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AUF School of Law BOOK IV OBLIGATIONS and CONTRACTS TITLE I OBLIGATIONS Art. 1156. Obligation is a !

!ridi"al n#"#ssit$ to gi%#& to do or not to do. Juridical necessity to comply with a prestationSanchez Roman Legal relation established between one person and another, whereby the latter is bound to the fulfillment of a prestation which the former may demand from him. - Manresa Ci%il obligation %s Nat!ral obligation

Obligations and Contract interest be specified in writing. ('rt. 405., ) ---6onation of immovable property be made in a public document and the acceptance be made in the same document or separate public document ('rt. -.2, ) ---contribution of immovable property or real rights to common fund (partnership) must be in a public instrument with attached inventory signed by the parties. ('rt. 0--0, 0--5, ) --- hattel 7ortgage, personal property must be recorded in the hattel 7ortgage $egister ('rt. 40.,, ) ---sale or transfer of large cattle, such transfer or sale must be registered. (8ec. 44, 'ct 9o. 00.-, 'rt. 0+/0, ) Classi'i"ations o' obligation !rimary pure and conditional with a period alternative and facultative joint and solidary divisible and indivisible with a penal clause

Gives to the obligee #''#"t annot be or creditor the right enforced by court of enforcing it action against the obligor or debtor in a court of justice. (right of action) !ositive law so!r"# "#uity and natural law.

8econdary

$e#uisites of %bligation juridical or legal tie -bilateral -unilateral active subject passive subject fact, prestation or service &&'s a general rule, the form of the obligation is not an essential element(re#uisite. E("#)t (the noncompliance of the following formalities would have the effect of rendering the contract agreement void or ine)istent)* ---donation of personal property whose value e)ceeds !+,,,,.,,, contract in writing. ('rt. -./, ) ---sale of a piece of land or any interest therein through an agent, authority of such agent be in writing. ('rt. 0/-., ) ---1nterests in a contract of simple loan or mutual, agreement with respect to such be in writing. ('rt. 02+3, ) ---anticheresis, principal amount and
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legal, conventional, penal real and personal determinate and generic unilateral and bilateral individual and collective accessory and principal

"lassi'i"ations a""ording to *anr#sa As to !ridi"al +!alit$ -9atural -civil -mi)ed As to )arti#s -:nilateral and bilateral -individual and collective -6eterminate and generic -simple and multiple -positive and negative -real and personal -possible and impossible -divisible and divisible -principal and accessory

As to ob #"t

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AUF School of Law As to )#r'#"tion and -!ure #(ting!is,-#nt -conditional -with term or period 'ait,. 51671a8

Obligations and Contract

Art. 115.. Obligations aris# 'ro-/ la0 "ontra"ts +!asi "ontra"ts a"ts or o-issions )!nis,#d b$ la01 and +!asi2d#li"ts &&;he addition of lege has been critici<ed as theoretically erroneous. &&;he enumeration is e)clusive. Art. 1153. Obligations d#ri%#d 'ro- la0 ar# not )r#s!-#d. Onl$ t,os# #()r#ssl$ d#t#r-in#d in t,is Cod# or in s)#"ial la0s ar# d#-andabl#& and s,all b# r#g!lat#d b$ t,# )r#"#)ts o' t,# la0 0,i", #stablis,#s t,#-1 and as to 0,at ,as not b##n 'or#s##n& b$ t,# )ro%isions o' t,is Boo4. 516768 &&obligations derived from law presumed. (unli=e other obligations) cannot be

Contra"t-meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. Cons#ns!al "ontra"ts- contracts perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been e)pressly stipulated but also to all of the conse#uences which according to their nature may be in =eeping with good faith, usage and law. R#al Contra"ts2 perfected upon the delivery of the obligation. Obligation aris#s 'ro- t,# -o-#nt o' )#r'#"tion o' t,# "ontra"t. R#"i)ro"al obligation- parties are mutually obliged to do or to give something. 9nilat#ral obligation- only one party (obligor) is obliged to do or to give something. &&%bligations arising from contract are governed primarily by the agreement of the contracting parties. Co-)lian"# in good 'ait,- performance in accordance with the stipulations, clauses, terms and conditions of the contract. :njust enrichment &&1n default of agreement, the provisions of the ivil ode regulating such obligations are applicable. G#n#ral R!l#/ ;he contract is the law between the contracting parties. ")* 7acasaet vs %' #("#)tion to g#n#ral r!l#/ 'gcaoili vs G818 Art. 1166. Obligations d#ri%#d 'ro- +!asi2 "ontra"ts s,all b# s!b #"t to t,# )ro%isions o' C,a)t#r 1& Titl# :VII& o' t,is Boo4. 5n8

&&re#uisites to determine whether an obligation arises from law or from other sources. law that establishes or recogni<es the obligation act or condition upon which the obligation is based. && when the law merely recogni<es the e)istence of an obligation generated by an act which may constitute a contract, #uasi-contract, criminal offense, or #uasi-delict an its only purpose is to regulate such obligation, then the ' ; itself is the source of the obligation and 9%; the law. !elayo vs Llauron-obligation of support between spouses. 'rt. 4,0. obligation of the winner in a gambling to return the money to the one who lost.

Art. 1157. Obligations arising 'ro- "ontra"ts ,a%# t,# 'or"# o' la0 b#t0##n t,# "ontra"ting )arti#s and s,o!ld b# "o-)li#d 0it, in good
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;!asi2"ontra"ts2 juridical relations arising from lawful, voluntary, and unilateral acts, by virtue which the parties become bound to each other, based on the principle that no one shall be unjustly
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AUF School of Law enriched or benefited at the e)pense of others. ase* ;raders :nion vs 9L$ N#gotior!- g#stio 'rises whenever a person voluntarily ta=es charge of the agency or management of the business or property of another without authority from the latter ;he gestor or officious manager shall be obliged to continue such agency or management until the termination of the affair and its incidents Sol!tio ind#biti 'rises whenever a person unduly delivers a thing through mista=e to another who has no right to demand it. E''#"t o' A"+!ittal Gro!nd 'or a"+!ittal

Obligations and Contract

effect

E%id#n"# n##d#d

Guilt not ivil action to !reponderance proven beyond recover of evidence reasonable damages doubt based on the same act or omission *A? still be instituted 9on-e)istence of facts for the commission of the offense ivil action to recover damages is no longer possible.

;he person to whom the delivery has been unduly made shall return the property delivered or the money paid.

<r#s!-)ti%# "ons#nt2 consent given by law if there is no e)press consent given by the other party --gives rise to multiple juridical relations resulting in obligations for delivery of the thing or rendering of service. Art. 1161. Ci%il obligations arising 'ro"ri-inal o''#ns#s s,all b# go%#rn#d b$ t,# )#nal la0s& s!b #"t to t,# )ro%isions o' arti"l# =1..& and o' t,# )#rtin#nt )ro%isions o' C,a)t#r =& <r#li-inar$ Titl#& on >!-an R#lations& and o' Titl# :VIII o' t,is Boo4& r#g!lating da-ag#s. 5167=a8 'rt. 0,,, $! e)cept* treason, rebellion, illegal possession of firearms and gambling. "nforcement of civil liability 0. institution of criminal and civil actions- civil action impliedly instituted, e)cept* i. e)press waive of the civil action ii. reservation of right to institute it separately, or iii. institution of the civil action prior to the criminal action. 4. independent civil action 5. other civil actions arising from offense
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E''#"t o' Ind#)#nd#nt Ci%il A"tion G#n#ral r!l#/ ;he civil action to recover from the person criminally liable is not independent from the criminal action. 8eparate civil action- the right to file a civil action shall depend upon the result of the criminal action. ommencing the civil action prior the criminal action- once the criminal action is instituted, the action to recover damages shall be suspended. ")amples of entirely separate and independent civil action* the civil action is based on an obligation not arising from the act complained of as offense or felony. 8uch action may proceed independently of the criminal action and regardless of the result of the latter. Culpa contractual- 9egligence in the performance of a contract culpa aquiliana- 9egligence as a source of obligation (#uasi-delict) Law grants to the injured party the right to institute a civil action separate and distinct from the criminal action. 1nterferences by public officers or employees or by private individuals with civil rights and liberties defamation fraud
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AUF School of Law physical injuries refusal or neglect of a city or municipal police to render aid or protection in case of danger to life or property. R#s#r%ation o' rig,t to 'il# s#)arat# and distin"t "i%il a"tion2 is a substantive right> -procedural re#uirement under 8ec. 4 of $ule 000 of the 9ew $ules of ourt is not mandatory. -this was amended by 8ec. 5 of $evised $ules of criminal !rocedure 4,,,. Art. 116=. Obligations d#ri%#d 'ro- +!asi2 d#li"ts s,all b# go%#rn#d b$ t,# )ro%isions o' C,a)t#r =& Titl# :VII o' t,is Boo4& and b$ s)#"ial la0s. 5167@a8 ;!asi2d#li"t2 fault or negligence of a person who, by his acts or omission, connected or unconnected with, but independent from, any contractual relation, causes damage to another person. -covers not only those that are not punished by law but also those acts which are voluntary and negligent . reasons* "it#d in Barr#do %s Gra"ia &&&' single act can give rise to various obligations !ersons liable- the person directly responsible for the damage incurred and* ;he father, and, in case of his death or incapacity, the mother, are liable for any damages caused by the minor children who live with them. Guardians are liable for damages done by minors or incapacitated persons subject to their authority and living with them. %wners or directors of an establishment or business are e#ually liable for any damages caused by their employees while engaged in the branch of the service in which employed, or on occasion of the performance of their duties. "mployers with respect to damages caused by their employees and household helpers acting within the scope of their assigned tas=s, even though the former are not engaged in any business or industry. ;he 8tate when it acts through a special agent, but not if the damage shall have
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Obligations and Contract been caused by the official upon whom properly devolved the duty of doing the act performed, in which case the provisions of the ne)t preceding article shall be applicable. ?inally, teachers or directors of arts and trades are liable for any damages caused by their pupils or apprentices while they are under their custody. ;he liability shall cease in case the persons mentioned therein prove that they e)ercised all the diligence of a good father of a family to prevent the damage. R#+!isit#s o' liabilit$ ;here e)ist a wrongful act or omission imputable to the defendant by reason of his fault or negligence. ;here e)ist a damage or injury which must be proved by the person claiming recovery. ;here must be a direct causal connection between the fault or negligence and the damage or injury. (proximate cause) ;!asi2d#li"t !rivate right %s Nat!r# o' rig,t %iolat#d Aor- o' r#dr#ss Cri-# !ublic right

ompensation or indemnification (reparation of injury suffered by the individual)

!unishment (fine, imprisonment, or both)

1t e)ist in any L#gal basis act or omission o' liabilit$ wherein fault or negligence intervenes ivil liability riminal intent not necessary !reponderance of evidence an be liabilit$

")ists when there are penal laws clearly penali<ing such crime riminal and civil liability

ondition of riminal intent the mind necessary evidence compromise @eyond reasonable doubt an never be

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AUF School of Law compromised compromised.

