100 of the RPC and an action from quasi-delict under Articles 2176-2194 of the Civil Code. NEGLIGENCE: Failure to observe for the protection of the interests of another person, that degree of care, precaution and vigilance which the circumstances justly demand, whereby such other person suffers injury. ( US v. Barrios, 23 Phil. 434[1912] ) y ELEMENTS OF NEGLIGENCE: (DFI) a. A duty on the part of the defendant to protect the plaintiff from the injury of which the latter complains; b. A failure to perform that duty; and c. An injury to the plaintiff through such failure y TEST of NEGLIGENCE: Would a prudent man, in the position of the person to whom negligence is attributed, foresee harm to the person injured as a reasonable consequence of the course about to be pursued? (Picart v. Smith, 37 Phil. 809) y

EXTINGUISHMENT OF LIABILITY: The civil liability for crimes is extinguished by the same causes provided by the Civil Code for the extinguishment of other obligations. 5. QUASI-DELICT/ TORTS (OBLIGATIONS EX QUASIDELICTO / EX QUASI MALEFICIO) y It is an act or omission arising from fault or negligence which causes damage to another, there being no preexisting contractual relations between the parties y ELEMENTS: 1. That there exists a wrongful act or omission imputable to the defendant by reason of his fault or negligence; 2. That there exists a damage or injury, which must be proved by the person claiming recovery; 3. That there must be a direct causal connection or a relation of cause and effect between the fault or negligence and the damage or

NATURAL OBLIGATIONS Arts. 1423-1430 NATURAL OBLIGATIONS y They are real obligations to which the law denies an action, but which the debtor may perform voluntarily. It is patrimonial, and presupposes a prestation. The binding tie of these obligations is in the conscience of man, for under the law, they do not have the necessary efficacy to give rise to an action.

it and cannot be denied or disproved against the person relying thereon. KINDS: 1. Estoppel in pals (by conduct) a. Estoppel by silence b. Estoppel by acceptance of benefits 2. Technical Estoppel a. Estoppel by deed b. Estoppel by record c. Estoppel by judgment d. Estoppel by laches

y y

EXAMPLES OF NATURAL OBLIGATIONS ENUMERATED UNDER THE CIVIL CODE: 1. Performance after the civil obligation has prescribed 2. Reimbursement of a third person for a debt that has prescribed 3. Restitution by minor after annulment of contract 4. Delivery by minor of money or fungible thing in fulfilment of obligation 5. Performance after action to enforce civil obligation has failed 6. Payment by heir of debt exceeding value of property inherited 7. Payment of legacy after will have been declared void.

LACHES OR STALE DEMANDS LACHES- Failure or neglect, for an unreasonable and unexplained length of time to do that which, by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within reasonable time warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it ELEMENTS 1. Conduct on part of the defendant, or of one under whom he claims, giving rise to the situation of which complaint is made and for which the complaint seeks a remedy 2. Delay in asserting the complaints rights, the complainant having knowledge or notice, of the defendants conduct and having been afforded the opportunity to institute a suit 3. Lack of knowledge or notice on the part of the defendant that the complainant

ESTOPPEL Arts. 1431-1439 ESTOPPEL- a condition or state by virtue of which an admission or representation is rendered conclusive upon the person making

would assert the right on which he bases his suit 4. Injury to the defendant in the event relief is accorded to the complainant, or the suit in not held to be barred. LACHES Concerned with effect of delay Question of inequity of permitting the claim to be enforced Not statutory Applies in equity Not based on a fixed time PRESCRIPTION Concerned with fact of delay Question or matter of time Statutory Applies at law Based on a fixed time

VI. NATURE & EFFECT OF OBLIGATIONS Arts. 1163-1178 Personal Obligations: obligations to do or not to do; where the subject matter is an act to be done or not to be done a. Positive- obligation to do b. Negative- obligation not to do Real obligations: obligations to give; where the subject matter is a thing which the obligor must deliver to the oblige a. Determinate or specific- object is particularly designated or physically segregated from all other things of the same class b. Generic- object is designated by its class or genus c. Limited generic- generic objects confined to a particular class

a. Ex: An obligation to deliver one of my horses( Tolentino, Volume IV, p. 91; De Leon, 2003 ed., p. 7) A. OBLIGATION TO GIVE y DUTIES OF OBLIGOR IN AN OBLIGATION TO GIVE A GENERIC THING ( Arts. 1246 AND 1170) 1. To deliver the thing of the quality intended by the parties, taking into consideration the purpose of the obligation, intent of the parties, and other circumstances; 2. To be liable for damages in case of fraud, negligence, or delay, in the performance of his obligation, or contravention of the tenor thereof. y DUTIES OF OBLIGOR IN AN OBLIGATION TO GIVE A DETERMINATE THING (Arts. 1163,1164,1166.) 1. To preserve or take care of the thing due with the diligence of a good father of a family EXCEPT: If the law requires or the parties stipulate another standard of care; y INSTANCES WHERE THE LAW REQUIRES A HIGHER STANDARD OF CARE: a. Banks- as a business affected with public interest, and because of the nature of its functions, the banks is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the

fiduciary nature of their relationship. (Simex v. CA, 183 SCRA 360) EXCEPT: Extraordinary diligence does not cover transactions outside bank deposits, le: commercial transactions (Reyes v. CA, 363 SCRA 51) b. Common Carriers- from the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case (Art. 1733) Diligence of a good father of a family: ordinary care or that diligence which an average or reasonably prudent person would exercise over his own property. NOTE: Rule on Standard of Care y y y That which the law requires; or That stipulated by the parties; or In the absence of the two, diligence of a good father of a family

