Art. 1174. Except in cases expressly specified by the 4) the OBLIGOR MUST BE FREE FROM ANY PARTICIPATION in
law, or when it is otherwise declared by stipulation, the aggravation of the injury or loss
or when the nature of the obligation requires the
assumption of risk, no person shall be responsible for
those events which could not be foreseen, or which,
though foreseen, were inevitable. (1105a) When Debtor Still Liable
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Art. 1957. Contracts and stipulations, under any date of demand)
cloak or device whatever, intended to circumvent
the laws against usury shall be void. The
borrower may recover in accordance with the
laws on usury. (n) Contra Bonos Mores – contrary to morals; morally shocking to the
Art. 1306. The contracting parties may establish such conscience
stipulations, clauses, terms and conditions as they
Central Bank Circular No. 905 – suspended the operation of the
may deem convenient, provided they are not contrary
to law, morals, good customs, public order, or public Usury Law; no more ceiling in interest rates (Security Bank v RTC of
policy. (1255a) Makati)
Notes:
Usury – exaction of excessive interest
Interest - to be able to collect - must be in writing (if there is no rate
indicated – legal interest ay be applied).
Interest
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Obligations & Contracts
may have passed to the buyer, the unpaid seller expiration of the period fixed for the delivery of
of goods, as such, has: the thing, should not have appeared to receive it,
(1) A lien on the goods or right to retain or, having appeared, he should not have tendered
them for the price while he is in possession the price at the same time, unless a longer period
of them;
has been stipulated for its payment.
(2) In case of the insolvency of the buyer, a
right of stopping the goods in transitu after Art. 1165. When what is to be delivered is a
he has parted with the possession of them; determinate thing, the creditor, in addition to the
(3) A right of resale as limited by this Title; right granted him by Article 1170, may compel the
(4) A right to rescind the sale as likewise debtor to make the delivery.
limited by this Title.
Where the ownership in the goods has not passed If the thing is indeterminate or generic, he may ask
to the buyer, the unpaid seller has, in addition to that the obligation be complied with at the expense of
his other remedies a right of withholding delivery the debtor.
similar to and coextensive with his rights of lien
and stoppage in transitu where the ownership If the obligor delays, or has promised to deliver the
has passed to the buyer. (n) 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 the delivery.
Art. 1592. In the sale of immovable property, (1096)
even though it may have been stipulated that
upon failure to pay the price at the time agreed Art. 1167. If a person obliged to do something fails to
upon the rescission of the contract shall of right do it, the same shall be executed at his cost.
take place, the vendee may pay, even after the
expiration of the period, as long as no demand This same rule shall be observed if he does it in
for rescission of the contract has been made contravention of the tenor of the obligation.
upon him either judicially or by a notarial act. Furthermore, it may be decreed that what has been
After the demand, the court may not grant him a poorly done be undone. (1098)
new term. (1504a)
Art. 1168. When the obligation consists in not doing,
Art. 1593. With respect to movable property, the
and the obligor does what has been forbidden him, it
rescission of the sale shall of right take place in
shall also be undone at his expense. (1099a)
the interest of the vendor, if the vendee, upon the
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Obligations & Contracts
Art. 1170. Those who in the performance of their Rights of Creditors
obligations are guilty of fraud, negligence, or delay,
and those who in any manner contravene the tenor - Exact payment
thereof, are liable for damages. (1101)
- Principal Remedies
Art. 1191. The power to rescind obligations is implied
in reciprocal ones, in case one of the obligors should - Subsidiary Remedies
not comply with what is incumbent upon him.
- Ancillary Remedies
The injured party may choose between the fulfillment
and the rescission of the obligation, with the payment
of damages in either case. He may also seek Rights of the Unpaid Seller
rescission, even after he has chosen fulfillment, if the
latter should become impossible. - Lien over the goods while still in possession of them
The court shall decree the rescission claimed, unless - Right of stoppage in transitu
there be just cause authorizing the fixing of a period.