Obligations and Contract contract is violated. Neglect or malfeasance of the carrier's employees could give ground for an action for damages. Damages here are proper because the stress of respondent's action is placed upon his wrongful expulsion, which is a violation of a public duty by petitioner- air carrier a case of !uasi-delict." #$ir %rance vs &arrascoso, G.R. No. L2 =1B@3. S#)t#-b#r =3& 1766.' C,a)t#r = NAT9RE ANC EAAECTS OA OBLIGATION Art. 116@21166 Obligation to Gi%# Ddilig#n"# o' a good 'at,#r o' a 'a-il$E - standard normal state of diligence -ordinary diligence obligations to gi%# d#t#r-inat#2 the object is particularly designated or physically segregated from all others of the same class ('rt. 0035 applies particularly to determinate object) g#n#ri"2 the object is merely designated by its class or genus without any particular designation or physical segregation from all others of the same class. (e.g. money) &&&'rt. 0035 is a guaranty that the debtor will comply with the obligation. 9ature of right of the creditor --;he obligee(creditor has the right to the thing which is the object of the obligation as well as the fruits thereof from the time the obligation to deliver it arises. ('rt. 003.)

Auasi-delict covers not only acts not punishable by laws but it also includes acts which are criminal in character, whether intentional, voluntary or negligent. 5El"ano %s >ill8 T0o distin"t 'a!lts (!adua vs $obles, Justice @arredo) "!l)a "ri-inal2 civil liability arising from crimes "!l)a2a+!iliana- liability arising from civil negligence. -recovery of damages twice for the same negligent act is omission is precluded. -the e)tinction of the civil liability referred in !ar (e) of 8ec. 5, $ule 000 refers e)clusively to liability founded on 'rt. 0,, of $! , whereas the civil liability for the same act considered as #uasi delict is not e)tinguished even by a declaration in the criminal case that the criminal act charged has not happened or has not been committed by the accused.("lcano vs Bill) 6iligence of employers* ;!asi2d#li"t 'rt. 40/, of !rimary liability

Cri-#s 'rt. 0,5 of $! 8ubsidiary liability

"mployer can avoid Liability is absolute and liability after proving that cannot be avoided by he e)ercised due proof of diligence. diligence 'pplies to all employers whether they are engaged in enterprise or not. 'pplies only to employers engaged in some =ind of business or industry.

ubi jus ibi remedium- unvindicated civil wrongs --;he death of the accused after arraignment and during the pendency of the criminal action shall e)tinguish the civil liability arising from the delict. &&'lthough the relation between the contracting parties is purely contractual a #uasi-delict can still be committed in view of the manner in which the
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Obligation ;hose arising from law #uasi-delicts #uasi-contracts

F,#n obligation to d#li%#r aris#s ;he specific provisions of law determine when the delivery should be made.

2nd Semester/2009-2010

AUF School of Law crimes contracts 8ubject to a suspensive condition 7oment of perfection of the contract. ('rt. 0+5-) ?rom the moment the condition happens.

Obligations and Contract contravention of the tenor thereof. G#n#ri" obligations 0. to as= for 0. ;o deliver a thing performance of which is neither of the obligations superior nor inferior 4. to as= that the #uality. obligation be 4. ;o be liable for complied with at damages in case of the e)pense of breach of obligation the debtor. 5. ;o recover damages for the breach of obligation. Non# #(#-)tion 'ro- liabilit$ b#"a!s# o' caso fortuito/ d#la$ r#ason/ ;here would have been no loss if the debtor had complied with the obligation to deliver the object without delay. )ro-is# to t0o or -or# di''#r#nt )#rsons r#ason/ 1t would be impossible to comply with both obligations therefore the debtor already made himself liable for damages. A""#ssions- all of those things which are produced by the object of the obligation as well as all of those which are naturally or artificially attached thereto. Accession discreta- natural, industrial and civil fruits accession industrial D building, planting, and sowing accession natural- allusion, alvusion, abandoned river beds, and islands formed in navigable rivers. 'ccession with respect to movable property. A""#ssori#s- all of the things which have for their object the establishment, use or preservation of another thing which is more important and to which they are not incorporated or attached. embellishments &&;he liability of debtor for damages in case of breach of obligation, e)tends only to breach which
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Cith suspensive :pon the e)piration of the term or period term or period

<#rsonal rig,t- a right pertaining to a person to demand from another the fulfillment of a prestation to give, to do, or not to do. (jus ad rem) right enforceable only against a definite person or group of persons before delivery in obligations to give R#al rig,t2 right pertaining to a person over a specific thing, without passive subject individually determined against whom such right may be personally forced. (ownership, possession, easement) #jus in re' right enforceable against the whole world ac#uired once the thing and the fruits are delivered. Rig,ts o' Cr#ditor Obligations o' C#btor

d#t#r-inat# obligations 0. to compel specific 0. to perform the performance obligation 4. to recover damages specifically for breach of the 4. to ta=e care of the obligation. things with proper 5. "ntitlement to fruits diligence of a good and interests of the father of a family. thing at the time 5. ;o deliver all the obligation to accessions and deliver it arises. accessories of the things even though they may not have been mentioned. .. ;o be liable for damages in case of breach of obligation by reason of delay, fraud, negligence or
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AUF School of Law is voluntary in character and not to one which is involuntary (fortuitous event) &&%nly a determinate thing can be destroyed by a fortuitous event, generic things can never perish. (genus nun!uam peruit) Art. 116.. Obligation to Co (positive personal obligation) &&1f the obligor fails to do what he has obligated himself to do, the obligee can have the obligation performed or e)ecuted at the e)pense of the latter and recover damages . &&;his type of obligation recogni<es individual freedom, the obligor cannot be compelled to do what he has obligated himself to do. $emedy for obligee(creditor* performance of the obligation at the e)pense of the obligor &&1f the object of the prestation is the personal and special #ualification (i.e. artist) of the obligor, the r#-#d$ for the obligee is to recover damages under 'rt. 00-, of the ivil ode. Rig,ts a%ailabl# to t,# oblig## (in case there has been a performance of the obligation but in contravention of the tenor thereof) to have the obligation performed at the e)pense of the obligor to as= that what has been poorly done be undone to recover damages for breach of obligation ase* have< vs Gon<ales ;anguilig vs ourt of 'ppeals Arti"l# 1163. Obligation NOT to Co (negative personal obligation) -fulfilled or reali<ed so long the obligor does not do what is forbidden $emedy for obligee in case of breach* to have it undone at the e)pense of the obligor ('rt. 003/) e)ception (cannot be undone)*
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Obligations and Contract effects of the act are definite in character. physical and legal impossibility to as= for damages ('rt. 00-,) mora is not applicable

&&1n obligation not to do, the obligation is either fulfilled or not fulfilled Art. 1167. C#la$ in t,# '!l'ill-#nt o' obligation Vol!ntar$ 6efault (mora), deceit(fraud (dolo), negligence (culpa), or in manner that contravenes the tenor thereof %bligor is damages liable In%ol!ntar$ 1nability to comply because of an unforeseen event, or which though foreseen is inevitable.

for %bligor has no liability for damages

G#n#ral R!l#/ :nless there is no demand there is no delay. &&&1n reciprocal obligation, the moment the other party complied with his obligation failure to comply will cause the other party to be in delay C#'a!lt(mora)- signifies delay in the fulfillment of an obligation with respect to time. &&&;he mere stipulation of a date when the obligation is due does not by itself dispense with the necessity of a demand, unless there is an e)press stipulation (either by law or contract) that the debtor will incur delay without need of a demand. Kinds o' -ora mora solvendi- default on the part of the debtor 4inds o' -ora sol%#ndi ex re-refers to obligation to give ex persona- refers to obligation to do mora accipiendi- default on the part of the creditor to accept the delivery of the object of the obligation
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AUF School of Law compensatio morae- default of both parties in reciprocal obligations

Obligations and Contract -present at the time of birth of an obligations 4inds o' 'ra!d criminal fraud civil fraud Ara!d in t,# )#r'or-an"# o' an obligation

$e#uisites to declare in default that the obligation be demandable and already li#uidated that the debtor delays performance that the creditor re#uires the performance judicially or e)tra judicially &&1n positive obligation, default arises from the moment the creditor demands the performance of the obligation. Judicially- through a complaint e)tra-judicially- oral or written demand Chen demand not necessary when there is an e)press stipulation to that effect where the law so provides when the period is the controlling motive or the principal inducement for the creation of the obligation (when time is of the essence) where demand would be useless &&9egative obligations are not subject to delay. R#"i)ro"al obligation-created or established at the same time, out of the same cause and which results in the mutual relationship of creditor and debtor between the parties. -obligations which are conditioned upon each other -conditional obligation &&1n case of delay, the liability of the obligor subsist even if the thing which constitutes the object of obligation may have been destroyed or lost through fortuitous events. ;he moment the other party has complied with his obligation, delay on the other begins. E("#)tion/ 1f there are different dates for the performance of the obligation, apply the general rule in 0032 (demand is needed). 5Art. 11.6211.@8 Ara!d 5dolo8- consist in the conscious and intentional proposition to evade the normal fulfillment of an obligation
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%s

Ara!d in t,# "onstit!tion or #stablis,-#nt o' an obligation

6uring the F,#n 't the time of the performance of an )r#s#nt birth of an e)isting obligation obligation. "vading fulfillment obligation normal )!r)os# 8ecuring the of an consent of the other party to enter into the contract r#s!lt Eitiation of consent of other party the the