frame of a picture (De Leon, 2003 ed., pp. 37-38) 4. To deliver the thing itself (Specific Performance) 5. To pay damages in case of breach of the obligation by reason of delay, fraud, negligence or contravention of the tenor of the obligation RIGHTS OF THE CREDITOR OF THE FRUITS 1. Before Delivery- personal right 2. After Delivery- real right RIGHTS OF THE CREDITOR IN REAL OBLIGATION TO GIVE (Art. 1165) GENERIC REAL OBLIGATION (Obligation to deliver a generic thing): 1. To ask for performance of the obligation 2. To ask that obligation be complied with at the expense of the obligor 3. To recover damages in case of breach of obligation NOTE: A generic real obligation can be performed by a third person since the object is expressed only according to its family or genus. DETERMINATE OR SPECIFIC REAL OBLIGATION ( Obligation to deliver a determinate thing): 1. To demand specific performance or fulfilment ( if it is still possible) of the obligation with a right to indemnity for damages 2. To demand rescission of the obligation with right to recover damages 3. To demand payment of damages when it is the only feasible remedy y

2. To deliver the fruits of the thing: Right to the fruits of the thing from the time the obligation to deliver it arises; 3. To deliver its accessions and accessories (Art. 1166) y Accessionsadditions to or improvements upon a thing Ex: air conditioner in a car y Accessories- things joined to, or included within the principal thing for its better use, embellishment or competition. Ex: key of a house;

4. If the obligor delays, or has promised to deliver the same thing to two or more persons who do not have the same interest, he shall be responsible for any fortuitous event until he has effected delivery. NOTE: In an obligation to deliver a determinate thing, the very thing itself must be delivered and consequently, only the debtor can comply with the obligation. WHEN OBLIGATION TO DELIVER THE THING AND FRUIT ARISES 1. If the source of the obligation is law, quasi-contract, delict, quasi-delict, it arises from the time designated by the law creating or regulating them; 2. If the source is contract, it arises from the time of the perfection of the contract (i.e. meeting of the minds between the parties), unless a. The parties made a stipulation to the contrary b. The obligation is subject to a suspensive condition or period; arises upon fulfillment of the condition or arrival of the period c. In a contract to sell, the obligation arises from the perfection of the contract even if the obligation is subject to a suspensive condition or a suspensive period where the price has been paid B. OBLIGATIONS TO DO OR NOT TO DO RIGHTS OF A CREDITOR IN PERSONAL OBLIGATION ( TO DO OR NOT TO DO)

POSITIVE PERSONAL OBLIGATIONS: 1. Performance at debtors cause: The obligee is entitled to have the thing done in a proper manner, by himself or by a third person, at the expense of the debtor. 2. To demand what has been poorly done be undone 3. To recover damages because of breach of the obligation y NEGATIVE PERSONAL OBLIGATION 1. To have it undone at the expense of the obligor; and 2. To ask for damages y

PERSONAL AND DISTINGUISHED PERSONAL Jus ad rem, a right enforceable only against a definite person or group of persons Right pertaining to a person to demand from another as a definite passive subject, the fulfillment of the prestation to give, to do or not to do.

REAL

RIGHT

REAL Jus in re, a right enforceable against the whole world

Right pertaining to a person over a specific thing without a definite passive subject against whom the right may be personally enforced

C. BREACH OF OBLIGATIONS (Arts. 1170-1174) y Voluntary- debtor in the performance of the obligation is guilty of: 1. Fraud (Dolo) 2. Negligence(Culpa) 3. Delay ( Mora) 4. Contravention of the tenor of the obligation NOTE: debtor is liable for damages y Involuntary- debtor is unable to comply with his obligation due to fortuitous event/s

FRAUD IN THE PERFORMANCE / DOLO INCIDENTE (ART. 1170) Present during the performance of a preexisting obligation Purpose is to evade the normal fulfillment of the obligation Results in the breach of an obligation

CAUSAL FRAUD/ DOLO CAUSANTE (ART 1338) Present during the perfection of a contract

Results in vitiation of consent; voidable contract Give rise to a right in Give rise to a right of an favor of the creditor to innocent party to annul recover damages the contract NOTE: Future fraud cannot be waived. However, the law does not prohibit renunciation of the action for damages on the ground of past fraud. REMEDIES OF DEFRAUDED PARTY a. Specific performance ( Art 1233) b. Resolve contract ( Art 1191) c. Damages, in either case 2. NEGLIGENCE (Culpa) y Any voluntary act or omission, there being no malice which prevents the normal fulfillment of an obligation y Consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place ( Art. 1173)

NOTE: debtor is not liable for damages 1. FRAUD (Dolo) y It is the deliberate or intentional evasion of the normal fulfillment of an obligation. ( 8 Manresa 72) y It is the fraud in the performance or fulfillment of an obligation already existing, as distinguished from the fraud referred to in Article 1338 which is the cause of nullity of contracts and which exists before and at the moment of creating the obligation. TYPES OF FRAUD a. Casual Fraud ( Dolo Causante): fraud employed in the execution of the contract b. Incidental Fraud ( Dolo Incidente): fraud in performance of obligation already existing because of a contract

KINDS OF NEGLIGENCE a. Quasi-Delict ( Culpa aquiliana/ culpa extra contractual) source of obligation; wrong or negligence committed independent of contract and without criminal intent b. Contractual Negligence ( Culpa Contractual)- wrong or negligence in the performance of a obligation/ contract c. Criminal Negligence ( Culpa Criminal)- wrong or negligence in the commission of a crime FRAUD VS. NEGLIGENCE, DISTINGUISHED FRAUD There is deliberate intention to cause damage NEGLIGENCE There is no deliberate intention to cause damage

NEGLIGENCE VS. CRIME, DISTINGUISHED NEGLIGENCE Any act with fault or negligence Criminal intent unnecessary Damages may be awarded to injured party Violation of private rights Preponderance of evidence CRIME Acts punishable by law necessary Some crimes do not give rise to civil liability Public rights

