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OBLIGATIONS

Nature and Effect of


Obligations

ART. 1156 AN OBLIGATION IS A


JURIDICAL
NECESSITY TO
GIVE, TO DO OR NOT TO DO.

an obligation is a legal bond whereby


constraint is laid upon a person or group of
persons to act or forbear on behalf of
another person or group of persons.
obligation arises from the concurrence of:
a) the vinculum juris or juridical tie;
b) the object which is the prestation;

ART. 1157- OBLIGATIONS ARISE FROM:


1)LAW;
2)CONTRACTS;
3)QUASI-CONTRACTS;
4)ACTS OR OMISSIONS PUNISHED BY
LAW;
5)QUASI-DELICTS.
obligations are civil or natural. Civil obligations
give a right of action to compel performance.
Natural obligations, not being based on positive
law but on equity and natural law, do not grant a
right of action to enforce performance, but after
their voluntary fulfillment by the obligor, they
authorize the retention of what has been delivered
or rendered by reason thereof.

ART. 1158- OBLIGATIONS DERIVED FROM


LAW ARE NOT PRESUMED. ONLY THOSE
EXPRESSLY DETERMINED IN THIS CODE
OR IN SPECIAL LAWS ARE DEMANDABLE,
AND SHALL BE REGULATED BY THE
PRECEPTS
OF
THE
LAW
WHICH
ESTABLISHES THEM; AND AS TO WHAT
HAS NOT BEEN FORSEEN, BY THE
PROVISIONS OF THIS BOOK.
among sources of obligation, the law is the most
important one. It does not depend upon the will of
the parties.
It is imposed by the state and is
generally
imbued
with
some
public
policy
considerations.

It cannot be presumed.
Hence, the payment of taxes must be
specifically directed by our tax statutes. Also,
parents and children are obliged to support
each other as mandated by the provisions of
the Family Code.

ART.
1159OBLIGATIONS
ARISING
FROM CONTRACTS HAVE THE FORCE
OF LAW BETWEEN THE CONTRACTING
PARTIES AND SHOULD BE COMPLIED
WITH IN GOOD FAITH.
a contract is a meeting of minds between 2 or more
persons whereby a person (or a group of persons)
binds himself, with respect to the other (or others)
to give something or to render some service.
a contract may likewise involve mutual and
reciprocal obligations and duties between and
among the parties.

Whatever stipulations, clauses, terms and


conditions are included in a contract, as long as
they are not contrary to law, morals, good
customs, public policy or public order, such
contract is the law between the parties (Gaw v.
IAC)
Contracts which are the private laws of the
contracting parties should be fulfilled according
to the literal sense of their stipulations, if their
terms are clear and leave no room for doubt as
to their intention of the contracting parties, for
contracts are obligatory, no matter what form
they may be, whenever essential requirements
for their validity are present (PAGICO v. Mutuc)

ART 1160 - OBLIGATIONS DERIVED


FROM QUASI-CONTRACTS SHALL BE
SUBJECT TO THE PROVISIONS OF
CHAPTER 1 TITLE 17 OF THIS BOOK.
certain lawful, voluntary and unilateral acts
give rise to the juridical relation of quasicontract to the end that no one shall be
unjustly enriched or benefited at the expense
of the other.
A good example of an obligation arising from a
quasi-contract is the obligation to return what
has been obtained by mistake (solutio indebiti)

ART 1161CIVIL OBLIGATIONS


ARISING
FROM
CRIMINAL
OFFENSES SHALL BE GOVERNED
BY THE PENAL LAWS, SUBJECT TO
THE PROVISIONS OF ART 2177
AND
OF
THE
PERTINENT
PROVISIONS OF CHAPTER 2,
PRELIMINARY TITLE, ON HUMAN
RELATIONS, AND OF TITLE 18 OF
THIS
BOOK,
REGULATING
DAMAGES.

ART. 1162- OBLIGATIONS DERIVED


FROM QUASI-DELICTS SHALL BE
GOVERNED BY THE PROVISIONS
OF CHAPTER 2, TITLE 17 OF THIS
BOOK AND BY SPECIAL LAWS.
quasi-delict: whoever by act or omission
causes damage to another, there being fault
or negligence, is obliged to pay for the
damage done. Such fault, if there is no preexisting contractual relation between the
parties, is called quasi-delict.