9on-fulfillment or breach of the obligation

$ecover damages R#-#d$ Causal fraudfrom the 'or t,# 'nnulment of the debtor(obligor inno"#nt contract. )art$ Incidental fraudrecover damages &&&7alice or dishonesty is implied as a ground for damages. &&&?raud or dolo is synonymous with bad faith. &&&Caiver or renunciation of liability made in anticipation of the fraud is VOIC. ('rt. 00-0) &&&Caiver or renunciation of liability made after the fraud has already been committed is VALIC. &&&Chat is renounced is the effect of fraud or the right of the party to indemnity. E(t#nt o' r#"o%#rabl# da-ag#s/ all damages which may be attributable to the breach or non-fulfillment of the obligation, regardless of whether such conse#uences are natural or unnatural, probable or improbable, foreseeable or unforeseeable. 7oral and e)emplary damages
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AUF School of Law

Obligations and Contract 'rt. 00-5 (if the Governing rule 'rt. 00-5, par.0 negligence shows bad faith) Ealid (unless the Caiver of nature of the action (future) waiver is against public policy) Eoid

9egligence (culpa)- omission of that diligence which is re#uired by the nature of the obligation and corresponds with the circumstances of the person, the time, and of the place. -absence of due care re#uired by the nature of the obligation &&&6iligence of good father of a family ( pater familias) is the standard diligence re#uired if the contract does not state the diligence which is to be observed in the performance of the obligation. Finds of negligence &ulpa contractual 9egligence in the performance of a contract

%s d#'inition

&ulpa a!uiliana 9egligence as a source of obligation. (#uasi-delict)

)ro(i-at# "a!s#2 cause which is a natural and logical conse#uence uninterrupted by an intervening cause, without which the damage will not have happened. N#glig#n"# Bad 'ait, Good 'ait,

1ncident of the ",ara"t#risti 8ubstantive and performance of " independent an obligation !re-e)isting contractual relation <art$ ;here may or r#lations,i) may not be a pre-e)isting contractual relationship of So!r"# o' obligation 6efendantGs negligent act or omission

@reach contract

")istence of the F,at n##ds 9egligence of contract and its to b# )ro%#n the defendant breach !roof of A%ailabilit$ !rof of diligence diligence is not o' dilig#n"# is a %alid a defense defense N#glig#n"# %s Ara!d N#glig#n"# ulpa

%s

Ara!d 6olo

1f present, the Liability will only be on provisions of 'rt. 00-5 natural and probable and 'rt 44,0, par.4 will conse#uences of the apply. breach of obligation &&&6amages resulting from negligence is reduced or mitigated if there was contributory negligence of the obligee. %ther circumstances that can mitigate the damages* when the plaintiff himself contravenes the terms of the contract> where the plaintiff has derived some benefit as a result of the contract> in cases where e)emplary damages are to be awarded, where the defendant acted upon advice of counsel> where the loss would have resulted in any event> where upon filing of the action, the defendant has done his best to lessen the plaintiffGs loss or injury. &&&1f the negligent act of the obligee is the pro)imate cause of the event which led to the damage or injury complained of, he cannot recover. &&&;he phrase in any manner that contravenes the tenor" of the obligation includes not only any illicit act which impairs the strict fulfillment of the obligation but also every =ind of defective performance.

Eoluntary act or characteristic onscious and omission intentional proposition to evade the fulfillment of an obligation
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2nd Semester/2009-2010

AUF School of Law T#st o' n#glig#n"#/ :se the reasonable care and caution which an ordinary prudent person would have used in the same situation. 5Art. 11.B8 Aort!ito!s #%#nt (caso fortuito)- event which could have not been foreseen, or though foreseen, were inevitable. A"t o' God Aor"# -a #!r# 1ndependent of human intervention events that arise from legitimate or illegitimate acts of persons other than the obligor. e)traordinary

Obligations and Contract participation in the aggravation of the injury to the obligee. &&&#()iration o' agr##-#nt/ ;he case of Ba"olod2*!r"ia %s CA compared and contrasted with <,ilCo-Sat %s Glob#. &&&8outheastern fortuito ollege vs '- typhoon is a caso

&&& o vs '- carnapping of a vehicle is not considered a caso fortuito &&&;anguilig vs ' D windmill case

As to 'or#s##abilit$ %rdinary

G#n#ral r!l#/ 1f the reason for the non-compliance in the obligation is a fortuitous event, the obligor is e)empted from liability whatsoever. E:CE<T/ 0. where such liability is e)pressly specified by law> 4. where it is declared by stipulation of the parties> 5. where the nature of the obligation re#uires the assumption of ris=. -(volenti non fit injuria) no wrong is done to one who consents &&&'rt. 00-. applies only to determinate obligations and not to generic ones. ***res ipsa loquitur &&&;he caso fortuito must me the 8%L" and pro)imate cause of the incident, to avail of it as a defense. &&& o-mingling negligence on the part of the obligor forfeits the defense of caso fortuito. Ess#ntial "onditions 'or Art. 11.B to a))l$/ 0. that the event must be independent of the will of the obligor> 4. that the event must be either foreseeable or inevitable> 5. that the event must be of such a character as to render it impossible for the obligor to fulfill his obligation in a normal manner> .. that the obligor must be free from any
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5Art. 11.58 9s!r$2 contracting for or receiving something in e)cess of the amount allowed by law for the loan or forbearance of money, goods or chattels. -ta=ing of more interest for the use of money, goods, or chattels or credits than the law allows. :sury Law ('ct 9o. 43++) and other laws amending it- special law referred to in 'rt. 00-+. entral @an= ircular 9o. 44. (6ec. 0, 02/4)- no more ceiling in interest rates on loans. &&&Loan or forebearance of money-04H interest in the default of interest stipulated by law or the parties, 3H interest for obligation not involving forebearance or loan. &&&04H interest per annum from the time the judgment has become final if t. 5Art. 11.68 &&&;here is a presumption that the interests has been paid if on the face of the receipt that the creditor issued to the obligor that the principal has been paid without reservation with respect to the interest. (in accordance with 'rt. 04+5) &&&1f the debtor is issued a receipt by the creditor ac=nowledging payment of a latter installment without reservation to prior installments, there is also a presumption that such prior installments have already been paid. GGG?or the presumption to arise, the receipt should
2nd Semester/2009-2010

AUF School of Law clearly state that the payment is for the installment for a latter installment or as payment for the interest. (*anila Trading %s *#dina) 5Art. 11..8 $emedies of creditor to protect credits* 0. to e)haust the property in possession of the debtor>('rt. 4453, ) 4. to be subrogated to all of the rights and actions of the debtor to save those which are inherent in hi person. (accion su!ro"atoria) onditions* that the debtor is indebted to the creditor> the creditor must be prejudiced by the inaction of the debtor to proceed against the third person> the creditor must have first pursued all of the properties of the debtor which are not e)empt from e)ecution. 5. to impugn all of the acts which the debtor may have done to defraud him. (accion pauliana) $ccion subrogotoria- the right of the creditor to e)ercise all of the rights of the debtor to bring all of the actions against third persons. -the creditor merely acts in the name and for the account of the debtor. E:CE<TION* $ights which are purely personal in the sense that they are inherent n the person of the debtor. (i.e. family rights) $ccion pauliana- impugning or attac=ing fraud directly by means of a rescissory action at the instance of the creditors who are prejudiced. -subsidiary in character. 5Art. 11.38 G#n#ral r!l#* $ights of obligations or those rights which are ac#uired by virtue of an obligation are transmissible in character. E("#)tions* 0. where they are not transmissible in their very nature (i. e. purely personal rights)> 4. where there are stipulations by the parties that they are not transmissible> 5. where they are not transmissible by operation of law.
jmvdg 11

Obligations and Contract

C>A<TER T>REE CIAAERENT KINCS OA OBLIGATIONS Sec # - $ure and Conditional %!li"ations 5Art. 11.78 <!r# Obligation2 one whose effectivity or e)tinguishment does not depend upon the fulfillment or non-fulfillment of a condition or upon the e)piration of a term or period> characteri<ed by the #uality of immediate demandability, but there must be a reasonable period of grace. Condition2 future and uncertain fact or event upon which an obligation is subordinated or made to depend. T#r-H)#riod2 a term will surely pass and may or may not =now when e)actly> characteri<ed by futurity and certainty "ondition2 it may or may not happen Conditional obligations2 one whose effectivity is subordinated to the fulfillment or non-fulfillment of a future and uncertain act or event. (inds of conditional obligation) 1. S!s)#nsi%# %s R#sol!tor$ 5Art. 11318

S!s)#nsi%# ondition precedent

R#sol!tor$ ondition subse#uent

$esults in the $esults in the ac#uisition of rights e)tinguishment of rights arising out of the arising out of the obligations obligations ;he happening of the ;he happening of the condition gives birth to condition e)tinguishes the obligation. obligation 1f the condition is not 1f the condition is not fulfilled, no juridical tie is fulfilled, juridical relation created. is consolidated. Chat is ac#uired by the obligee in the constitution of the obligation is only mere hope and e)pectancy, Chat is ac#uired by the obligee in the constitution of the obligation are rights that are subject to threat or
2nd Semester/2009-2010

AUF School of Law protected by law. danger of e)tinction.

Obligations and Contract )!r# )ot#stati%# void> envisioned by 'rt. 00/4 @. <ossibl# %s I-)ossibl# 5Art. 113@8 <ossibl# I-)ossibl# when the condition is capable of reali<ation according to nature, law, public policy, or good customs. when the condition is not capable of reali<ation according to nature, law, public policy, or good customs. (contrary to good customs or public policy, illicit, illegal)

=. <ot#stati%#& "as!al& and -i(#d (cause upon which the fulfillment depends) ('rt. 00/4) <ot#stati%# "as!al -i(#d fulfillment of the obligation depends upon the will of a party to the obligations fulfillment of the condition depends upon chance(or upon the will of a third person fulfillment of the obligation depends upon the will of a party to the obligation and partly upon chance and(or will of a third person. ;he obligation and the condition shall ta=e effect. (valid and enforceable)

E''#"ts ;he obligation and the 'nnulment of the condition is valid and obligation that are enforceable. dependent of such impossible condition &&but is there is a pree)isting obligation, therefore not dependent upon the fulfillment of the obligation for its perfection, only the %961;1%9 is void, not the obligation. &&&1f the impossible condition is attached to an obligation, the obligation itself is Void. &&&1f the impossible condition is attached to a simple donation or testamentary disposition, the condition is not i-)os#d, although the donation or testamentary disposition itself is %alid. &&&;otal 'bsence of seriousness- reason why the law invalidate the impossible condition I the dependent obligation. E:CE<TION/ gratuitous disposition(donation> because the moving force here is the generosity of the donor. &&&;he impossibility of the condition should be determined at the time the obligation is made or constituted. B. <ositi%# %s N#gati%# 5Art. 11358 <ositi%# N#gati%# condition involves the condition involves the

E''#"ts dependent on the "r#ditorcondition and obligation, VALIC dependent on the d#btor2 condition and obligation, VOIC &&&;he precept in the first sentence of 'rt. 0/4 is applicable only to a suspensive condition. Bence, R#sol!tor$ I <ot#stati%# J VALIC obligation and condition (e)planation at pp.00., Jurado) &&&to avoid illusory obligation- $eason for the invalidity of potestative condition dependent on the debtor. &&&!ayment for previous indebtedness(pre-e)isting obligation although the condition is purely potestative, affects the validity of the condition but =eeps the validity of the obligation because the obligation is not dependent upon the condition. Si-)l# )ot#stati%# - valid> presupposes not just the manifestation of the will but also the reali<ation of an e)ternal act. ;he obligation and the condition shall ta=e effect. (valid and enforceable)

jmvdg

12

2nd Semester/2009-2010

AUF School of Law performance of an act omission of an act.