WHAT IS PUNISHABLE CONDITION OF THE MIND LIABILITY FOR DAMAGES NATURE OF THE RIGHT VIOLATED AMOUNT OF EVIDENCE COMPROMISE

Can be compromised as any other civil liability PRESUMPTION Presumption of negligence KINDS OF NEGLIGENCE, DISTINGUISHED

Proof beyond reasonable doubt Criminal liability can never be compromised Presumption of innocence

Waiver for future fraud is void

Waiver for future negligence may be allowed in certain cases

CULPA ACQUILIANA Negligence is substantive and independent

CULPA CONTRACTUAL Negligence merely an incident of performance of an obligation Source of the obligation is the breach of the contractual obligation Diligence in the

Source of the obligation is the negligence itself

Diligence in the

selection and supervision of the employees is a defense

selection and supervision of the employees is not available as a defense.

NOTES: y Situation exempting from liability for gross negligence is null and void because such negligence amounts to fraud If the negligent act or omission of the creditor is the proximate cause of the event which led to the damage or injury complained of he cannot recover

EFFECTS OF CONTRIBUTORY NEGLIGENCE OF THE OBLIGEE GENERAL RULE: Reduces or mitigates the damages which he can recover EXCEPTION: If the negligent act or omission of the creditor is the proximate cause of the event which led to the damage or injury complained of, he cannot recover. TEST OF NEGLIGENCE: If the defendant, in committing or causing the negligent act, had used reasonable care and vigilance which a man of ordinary prudence would have employed under the same situation, he is not guilty of negligence. Otherwise, he is guilty. DOCTRINE OF RES IPSA LOQUITOR AS APPLIED IN NEGLIGENCE CASES The thing or transaction speaks for itself y When the thing which caused injury, without fault to the injured person, is under the exclusive control of the defendant and the injury is such as in the ordinary course of things does not occur if he having such control uses proper care, it affords reasonable evidence in the absence of explanation from the defendant, that the injury arose from defendants want of care ( Africa vs Caltex, 16 SCRA 448 and Republic vs Luzon Stevedoring, 21 SCRA 272)

GENERAL RULE: Future Negligence can be waived EXCEPTION: In cases where the nature of the obligation or public policy requires another standard of care (e.g. Nature of Obligation of a Common Carrier)

3. DELAY (MORA) a. Ordinary Delay- failure to perform an obligation on time b. Legal Delay/ Default- failure to perform an obligation on time which failure constitutes a breach of the obligation. ( De Leon, 2003 ed., p. 42) REQUISITES OF DELAY a. Obligation must be due, demandable and liquidated; b. Debtor fails to perform his positive obligation on the date agreed upon; c. A demand ( not merely a reminder or notice), judicial or extra-judicial, made by the creditor upon the debtor to fulfil, perform or comply with his obligation otherwise, he will be in default; and

d. Failure of the debtor to comply with such demand. KINDS OF DELAY 1. MORA SOLVENDI- default on the part of the debtor: KINDS: a. Mora Solvendi Ex re- default in real obligations ( obligation is to give) b. Mora Solvendi Ex persona- default in personal obligations (obligation to do) REQUISITES: a. The obligation must be due, enforceable and already liquidated or determinate in amount; b. There must be non-performance; and c. There must be a demand, unless demand is not required. 2. MORA ACCIPIENDI- default on part of creditor when he unjustifiably refuses to accept the performance of the obligation. REQUISITES: a. Offer of performance by the debtor b. Offers must be to comply with the prestation as it should be performed c. Creditor refuses the performance without just cause 3. COMPENSATIO MORAE- both parties are in default ( in reciprocal obligations); there is no actionable default on the part of both parties

EFFECTS OF DELAY: 1. MORA SOLVENDI a. Debtor is guilty of breach of the obligation b. Liability: If obligation to pay moneymust pay interest. If no extra-judicial demand, interest runs from the filing of the complaint. In other obligations, pay damages. c. Obligations to deliver a determinate thing, liable for fortuitous events. If debtor can prove that loss would have resulted even if he had not been in default, the court may equitably mitigate the damages (Art. 2215 [4]) d. Resolution ( Art. 1170, In proper cases) 1. MORA ACCIPIENDI a. Responsibility of debtor is limited to fraud and gross negligence b. Debtor is exempted from risk of loss of thing; creditor bears risk of loss c. Expenses by debtor for preservation of thing after delay is chargeable to creditor d. If obligation bears interest, debtor does not have to pay from time of delay e. Creditor liable for damages f. Debtor may relieve himself of obligation by consigning the thing RULES ON DEFAULT 2. UNILATERAL OBLIGATIONS GENERAL RULE: (No demand, no delay.) Those obliged to deliver or to do something incur in delay from the time the obligee

judicially or extrajudicially demands from them the fulfillment of their obligation. The mere expiration of the period fixed by the parties is not sufficient. EXCEPTIONS (no demand necessary) a. When the obligation or the law expressly so declare; or b. When time is of the essence of the contract, i.e. when from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or c. When demand would be useless, as when the obligor has rendered it beyond his power to perform d. When the debtor acknowledged that he is in default NOTE: It is not enough that there is a specific date of performance (e.g. On Jan 15, 2006), the words without need of demand should appear on the face of the instrument. 3. RECIPROCAL OBLIGATIONS created or established at the same time, out of the same cause and which results in the mutual relationship between the parties GENERAL RULE: In reciprocal obligations one party incurs in delay from the moment the other party fulfils his obligation, while he himself does not comply or is not ready to comply in a proper manner with what is incumbent upon him.