ART 1163- EVERY PERSON OBLIGED TO


GIVE SOMETHING IS ALSO OBLIGED TO
TAKE CARE OF IT WITH THE PROPER
DILIGENCE OF A GOOD FATHER OF A
FAMILY, UNLESS THE LAW OR THE
STIPULATION OF THE PARTIES REQUIRES
ANOTHER STANDARD OF CARE.
this article involves the prestation to give. The word
something connotes a determinate object which is
definite, known, and has already been distinctly
decided and particularly specified as the matter to be
given from among the same things belonging to the
same kind.

diligence of a good father of a family because it is


a commonly-accepted notion that a father will
always do everything to take care of his concerns.
If the law does not state the diligence which is
supposed to be observed in the performance of an
obligation, that which is expected of a good father
of a family is required.
In case of a contrary stipulation of the parties, such
stipulation is should not be one contemplating a
relinquishment or waiver of the most ordinary
diligence.
An example where the law requires another
standard of care is that which involves common
carriers (persons or firms engaged in the business of
carrying, transporting passengers or goods of both,
by land, water, air for

compensation, offering their service to the public)they are bound to observe extraordinary diligence

ART 1164- THE CREDITOR HAS THE


RIGHTS TO THE FRUITS OF THE
THING
FROM
THE
TIME
THE
OBLIGATION TO DELIVER IT ARISES.
HOWEVER, HE SHALL ACQUIRE NO
REAL RIGHT OIVER IT UNTIL THE
SAME HAS BEEN DELIVERED TO HIM.

after the right to deliver the object of the prestation


has arisen in favor of the creditor but prior to the
delivery of the same, there is no real right
enforceable or binding against the whole over the
object and its fruits in favor of the person to whom
the same should be given.
The acquisition of a real right means that such right
can be enforceable against the whole world and will
prejudice anybody claiming the same object of the
prestation.
The real right only accrues when the thing or object
of the prestation is delivered to the creditor.
He only has a personal right over the same if it is
enforceable only against the debtor who is under an

obligation to give.
This means that the
personal right of the creditor can be defeated
by a third party in good faith who has
innocently acquired the property prior to the
scheduled delivery regardless of whether or
not such third party acquired the property
after the right to the delivery of the thing has
accrued in favor of the creditor. In this case,
however, the aggrieved creditor can go
against the debtor for damages as the debtor
should have known that the fruits should
have been delivered to the creditor alone.

ART 1165- WHEN WHAT IS TO BE


DELIVERED
OS
A
DETERMINATE
THING, THE CREDITOR, IN ADDITION
TO THE RIGHT GRANTED HIM BY ART
1170, MAY COMPEL THE DEBTOR TO
MAKE DELIVERY.
IF THE THING IS INDETERMINATE OR
GENERIC, HE MAY ASK THAT THE
OBLIGATION BE COMPLIED WITH AT
THE EXPENSE OF THE DEBTOR.
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 REPSONSIBLE FOR ANY
FORTUITOUS EVENT UNTIL HE HAS
EFFECTED DELIVERY.
In the event that there is non-delivery of a generic
thing, the creditor may have it accomplished or
delivered in any reasonable and legal way charging
all expenses in connection with such fulfillment to
the debtor. The same creditor can ask a third party
to deliver the same thing of the same kind with all
the expense charged to the debtor.

In case of non-delivery of a determinable thing, the


remedy is to file an action to compel the debtor to
make the delivery. This action is called specific
performance.
If the debtor is guilty of fraud, negligence, delay or
contravention in the performance of the obligation,
the creditor can likewise seek damages against the
debtor.
A fortuitous even- an event which could not be
foreseen, or which though foreseen, were inevitable.
The last paragraph of art 1165 however provides that
a fortuitous event will not excuse the obligor from his
obligation in 2 cases namely: 1) if the obligor delays;
and 2) if he has promised to deliver the same thing to
2 or

more persons who do not have the same


interest. In both cases, the obligor will be liable
for damages or will be bound to replace the lost
object of the prestation in cases when the
obligee agrees to the replacement.

ART 1166- THE OBLIGATIONTO GIVE


A DETERMINATE THING INCLUDES
THAT OF DELIVERING ALL ITS
ACCESSIONS AND ACCESSORIES,
EVEN THOUGH THEY MAY NOT
HAVE BEEN MENTIONED.

ART 1167- IF THE PERSON OBLIGED


TO DO SOMETHING FAILS TO DO
IT,
THE
SAME
SHALL
BE
EXECUTED AT HIS COST.
THIS
SAME
RULE
SHALL
BE
OBSERVED IF HE DOES IT IN
CONTRAVENTION OF THE TENOR
OF
THE
OBLIGATIONS.
FURTHERMORE,
IT
MAY
BE
DECREED THAT WHAT HAS BEEN
POORLY DONE BE UNDONE.

ART 1168- WHEN THE OBLIGATION


CONSISTS IN NOT DOING AND THE
OBLIGOR DOES WHAT HAS BEEN
FORBIDDEN, IT SHALL ALSO BE
UNDONE AT HIS EXPENSE.
the debtor can ask any third person to perform
the obligation due from the debtor should the
latter fail to do the same.
The debtor will be liable for all the expenses in
connection with the performance or fulfillment
of the obligation undertaken by the third person.

The words at his cost imply both the right to


have somebody else perform the obligation and
the right to charge the expenses thereof to the
debtor.
With respect to the situation wherein the debtor
poorly undertook the obligation, the creditor has
the right to have everything be undone at the
expense of the debtor. The reason for this rule is
to prevent the debtor from taking his obligation
lightly.
In case the prestation is for the debtor not to do
a particular act or service and he nevertheless
performs it, it shall likewise be undone at his own
expense.

In Chaves v. Gonzales, the Supreme Court ruled that the


original repairer can be held liable not only for the missing
parts but also for the cost of the execution of the obligation
for repairing the typewriter by another company.

ART 1169- THOSE OBLIGED TO DELIVER


OR TO DO SOMETHING INCUR IN DELAY
FOR THE TIME THE OBLIGEE JUDICIALLY
OR EXTRAJUDICIALLY DEMANDS THEM
THE
FULFILLMENT
OF
THEIR
OBLIGATION.
HOWEVER,
THE
DEMAND
BY
THE
CREDITOR SHALL NOT BE NECESSARY
IN ORDER

THAT DELAY MAY EXIST:


1) WHEN THE OBLIGATION OR THE LAW
EXPRESSLY SO DECLARES;
2) WHEN FROM THE NATURE AND
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;
3) WHEN DEMAND WOULD BE USELESS,
AS WHEN THE OBLIGOR HAS RENDERED
IT BEYOND HIS POWER TO PERFORM

IN RECIPROCAL OBLIGATIONS, NEITHER


PARTY INCURS IN DELAY IF THE OTHER
DOES NOT COMPLY OR IS NOT READY
TO COMPLY IN A PROPER MANNER
WITH WHAT IS INCUMBENT UPON HIM.
FROM THE MOMENT ONE OF THE
PARTIES FULFILLS HIS OBLIGATION,
DELAY BY THE OTHER BEGINS.
Delay or default can be committed by the debtor in
which case it is known as mora solvendi.
If it is committed by the creditor, it is known as
mora accipiendi.

Delay in the performance of the obligation,


however, must be either malicious or negligent.
Hence, if the delay was only due to inadvertence
without any malice or negligence, the obligor will
no be held liable under Art 1170.
Default generally begins from the moment the
creditor demands the performance of the
obligation. Without such demand, judicial or
extra-judicial, the effects of default will not arise.
Commencement of suit is a sufficient demand.
Art 1169 is only applicable when the obligation is
to do something other than the payment of
money (Picson v. Picson).

In obligations for the payment of money, Art 2209


shall apply which provides that if the obligation
consists in the payment of a sum of money, and the
debtor incurs in delay, the indemnity for damages,
there being no stipulation to the contrary, shall be
the payment of the interest agreed upon, and in the
absence of stipulation, the legal interest, which is 6
percent per annum.
Hence, it the case of obligation for the payment of
sum of money, the interest replaces the damages.
If the contract stipulates from what time interest
will be counted, said stipulated time controls, and
therefore, interest is payable from such time and
not
from
the
date
of
filing
of
the
complaint(Firestone Tire and Rubber Co.Phils.Inc. v.
Delgado)

If the contract involving a sum of money does


not stipulate any interest and/or the time when
it will be counted, interest will run only from
the time of judicial or extra-judicial demand.
However, damages or interest shall start to run
only after judicial or extra-judicial demand.
Hence, if the obligation were due on March 1,
2011, the aggrieved party can file suit for
specific performance immediately after March
1, 2011. If extra-judicial demand however was
made on March 5, 2011, damages shall be
counted not from March 1, 1998 but from
March 5, 2011.

The 2 cases where an extra-judicial


demand should first be made prior to
the filing of a civil suit are: ejectment
cases and consignment cases. If there is
no extra-judicial demand made prior to the
filing of the civil suit, the ejectment case will
be dismissed.
In consignment cases, the
debtor must first make an extra-judicial
demand for the creditor to accept payment of
the obligation. If the creditor unjustifiably
refuses to accept payment, the debtor can
now consign the amount in court for purposes
of extinguishing the obligation.

Demand not necessary in 3 cases: 1) when the


obligation or the law expressly so declares (ex.
Promissory note providing for payment on a
particular date without necessity of demand; Also the
law expressly declares that taxes should be paid on a
particular date); 2) when time is of the essence in a
particular contract (ex. Stock market transactions;
delivery for a one-day car exhibit); 3) when it would
be useless, as when the obligor has rendered it
beyond his power to perform (ex. A debtor promised
to constitute his house as a collateral for a particular
loan which is payable at a particular date but before
he can make the mortgage, he donates the house to
his friend, demand from the creditor to constitute the
house as a collateral is useless. In this case, his
obligation
becomes
immediately
demandable
considering that he loses his right to the period
within which to pay the loan).

Reciprocal obligations are those created and


established at the same time, out of the same
cause and which results in a mutual relationship of
creditor and debtor between parties. In reciprocal
obligations, the performance of one is conditioned
upon the simultaneous fulfillment of the other.
In Agcaoili v. GSIS, the GSIS and Agcaoili entered
into a contract of sale of a government housing
unit on the condition that Agcaoili should occupy
the same within 3 days from the receipt of the
notice.
Failure
to
immediately
occupy
contractually allowed the GSIS to terminate the
contract.
Agcaoili upon receipt of the notice,
immediately went to the place and found a

in a state of incompleteness that civilized


occupation was not possible. The buyer paid the 1 st
monthly installment but refused to make further
payments until and unless GSIS completed the
housing unit.
GSIS cancelled the award and
required Agcaoili to vacate the premises.
The
Supreme Court ruled that the GSIS had no right to
rescind the sale saying : By any objective
interpretation of its terms, the contract can only be
understood as imposing on the GSIS an obligation to
deliver the Agcaoili a reasonably habitable dwelling
in return for his undertaking to pay the stipulated
price. Since it did not fulfill that obligation, and was
not willing to put the house in habitable state, it
cannot invoke Agcaoilis suspension of payment of
amortizations as cause to cancel the contract
between them.

In Tanguiling v. CA, the petitioner and the


respondent entered into a contract for the
construction of a windmill for a consideration with
a one-year guaranty, and where after completion,
the petitioner sued the respondent for nonpayment of the balance of the construction price
but the respondent did not pay bec. The windmill
collapsed due to defects in construction. The SC
ruled that: when the windmill failed to function
properly it became incumbent upon petitioner to
institute the proper repairs in accordance with the
guaranty. Thus, respondent cannot be said to have
incurred in delay; instead, it is the petitioner who
should bear the expenses for the reconstruction of
the windmill.

ART 1170- THOSE WHO IN THE


PERFORMANCE
OF
THEIR
OBLIGATIONS ARE GUILTY OF FRAUD,
NEGLIGENCE, OR DELAY, AND THOSE
WHO IN ANY MANNER CONTRAVENE
THE TENOR THEREOF, ARE LIABLE FOR
DAMAGES.
The law specifically provides that damages can be
awarded to any person who may have been
prejudiced in the performance of the obligation as a
result
of
fraud,
negligence,
delay
or
contravention of the tenor of the obligation.

Significantly, if any of these 4 bases of liability coexist with a fortuitous event or aggravates the loss
caused by a fortuitous event, the obligor cannot be
excused from being liable on his obligation.

ART 1171- RESPONSIBILITY ARISING


FROM FRAUD IS DEMANDABLE IN ALL
OBLIGATIONS. ANY WAIVER OF AN
ACTION FOR FUTURE FRAUD IS VOID.
When a party complies with or performs his
obligation fraudulently, he is liable for damages.

If, in the contract of sale, A and B stipulated


that any fraudulent act by another in the
performance of his obligation shall not be a
ground for the aggrieved party to file a suit
against the other for fraud is a void stipulation.
By express provision of law, such waiver is void.
The dolo or fraud which is committed to induce
a party to enter into a contract, thereby making
the agreement annullable is not the one
contemplated by Art 1171.
The dolo or fraud under Art 1171 necessarily
involves a valid agreement but, in the
performance of the same, fraud is committed.

ART
1172RESPONSIBILITY
ARISING FROM NEGLIGENCE IN
THE PERFORMANCE OF EVERY
KIND OF OBLIGATION IS ALSO
DEMANDABLE,
BUT
SUCH
LIABILITY MAY BE REGULATED BY
THE COURTS, ACCORDING TO
THE CIRCUMSTANCES.

ART 1173- THE FAULT OR NEGLIGENCE OF


THE OBLIGOR 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 THE PLACE. WHEN
NEGLIGENCE SHOWS BAD FAITH, THE
PROVISIONS OF ARTICLES 1171 AND
2201, PARAGRAPH 2, SHALL APPLY.
IF THE LAW OR CONTRACT DOES NOT
STATE THE DILIGENCE WHICH IS TO BE
OBSERVED IN THE PERFORMANCE, THAT
WHICH IS EXPECTED OF A GOOD FATHER
OF A FAMILY SHALL BE REQUIRED.

In essence, negligence is that want of care


required by the circumstances.
As a general rule, negligence must be
proven.
In Syquia v. CA, the law defines negligence as
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. In the absence of
stipulation or legal provision providing the
contrary, the diligence to be observed in the
performance of the obligation is that which is
expected of a good father of a family.

In PNB v. CA,
where the bank negligently
dishonored the check of its depositor, the SC said,
This court has ruled that a bank is under the
obligation to treat the accounts of its depositors
with meticulous care whether such account
consists only of a few hundred pesos or of
millions of pesos.
Responsibility arising from
negligence in the performance of every kind of
obligation is demandable.
While petitioners
negligence in this case may not have been
attended with malice and bad faith, nevertheless,
it caused serious anxiety, embarrassment and
humiliation to private respondent for which she is
entitled to recover reasonable moral damages.

The law likewise provides that when negligence


shows bad faith, the provisions of Articles 1171
and 2201, par 2 shall apply.
In Samson v. CA, the SC discussing bad faith
said: Bad faith is essentially a state of mind
affirmatively operating with furtive design or
with some motive of ill-will. It does not simply
connote bad judgment or negligence. It imports
a dishonest purpose or some moral obliquity and
conscious doing of wrong. Bad faith is thus
synonymous with fraud and involves a design to
mislead or deceive another, not prompted by an
honest mistake as to ones rights or duties, but
by some interested or sinister motive.

Pursuant to Art 2201, par 2, the obligor shall be


responsible for all damages which may be reasonably
attributed to the non-performance of the obligation.

ART 1174- EXCEPT IN CASES EXPRESSLY


SPECIFIED BY THE LAW, OR WHEN IT IS
OTHERWISE DECLARED BY STIPULATION,
OR
WHEN
THE
NATURE
OR
THE
OBLIGATION REQUIRES THE ASSUMPTION
OF
RISK,
NO
PERSON
SHALL
BE
RESPONSIBLE FOR THOSE EVENTS WHICH,
COULD NOT BE FORESEEN, OR WHICH,
THOUGH FORESEEN, WERE INEVITABLE.

The general rule is that no one should be held to


account for fortuitous cases which are those
situations that could not be foreseen, or which
though foreseen, were inevitable. An act of God has
been defined as an accident, due directly and
exclusively to natural causes without human
intervention, which by no amount of foresight, pains
or care, reasonably to have expected, could have
been prevented.
In Nakpil v. CA, the SC said, To exempt the obligor
from liability under Art 1174 of the Civil Code, for a
breach of an obligation due to an act of God, the
ff. must concur: a) the cause of the breach of the
obligation must be independent of the will of the
debtor;

b) the event must either be unforeseeable or


unavoidable; c) the event must be such as to
render it impossible for the debtor to fulfill his
obligation in a normal manner; and d) the debtor
must be free from any participation in, or
aggravation of the injury. Thus, it has been held
that when the negligence of a person concurs
with an act of God in producing a loss, such
person is not exempt from liability by showing
that the immediate cause of the damage was the
act of God. To be exempt from liability for loss
because of an act of God, he must be free from
any previous negligence or misconduct by which
that loss or damage may have been occasioned.

In Sia v. CA, where the bank failed to notify its


client of the flooding of its safety deposit box
containing the said clients valuable stamp
collection resulting in the destruction of the said
collection, and where the said bank already had
two previous experiences of the flooding of the
said safety deposit box located inside the bank
that was guarded 24 hrs a day, the SC reversed
the ruling of the CA in not holding the bank for
damages on the basis of fortuitous event and
held that the bank was negligent.
In Dioquino v. Laureano, the SC considered the
sudden and unexpected throwing of stone
directed at the

car of the plaintiff causing damage to the said car


a fortuitous event.
In Ace-Agro Development Corp. v. CA, where the
petitioner was engaged by the private respondent
to clean its bottles and repair wooden shells inside
its plant from Jan. 1, 1990 up to Dec. 31, 1990,
and where, because of the burning on April 25,
1990 of the said plant, work of the petitioner was
suspended for a certain period of time, thereby
prompting the petitioner to seek an extension of
the contract period to compensate for the
suspension and refusing to work without such
extension despite notification from the private
respondent for the resumption of the contract on