Obligations and Contract

;he event will happen ;he event will 9%; or ta=e place. happen or ta=e place. E''#"ts ;he obligation is #(ting!is,#d as soon as the time e)pires or if it becomes indubitable that the event will not ta=e place. ;he obligation is rendered #''#"ti%# from the moment the time indicated has elapsed, or if it has become evident that the event cannot occur.

'rt. 00//, par. 4- protection for the debtor %bligation subject to %bligation subject suspensive condition period(term

to

;here is no certainty if 1t is certain that the the obligation will be obligation will be fully fulfilled demandable and enforceable. 1nterests and fruits shall also be delivered when the debtor paid(delivered by mista=e. 1nterests and fruits shall also be delivered when the debtor paid(delivered by mista=e.

&&&;he intention of the parties, ta=ing into consideration the nature of the obligation, shall govern if no time has been fi)ed for the fulfillment of the condition. ;he same rule applies to <OSITIVE CONCITION. Constr!"ti%# A!l'ill-#nt o' S!s)#nsi%# Condition- ;he condition shall be deemed fulfilled when the obligor voluntarily prevents &the o!li"ee from' its fulfillment &of the condition'.('rt. 00/3) -applicable only to S!s)#nsi%# "onditions and not to $esolutory conditions. &&&;he prevention must have been done for the precise purpose of preventing the condition. E''#"ts o' S!s)#nsi%# Condition 5Art. 11338 B#'or# A!l'ill-#nt A't#r A!l'ill-#nt 6emandability as well ;he obligation arises as the ac#uisition or and becomes effective. effectivity of rights arising from the obligation is suspended. ;he right of the creditor ;he right of the creditor is mere hope I is perfected. (becomes e)pectancy. effective I demandable) "ffects are retroactive (applicable only to consensual contracts) 'rt. 00//, par. 0- !rotection for the creditor file an injunction to stop the debtor does not necessarily always involves court action in spite the wordings of the law. i.e. registration
jmvdg 13

R#ason 'or r#troa"ti%it$/ ;he condition is only accidental, not essential element of the obligation. &&& ;he principle of retroactivity must be tempered by principles of justice and practicability. 1n obligations to give the principal obligation as well as the fruits should be delivered in unilateral obligations, the debtor shall appropriate the fruits and interests received, unless there is a contrary intention on his part in obligations to do or not to do ourts shall determine in each case the retroactive effect of the condition that has been complied with. &&&1n reciprocal obligations the fruits and interest must be e#ually compensated between the parties. &&&1n unilateral obligation, the debtor shall appropriate the fruits and interests received unless the intention is different. &&&1n personal obligations, the courts will have to determine in each case the retroactive effect of the condition that has been complied. E''#"t o' Loss& C#t#rioration& or I-)ro%#-#nt 5Art. 11378 0. 1f the thing is lost without the fault of the debtor, the obligation shall be #(ting!is,#d> 4. 1f the thing is lost through the fault of the debtor, he shall be obliged to )a$
2nd Semester/2009-2010

AUF School of Law da-ag#s> it is understood that the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its e)istence is un=nown or it cannot be recovered> Chen the thing d#t#riorat#s without the fault of the debtor, the i-)air-#nt is to b# born# b$ t,# "r#ditor> 1f it d#t#riorat#s through the fault of the debtor, the creditor may choose between the r#s"ission o' t,# obligation and its '!l'ill-#nt, with ind#-nit$ 'or da-ag#s in either case> 1f the thing is i-)ro%#d by its nature, or by time, the improvement shall in!r# to t,# b#n#'it o' t,# "r#ditor> 1f it is i-)ro%#d at the e)pense of the debtor, he shall have no other right than that granted to the !s!'r!"t!ar$.

Obligations and Contract improvements provided it is possible to do so without damage to the thing or property. E''#"t o' R#sol!tor$ Condition/ B#'or# A!l'ill-#nt A't#r A!l'ill-#nt ;he obligation is subject ;he rights vested in the to the threat of obligation is e)tinction. e)tinguished. !laced in the same position with creditor in obligation with suspensive condition. Chatever is paid or delivered to any of the parties should be returned (return to status #uo)

5. ..

+. 3.

&&&;here are no e)ceptions in the retroactive effect of resolutory condition> what was delivered need to be returned. &&&;he fulfillment of a resolutory condition signifies the none)istence of the obligation, what is none)istent must no give rise to any effect whatsoever. &&&&&&;here is no provision of mutual compensation of fruits and interests but in connection with the concept of justice, restitution in 'rt. 002, carries with it the conse#uence of reimbursement for all the e)penses incurred for the production, gathering, and preservation of the fruits. &&&7utual restitution is absolute in resolutory conditions because the obligation is e)tinguished, and it ceases to have effect thus does not carry with it fruits and interests. &&&1n obligations to do or not to do, the retroactive effects shall depend upon the discretion of the courts. &&&'rt. 00/2 is also applicable with regard the effects of loss, deterioration, and improvements of things during the pendency of resolutory condition. &&&1n R#sol!tor$ "ondition the Dd#btorE is the person obliged to return while the D"r#ditorE is the person to whom the thing must be returned. R#"i)ro"al obligations 5Art. 11718 remedy for the injured party* rescission or
14 2nd Semester/2009-2010

&&&$ule in 'rt. 00/2 are natural conse#uences of the principle of retroactivity. &&&!redicated on the fulfillment of the condition. &&&$efer only to conditional obligations to give a determinate thing !s!'r!"t- right or enjoyment of a thing, the property of which is vested in another and to draw from the same all the profit, utilities, and advantage it may produce without altering the form(substance of the thing. Loss a thing is considered lost when it* 0. perishes> 4. goes out of commerce D impossible to legally transfer or re-ac#uire 5. disappears in such a way that its e)istence is un=nown or it cannot be recovered I-)ro%#-#nts nat!ral a""#ssions/ alluvion, abandoned river beds, island formed avulsion,

&&&;he debtor cannot as= for reimbursement for e)penses incurred for useful improvements or improvements for pleasure. &&&the debtor may have the right to remove such
jmvdg

AUF School of Law fulfillment R#"i)ro"al obligation-created or established at the same time, out of the same cause and which results in the mutual relationship of creditor and debtor between the parties. -characteri<ed by reciprocity> one obligation is correlative of the other. -bilateral in character. -tacit resolutory condition. &&&G#n#ral r!l#* 1f one of the parties fails to comply with what is incumbent upon him,there is a right on the part of the other to rescind (or resolve) the obligation. Rig,t o' r#s"ission- belongs to the injured party alone. -must be invo=ed judicially by filing the proper action of rescission. not absolute> the court is given the discretionary power to fi) a period within which the obligor in default may be permitted to comply with what is incumbent upon him. implied in reciprocal obligations('rt. 0020, par. 0) &&&1f the contract contains a resolutory provision by virtue of which the obligation may be canceled or e)tinguished by the injured party in case of breach of obligation, judicial permission to cancel or rescind the contract is no longer necessary. @ut the ourt may confirm such e)tra judicial rescission. &&&1f there is no e)press provision of rescission in the contract, rescission should be invo=ed judicially. &&&;he termination of a contract must not be contrary to law, morals, good customs, public order, or public policy. &&&9otice is always important in rescission so the alleged infractor can #uestion the propriety of the rescission. &&&'rt. 0020 is not applicable to contracts of partnership. ;here are special provisions that govern the latter, thus the general provision will not prevail. ;he same applies to sales of real property
jmvdg 15

Obligations and Contract ($ecto Law) and sales of personal property by installment (7aceda Law). &&&$escission will only be rendered when the breach is s!bstantial so as to defeat the object of the parties in entering into the agreement. ase* *ong %o + &o. vs ,awaiian--hilippine &o. 'lternative remedies to the injured party* --fulfillment of the obligation with payment for damages (8pecific performance with damages) --rescission of the obligation with payment for damages (resolution with damages) ase* *ongcuan vs .$& &&&;he injured party can still see= the rescission or resolution of the obligation even if he has opted to choose the fulfillment of such obligation if fulfillment should become impossible. ase* $yson-*imon vs $damos

&&&1n awarding damages... 1n case or only those elements of rescission damages can be admitted that are compatible with the idea of rescission. 1n case of specific %nly the elements of damages performance can be admitted which are compatible with the idea of specific performance. E''#"ts o' R#s"ission* it is the duty of the court to re#uire the parties to surrender whatever they may have received from the other (without prejudice to the obligation of the party who was not able to comply with what is incumbent upon him). $escission can no longer be demanded when he who demands is no longer in the position to return whatever he may be obliged to restore> neither can it be demanded when the thing which is the object of the contract is already in the possession of a 5rd party who obtained it in good faith. $emedy for the latter will be an action
2nd Semester/2009-2010

AUF School of Law for the transfer or conveyance for damages. 1f 5rd person obtained the property in bad faith, the injured party can still go after the property. 1f it canGt really be recovered, the remedy is for the injured party to proceed against 5rd person who acted in bad faith for damages.