The general rule is that fulfillment by both parties should be simultaneous. EXCEPTION: When different dates for the performance of obligations is fixed by the parties NOTES: y In reciprocal obligations, demand is still necessary only when the respective obligations are to be performed on separate dates In neither party complies with his prestation, the default on one compensates the default of the other

Rule in Reciprocal Obligations: In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfils his obligation, delay by the other begins. Performance must be simultaneous unless different dates for the performance of the obligation were fixed by the parties CESSATION OF THE EFFECTS OF MORA: y y Renunciation ( express or implied) Prescription

NOTE: There is no delay in negative obligations and natural obligations E. FORTUITOUS EVENT- An event which could not be foreseen, or which though foreseen, was inevitable. REQUIREMENTS: (Nakpil and Sons vs. CA, 1986)

1. The cause of the breach of the obligation must be independent of the will of the debtor 2. The event must be either unforeseeable or unavoidable 3. The event must be such as to render it impossible for the debtor to fulfil his obligation in a normal manner 4. The debtor must be free from any participation in, or aggravation of injury to the creditor RULES ON FORTUITOUS EVENT: GENERAL RULE: No liability for fortuitous event EXCEPTIONS: 1. When expressly declared by law( bad faith , subject matter is generic, debtor is in delay) 2. When expressly declared by stipulation or contract 3. When nature of obligation requires assumption of risk 4. When the obligor is in default or has promised to deliver the same thing to two or more persons who do not have the same interest ( Art. 1165 [3]) NOTES: It must not only be the proximate but it must be the ONLY or SOLE cause. Contributory negligence of the debtor renders him liable despite the fortuitous event EFFECT OF FORTUITOUS EVENT DETERMINATE OBLIGATION GENERIC OBLIGATION

Obligation extinguished

is Obligation is not extinguished based on the rule that the genus never perishes ( genus nunquam perult)

F. PRINCIPLE IN ARTICLE 1176 GENERAL RULE: Receipt of the principal or the latter installment without reservation as to the interest shall give rise to disputable presumption that the interest or the prior installment has been paid. Exceptions: 1. When there is a reservation made orally or in writing 2. If the receipt does not recite that it was issued for a particular installment due as when the receipt is only dated. 3. Payment of taxes 4. When non-payment has been proven D. REMEDIES AVAILABLE TO CREDITORS FOR THE SATISFACTION OF THEIR CLAIMS 1. Exact fulfillment of the obligation by specific or substitute performance with a right to damages in either case; 2. In case of reciprocal obligations, petition the court to resolve the contract; 3. Exhaustion of debtors property or pursue leviable ( not exempt from attachment under the law) property of the debtor; 4. Accion directa ( Arts. 1729 and 1652): Right of the lessor to go directly to sublesee for unpaid rents of the lessee. Right of the laborers or persons who

furnish materials for a piece of work undertaken by a contractor to go directly to the owner for any unpaid claims due to the contractor 5. Accion subrogatoria- to be subrogated to all the rights and actions of the debtor save those which are inherent in his person REQUISITES OF SUBROGATORIA: ACCION

d. The creditor has no other legal remedy to satisfy his claim e. The debtors acts are fraudulent NOTE: Remedies 5 and 6 are subsidiary to the remedy of exhaustion. It can only be availed of in the absence of any other legal remedy to obtain reparation for the injury. TRANSMISSIBILITY OF OBLIGATIONS GENERAL RULE: Rights acquired by virtue of an obligation are transmissible in character EXCEPTION: 1. When they are not transmissible by their very nature e.g. purely personal right 2. When there is a stipulation of the parties that they are not transmissible 3. Not transmissible by operation of law REMEDIES IN CASE OF NON PERFORMANCE IN REAL OBLIGATIONS (Arts. 1165-1168) 1. Specific Performance- Performance by the debtor of the prestation itself 2. Substitute Performance: someone else performs or something else is performed at the expense of debtor 3. Equivalent Performance: damages
PRESTATION SPECIFIC PERFORMANCE SUNSTITUTED PERFORMANCE EQUIVALENT PERFORMANCES (Damages)

a. The debtor to whom the right of action properly pertains must be indebted to the creditor; b. The creditor must be prejudiced by the inaction or failure of the debtor to proceed against the third person; c. The creditor must have pursued first or exhausted all the properties of the debtor which are not exempt from execution; d. The debtors assets are insufficient to satisfy his claims; and e. The right of account is not purely personal 6. Accion Pauliana- asking the court to rescind or to impugn all the acts which the debtor may have done to defraud the creditors ( Arts. 1380-1389) REQUISITES OF ACCION PAULIANA: a. There is a credit in favor of plaintiff b. The debtor has performed an act subsequent to the contract, giving advantage to other persons c. The creditor is prejudiced by the debtors act which are in favor of 3rd parties and rescission will benefit the creditor

To Give Determinate Y N Y

Indeterminate To Do Personal Not Personal Not to Do

VII. KINDS OF CIVIL OBLIGATIONS A. PRIMARY CLASSIFICATION OF OBLIGATIONS UNDER THE CIVIL CODE 1. Demandability 1. Pure 2. Conditional 3. With a period 2. Plurality of object a. Simple b. Alternative c. Facultative 3. Plurality of subject a. Simple b. Joint c. Solidary 4. Performance a. Divisible b. Individible 5. Sanctions for breach a. With a penal clause b. Without a penal clause A. PURE PUREone whose effectivity or extinguishment does not depend upon the fulfillment or non-fulfillment of a condition or upon the expiration of a period and is demandable at once B. CONDITIONAL CONDITIONAL- one whose effectivity is subordinated to the fulfillment or nonfulfillment of a future AND uncertain event or upon a past event unknown to the parties

N N N

N Y Y

Y Y Y

REAL OBLIGATIONS SPECIFIC Specific performance x GENERIC x

PERSONAL OBLIGATIONS TO NOT TO DO DO x Undo things already done Undo things already done at debtor s expense

Sunstitute performance

Principles of Balancing of Equities as Applied in actions for Specific Performance y In decreasing specific performance equitably requires not only that the contract be just and equitable in the provision, but that the consequences of specific performance likewise be equitable and just. The general rule is that this equitable relief will not be granted if, under the circumstances of the case the result of the specific performance of the contract would be harsh, inequitable, and oppressive or result in an unconscionable advantage to the plaintiff. (Agcaolli vs GSIS, G. R. No. 30056, August 30, 1988)

WITHOUT THE FAULT OF THE DEBTOR Loss Obligation is extinguished

WITH THE FAULT OF THE DEBTOR Debtor obliged to pay damages AT THE DEBTORS EXPENSE Debtor shall have no other right than that granted to a usufructuary (Arts. 579 & 580)

y y c. d. e. f.