- Resell perishable goods or as agreed upon
This is understood to be without prejudice to the
rights of third persons who have acquired the thing, - Cancel/rescind the sale
in accordance with Articles 1385 and 1388 and the
Mortgage Law. (1124) - Withhold delivery if ownership is still with seller
Notes: 1. Rescission
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Art. 1385. Rescission creates the obligation to return the
things which were the object of the contract, together with
Specific Performance – to compel the obligor to perform the their fruits, and the price with its interest; consequently, it
obligation (specific or generic) can be carried out only when he who demands rescission
Substitute Performance – to let the obligation be executed by can return whatever he may be obliged to restore.
another at the cost of the debtor Neither shall rescission take place when the things which
Equivalent Performance – in the form of damages (i.e. only MJ can are the object of the contract are legally in the possession
do it, so just pay damages) of third persons who did not act in bad faith.
Extra-Judicial Rescission – when stipulated and when delivery has *the injured party must be himself ready, willing, and able to
not yet been made comply with his obligation and the other is not
Substantial Breach
- Such breach that would defeat the very object of the parties in *rescission abrogates the contract from its inception – mutual
making the agreement (DBP v CA) restitution is required
Art. 1385 of the Civil Code provides that rescission creates the - Required for extra-judicial rescission
obligation to return the things which were the object of the
contract together with their fruits and interest.
Extra-Judicial Rescission is subject to Judicial Review.
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Contact to Sell (Conditional Sale) v Contract of Sale (Absolute Sale) Replevin
Subsidiary Remedies – may be availed of when principal remedies Art. 1180. When the debtor binds himself to pay when
are not available his means permit him to do so, the obligation shall be
deemed to be one with a period, subject to the
Accion Subrogatoria – to substitute the other in his right to fulfill his provisions of Article 1197. (n)
obligation; cannot be done to intransmissible rights
Art. 1181. In conditional obligations, the acquisition of
Accion Pauliana – to cancel/annul contracts entered into by debtors rights, as well as the extinguishment or loss of those
to defeat judgement or defraud creditors already acquired, shall depend upon the happening of
the event which constitutes the condition. (1114)
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(1) If the thing is lost without the fault of In case of the loss, deterioration or improvement of
the debtor, the obligation shall be the thing, the provisions which, with respect to the
extinguished; debtor, are laid down in the preceding article shall be
applied to the party who is bound to return.
(2) If the thing is lost through the fault of the
debtor, he shall be obliged to pay damages; it is As for the obligations to do and not to do, the
understood that the thing is lost when it provisions of the second paragraph of Article 1187
perishes, or goes out of commerce, or shall be observed as regards the effect of the
disappears in such a way that its existence is extinguishment of the obligation. (1123)
unknown or it cannot be recovered;
Art. 1191. The power to rescind obligations is implied
(3) When the thing deteriorates without the in reciprocal ones, in case one of the obligors should
fault of the debtor, the impairment is to be not comply with what is incumbent upon him.
borne by the creditor;
The injured party may choose between the fulfillment
(4) If it deteriorates through the fault of the and the rescission of the obligation, with the payment
debtor, the creditor may choose between the of damages in either case. He may also seek
rescission of the obligation and its fulfillment, rescission, even after he has chosen fulfillment, if the
with indemnity for damages in either case; latter should become impossible.
(5) If the thing is improved by its nature, or by The court shall decree the rescission claimed, unless
time, the improvement shall inure to the there be just cause authorizing the fixing of a period.
benefit of the creditor;
This is understood to be without prejudice to the
(6) If it is improved at the expense of the rights of third persons who have acquired the thing,
debtor, he shall have no other right than that in accordance with Articles 1385 and 1388 and the
granted to the usufructuary. (1122) Mortgage Law. (1124)
Art. 1190. When the conditions have for their Art. 1192. In case both parties have committed a
purpose the extinguishment of an obligation to breach of the obligation, the liability of the first
give, the parties, upon the fulfillment of said infractor shall be equitably tempered by the
conditions, shall return to each other what they courts. If it cannot be determined which of the
have received. parties first violated the contract, the same shall
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be deemed extinguished, and each shall bear his Potestative Suspensive – NOT VALID
own damages. (n)
Potestative Resolutory – VALID
Notes:
Potestative Term/Period – VALID
Pure Obligation – obligations without a period or condition and
which are demandable at once Casual - dependent upon chance or the will of 3rd persons
Conditional Obligations – obligations which are demandable upon Mixed – dependent partly upon one of the parties and by chance/3rd
the happening of a future and uncertain event or a past event persons
unknown to the parties
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compensated
Constructive Fulfillment
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