Obligations and Contract

T#r-H<#riod

Condition

1nterval of time r#+!isit#s $efers to a fact which is future or event which is and certain future and uncertain 1nterval of time '!l'ill-#nt ' future and that must uncertain fact or necessarily event that may come, although it or may not may not be happen. =nown when 7erely e)erts an In'l!#n"# ")erts an influence upon on influence upon the time of the obligation the very demandability or e)istence of the e)tinguishment of obligation itself. an obligation. 9o retroactive R#troa"ti%# Bas retroactive effects unless #''#"ts effects there is an agreement to the contrary. Chen a term or a period is left e)clusively to the will of the debtor, the e)istence of the obligation is not affected (potestative term or period) E''#"t o' 0ill o' t,# d#btor Chen a condition is left on the e)clusive will of the debtor, the e)istence of the obligation is affected (Eoid) (potestative condition)

&&&;here can be partial rescission or fulfillment under 'rt. 0020. ase* &entral /an0 vs &$ &&&$escission calls for mutual restitution. (1aperal vs *olid ,omes) &&&1f there is arbitration in the contract, arbitration should be resorted to before as=ing for rescission ((orean 2echnology vs 1erma)

E''#"t o' br#a", b$ bot, )arti#s 5Art. 117=8 R!l#s* 0. the liability of the first infractor shall be e#uitably tempered by the courts. -fair to both parties because the second infractor also derived, or thought he would derive, some advantage for his own act or neglect 4. 1f it cannot be determined which of the parties first violated the contract, the same shall be deemed e)tinguished, and each shall bear his own damages -it is presumed that both at about the same time tried to reap some benefit Sec ) - %!li"ations *ith a $eriod T#r- or <#riod- interval of time, which e)erting an influence on an obligation as a conse#uence of a juridical act, either suspends its demandability or produces its e)tinguishment. Obligations 0it, a )#riod- obligations whose demandability or e)tinguishment is subject to the e)piration of a term or a period.
jmvdg 16

Classi'i"ation o' t#r- or )#riod 0. suspensive or resolutory a) suspensive (e) die) - demandable only upon the arrival of a day certain. b) resolutory (in diem) D demandable at once, although it is terminated upon the arrival of a day certain &&&da$ "#rtain- which must necessarily come, although it may not be =nown when. 4. legal, conventional, or judicial a) legal- term or period granted by law b) conventional- stipulated by the parties c) judicial- fi)ed by the courts 5. definite or indefinite a) definite- the date or time is =nown beforehand
2nd Semester/2009-2010

AUF School of Law b) indefinite- can only be determined by an even which must necessarily come to pass, although it may not be =nown when #''#"ts o' t#r- or )#riod/ suspensive the demandability of the obligation term or period is e)tinguished, not the ac#uisition of right or the effectivity of the obligation. $esulotory ;he fulfillment or performance of term or period the obligation is demandable at once, but it is e)tinguished or terminated upon the arrival of the day certain or the e)piration of the term. ase* -N/ vs 1ope3 4ito &&&'cceleration clause is a clause where upon default of the debtor with one or more payment will ma=e the whole obligation demandable. ;his is a valid provision in contracts. "ffect of fortuitous event- relieve the contracting parties from the fulfillment of their respective obligations during the term or period. ase* 4ictoria's -lanters vs 4ictorias 5illing &o. #''#"t o' ad%an"# )a$-#nt or d#li%#r$- obligor can recover what he has paid or delivered with fruits or interests. ('rt. 002+) -applicable only to obligations to give &&&;here can be no right of recovery if the obligor delivers the thing voluntarily or with =nowledge of the period or term or the fact that the obligation has not yet become due and demandable. ('rt. 0023) G#n#ral r!l#/ a period designated for the performance or fulfillment of an obligation is presumed to have been established for the benefit of both the creditor and the debtor. ase* de 1eon vs *yjuco &&&1f the tenor of the obligation or from other circumstances that the term or period has been
jmvdg 17

Obligations and Contract established in favor of the creditor or of the debtor, the general rule will not apply. K!di"ial t#r- or )#riod ('rt. 002-) K!di"ial t#r- or )#riod- when fi)ed by a competent court, the period can no longer be judicially changed ('rt. 002-, par. 5). -becomes a law governing the contract between the party ases when court can fi) term* if the obligation does not fo) a period, but it can be inferred that a period was intended by the parties cannot be applied to contract for services in which no period was fi)ed by the parties. 1n such contracts the period of employment is understood to be implicitly fi)ed, in default of e)press stipulation, by the period of the payment of the salary of the employee, in accordance with the custom universally observed throughout the world. cannot be applied to pure obligations if the duration of the period depends upon the will of the debtor just and logical, because otherwise, there would always be the possibility that the obligation will never be fulfilled or performed. if the debtor binds himself to pay when his means permit him to do so. ase* 6on3ales vs 7ose &&&9o other action can prosper unless the court has fi)ed the duration of the term or period. &&&1n potestative term or period, in order to prevent the obligation contracted from becoming ineffective by non fulfillment, the courts must fi) the duration of the term or period. &&&8o long as such period has not been fi)ed by the court, legally there can be no possibility of any breach of contract or of failure to perform the obligation. 8uch cannot be raised for the first time on appeal.

2nd Semester/2009-2010

AUF School of Law &&&'rt. 002- applies to a lease agreement, where a contract of lease clearly e)ists. &&&1t is not necessary that the creditor will e)pressly as= in the complaint for the court to fi) the period, such may be granted although the complaint does not as= for such relief. &&&;wo ultimate facts that need to be alleged in the complaint to describe an obligation with an indefinite period. 0. ?acts showing that the contract was entered imposing on one of the parties an obligation in favor of the other 4. facts showing that the performance of the obligation was left to the will of the obligor, or clearly showing, or from which an inference can be reasonably drawn that a period was intended. &&&;he action recogni<ed by 'rt. 002- may also prescribe li=e any ordinary civil action. (6on3ales vs 7ose' E(ting!is,-#nt o' C#btorLs rig,t to <#riod ('rt. 002/) (0) Chen after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for the debt> (a) insolvency needs no judicial declaration (b) includes any case in which it would be impossible financially for the debtor to comply with his obligations (c) such insolvency must not be pree)isting> arose after the constitution of the obligation (d) if there is a guaranty or security for the debt, the debtor, in spite of insolvency, does not lose his right to the period. (4) Chen he does not furnish to the creditor the guaranties or securities which he has promised> (a) such failure renders the original obligation pure and without any condition, and conse#uently, the loan become due and demandable. (5) Chen by his own acts he has impaired said guaranties or securities after their
jmvdg 18

Obligations and Contract establishment, and when through a fortuitous event they disappear, unless he immediately gives new ones e#ually satisfactory> (a) there is a difference between effects of impairment and effects of disappearance 0. if the guaranty or security is impaired through the fault of the debtor, he shall lose his right to the benefit of the period> 4. if it is impaired without his fault, he shall retain his right> 5. if the guaranty or security disappears through any cause, even without the fault of the debtor, he shall lose his right to the benefit of the period .. in either case of impairment or disappearance, the debtor will not lose his right to period if he gives a new guaranty or security which is e#ually satisfactory. (.) Chen the debtor violates any underta=ing, in consideration of which the creditor agreed to the period> (+) Chen the debtor attempts to abscond. (a) 7ere attempt of the debtor disappear or run away from his obligation. Sec + - Alternative and ,acultative %!li"ations 5. Con !n"ti%# %s Alt#rnati%# Con !n"ti%# Alt#rnati%# there are several there are several conditions, all of which conditions but only one must be reali<ed must be reali<ed.

Con !n"ti%# obligation2 all of the objects of the obligation are demandable at the same time distrib!ti%# obligation- when only one object of the obligation is demandable. Alt#rnati%#- comprehends several objects or prestation which are due, but it may be complied with by the delivery or performance of only one of them.
2nd Semester/2009-2010

AUF School of Law !erformance of one of the obligation is sufficient Aa"!ltati%#- comprehends only one object or prestation which is due, but it may be complied with by the delivery of another object or the performance of another prestation in substitution. Alt#rnati%# Obligations ('rt. 04,,) G#n#ral r!l#/ ;he right of choice belongs or pertains to the debtor. &&&%nce the debtor has made the choice, and such choice is duly communicated to the creditor, the obligation becomes simple. ")ceptions* when the right of choice belongs or pertains to the creditor when it has been e)pressly granted to a third person. Limitation to the right of choice* debtor cannot choose those prestations or underta=ings that are impossible, unlawful, or which could not have been the object of the obligation. J!restations which could not have been the object of prestationK underta=ings that are not included among others those from which the obligor may select, or those which are not yet due and demandable at the time the selection is made, or those by reason of accident or some other cause, have ac#uired a new character distinct or different from that contemplated by the parties when the obligation was constituted. &&&!ar. 4 of 'rt. 04,, contemplates a case in which the right to choose or select is 9%; lost or e)tinguished altogether. ('rt. 04,0)
jmvdg 19

Obligations and Contract &&&'pplicable to cases in which the choice is dependent on the debtor, creditor, or third person. &&& ommunication is needed to ma=e the choice effective. &&&9o special form for the communication or notification of choice, although it is always better to ma=e the notification either in a notari<ed document or in any other authentic writing. &&&6ebatable* an the creditor to whom the selection has been duly communicated impugn such selectionL &&&%nce the choice is made by the debtor (or creditor, or 5rd person) and such selection has been communicated, the obligation ceases to be alternative. ;he loss of the object of prestation chosen and communicated e)tinguishes the liability. ('rt. 04,4) &&&Chen only one prestation is practicable, the debtor loses his right of choice altogether. ;he obligation becomes simple. Art. 1=6= Art. 1=66& )ar. =

%nly one prestation ;here are still two or which can be performed more prestations that can be performed. %bligation is converted to a simple one because the debtor loses his right of election ;he obligation is still alternative because the debtor can still e)ercise his right of election.