Deterioration IMPROVEMENT

BY THE THINGS NATURE OR BY TIME Improvement shall inure to the benefit of the creditor

The obligation arises or becomes effective The obligor can be compelled to comply with what is incumbent upon him Effectivity retroacts to the day of the constitution of the obligation No retroactivity with reference to fruits or interest and prescription Creditor may preserve rights Debtor- recovery of payment by mistake or even without mistake Doctrine of Constructive Fulfillment of Suspensive Condition: the condition is deemed fulfilled when the obligor actually prevented the obligee from complying with the condition Requisites of Constructive Fulfillment: 1. Condition is suspensive 2. Debtor prevented the fulfillment of the condition 3. It was voluntary Principle of Retroactivity in Suspensive Condition: 1. In obligation to give: The Retroactivity principle applies since the condition is only an accidental element of the contract. 2. The principle has no application to real contracts and contracts in which the obligation arising therefrom can only be realized with successive periods or intervals. 3. Retroactive affects to fruits and interest do not apply. RULES ON LOSS, DETERIORATION, AND IMPROVEMENTS DURING PENDENCY OF A SUSPENSIVE CONDITION( Art. 1189)

CONDITION- Future and uncertain event or a past event unknown to the parties upon which an obligation or provision is made to depend. Classification of Conditions: 1. Suspensive- the happening of condition gives rise to obligation y Effects: a. Upon constitution of obligation and before its fulfillment, obligee acquires a mere hope or expectancy which is protected by law.  Before fulfillment: 1. Demandability and the acquisition of the rights arising from the obligation is suspended. 2. Obligation of the obligor to comply with the prestation is suspended. b. Obligation shall be effective upon the fulfillment of the condition  After fulfillment: y

NOTES: y y Applies only to determinate things Also applied to obligations with a period

A THING IS LOST WHEN IT: y y y Perishes Goes out of commerce Disappears in such a way that its existence is unknown or it cannot be recovered ( Art. 1189)

c. After the fulfillment of the obligation, whatever may have been paid or delivered by one or both parties upon the constitution of the obligation shall have to be returned; there is a return in the status quo d. Principle of retroactivity applies e. Obligation extinguished f. Restore to each other what was received plus interest/ fruits SUSPENSIVE RESOLUTORY Happening of the ..extinguishes an condition give rise to obligation obligation During the ..hovering pendency, obligation possibility is a mere hope termination

REQUISITES FOR THE APPLICATION OF ARTICLE 1189 a. The obligation must be a real obligation b. The obligation is a specific or determinate thing c. The obligation is subject to a suspensive condition d. The condition is fulfilled e. There is loss, deterioration or improvement of the thing during the pendency of the happening of the condition 2. Resolutory- happening of condition extinguishes the obligation EFFECTS: a. obligation becomes demandable immediately after its constitution and rights are immediately vested in the obligee. b. Before the fulfillment of the condition, the rights are recognized in Art. 118, par. 1 In case of suspensive conditions should likewise be available.

of

3. Potestative- dependent on sole will of 1 party; if on part of the debtor and suspensive void 4. Casual- dependent on chance or hazard 5. Mixed chance, or any of parties 6. With term a. Positive extinguished if time expires or indubitable of condition to happen b. Negative effective from moment of time elapsed or evident it cant happen POSITIVE AND NEGATIVE OBLIGATIONS y Positive condition: obligation is extinguished as soon as the time expires or it becomes indubitable that the event will not happen Negative condition: the obligation is effective from the moment the time

indicated has lapsed or it has become evident that the event cannot occur, although the time indicated has not yet lapsed. IMPOSSIBLE AND ILLEGAL CONDITIONS GENERAL RULE: They shall annul the obligation which depends upon them EXCEPTIONS: a. b. c. d. e. Pre-existing obligation If obligation is divisible In simple or remuneratory donations Testamentary dispositions Conditions not to do an impossible thing

depends on a future and certain event; subject to the expiration of a term of period ( Arts 1193, 1196)  PERIOD- Interval of time, which, exerting and influence on an obligation as a consequence of a juridical act, either suspends its demandability or produces its extinguishment REQUISITES: 1. Future 2. Certain 3. Legally and physically possible

WHEN STIPULATION SAYS PAYABLE WHEN ABLE y When the obligor binds himself to pay when his means permit him to do so, the obligation shall be deemed to be one with a period. Remedy : 1. Agreement among parties 2. Court shall fix period of payment when parties unable to agree

NOTE: the determining point as to whether the obligation is impossible or not is at the time of the perfection of the contract EFFECT OF IMPOSSIBLE ILLEGAL CONDITIONS
CONDITION TO DO impossible or illegal NOT to DO an illegal thing NOT to do an Impossible thing Condition IMPOSSIBLE BUT Obligation Divisible EFFECT ON OBLIGATION VOID

AND

EFFECT ON CONDITION VOID

KINDS OF OBLIGATIONS WITH A PERIOD: 1. Accorfing to effect: a. Resolutory ( In diem) demandable at once but terminates upon arrival of the day certain y Day certain- that which must necessarily come, although it may not be known when b. Suspensive (ex die) obligation becomes demandable on the day stipulated 2. According to source a. Legal- when it is provided by laws

VALID VALID

VALID DISREGARD CONDITION

ONLY THE AFFECTED OBLIGATION IS VOID.

C. OBLIGATIONS WITH A PERIOD WITH A PERIODAn obligation whose demandability or extinguishment

b. Conventional or Voluntary- when it is agreed to by the parties c. Judicial- when it is fixed by the court 3. According to definiteness: a. Definite when it is fixed or it is known when it will come b. Indefinite when it is not fixed or it is not known when it will come TERM VS. CONDITION, DISTINGUISHED TERM Interval of time which is future and certain CONDITION Fact or event which is future or uncertain or a past event unknown to the parties

be inferred that a period was intended by the parties 2. If the duration of the period depends upon the will of the debtor 3. In case of reciprocal obligations, when there is a just cause for fixing a period 4. If the debtor binds himself when his means permit him to do so PERIOD, FOR WHOSE BENEFIT GENERAL RULE: When a period is designated for the performance or fulfillment of an obligation, it is presumed to have been established for the benefit of both parties. EXCEPTION: When it appears from the tenor of the obligation or other circumstances that the period has been established in favor of one or the other. PERIOD FOR THE BENEFIT OF THE CREDITOR y Creditor may demand the fulfillment of the obligation at any time but the debtor cannot compel him to accept before the expiration of the period.

Exerts an influence upon the time of demandability or extinguishment of an obligation

Exerts an influence upon the very existence of the obligation itself

When it is left exclusively to the will of the debtor, the existence of the obligation is affected

When it is left exclusively to the will of the debtor, the obligation is void

PERIOD FOR THE BENEFIT OF THE DEBTOR y Debtor may oppose any premature demand of the creditor but he may renounce the benefit of the period by performing his obligation in advance ( Manresa )

WHEN COURTS MAY FIX PERIOD: 1. If the obligation does not fix period, but from its nature and circumstances it can

WHEN DEBTOR LOSES RIGHT TO PERIOD: y y y Insolvency of debtor, unless security provided Did not deliver security promised Impaired security through his own acts or through fortuitous event unless he gives new securities equally satisfactory Violates undertaking in consideration of extension of period Attempts to abscond D. ALTERNATIVE OBLIGATIONS (ARTS 1199 1206) FACULTATIVE only one prestation has been agreed upon but another may be given in substitution EFFECT OF LOSS OR DETERIORATION THRU NEGLIGENCE, DELAY OR FRAUD OF OBLIGOR: y y Of thing intended as a substitute no liability Of the substitute after substitution is made with liability different

LIMITATIONS ON THE RIGHT OF CHOICE OF THE DEBTOR The debtor shall not have the right to choose the prestation which are: a. Impossible b. Unlawful c. Those which could not have been the object of the obligation WHEN CONVERTED TO SIMPLE OBLIGATION: 1. When the person who a right of choice has communicated his choice 2. Only one is practicable EFFECT OF LOSS OF OBJECTS OF ALTERNATIVE OBLIGATIONS 1. If the right of choice belongs to the debtor y If through a fortuitous event all were lost, debtor cannot be held liable for damages y If 1 or more but not all of the things are lost or some but not all of the prestations cannot be performed due bto fortuitous event or fault of the debtor, creditor cannot hold the debtor liable for damages because the debtor can still comply with his obligation y If all things, except one, were lost, the debtor must comply by performing that which remain y If all were lost by fault of the debtor the later is liable for the value of the last thing or service which became impossible

y y

ALTERNATIVE- bound by prestations but only one is due

RIGHT OF CHOICE IN ALTERNATIVE OBLIGATIONS GENERAL RULE: The right of choice belong to the debtor EXCEPTION: 1. Expressly granted to creditor 2. Expressly granted to third person

2. If right of choice belongs to the creditor y If 1 of the things is lost through a fortuitous event, the debtor shall perform the obligation by delivering that which the creditor should choose from among the remainder or that which remains if only 1 subsists y If the loss of 1 of the things occurs through the fault of the debtor, the creditor may claim any of those subsisting or the price of thaht which, through the fault of the former, has disappeared with a right to damages y If all the things are lost throught the fault of the debtor, the choice by the creditor shall fall upon the price of any 1 of them, also with indemnity for damages. REQUISITES CHOICE: FOR MAKING THE

principally of one is be given to render sufficient payment/ fulfillment easy

If it is impossible to give all except one, the last one must still be given

If it is impossible to give the principal, the substitute does not have to be given; If it is impossible to give the substitute, the principal must still be given

VIII. JOINT AND SOLIDARY OBLIGATIONS ( Arts. 1207-1222) A. JOINT (DIVISIBLE) OBLIGATION JOINT OBLIGATION (Obligacion Mancumunada) The whole obligation is to be paid or fulfilled proportionately by different debtors or demanded proportionately by the different obligees.