&&&Chen the debtorGs right of choice is rendered ineffective through the creditorGs fault, the only possible remedy for the debtor is to bring an action for the rescission of the contract with damages. ('rt. 04,5) Art. 1=6B Art. 1=65 choice of

$ight of choice of $ight of debtor reditor

2nd Semester/2009-2010

AUF School of Law General rule e)ception

Obligations and Contract &&&'rt. 04,0 is applicable by analogy with respect to the time or moment when the substitution will ta=e effect. &&& ommunication is substitution effective. needed to ma=e the

?actors to consider in =nowing the effect of loss of the object of prestation to whom the right of choice belongL Chat is the cause of the loss of the object of prestationL (fortuitous event or fault of the debtor) (for Summar- of .ffects of /oss of %!li"ation0 see Annex 1A2 ) Aa"!ltati%# Obligations ('rt. 04,3) Aa"!ltati%# obligation- obligation wherein only one object or prestation has been agreed upon by the parties to the obligation, but which may be complied with by the delivery of another object or the performance of another prestation in substitution. Aa"!ltati%# %nly one object %s Alt#rnati%#

&&&Chatever may be the cause of the loss or deterioration of the thing intended as a substitute, such loss shall not render the debtor liable. - 3ean Capistrano &&&%nce the substitution has been made, the debtor shall be liable for the loss or deterioration of the substitute on account of his delay, negligence, or fraud. &&&%nce the substitution is made, the obligation is converted into a simple one. Sec 4 - 5oint and Solidar- %!li"ations Koint obligation - obligation where there is a concurrence of several creditors, or of several debtors, or of several creditors and debtors, by virtue of which each of the creditors has a right to demand, and each of the debtors is bound to render, compliance with his proportionate part of the prestation which constitutes the obligation o!li"acion mancomunada Solidar$ obligation D obligation where there is a concurrence of several creditors, or of several debtors, or of several creditors and debtors, by virtue of which each of the creditors has a right to demand, and each of the debtors is bound to render, entire compliance with the prestation which constitutes the obligation o!li"acion solidaria Coll#"ti%# Obligations ('rt. 04,-) General rule* 1f there is a concurrence of several creditors, or of several debtors, or of several creditors and debtors,the presumption is that the obligation is J%19; and not solidary. ")ceptions* 0. when the obligation e)pressly states that there is solidarity> Jjointl- and severall-2
20 2nd Semester/2009-2010

Ob #"t d!# 8everal objects

@y the delivery "o-)lian"# @y the delivery of of another object one of the or by the objects or by the performance of performance of another one of the prestation in prestations which substitution are alternatively due. !ertains only to the debtor ",oi"# 7ay pertain to the debtor, or creditor, or third person Loss of all the objects of prestation is necessary to e)tinguish the obligation 7ay give rise to a liability on the part of the debtor

Loss or impossibility of the object e)tinguishes the obligation 6oes not give rise to liability on the part of the debtor

E''#"t o' 'ort!ito!s loss

E''#"t o' "!l)abl# loss

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AUF School of Law 1individuall- and collectivel-2 4. when the law re#uires solidarity> and, Art 6)70 #8)40 #6##0 #6#90 )#4:0 )#970 and )#64 ;CC Art ##<0 R$C 5. when the nature of the obligation re#uires solidarity. %!li"ations arisin" from criminal offenses or torts Koint Ci%isibl# Obligations ('rt. 04,/) &&&"ach creditor can demand only for the payment of his proportionate share of the credit, while the debtors can be held liable only for the payment of his proportionate share of the debt. &&&Joint creditor cannot act in representation of the others> neither can debtor be compelled to answer for the liability of the others. &&&;he payment or ac=nowledgement by one of the joint debtors will not stop the running of the period of prescription as to the others. Koint Indi%isibl# Obligations ('rt. 04,2) -midway between joint and solidary obligations characteristics* no creditor can act in representation of the other no debtor can be compelled to answer for the liability of the others. joint with respect of the parties indivisible with respect the fulfillment of the obligation = or -or# "r#ditors ;he concurrence or collective act of all the creditors, although each for his own share, is necessary for the enforcement of the obligation. of

Obligations and Contract proceeding against the debtors all

&&&1f one of the joint debtors fails to comply with his underta=ing, the obligation can no longer be fulfilled or performed. &&&;he debtors who are ready to fulfill what was incumbent upon them shall not contribute to the indemnity beyond the corresponding portion of the price of the thing or of the value of the service in which the obligation consists. ('rt. 044.) &&&1f one of the joint debtors be insolvent, the others shall not be liable for his share. &&&6ebatable* 1f there are two or more creditors or debtors, will the claim of a creditor addressed to a single debtor or the ac=nowledgment made by one of the debtors in favor of one or more creditors be sufficient to interrupt the period of prescriptionL &&&1ndivisibility and solidarity are 9%; identical. Indi%isibilit$ %s Solidarit$ !restation which constitute object of obligation. !lurality subjects re#uired nat!r# the the of not r#+!isit#s Legal tie or vinculum, and conse#uently to the parties of the obligation. !lurality of subjects is indispensable. $emains even though there is a liability on the part of the debtors because of breach.

= or -or# d#btors ;he fulfillment of or compliance with the obligation re#uires the concurrence of all the debtors, although each for his own share

;erminated when the obligation is converted into one of indemnity for damages

E''#"t o' br#a",

;he obligation can be 9ot susceptible enforced only by partial fulfillment.

Finds of solidarity active D among creditors tie or vinculum e)isting among several creditors of one and the same obligations by virtue of which each of them, in relation to his co-creditors, possesses the character of a creditor only with respect to his share of the
21 2nd Semester/2009-2010

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AUF School of Law obligation but in relation to other debtor or debtors, represents all other creditors. 7utual representation passive D among debtors tie or vinculum e)isting among several debtors of one and the same obligations by virtue of which each of them, in relation to his co-debtors, possesses the character of a debtor only with respect to his share of the obligation, but in relation to other creditor or creditors, represents all other debtors. each solidarity debtors, as far as the creditors are concerned, is the debtor to the entire amount mi)ed D among creditors and debtors

Obligations and Contract 1f he pays the entire obligation, he has a right to demand reimbursement from his co-debtor of their share in the obligation. 'n e)tension of time granted by the creditor to one of the solidary debtors without the =nowledge of the other solidary debtors would not have the effect of releasing the latter from their obligation. 1f the surety pays the entire obligation, he ac#uires a right to reimbursement from the principal debtor of the entire amount he has paid. 'n e)tension of time granted by the creditor to the principal debtor would release the surety from the obligation.

'!nda-#ntal #''#"t o' a"ti%# solidarit$- creation of a r#lations,i) o' -!t!al ag#n"$ among solidary creditors by virtue of which the creditor is empowered against the debtor or debtors not only the rights which corresponds to him, but also all the rights which correspond to the other creditors, with the conse#uent obligation to render an accounting of his acts to such creditors. (e#ual mutual representation) &&&relationship of mutual agency, basis of the difference of the rules in 'rt. 0404 and 040+. '!nda-#ntal #''#"t o' )assi%# solidarit$2 liability of each debtor for the payment of the entire obligation, with the conse#uent right to demand reimbursement from the others for their corresponding shares, once payment has been made. <assi%# solidar$ d#btor S!r#t$

&&&:niform bond or tie- when the creditors and debtors are bound in the same manner and by the same conditions or periods. &&&Earied bond or tie- when the creditors and debtors are not bound in the same manner and by the same conditions or periods. &&&1n 'rt. 0400, the right of the creditor is limited to the recovery of the share owed by the debtor whose obligation has become mature leaving in suspense his right to recover the shares corresponding to the debtors whose obligations have not yet matured. ase* .nchausti + &o. vs 8ulo ('rt. 0404) "ffects of !rejudicial acts of a creditor to... debtor(debtors D valid and binding because of the principle of mutual representation which e)ists among the creditors solidary creditors D the creditor who performed the act shall incur the obligation of indemnifying the others for damages. &&&'rt. 0404 refers to effect of prejudicial acts upon the relationship of the creditor among themselves. &&&'rt. 040+ refers to the effect of prejudicial acts upon the entirely different relationship of the creditors with the debtor or debtors. 8hall result in
22 2nd Semester/2009-2010

@oth are solidarily liable to the creditor for the payment of the entire obligations Liable for the payment Liable for the debt of of the debt of another another. but also for the payment of a debt which is properly his own.

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AUF School of Law the e)tinguishment of the obligation &&&!rejudicial acts* novation compensation confusion remission &&&;he act of e)tinguishment, which is prejudicial to the co-creditors, will be valid so as to e)tinguish the claim against the debtors, but not with respect to the co-creditors whose right subsists and can be enforced against the creditor who performed the act alone. Assign-#nt o' rig,t ('rt. 0405) &&& onsent of other creditors in the assignment of rights by another solidary creditor is needed. &&&mutual agency "ffects if assigned without the consent* 0. if assigned to another co-creditor, there is no violation of the precept stated in 'rt. 0405> Ealid assignment 4. if the assignment is made to a third person, there is a violation of the precept in 'rt. 0405> 1nvalid assignment ('rt. 040.) &&&'ny creditor may demand (judicial or e)tra judicial) the payment or performance of the obligation from one, some, or all of the debtors. &&&!ayment to be made on the creditor who made the demand and to no other. 1f there is no demand, payment may be made by the debtor to anyone of the solidary creditors. &&&1n mi)ed solidarity, judicial or e)tra judicial demand prohibits the debtor upon whom the demand is made from ma=ing payment to any creditor other than to the one who made the demand> does not e)tend to other debtors upon whom no demand has been made. ('rt. 040+) No%ation D change or substitution of an obligation by another, resulting in its e)tinguishment or
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Obligations and Contract modification, either by... changing its object or principal condition, or if prejudicial D the creditor who effected the novation shall reimburse the others for damages incurred by them if beneficial D the creditor who effected the novation is able to secure performance of the new obligation, such creditor shall be liable to the others for the share which corresponds to them, not only in the obligation, but also in the benefits. substituting another in place of the debtor, or creditor shall be liable to the acts of the new debtor in case there is a deficiency in performance or in case damage is incurred by the other solidary creditors subrogating a third person in the rights of the creditor. ;he obligation of the debtor and creditor is not in reality e)tinguished. 1f effected by subrogating a third person in the rights of all the solidary creditors, the creditor liable for such novation is liable to the creditors for the share which corresponds to them in the obligation. e)tinguishes the obligation but it creates a new one in lieu of the old. ;he co-creditor who does not participate in the novation of the obligation can have a share in the benefits of the modification but not in possible losses.

General rule* ")tension of time for the payment of the obligation does not constitute novation. &&&needed in order that an obligation may be e)tinguished by another which substitutes it. ")press declaration of novation incompatibility of the old and new obligation. &&&1n suretyship, e)tension of time given to the principal debtor by the creditor without the consent of the surety e)tinguishes the latterGs liability, e)cept when the surety is liable for different payments or upon series of installments.

2nd Semester/2009-2010

AUF School of Law Co-)#nsation D weighing two obligations simultaneously in order to e)tinguish them to the e)tent that the amount of one is covered by the amount of the other. Con'!sion D refers to the merger of the #ualities of creditor and debtor in one and the same person with respect to one and the same obligation. !artial compensation or confusion* there may be some doubt as to the part of the obligation to which the confusion or compensation shall be applied. 'pply the rules on 'pplication of payment ;otal compensation or confusion* obligation is e)tinguished altogether and what is left is the ensuing liability for reimbursement within each group R#-ission act of pure liberality by virtue of which the creditor, without having received any compensation or e#uivalent, renounces his right to enforce the obligation, thereby e)tinguishing the same either in its entirety or in the part or aspect thereof to which the remission refers. "ffects* "o%#rs #ntir# obligation/ total e)tinguishment of the obligation. the entire juridical relation is terminated for the benefit of one of the debtors and covers his entire share of the obligation. ;otally releases the debtor from the creditors. @ut the debtor is still bound to his codebtors for the benefit of one of the debtors and covers only a part of his share of the obligation. Bis character as a solidary debtor is not affected covers the entire share of a solidary debtor in the obligation or only part thereof. !artial remission is a valid defense if the creditors proceed against any one of the solidary debtors for the payment of the entire obligation. &&&8uch rules cannot be applied if the debt had
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Obligations and Contract already been totally paid by anyone of the solidary debtors before the remission is effected. &&&1f one of the solidary creditor was able to collect the entire amount from one or some, or all of the solidary debtors, the obligation is totally e)tinguished and that creditor must render an account to his co-creditors.

('rt. 0403) &&& reditor may proceed against any one, or some, or all of the solidary debtors simultaneously. &&&@ringing of an action against the principal debtor to enforce the payment of the obligation is not inconsistent with, and does not preclude the bringing of another to compel the surety to fulfill hid obligation under the surety agreement. &&&' creditorGs right to proceed against the surety e)ist independently of his right to proceed against the principal. &&&if the obligation is joint and several, the surety has the right to proceed even against the surety alone. &&&obligation of the surety is the same as that of a principal. &&&;he surety is not entitled, as a matter of right, to be given notice of the principalGs default. ommencement of the suit is a sufficient demand. ('rt. 040-) &&&Chere payment is made by one of the solidary debtors, the effect is either the total of partial e)tinguishment depending upon whether the entire amount of the debt is paid or only part thereof. &&&%nce payment is made by one of the solidary debtors of the entire obligation,, there arises immediately a conse#uent right of such debtor to claim from his co-debtors the share which
2nd Semester/2009-2010

AUF School of Law corresponds to them, with interest for the payment already made. &&&the right is not available to a debtor who ma=es the payment after the obligation has prescribed or has become illegal. &&&;he interest shall be computed not from the time payment was made, but from the time the debt became due. 1f one of the solidary debtors become insolvent, his share shall be borne by all his co-debtors, in proportion to the debt of each. (par. 5, 'rt. 040-) ('rt. 0402 D 0440) E''#"t o' Loss or I-)ossibilit$ o' <#r'or-an"# 1. NOT d!# to t,# 'a!lt o' t,# solidar$ d#btors %bligation is e)tinguished =. C!# to t,# 'a!lt o' on# o' t,# solidar$ d#btors the obligation is converted into an obligation of indemnity for damages, but the solidary character of the obligation remains @. Aort!ito!s #%#nt the obligation is converted into an obligation of indemnity for damages, but the solidary character of the obligation remains unjust enrichment D reason or philosophy behind 'rt. 044, &&&a solidary debtor who paid the entire amount of the obligation does not step into the shoes (subrogation) of the creditors because he does not ac#uire the same right to collect the entire amount of the obligation from his co-debtors. Be is only entitled to the proportionate share of each of the co-debtors. ('rt. 0444) &&&;he creditor(s may proceed against any of the solidary debtors or all of them simultaneously for the payment of the obligation, but whether only one or all of the solidary debtors are sued jointly, any soliadary debtor may interpose against the claim of
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Obligations and Contract the creditor or creditors* 6efenses available to a solidary debtor defenses derived from the very nature of the obligation payment or performance> res judicata> prescription> those which invalidate the contract such as mista=e, violence, undue influence, fraud, etc... defenses personal to him or pertaining to his own share minority> insanity, etc.. defenses personal to the others, but only as regards that part of the debt for which the latter are responsible. 7erely a partial defense Sec 9 = 3ivisi!le and Indivisi!le %!li"ations 6. Ci%isibl# %s Indi%isibl# Ci%isibl# Indi%isibl# condition is susceptible of partial reali<ation or performance without the obligation in essence being changed. condition is not susceptible to partial reali<ation or performance because, otherwise, the essence of the obligation will be changed. 1f separated into parts, its essence is changed or its value decreased disproportionately.

1f separated into parts, its essence is not changed or its value is not decreased disproportionately, because each of the parts into which it is divided are ,o-og#n#o!s and analogo!s to each other as well as the thing itself.

;he divisibility of the MperformanceN obligation IS NOT divisibility of the thing or the prestation which constitutes the object of the obligation. &&&;he divisibility or indivisibility of the object itself is a very important factor, probably the most important, in determining whether the prestation which constitutes the object of the obligation is susceptible to partial performance, or not.
2nd Semester/2009-2010

AUF School of Law

Obligations and Contract comply with the obligation, it is converted into indemnity for damages the debtor who failed or refused to comply with his obligation shall bear the burden of paying all of the damages suffered by the creditors the other debtor may also recover for damages form the debtor at fault.

&&&?or a thing to be considered divisible, it is important that it must be possible for reconstruction into its condition prior the division, by uniting the different parts into which it had been divided. T,r## 4inds o' Ci%ision Auantitative D when the thing can me materially divided into parts and such parts are homogeneous to each other. 7ovable- parts are actually separated from each other immovable- the limits of the parts are fi)ed by metes and bounds Aualitative D the thing can be materially divided but the parts are not e)actly homogeneous. (i.e inheritance) 1deal(1ntellectual D the thing can only be separated into ideal or intellectual parts, not material parts. (i.e. co-ownership) ('rt. 0445) %ne debtor one creditor- the divisibility is of little significance. G#n#ral R!l#/ the creditor cannot be compelled to partially receive the prestation in which the obligation consists> neither may the debtor may the re#uired to ma=e partial fulfillment. E("#)tions/ when the obligation e)pressly stipulates the contrary when the different prestations constituting the objects of the obligation are subject to different terms and conditions. Chen the obligation is in part li#uidated and in part unli#uidated. !lurality of debtors and creditors- the effect of the divisibility or indivisibility of the obligation shall depend whether the obligation is joint or solidary. Joint D 6ivisible- 'rt. 04,/ shall apply 1ndivisible- 'rt. 04,2 and 044. 8olidary D 'rt. 0400- 0444 shall apply 5'rt. 044.) @reach of joint indivisible obligation the obligation can be enforced only by proceeding against all of the debtors if any of the debtors fails or refuse to
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('rt. 044+) ;rue test of divisibility* FON t,# obligation is s!s"#)tibl# o' )artial "o-)lian"#. &&&;he susceptibility of partial compliance should be understood in the sense of the possibility of reali<ing the end or purpose which the obligation see=s to attain. ('pplies to obligations to give, to do, or not to do) To gi%# ;he divisibility or indivisibility of the obligation is the most important factor. definite I indivisible object- not susceptible of partial fulfillment ('bsolute rule) divisible object- susceptible of partial performance. e)cept* when the law provides for its indivisibility which may be inferred or presumed either> from the fact that although the object of the obligation can be separated in parts, yet each part constitutes a necessary complement of the other parts from the very purpose of the obligation itself it is so intended by the parties e)press implied To Co


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indivisible prestation- not susceptible of partial fulfillment ('bsolute rule) 1n order to determine whether the prestation is divisible or not, the object or purpose of the obligation must always be considered it is divisible when it has for its object...
2nd Semester/2009-2010

AUF School of Law 0. the e)ecution of a certain number or days of wor=, 4. the accomplishment of wor= by metrical units> or 5. the accomplishment of analogous things which by their nature are susceptible of partial performance.

Obligations and Contract parties 's to purpose Co-)#nsator$ (for reparation) "stablished for the purpose of indemnifying the damages suffered by the obligee or creditor in case of breach S!bsidiar$('lternative <!niti%# "stablished for the purpose of punishing the the obligor or debtor in case of breach

6ivisible prestation- susceptible of partial fulfillment, with certain #ualifications. when the law provides for its indivisibility it is so intended by the parties

's to "ffect KointH umulative %nly the penalty may be both the penalty and the demanded in case of principal obligation may breach be demanded ('rt. 0443) &&&!enalty may be considered as reparation or substitute for damages or as a punishment in case of breach of the obligation. R#)aration D the #uestion of damage is resolved, since the stipulated indemnity or prestation represents a legitimate estimate made by the contracting parties of the damages caused by the breach of the obligation. proof of actual damage is not needed general rule <!nis,-#nt D the #uestion of damage is not yet resolved t,# rig,t to da-ag#s& asid# 'ro)#nalt$& still s!bsists if the injured party desires to recover the damages actually suffered by him in addition to the penalty, he must prove such damages. ")ception to the general rule G#n#ral R!l#* the penalty is fi)ed by the parties as a compensation or substitute for damages in case of breach. E("#)t/ 0. when there is a stipulation to the contrary 4. when the obligor is sued for refusal to pay the agreed penalty 5. when the obligor is guilty of fraud (see Art ##7<)
27 2nd Semester/2009-2010

Not to Co ;he determination of the character of the obligation will depend upon the sound discretion of the court Sec : = %!li"ations *ith $enal Clause one in which an accessory underta=ing is attached for the purpose of insuring its performance by virtue of which the obligor bound to pay a stipulated indemnity or perform a stipulated prestation in case of breach. !enalty or penal clause is an accessory obligation attached to the principal obligation <!r)os#s o' )#nalt$/ insure the performance of the obligation (funcion coercitiva o de "arantia)> general purpose li#uidate the amount of damages to be awarded to the injured party in case of breach of the principal obligation (funcion liquidatoria)> compensatory> pre-agreed amount for the damages to punish the obligor in case of breach of the principal obligation (funcion estrictamente penal)> punitive Kinds o' )#nalt$ 's to origin L#gal onstituted by law Con%#ntional onstituted agreement of by the

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AUF School of Law (the purpose of the penalty is to punish the obligor) &&&;he obligee can recover from the obligor not only the penalty, but also the damages or interests resulting from the breach of the principal obligation where both parties were unable to comply with their obligation (fortuitous event), th penal clause cannot be invo=ed by anyone of them to the prejudice of the other. ('rt. 044-) &&&;he debtor cannot e)empt himself form the performance of the principal obligation by paying the stipulated penalty. :nless the right has been e)pressly and clearly granted to him. &&&(*hat happens to the o!li"ation if the ri"ht to choose to pa- the penalt- in su!stitute of the principal o!li"ation has !een "ranted to the de!tor0 is the o!li"ation converted to facultative o!li"ation or does it remain an o!li"ation *ith a penal clause?) &&&;he creditor cannot demand the fulfillment of the principal obligation and the satisfaction of the stipulated penalty at the same time. :nless the right must be clearly granted to him. if there is fault on the part of the debtor, the creditor can demand not only the satisfaction of the penalty but also the payment for damages. ('rt. 044/) &&&'pplicable only to the general rule in 'rt 0443 and not to the e)ceptions. ('rt. 0442) t,# )#nalt$ -a$ b# r#d!"#d/ if the principal obligation has been partly complied with some but not all the prestation are complied with by the debtor refers to the #uantity or #uality of the performance if the principal obligation has been irregularly complied with all the prestations were complied with but not in accordance with the tenor of the agreement refers to the form if the penalty is ini#uitous or
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Obligations and Contract unconscionable. &&&;he creditor cannot recover more than the penalty stipulated even if he proves that the damage suffered by him e)ceed in amount such penalty.(the amount is already agreed upon) ('rt. 045,) &&&1f the principal obligation is void, the penal clause is also void. &&&if the penal clause is void, the principal obligation is not affected. C,a)t#r B E:TING9IS>*ENT OA OBLIGATIONS ('rt. 0450) -od#s o' #(ting!is,ing obligations payment or performance loss of the thing due condonation or remission of the debt confusion compensation novation annulment rescission fulfillment of a resolutory condition prescription --renunciation or waiver by the creditor compromise e)piration of the resolutory term or condition death of one of the contracting parties (personal obligations) will of one of the contracting parties mutual assent or dissent Sec # = $a-ment or $erformance ('rt. 0454) <a$-#nt D fulfillment of the obligation either voluntarily or involuntarily, including its e)tinguishment by any means or modes "onsists in t,# nor-al and %ol!ntar$ '!l'ill-#nt o' t,# obligation b$ t,# r#aliMation o' t,# )!r)os# 'or 0,i", it 0as "onstit!t#d. 1ncludes )#r'or-an"# in any other
2nd Semester/2009-2010

AUF School of Law manner, of an obligation. ?ulfillment of the obligation by the delivery of a sum of money.

Obligations and Contract (with the =nowledge and consent of the debtor) right of reimbursement D recover from the debtor the #ntir# a-o!nt which he has paid. right of subrogation (without the =nowledge and consent of the debtor) right of reimbursement D recover only insofar as the payment has been beneficial to the debtor &&&1f the obligation has been previously e)tinguished by any mode, the 5rd person may proceed against the creditor based on the principle of unjust enrichment. Gratuitous payments D payments effected by a third person who does not intend to be reimbursed by the debtor. consent of the debtor is necessary. ;here is no gift if the gift was not accepted by the debtor. 1f the consent is 8" :$"6 rules on ordinary donation will apply if the consent is 9%; 8" :$"6, 'rt. 0453 and 045will apply. 8uch gratuitous payments are valid as far as the creditor is concerned.('rt. 045/) so the 5rd person who offered the gift but was declined by the debtor can compel the debtor to reimburse him (5rd person) the amount accepted by the creditor. ('rt. 0452) &&&1t is essential that the person who pays the obligation should have the necessary legal capacity to effect such payment. free disposal of the thing due capacity to alienate the thing effect of absence of one or another will effect the invalidity of payment &&&"ven if the creditor has already accepted the payment, it may still be annulled by proper action in court, subject to the e)ception provided in 'rt. 0.4-.(But such provision has alread- !een modified *hen the a"e of majorit- has !een lo*ered to #8 - o )
29 2nd Semester/2009-2010

('rt. 0455-045+) General $ule* there should be "o-)l#t# performance. ('rt. 0455) E("#)t/ substantial performance in good faith the debtor may recover as though there has been a strict and complete fulfillment, less damages suffered by the creditor. ('rt. 045.) ase* Diesel &onstruction vs 9-*. Chen the obligee accepts the performance =nowing its incompleteness or irregularity, without e)pressing any objection or protest. ('rt. 045+) @ased on the principle of estoppel when the obligation has been converted into an indemnification (falls under 'rt. 0455) ('rt. 0453-045/) G#n#ral R!l#/ reditor is not bound to accept payment or performance by a third person. @his is !ecause the creditor ma- not have confidence in the honest- of the +rd person *ho mi"ht deliver a defective thin" or pa- *ith a checA *hich ma- not !e honored ")cept* when it is made by a 5rd person who has interest in the fulfillment of the obligation. (joint debtor, guarantor, surety) when there is a stipulation to the contrary )#rsons 0,o -a$ )a$ obligation/ the debtor himself or his legal representatives any third person who have an interest in the fulfillment of the obligation. (subject to some juridical effects) 'rt.0453-045- are not applicable to a third person who pays the redemption price in sales with right to repurchase, because a vendor a retro is not a debtor within the meaning of the law.

Rig,ts o' a @rd )#rson


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AUF School of Law ('rt. 04.,) to 0,o- )a$-#nt -!st b# -ad# person in whose favor the obligation has been constituted his successor in interest any person authori<ed to receive payment by the creditor himself (conventional authority) by law or legal authority (guardian, e)ecutor or administrator of the estate of a deceased person, assignee or li#uidator of a partnership or corporation) General rule*payment to unauthori<ed person is invalid. ")ceptions* payment made to a 5rd person, provided that it has redounded to the benefit of the creditor. ;his can be invo=ed through the following proofs* (Art #)4#) if after payment, the 5rd person ac#uires the creditorGs rights if the creditor ratifies the payment to the 5rd person if by the creditorGs conduct, the debtor has been led to believe that the 5rd person has authority to receive the payment !ayment made to the possessor of the credit, provided that it was made in good faith. (Art #)4)) Ealid payment to the )oss#ssor o' t,# "r#dit does not refer to possessor of the document evidencing it. the remedy of the creditor would be to proceed against the possessor if credit to whom payment was improperly made. &&&'lthough the payment is not valid because it is not made to a person authori<ed to receive payment, nevertheless it is clear that the vendee had acted in good faith> he can not therefore be said to have incurred in delay> conse#uently, the vendor cannot as= for rescission of the contract. ('rt. 04.0) payment to incapacitated person is valid* if he has =ept the amount or thing paid or delivered insofar as the payment has been beneficial
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Obligations and Contract to him. ;he payment is beneficial to him (incapacitated) when that which has been paid or delivered is applied or spent for some rational, necessary or useful purpose for his benefit. &&&;hese rules are applicable only to obligations to give. ('rt. 04.5) &&&!ayment by the debtor to the creditor after having been judicially ordered to retain the debt is invalid. such payment must be made to the proper officer of the court issuing the writ of attachment or garnishment in conformity with the $ules of ourt. ('rt. 04..-04.3) obligation to give specific or determinate thing D the debtor cannot fulfill his obligation by delivering a thing which is different from what is due although such may be of the same value or even more valuable than that which is due. %bligation to do or not to do D the obligor cannot fulfill his obligation by substituting another act or forbearance. &&&if the creditor or obligor accepts the delivery or substitution, such acceptance shall give the same effect as a fulfillment or performance of the obligation. Cation in )a$-#nt (dacion en pa"o) = transmission of the ownership of a thing by the debtor to the creditor as an accepted e#uivalent of the performance of the obligation. !roperty is alienated to the creditor in satisfaction of a debt in money> law on sales shall govern ('rt. 04.+)> e)ception in 'rt. 04.. ('rt. 04.-) e)tra judicial e)penses D for the account of the debtor judicial costs D $ules of ourt will govern &&&1f the debtor changed his domicile in bad faith or after he has incurred in delay, the additional e)penses shall be borne by him.
2nd Semester/2009-2010

AUF School of Law

Obligations and Contract $ule* the debtor cannot compel the creditor to accept a chec= or draft. ")cept* when the document has been cashed when it had been impaired through the fault of the creditor. ('rt. 04+,) &&&1n case of e)traordinary inflation or deflation, the value of the currency at the time of the establishment of the obligation would be the basis of payment. ")traordinary inflation or deflationO unusual or beyond the common fluctuation in the value of the currency which the parties could not have been foreseen when the obligation was established. (;olentino) uncommon decrease or increase in the purchasing power of the currency which could not have been reasonably foreseen. (6ean apistrano) &&&'rt. 04+, is applicable only to contractual obligations and not to obligations arising from torts. &&&re#uisites for @allantyne schedule to apply* obligation should have been contracted during the Japanese occupation it could have been paid during the Japanese occupation it could have been paid with Japanese military notes ('rt. 04+0) !lace of payment* Obligation deliver thing a <la"# o' )a$-#nt

('rt. 04./) 5 conditions or characteristics of payment* identity D only the prestation agreed upon and no other must be complied with completeness D the thing or service in which the obligation consists must be completely delivered or rendered indivisibility D the payment or performance must be indivisible General $ule* 'rt. 04./ is applicable only to obligation where there is one debtor and one creditor. ")ceptions* when the obligation e)pressly states the contrary when the different prestations which constitutes the objects of the obligation are subject to different terms and conditions when the obligation is in part li#uidated and in part unli#uidated. ('rt. 04.2) &&&' judgment awarding an amount in :8 dollar may be made with its e#uivalent amount in local currency in the conversion rate prevailing at the time of payment. ;he trial court should determine the the conversion rate if the parties cannot agree on the same. (Ca"ala vs 5imenez) $' +42 D 'n 'ct to assure the uniform value of !hilippine oins and urrency. the rule that payment of debts imoney shall be made in the currency stipulated was completely abrogated. $' .0,, D amending $' +42 the law prohibiting stipulations in domestic monetary obligations purporting to give the obligee the right to re#uire payment in currency other than the !hil. currency does not apply to transactions listed on pp. 4.3, %bligations and ontracts, 5urado Legal tender D currency which may be used for the payment of all debts, whether public or private in the !hil., legal tender would be notes and coins issued by the entral @an=. !romissory notes payable to order or bills of e)change, chec=s, etc. are not legal tender

determinate !lace where the thing might be at the time the obligation was constituted 6omicile of the debtor (unilateral obligations)

'ny other case

jmvdg

31

2nd Semester/2009-2010

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