1. Made properly so that creditor or his agent will actually know 2. Made with full knowledge that a selection is indeed being made 3. Made voluntarily and freely 4. Made in due time before or upon maturity 5. Made to all proper persons 6. Made w/o conditions unless agreed by the creditor 7. May be waived, expressly or impliedly ALTERNATIVE vs. FACULTATIVE ALTERNATIVE FACULTATIVE

EXCEPTIONS TO THE PRESUMPTION 1. When expressly stated that there is solidarity 2. When the law requires solidarity 3. When the nature of the obligation requires solidarity 4. When a charge or condition is imposed upon heirs or legatees and the testament expressly makes the

Various things are due Only one thing is due but the giving but a substitute may

charge or condition in solidum (Manresa) 5. When a solidary responsibility is imputed by a final judgement upon several defendants (Gutierrez v. Gutierrez) EFFECTS OF JOINT LIABILITY 1. Demand on one produces delay only with respect to the debt 2. Interruption in payment by one does not benefit or prejudice the other 3. Vices of one debtor to creditor has no effect on the others 4. Insolvency of one debtor does not affect other debtors

only by proceeding against all of the debtors. 2. If there are 2 or more creditors, the concurrence or collective act of all the creditors, although each for his own share, is also necessary for the enforcement of the obligation EFFECT OF BREACH If one of the joint debtors fails to comply with his undertaking, the obligation can no longer be fulfilled performed. Consequently, it is converted into one of indemnity for damages. Innocent joint debtor shall not contribute to the indemnity beyond their corresponding share of the obligation.

JOINT DIVISIBLE OBLIGATION 1. Each creditor can demand for the payment of his proportionate share of the credit, while each debtor can be held liable only for the payment of his proportionate share of the debt 2. A joint creditor cannot act in representation of the other creditors while a joint debtor cannot be compelled to answer for the acts or liability of the other debtors B. JOINT (INDIVIDIBLE) OBLIGATIONS JOINT INDIVISIBLE OBLIGATIONS 1. If there are or more debtors, the fulfillment of or compliance with the obligation requires the concurrence of all the debtors, although each for his own share. The obligation can be enforced

INDIVISIBILITY Refers to the prestation which constitutes the object of the obligation

SOLIDARITY Refers to the legal tie and consequently to the subjects or parties of the obligation

In case of breach, obligation is converted into 1 of indemnity for damages because of breach, indivisibility of the obligation is terminated

When there is liability on the part of the debtors because of the breach, the solidarity among the debtors remains

PASSIVE SURETYSHIP SOLIDARITY Stands for some other person Maybe reimbursed after payment Liable for his and Only the principals co-debtors share share Primary Secondary

Extension of time, Released not released C. SOLIDARY OBLIGATION SOLIDARY OBLIGATION (Obligacion Solidaria) must be expressed in stipulation or provided by law or by nature of the obligation 1. Active- on the part of the creditor or obligee EFFECTS: y Death of 1 solidary creditor transmits share to heirs ( but collectively) y Each creditor represents the other in the act of recovery of payment y Credit is divided equally between creditors as among themselves y Debtor may pay any of the solidary creditors 2. Passive- on the part of debtors or obligors EFFECTS: y Each debtor may be requested to pay whole obligation with right to recover from co-debtors y Interruption of prescription to one creditor affects all y Interest from delay on 1 debtor is borne by all 3. Mixed- on the part of the obligors and obliges, or the part of the debtors and the creditors 4. Conventional- agreed upon by the parties

5. Legal- imposed by law y Instances where law imposes solidary obligation: a. Obligations arising from tort b. Obligations arising from quasicontracts c. Legal provisions regarding obligation of devisees and legatees d. Liability of principals, accomplices, and accessories of a felony e. Bailees in commodatum y EFFECTS: a. Payment made before debt is due, no interest can be charged, otherwise interest can be charged b. Insolvency of one others are liable for share pro-rata c. If different terms and conditions collect only what is due, later on collect from any d. No reimbursement if payment is made after prescription or became illegal e. Remission made after payment is made - co-debtor still entitled to reimbursement f. Effect of insolvency or death of co-debtor still liable for whole amount g. Fault of any debtor every one is responsible -price, damage and interest h. Complete personal defense- total or partial (up to amount of share only) if not personal to him

EFFECT OF LOSS OR IMPOSSIBILITY OF THE PRESTATION: 1. If without fault- no liability 2. If with fault there is liability (also for damage and interest) 3. Loss due to for fortuitous event after default there is liability ( because of default) D. DIVISIBLE AND INDIVISIBLE OBLIGATIONS (Arts. 1223-1225) DIVISIBLE- obligation that is capable of partial performance y y y Execution of certain no. of days work Expressed by metrical units Nature of obligation- susceptible of partial fulfillment

E. OBLIGATIONS WITH A PENAL CLAUSE (Arts. 1226-1230) WITH A PENAL CLAUSE- One to which an accessory undertaking is attached for the purpose of insuring its performance by virtue of which the obligor is bound to pay a stipulated indemnity or perform a stipulated prestation in case of breach. PENAL CLAUSE Constitutes an obligation Demandable in default Obligation exists CONDITION Not an obligation Never demandable

No obligation until condition happens Depends on the non- Principal itself is performance of the dependent on an principal obligation uncertain event

PENAL CLAUSE Only 1 prestation Impossibility of principal extinguished penalty Debtor may not choose between principal and penalty

INDIVISIBLE- one not capable of partial performance y y y y NOTES: y Divisibility or indivisibility of the obligation refers to the performance of the prestation and not to the thing which is the object thereof Intention of parties should be taken into account to determine whether obligation is divisible or not To give definite things Not susceptible of performance Provided by law Intention of parties

partial

ALTERNATIVE OBLIGATIONS Several prestations Impossibility of prestation does not extinguished obligation Debtor may choose among the prestations

PENAL CLAUSE

FACULTATIVE OBLIGATION Penalty of payment Power to choose in lieu of the prestation is absolute principal must be expressly granted Creditor may Creditor may not demand both if demand both expressly granted principal and penalty

PENAL CLAUSE GUARANTEE Insure performance of principal obligation Accessory and subsidiary obligations Obligation to pay the Object of the penalty is different principal and the from the principal guarantee is the sam obligation Principal and penalty can be assumed by the same person Penalty is Guarantee subsists extinguished by the even if the principal nullity of the obligation is principal voidable, unenforceable or a natural one, same applies if penal clause is assumed by a guarantee PURPOSE OF PENALTY 1. Funcion coercitiva o de garantia- to insure the performance of the obligation 2. Funcion liquidatoria- to liquidate the amount of damages to be awarded to the injured party in case of breach of the principal obligation (compensatory), and 3. Funcion estrictamente penal in certain exceptional cases, to punish the obligor. In case of breach of the principal obligation( punitive) CHARACTERISTICS CLAUSES: OF PENAL

b. Refusal to pay penalty c. With dolo ( not of creditor) PENALTY AS DAMAGES SUBSTITUTE FOR

GENERAL RULE: the penalty fixed by the parties is or substitute for damages in case of breach EXCEPTIONS: 1. When there is a stipulation to the contrary 2. When the debtor is sued for refusal to pay the agreed penalty; and 3. When debtor is guilty of fraud DOUBLE FUNCTIONS OF PENALTY 1. To provide for liquidated damages 2. To strengthen the coercive force of the obligation by the threat of greater responsibility in the event of breach KINDS OF PENALTIES: 1. Legal- constituted by law 2. Conventional- constituted by agreement of the parties 3. Compensatory- established for the purpose of indemnifying the damages suffered by the obligee or creditor in case of breach of the obligation 4. Punitive- established for the purpose of punishing the obligor or debtor in case of breach of the obligation 5. Subsidiary or alternative- in case of nonperformance only the penalty is demandable 6. Joint or cumulative- both the principal undertaking and the penalty may be demanded

1. Subsidiary as a general rule, only penalty can be demanded , except: Penalty is joint or cumulative 2. Exclusive takes place of damage, damage can only be demanded in the ff. cases: a. Stipulation- granting righ

CAUSES FOR PENALTY:

REDUCTION

OF

1. Partial/ Irregular performance 2. Penalty provided is iniquitous/ unconscionable IX. ESTINGUISHMENT OF OBLIGATIONS Arts 1232-1304 Principal Modes: (PAL-CoCoCo-No) 1. 2. 3. 4. 5. 6. Payment or performance Loss of the thing due Condonation or remission of debt Confusion or merger of rights Compensation Novation

20. Want of Interest in Some circumstances 21. Abandonment in Special Cases 22. Insolvency Judicially Declared and Debtor is discharged A. PAYMENT OR PERFORMANCE Delivery of money and performance, In any other manner of the obligation REQUISITES FOR VALID PAYMENT/ PERFORMANCE 1. With respect to prestation itself a. Identity b. Integrity or completeness c. Indivisibility 2. With respect to parties- must be made by proper party to proper party a. Payor 1. Payor- the one performing, he can be the debtor himself or his heirs or assigns or his agent, or anyone interested in the fulfillment of the obligation; can be anyone as long as it is with the creditors consent 2. 3rd person pays/ performs- only the creditors consent; if performance is done also with debtors consent he takes the place of the debtor. There is subrogation except if the 3rd person intended it to be a donation. 3. 3rd person pays/ performs with consent of creditor but not with debtors consent, the repayment is only to the extent that the payment has been beneficial to debtor

Other Modes: 7. Annulment 8. Rescission 9. Fulfillment of resolutory condition 10. Prescription Not Stated in the Civil Code: 11. Death of a party in personal obligations 12. Mutual desistance 13. Compromise 14. Impossibility of fulfillment 15. Happening of fortuitous event 16. Arrival of resolutory period 17. Will of One of the Parties due to Indeterminate duration or Nature of the Prestion/ Unilateral Withdrawal in Partnerships 18. Change of Civil status 19. Rebus Sic Stantibus (Art. 1267)

b. Payee 1. Payee creditor or obligee or successor in interest of transferee, or agent 2. 3rd person if any of the ff. concur: y It must have redounded to the obligees y Benefit and only to the extent of such benefit y It falls under art 1241, par 1, 2, 3 the benefit is total so, performance is total 3. Anyone in possession of the credit- but will apply only if debt has not been previously garnished. PRINCIPLE OF INTEGRITY ( Art. 1233) GENERAL RULE: A debt shall not be understood to have been paid unless a thing or service of which the obligation consists has been completely delivered or rendered, as the case maybe. EXCEPTIONS: 1. When the obligation has been substantially performed in good faith (Art 1234); 2. When the obligee accepts performance despites its incompleteness or irregularity and without expressing any protest or correction. (Art. 1235)

PERSONS FROM WHOM THE CREDITOR MUST ACCEPT PAYMENT 1. Debtor himself or his legal representative 2. Any person who has interest in the obligation (i.e., guarantor) 3. A 3rd person who has no interest in the obligation, when there is a stipulation to the contrary PAYMENT MADE BY A 3RD PERSON y If payment was made without the knowledge or against the will: the recovery is only up to the extent or the amount of the debt at the time of the payment; the defense may only be availed of by the obligor If payment was with knowledge: the rights of reimbursements and subrogation are acquired by the 3rd person.

TO WHOM PAYMENT MUST BE MADE 1. The person in whose favor the obligation has been constituted 2. His successor-in-interest 3. Any person authorized by law or by the obligee at the time when payment is due to receive it ( not during the time when the obligation is constituted)

PAYMENT MADE TO AN INCAPACITATED PERSON, VALID IF: 1. Incapacitated person kept the thing delivered, or 2. Insofar as the payment has been beneficial to him PAYMENT TO 3RD PERSON GENERAL RULE: Payment is not valid, even though made in good faith EXCEPTIONS: 1. Payment which redounded to the benefit of the obligee y Instances when the presumption that the payment redounded to the benfit of the obligee: A. After payment 3rd person (subrogation) B. Creditor ratifies payment to 3rd person C. By creditors conduct, debtor has been led to make the payment (estoppel) 2. Payment to the possessor of the credit, when made in good faith y REQUISITES: