TITLE V. – PRESCRIPTION
CHAPTER 1
GENERAL PROVISIONS
WHAT IS PRESCRIPTION?
WHAT IS LACHES?
a. Persons who can acquire property rights through the other modes of
acquiring ownership.
Prescription does not run between husband and wife, even though there
be a separation of property agreed upon in the marriage settlements or by
judicial decree.
Neither does prescription run between parents and children, during the
minority or insanity of the latter, and between guardian and ward during the
continuance of the guardianship (Article 1109).
EXAMPLES:
Legal separation must be filed within five (5) years from the occurrence of the
ground for legal separation (Article 57, FC);
Generally, action for annulment of marriage by a spouse against the other
must be filed within five (5) years (Article 47, FC);
Alienation made by the husband without the wife‘s consent provided that the
marriage was celebrated under the Civil Code (Article 173, CC).
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All things which are within the commerce of men are susceptible of
prescription, unless otherwise provided. Property of the State or any of its
subdivisions not patrimonial in character shall not be the object of prescription
(Article 1113).
EXAMPLES OF EXCEPTION:
WHAT ARE THE RIGHTS OF CREDITORS AND ALL OTHER PERSONS INTERESTED
IN MAKING THE PRESCRIPTION EFFECTIVE?
Thus:
a. If the period for prescription began and ended under the old laws, said
old laws govern.
b. If the period for prescription began under the new Civil Code, the new
Civil Code governs.
c. If the period began under the old law, and continues under the new Civil
Code, the old law applies.
EXCEPTION:
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In this third rule, it is the new Civil Code that will apply, provided two
conditions are present:
NOTE: It is more than fifty years since the new Civil Code became
effective. The transitional rules may no longer find application today, although
the same were applied before in several cases.
CHAPTER 2
PRESCRIPTION OF OWNERSHIP AND OTHER REAL RIGHTS
Acquisitive prescription of dominion and other real rights may be ordinary or extraordinary
(Article 1117).
Prescription where there is good faith is called ordinary prescription; whereas prescription where
there is bad faith is called extra-ordinary prescription.
Prescription may arise even if the possessor is in bad faith. However, when the possessor is in bad
faith, the period required for the actual possession is much longer to the case of a possessor in good faith.
Aside from the basic requirements of acquisitive prescription already stated, if prescription is
ordinary, the additional requisites are:
Note that the title for prescription must be true and valid (Article 1130); and for the purposes of
prescription, just title must be proved; it is never presumed (Article 1131).
The related Articles which must be considered in the determination of good faith in prescription of
ownership are the following:
a. Article 526 -- He is deemed a possessor in good faith who is not aware that there exists in his title or
mode of acquisition any flaw which invalidates it.
He is deemed a possessor in bad faith who possesses in any case contrary to the foregoing.
Mistake upon a doubtful or difficult question of law may be the basis of good faith.
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b. Article 527 -- Good faith is always presumed, and upon him who alleges bad faith on the part of a
possessor rests the burden of proof.
c. Article 528 -- Possession acquired in good faith does not lose this character except in the case and
from the moment facts exist which show that the possessor is not unaware that he possesses the
thing improperly or wrongfully.
d. Article 529 -- It is presumed that possession continues to be enjoyed in the same character in which
it was acquired, until the contrary is proved.
Just title means that the possessor obtained the possession of the property through one of the
modes recognized by law for acquiring ownership (as enumerated under Article 712) but the transferor or
grantor was not the owner of the property or he has no power to transmit the right (Article 1129). The just
title is intended to transmit ownership and could have actually transmitted ownership had the transferor or
grantor been the true owner of the property. This kind of possession arising from a just title can ripen into
ownership if the other elements of prescription are present.
Possession has to be in the concept of an owner, public, peaceful and uninterrupted (Article 1118).
a. Possession in the CONCEPT OF AN OWNER means the possessor is exercising the attributes of
ownership over the property. He does not recognize any ownership over the property except his
own.
b. Possession of a property is considered PUBLIC when the employment thereof is visible to all,
especially to the very person against whom possession is being asserted. The possession must be
publicly known to the community.
c. Possession is PEACEFUL when it is acquired without force or intimidation, and such character is
maintained all throughout the period fixed by law.
d. Possession is UNINTERRUPTED OR CONTINUOUS when the possessor has not stopped exercising the
rights of an owner over the property during the time fixed by law. However, if the right is
exercisable at intervals, and the right is so exercised, there is still continuity in the possession of the
property. Example: Harvesting of seasonal fruits from fruit bearing trees.
e. The possession must be ADVERSE. Thus, mere possession with juridical title, such as by a lessee,
mortgagee, usufructuary, trustee, or agent does not hold the proper adversely and in the concept of
an owner, unless the juridical relationship is first expressly repudiated and such repudiation has
been communicated to the other party.
f. The acts of possessory character must not be executed in virtue of LICENSE OR BY MERE TOLERANCE of
the owner because the acts shall not be available for the purposes of possession (Article 1119).
Possession is interrupted for the purposes of prescription, naturally or civilly (Article 1120).
a. Possession is naturally interrupted when through any cause it should cease for
more than one year (Article 1121, par. 1).
b. Civil interruption is produced by judicial summons to the possessor (Article
1123), except:
c. Any express or tacit recognition which the possessor may make of the owner's
right also interrupts possession (Article 1125).
a. The old possession is not revived if a new possession should be exercised by the same adverse
claimant (Article 1121, par. 2).
b. If the natural interruption is for only one year or less, the time elapsed shall be counted in favor of
the prescription (Article 1122).
Against a title recorded in the Registry of Property, ordinary prescription of ownership or real
rights shall not take place to the prejudice of a third person, except in virtue of another title also recorded;
and the time shall begin to run from the recording of the latter.
As to lands registered under the Land Registration Act, the provisions of that special law shall
govern (Article 1126).
a. Ownership and other real rights over immovable property are acquired by ordinary prescription
through possession of TEN YEARS (Article 1134).
1
Article 559. The possession of movable property acquired in good faith is
equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully
deprived thereof, may recover it from the person in possession of the same. If the possessor of a
movable lost or which the owner has been unlawfully deprived, has acquired it in good faith at a
public sale, the owner cannot obtain its return without reimbursing the price paid therefor.
2
ARTICLE 1505. Subject to the provisions of this Title, where goods are sold by a person who is
not the owner thereof, and who does not sell them under authority or with the consent of the owner, the
buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his
conduct precluded from denying the seller's authority to sell.
Nothing in this Title, however, shall affect:
(1) The provisions of any factors' acts, recording laws, or any other provision of law enabling the
apparent owner of goods to dispose of them as if he were the true owner thereof;
(2) The validity of any contract of sale under statutory power of sale or under the order of a court of
competent jurisdiction;
(3) Purchases made in a merchant's store, or in fairs, or markets, in accordance with the Code of
Commerce and special laws. (n) casia
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b. Ownership and other real rights over immovables also prescribe through uninterrupted adverse
possession thereof for THIRTY YEARS, without need of title or of good faith (Article 1137).
WHAT IS THE RULE WHEN THERE IS DISCREPANCY IN THE AREA POSSESSED AND IN THE AREA EXPRESSED
IN THE TITLE?
In case the adverse claimant possesses by mistake an area greater, or less, than that expressed in his
title, prescription shall be based on the possession (Article 1135).
Possession in wartime, when the civil courts are not open, shall not be counted in favor of the
adverse claimant (Article 1136).
WHAT ARE THE RULES IN THE COMPUTATION OF TIME NECESSARY FOR PRESCRIPTION?
In the computation of time necessary for prescription the following rules shall be observed:
(1) When the possession of the present possessor is just a continuation of the possession of the
predecessor in interest - The present possessor may complete the period necessary for prescription by
tacking his possession to that of his grantor or predecessor in interest;
(2) When the character of the possession of the possessor has changed from good faith to bad faith - It
is presumed that the present possessor who was also the possessor at a previous time, has continued to be in
possession during the intervening time, unless there is proof to the contrary;
(3) The first day shall be excluded and the last day included (Article 1138).
Tacking of possession is the linking of the possession of the present possessor to the possession of
the immediate past possessor of an identical property for the purpose of completing the period needed for
the prescription.
The condition for the tacking of possession is that privity must exist between the present possessor
and the predecessor in interest. In brief, the present possessor got his possession from the predecessor in
interest. Consequently, a mere usurper cannot invoke the possession of the previous possessor.
There is no privity of interest where the present possessor came into possession of the disputed
land by virtue of a void and fictitious sale (Ruiz vs. CA, 79 SCRA 525).
Tacking is not allowed if the predecessor in interest has not satisfied the requirements of
prescription. Otherwise, there can be no continuity in the nature of the possession.
WHAT IS THE RULE TO FOLLOW WHEN THE CHARACTER OF THE POSSESSION OF THE PREDECESSOR IS
DIFFERENT FROM THAT OF THE PRESENT POSSESSOR?
The law does not provide any solution to such kind of contingency. Thus, sound judgment must be
resorted to, thus:
a. If the predecessor was in good faith but the successor is in bad faith, should there be any tacking of
possession?
There are different views. Some writers say there must be no tacking. Others say, the good faith of
the predecessor should not be set at naught. The second is the better view. The computation of the periods
to be tacked should be proportionate, that is, in the proportion of what the period of possession in good
faith bears to the period of extraordinary prescription. So it is in the proportion of 2:1 as regards movables
and 3:1 for immovables.
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b. If the possession of the predecessor was in bad faith and the possession of the successor is in good
faith, should there be tacking of possession?
Possession of the predecessor in bad faith cannot be counted and added to that of the present
possessor. Here, the possession of the predecessor cannot be considered ordinary prescription because such
requires good faith all throughout the period fixed by law.
However, for purposes of extraordinary prescription, the possession in bad faith of the predecessor
can be tacked to the possession in bad faith of the successor. There is no prohibition to this.
CHAPTER 3
PRESCRIPTION OF ACTIONS
Actions prescribe by the mere lapse of time fixed by law (Article 1139).
Actions to recover movables shall prescribe EIGHT YEARS from the time the possession
thereof is lost, unless the possessor has acquired the ownership by prescription for a less period,
according to Articles 1132, and without prejudice to the provisions of articles 559, 1505, and 1133
(Article 1140), thus:
1. The ownership of movables prescribes through uninterrupted possession for FOUR YEARS
IN GOOD FAITH.
2. The ownership of personal property also prescribes through uninterrupted possession for
EIGHT YEARS, WITHOUT NEED OF ANY OTHER CONDITION.
3. With regard to the right of the owner to recover personal property lost or of which he has
been illegally deprived, as well as with respect to movables acquired in a public sale, fair,
or market, or from a merchant's store the provisions of Articles 559 and 1505 of this Code
shall be observed (Article 1132).
4. Movables possessed through a crime can never be acquired through prescription by the
offender (Article 1133).
Real actions over immovables prescribe after THIRTY YEARS. This provision is without
prejudice to what is established for the acquisition of ownership and other real rights by
prescription (Article 1141).
3. MORTGAGE ACTION:
4. ACTIONS UPON A WRITTEN CONTRACT; UPON AN OBLIGATION CREATED BY LAW; UPON A JUDGMENT:
They must be brought within TEN YEARS from the time the right of action accrues (Article
1144).
6. ACTIONS UPON AN INJURY TO THE RIGHTS OF THE PLAINTIFF; ACTIONS UPON A QUASI-DELICT:
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However, when the action arises from or out of any act, activity, or conduct of
any public officer involving the exercise of powers or authority arising from Martial Law
including the arrest, detention and/or trial of the plaintiff, the same must be brought
within ONE (1) YEAR. (Article 1146 as amended by PD No. 1755, Dec. 24, 1980.)
NOTE: The limitations of action mentioned in Articles 1140 to 1142, and 1144 to 1147 are
without prejudice to those specified in other parts of this Code, in the Code of Commerce, and in
special laws (Article 1148).
The phrase ―without prejudice‖ means that, in proper cases, the prescriptive period in
this chapter may be availed of notwithstanding other special provisions in other parts of the Civil
Code, in the Code of Commerce and in special laws. Thus, even though the claim falls under the
prescriptive period provided for in the Labor Code because of illegal and unlawful dismissal, the
case may still fall within the ambit of ―injury to the rights of the plaintiff (Virgilio Callanta vs.
Carnation Phi., Inc., G.R. No. L-70615, October 28, 1986, 145 SCRA 286).
WHAT RIGHTS ARE NOT EXTINGUISHED BY PRESCRIPTION?
The following rights, among others specified elsewhere in this Code, are not
extinguished by prescription:
OTHERS:
WHAT IS THE PRESCRIPTIVE PERIOD FOR FILING ACTIONS WHOSE PERIODS ARE NOT FIXED BY
THE CIVIL CODE AND OTHER LAWS?
All other actions whose periods are not fixed in this Code or in other laws must be
brought within five years from the time the right of action accrues (Article1149).
EXAMPLES:
a. Action to impugn the recognition of a natural child (Article 296 Civil Code);
b. Action to impugn the legitimation of a child (Article 275, Civil Code);
c. Action to reduce inofficious donations (to be counted from the death of the donor) (Vide
Article 772, Civil Code).
a. The time for prescription for all kinds of actions, when there is no special
provision which ordains otherwise, shall be counted from the day they
may be brought (Article 1150).
b. The time for the prescription of actions which have for their object the
enforcement of obligations to pay principal with interest or annuity runs
from the last payment of the annuity or of the interest (Article 1151).
c. The period for prescription of actions to demand the fulfillment of
obligation declared by a judgment commences from the time the
judgment became final (Article 1152).
d. The period for prescription of actions to demand accounting runs from
the day the persons who should render the same cease in their functions
(Article 1153).
e. The period for the action arising from the result of the accounting runs
from the date when said result was recognized by agreement of the
interested parties (Article 1153, 2nd par.).
f. The period during which the obligee was prevented by a fortuitous event
from enforcing his right is not reckoned against him (Article 1154).
BOOK IV
OBLIGATIONS AND CONTRACTS
TITLE I
OBLIGATIONS
OVERVIEW OF LAW
I. SOURCES OF LAW
A. Constitution
B. Legislative Enactment
C. Executive Issuance
D. International Law
E. Supreme Court Decisions
A. EFFECTIVITY
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ARTICLE 2. Laws shall take effect after fifteen days following the
completion of their publication in the Official Gazette, unless it is otherwise
provided.
While law may provide for the date of its effectivity, the requirement of
publication may not be dispensed with. (Tanada vs. Tuvera)
ARTICLE 14. Penal laws and those of public security and safety shall be
obligatory upon all who live or sojourn in Philippine territory, subject to the
principles of international law and treaty stipulations.
B. INTERPRETATION
A. PENAL
B. Civil
C. COMMERCIAL
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D. REMEDIAL
A. NATURAL PERSONS
ARTICLE 40. Birth determines personality; but the conceived child shall
be considered born for all purposes that are favorable to it, provided it be born
later with the conditions specified in the following articles.
ARTICLE 41. For all civil purposes, the foetus is considered born if it is
alive at the time it is completely delivered from the mother‘s womb. However, if
the foetus had an intra-uterine life of less than seven months, it is not deemed
born if it dies within twenty-four hours after its complete delivery from the
maternal womb.
ARTICLE 46. Juridical persons may acquire and possess property of all
kinds as well as incur obligations and bring civil or criminal actions, in
conformity with the laws and regulations of their organization.
V. CAPACITY
A. JURIDICAL CAPACITY
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B. CAPACITY TO ACT
ARTICLE 37. Capacity to act, which is the power to do acts with legal
effect, is acquired and may be lost.
ARTICLE 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and observe
honesty and good faith.
ARTICLE 21. Any person who willfully causes loss or injury to another in
a manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage.
ARTICLE 26. Every person shall respect the dignity, personality, privacy
and peace of mind of his neighbors and other persons.
ARTICLE 27. Any person suffering material or moral loss because a public
servant or employee refuses or neglects, without just cause, to perform his
official duty may file an action for damages and other relief against the latter,
without prejudice to any disciplinary administrative action that may be taken.
ARTICLE 31. When the civil action is based on an obligation not arising
from the act or omission complained of as a felony, such civil action may proceed
independently of the criminal proceedings and regardless of the result of the
latter.
CHAPTER 1
GENERAL PROVISIONS
WHAT IS AN OBLIGATION?
RULES :
Obligations derived from law are not presumed. Only those expressly determined in this
Code or in special laws are demandable, and shall be regulated by the precepts of the law
which establishes them; and as to what has not been foreseen, by the provisions of this
Book (Article 1158).
Obligations arising from contracts have the force of law between the contracting parties
and should be complied with in good faith (Article 1159).
Obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1,
Title XVII, of this Book (Article 1160).
Civil obligations arising from criminal offenses shall be governed by the penal laws,
subject to the provisions of article 2177, and of the pertinent provisions of Chapter 2,
Preliminary Title, on Human Relations, and of Title XVIII of this Book, regulating
damages (Article 1161).
Obligations derived from quasi-delicts shall be governed by the provisions of Chapter 2,
Title XVII of this Book, and by special laws (Article 1162).
CHAPTER 2
NATURE AND EFFECT OF OBLIGATIONS
Every person obliged to give something is also obliged to take care of it with the proper
diligence of a good father of a family, unless the law or the stipulation of the parties requires
another standard of care (Article 1163).
Notes:
The diligence needed is that which is required by the nature of the obligation and
corresponds with the circumstances of the persons, of the time and of the place. This is diligence
of a good father of a family. If the law or contract does not state the diligence which is to be
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observed in the performance, that which is expected of a good father of a family shall be required
(Article 1173).
However, if the law or contract provides for a different standard of care, said law or
stipulation must prevail (Article 1163) provided that it should not be one contemplating a
relinquishment or waiver of the most ordinary diligence
IN OBLIGATIONS TO GIVE, WHEN DOES THE CREDITOR ACQUIRE A RIGHT TO THE THING
WHICH CONSTITUTES THE OBJECT OF THE OBLIGATIONS AS WELL AS TO THE FRUITS THEREOF?
The creditor has a right to the fruits of the thing from the time the obligation to deliver it
arises. However, he shall acquire no real right over it until the same has been delivered to him
(Article 1164).
Thus, we must distinguish between the time when the creditor acquires a personal right
to the thing and the fruits thereof, and the time when he acquires a real right thereto.
After the right to deliver the object of the prestation has arisen in favor of the creditor but
prior to the delivery of the same, there is no real right enforceable or binding against the whole
world over the object and its fruits in favor of the person to whom the same should be given. The
acquisition of a real right means that such right can be enforceable against the whole world and
will prejudice anybody claiming the same object of the prestation. The real right only occurs
when the thing or object of the prestation is delivered to the creditor.
In obligations arising from contracts, the obligation to deliver arises from the moment of
the perfection of the contract, unless there is a stipulation to the contrary. From this it is clear that
before the delivery of the thing and the fruits thereof, the creditor has merely a personal right
against the debtor – a right to ask for the delivery of the thing and the fruits. Once the thing and
the fruits are delivered, then he acquires a real right over them, a right which is enforceable
against the whole world.
EXAMPLE:
If, however, X sells the fruits on March 20, 2005 to B who does not know the previous sale
to A and who immediately takes possession of the fruits, B shall have a better right over the said
fruits. Considering that there is no delivery of the property to A on March 20, 2005, A has no real
right over the said property at that time binding upon the whole world. A‘s remedy is to seek
damages from X in connection with the fruits.
If however, the mango orchard has already been delivered, A has a real right binding
upon the whole world. If X sells to B the fruits after the delivery to A, A can recover from B who
in turn can seek damages from X.
It depends - If there is no term or condition, then from the perfection of the contract. If
there is a term or condition, then from the moment the term arrives or the condition happens.
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IN OBLIGATIONS TO GIVE, WHAT ARE THE DIFFERENT RIGHTS WHICH ARE AVAILABLE TO THE
CREDITOR?
We must distinguish between the rights which are available to the creditor when the
obligation is determinate and those which are available to him when the obligation is
indeterminate or generic.
1. When what is to be delivered is a determinate thing (in the sense that the object thereof is
particularly designated or physically segregated from all others of the same class), the
rights of the creditor are:
a. The creditor may compel specific performance (compel the debtor to make the
delivery (Article 1165); and
b. To recover damages in case of breach of the obligation (Article 1170).
WHAT IS THE EFFECT OF FORTUITOUS EVENT IF THE OBLIGOR DELAYS, OR HAS PROMISED TO
DELIVER THE SAME THING TO TWO OR MORE PERSONS WHO DO NOT HAVE THE SAME INTEREST?
If the obligor delays, or has promised to deliver the same thing to two or more persons
who do not have the same interest, he shall be responsible for any fortuitous event until he has
effected the delivery (Article 1165).
IN OBLIGATION TO GIVE, WHAT ARE THE DIFFERENT DUTIES OR OBLIGATIONS WHICH ARE
IMPOSED UPON THE DEBTOR OR OBLIGOR?
a. If the obligation is determinate, the duties which are imposed upon the debtor are the
following:
b. If the obligation is indeterminate or generic, the duties which are imposed are:
a. To deliver a thing that which must be neither of superior nor inferior quality
(Article 1246);
b. To pay damages in case of breach of the obligation (Article 1170).
IN OBLIGATIONS TO DO OR NOT TO DO, WHAT ARE THE DIFFERENT RIGHTS WHICH ARE
AVAILABLE TO THE CREDITOR?
1. In obligations to do:
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a) If a person obliged to do something fails to do it, the same shall be executed at his cost.
b) This same rule shall be observed if he does it in contravention of the tenor of the obligation.
c) Furthermore, it may be decreed that what has been poorly done be undone (Article 1167).
a. When the obligation consists in not doing, and the obligor does what has been forbidden
him, it shall also be undone at his expense (Article 1168).
IN OBLIGATIONS TO GIVE OR TO DO, WHEN DOES THE OBLIGOR DEEMED TO HAVE INCURRED
IN DELAY?
Those obliged to deliver or to do something incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfillment of their obligation
However, the demand by the creditor shall not be necessary in order that delay may
exist:
In reciprocal obligations, neither party incurs in delay if the other does not comply or is
not ready to comply in a proper manner with what is incumbent upon him. From the moment
one of the parties fulfills his obligation, delay by the other begins (Article 1169 par. 1).
The delay is called mora solvendi ex re when the obligation is an obligation to give
and mora solvendi ex persona when the obligation is an obligation to do.
Delay or default committed by the creditor to accept the delivery of the thing
which is the object of the obligation is known as mora accipiendi.
Note: Delay in the performance of the obligation must either be malicious or negligent.
Hence, if the delay was only due to inadvertence without any malice or negligence, the obligor
will not be held liable under Article 1170.
a) The obligation must be due, enforceable, and already liquidated or determinate in amount;
b) There must be non-performance;
c) There must be demand, unless the demand is not required; and
d) The demand must be for the obligation that is due.
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Note: There is no mora solvendi in negative obligations (one cannot be late in not doing or
giving). There is no mora also in natural obligations.
For an obligation to become due, there must generally be a demand. Default generally
begins from the moment the creditor demand the performance of the obligation. Without such
demand, judicial or extra-judicial, the effects of default will not arise. Commencement of a suit is
a sufficient demand. Consequently, an obligor is liable for damages for the delay not from the
time the object of the prestation is to be delivered but from the time of extra-judicial or judicial
demand.
Note that Article 1169 is applicable only when the obligation is to do something other
than the payment of money. In obligations for the payment of money, Article 2209 shall apply
which provides that:
―If the obligation consists in the payment of a sum of money, and the
debtor incurs in delay, the indemnity for damages, there being no stipulation to
the contrary, shall be the payment of the interest agreed upon, and in the absence
of stipulation, the legal interest, which is six per cent per annum.‖
Hence, in obligation for the payment of sum of money, the interest replaces the damages.
Those who in the performance of their obligations are guilty of fraud, negligence, or
delay, and those who in any manner contravene the tenor thereof, are liable for damages (Article
1170).
WHAT DOES THE PHRASE “IN ANY MANNER CONTRAVENE THE TENOR” OF THE OBLIGATION
AS STATED UNDER ARTICLE 1170 COVER?
It includes any illicit act or omission which impairs the strict and faithful fulfillment of
the obligation and every kind of defective performance (Arrieta vs. National Rice and Corn Corp., 10
SCRA 79; Magat vs. Medialdea, L-37120, April 20, 1983)).
Fraud or dolo consists in the conscious and intentional proposition to evade the normal
fulfillment of an obligation. It is bad faith in the performance of an obligation oftentimes referred
as malice. In contracts it is deceit which if substantial (dolo causante) may result in annulment of
contract.
1. The first is present only during the performance of a pre-existing obligation, whereas the
second is present only at the time of the birth of the obligation;
2. The first is employed for the purpose of evading the normal fulfillment of an obligation,
whereas the second is employed for the purpose of securing the consent of the other
party to enter into the contract;
3. The first results in the non-fulfillment or breach of the obligation, whereas the second, if
it is the reason for the other party upon whom it is employed for entering into the
contract, results in the vitiation of his consent;
4. Dolo causante or causal fraud in Article 1338 are those deceptions or misrepresentations of
a serious character employed by one party and without which the other party would not
have entered into the contract. Dolo incidente or incidental fraud in Article 1344 are those
which are not serious in character and without which the other party would still have
entered into the contract;
5. Dolo causante determines or is the essential cause of the consent; while dolo incidente refers
only to some particular or accident of the obligation;
6. The effects of dolo causante are the nullity of the contract and the indemnification of
damages; dolo incidente obliges the person employing it to pay damages.
7. The first gives rise to a right of the creditor or obligee to recover damages from the debtor
or obligor, whereas the second gives rise to a right of the innocent party to ask for the
annulment of the contract if the fraud is casual (dolo causante) or to recover damages if it
is incidental (dolo incidente) (Vide Articles 1170, 1171, 1338 & 1344).
It is the omission of the diligence which is required by the nature of the obligation and
corresponds with the circumstances of the persons, of the time and of the place. When negligence
shows bad faith, the provisions of Articles 1171 and 2201, par. 2, may apply.
If the law or contract does not state the diligence which is to be observed in the
performance, that which is expected of a good father of a family shall be required (Article 1173).
The test by which we can determine the existence of negligence in a particular case may
be stated as follows:
Did the defendant in doing the alleged negligent act use the reasonable care and caution
which an ordinarily prudent person would have used in the same situation? If not, then he is
guilty of negligence. The law here in effect adopts the standard supposed to be supplied by the
imaginary conduct of the discreet pater familias of the Roman law. The existence of negligence in a
given case is not determined by reference to the personal judgment of the actor in the situation
before him. The law considers what would be reckless, blameworthy, or negligent in the man of
ordinary intelligence and prudence and determines liability by that (Picart vs. Smith, 37 Phil. 809).
No person shall be responsible for those events which could not be foreseen, or which,
though foreseen, were inevitable (Article 1174).
EXCEPTIONS:
3 ARTICLE 552 (Par. 2). A possessor in bad faith shall be liable for deterioration or loss in every case,
even if caused by a fortuitous event.
ARTICLE 1165 (Par. 3). If the obligor delays, or has promised to deliver the same thing to two or
more persons who do not have the same interest, he shall be responsible for any fortuitous event until he
has effected the delivery.
ARTICLE 1170. Those who in the performance of their obligations are guilty of fraud, negligence,
or delay, and those who in any manner contravene the tenor thereof, are liable for damages. (The obligor
shall be liable for damages and he cannot escape liability (Nakpil vs. CA, 144 SCRA 596).
ARTICLE 1268. When the debt of a thing certain and determinate proceeds from a criminal offense,
the debtor shall not be exempted from the payment of its price, whatever may be the cause for the loss,
unless the thing having been offered by him to the person who should receive it, the latter refused without
justification to accept it.
ARTICLE 1942. The bailee is liable for the loss of the thing, even if it should be through a
fortuitous event:
(1) If he devotes the thing to any purpose different from that for which it has been loaned; cd i
(2) If he keeps it longer than the period stipulated, or after the accomplishment of the use for which
the commodatum has been constituted;
(3) If the thing loaned has been delivered with appraisal of its value, unless there is a stipulation
exempting the bailee from responsibility in case of a fortuitous event;
(4) If he lends or leases the thing to a third person, who is not a member of his household;
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1. The cause of the breach of the obligation must be independent of the will of the
debtor;
2. The even must either be unforseeable or unavoidable;
3. The event must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner; and
4. The debtor must be free from any participation in, or aggravation of, the injury to
the creditor.
(5) If, being able to save either the thing borrowed or his own thing, he chose to save the latter.
ARTICLE 1979. The depositary is liable for the loss of the thing through a fortuitous event:
(1) If it is so stipulated;
(2) If he uses the thing without the depositor's permission;
(3) If he delays its return;
(4) If he allows others to use it, even though he himself may have been authorized to use the same.
ARTICLE 2147. The officious manager shall be liable for any fortuitous event:
(1) If he undertakes risky operations which the owner was not accustomed to embark upon;
(2) If he has preferred his own interest to that of the owner;
(3) If he fails to return the property or business after demand by the owner;
(4) If he assumed the management in bad faith.
ARTICLE 2148. Except when the management was assumed to save the property or business
from imminent danger, the officious manager shall be liable for fortuitous events:
(1) If he is manifestly unfit to carry on the management;
(2) If by his intervention he prevented a more competent person from taking up the management.
ARTICLE 2159. Whoever in bad faith accepts an undue payment, shall pay legal interest if a sum
of money is involved, or shall be liable for fruits received or which should have been received if the thing
produces fruits.
ARTICLE 129. Upon the dissolution of the conjugal partnership regime, the following
procedure shall apply: x x x (6) Unless the owner has been indemnified from whatever source, the loss or
deterioration of movables used for the benefit of the family, belonging to either spouse, even due to
fortuitous event, shall be paid to said spouse from the conjugal funds, if any.
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Ordinarily, the terms ―fortuitous event‖ and ―force majeure‖ are used interchangeably.
There is, however, a technical difference. ―Force majeure‖ is a term that is applicable only to those
fortuitous events which are dependent upon human intervention, such as wars, strikes, riots, etc.,
while ―fortuitous event‖ is the general term that is applicable regardless of whether the event is
independent of or dependent upon human intervention.
NOTE that when the object of the prestation is generic (like payment of a sum of money as a
consequence of a loan contract), the debtor cannot avail of the benefit of a fortuitous event.
The receipt of the principal by the creditor, without reservation with respect to the
interest, shall give rise to the presumption that said interest has been paid (Article 1176, par. 1).
WHAT IS THE EFFECT IF THE OBLIGATION IS PAYABLE FROM JANUARY 2004 TO OCTOBER 2004
AND X DID NOT PAY THE INSTALLMENT FOR JUNE 2004 BUT WHEN HE PAID IN JULY 2004, Y ISSUED A
RECEIPT FOR JULY 2004?
There is a presumption that the June 2004 installment has already been paid. The receipt
of a later installment of a debt without reservation as to prior installments, shall likewise raise the
presumption that such installments have been paid (Article 1176).
NOTE that the presumption here is only prima facie. The presumption can be rebutted by
strong evidence to the contrary. The burden of proof to show that the interest/installment has not
been paid shifts to the creditor.
WHAT ARE THE RIGHTS AND REMEDIES WHICH ARE AVAILABLE TO THE CREDITOR IN ORDER
TO PROTECT HIS RIGHTS AGAINST THE DEBTOR?
a) Exact payment;
b) Pursue the property in possession of the debtor to satisfy their claims (generally through
levying by attachments and execution upon all the property of the debtor, except such as are
exempt by law from execution),
c) Exercise all the rights and bring all the actions of the latter for the same purpose, save those
which are inherent in his person (accion subrogatoria);
d) Impugn the acts which the debtor may have done to defraud them (accion pauliana) (Article
1177).
NOTES:
The third and the fourth remedies are merely subsidiary to the second.
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The above-cited rights are not absolute as the creditor cannot bring those which
are inherent in the person of the obligor.
Article1381 (1) which provides that a contract entered into by the debtor is
rescissible if it were made in fraud of creditors when the latter cannot in any manner collect the
claim due is another remedy.
EXCEPTIONS:
a) If there has been no stipulation to the contrary.
b) If the law provides otherwise.
c) If the obligation is purely personal.
CHAPTER 3
DIFFERENT KINDS OF OBLIGATIONS
SECTION 1
PURE AND CONDITIONAL OBLIGATIONS
a) Pure, conditional, and with a term (Articles 1179; 1179 – 1192; 1193 - 1198);
b) Alternative and facultative (Articles 1199 – 1206);
c) Joint and solidary (Articles 1207 – 1222);
d) Divisible and indivisible (Articles 1223 – 1225); and
e) With and without a penal clause (Articles 1226 – 1230).
That which necessarily must come whether the parties know when it will
happen or not.
When the debtor binds himself to pay when his means permit him to do
so, the obligation shall be deemed to be one with a period, subject to the
provisions of article 1197 (Article 1180).
According to Article 1197, if the obligation does not fix a period, but from
its nature and the circumstances it can be inferred that a period was intended, the
courts may fix the duration thereof.
The courts shall also fix the duration of the period when it depends upon
the will of the debtor.
In every case, the courts shall determine such period as may under the
circumstances have been probably contemplated by the parties. Once fixed by
the courts, the period cannot be changed by them.
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Article 1182 provides that when the fulfillment of the condition depends
upon the sole will of the debtor, the conditional obligation shall be void. If it
depends upon chance or upon the will of a third person, the obligation shall take
effect in conformity with the provisions of this Code.
void (Article 1182). This happens when the birth of the contract depends upon
the sole will of the debtor. Hence, according to Article 1308, this is likewise
prohibited and may make the whole contract invalid. However, if the
potestative condition is imposed not on the birth of the obligation but on its
fulfillment, only the condition is avoided, leaving unaffected the obligation
itself.
b) If the condition is potestative in the sense that its fulfillment depends upon
the will of the creditor, the conditional obligation shall be valid. This is
because the provision of the first sentence of Article 1182 extends only to
conditions which are potestative to the obligor or debtor. Besides, the creditor
is naturally interested in the fulfillment of the condition since it is only such
fulfillment that the obligation arises or becomes effective.
c) If the condition is casual in the sense that its fulfillment depends partly upon
chance or upon the will of a third person, the obligation shall take effect
(Article 1182).
d) If the condition is mixed in the sense that its fulfillment depends partly upon
the will of a party to the obligation and partly upon chance and/or will of a
third person, the obligation shall be valid.
IN THE EVENT THAT THE CONDITION IS DECLARED VOID BUT THE OBLIGATION
IS STILL VALID, SHOULD THE OBLIGATION BE DECLARED PURE AND
UNCONDITIONAL?
The condition is mixed because its fulfillment depends not only upon the
will of the debtor but also upon the concurrence of other factors, such as the
acceptability of the price and other conditions of the sale as well as the presence
of the buyer, ready, able and willing to purchase the property.
SUPPOSE THAT IN THE ABOVE PROBLEM, THE DEBTOR PROMISED TO PAY HIS
OBLIGATION AS SOON AS HE HAS RECEIVED THE FUNDS DERIVED FROM THE SALE OF
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THE PROPERTY IF HE FINALLY DECIDES TO SELL IT, WILL THAT MAKE ANY DIFFERENCE
IN YOUR ANSWER?
Yes, in such case, the condition is potestative with respect to the debtor
because its fulfillment would then depend upon his will. Consequently, the
condition is void. The validity of the obligation is, of course, not affected, because
the rule stated in Article 1182 to the effect that when the fulfillment of the
condition depends upon the sole will of the debtor, the conditional obligation
itself shall be void, is applicable only when the obligation shall depend for its
perfection upon the fulfillment of the condition and not when the obligation is a
pre-existing one.
SUMMARY:
If also suspensive – both the condition and the obligations are void.
If also resolutory – valid.
d) If mixed – valid.
NOTE: It is very clear from the law that it is not only the condition which is
annulled but the whole obligation itself. Thus, an obligation to give money as a
loan only if it snows in the Philippines destroys the efficacy of the prestation. The
condition annuls the prestation. This is also true if the condition is against good
customs, public policy or is prohibited by law.
SUMMARY:
If the period is not fixed in the contract, the court, considering the parties‘
intentions, should determine what period was really intended (Vide Article 1185,
par. 2).
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The condition that some event will not happen at a determinate time shall
render the obligation effective from the moment the time indicated has elapsed,
or if it has become evident that the event cannot occur.
If no time has been fixed, the condition shall be deemed fulfilled at such
time as may have probably been contemplated, bearing in mind the nature of the
obligation (Article 1185).
The effects of a conditional obligation to give, once the condition has been
fulfilled, shall retroact to the day of the constitution of the obligation. This rule is
applicable only to suspensive conditions because the efficacy of the obligation is
merely suspended or held in abeyance until the condition is fulfilled. This is not
applicable to resolutory conditions because the fulfillment of the event
extinguishes the obligation; hence, retroactivity is not relevant.
a) When the obligation imposes reciprocal prestations upon the parties, the
fruits and interests during the pendency of the condition shall be deemed to
have been mutually compensated.
b) If the obligation is unilateral, the debtor shall appropriate the fruits and
interests received, unless from the nature and circumstances of the obligation
it should be inferred that the intention of the person constituting the same
was different.
c) In obligations to do and not to do, the courts shall determine, in each case, the
retroactive effect of the condition that has been complied with (Article 1187).
Fruits here refer to natural, industrial, and civil fruits (like rent) (Vide
Article 442).
The creditor may, before the fulfillment of the condition, bring the
appropriate actions for the preservation of his right (Article 1188, par. 1).
Note that the law says ―preservation‖, not preference over the creditor.
The debtor may recover what during the same time he has paid by
mistake in case of a suspensive condition (Article 1188, par. 2).
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When the conditions have been imposed with the intention of suspending
the efficacy of an obligation to give, the following rules shall be observed in case
of improvement, loss or deterioration of the thing during the pendency of the
condition:
(1) If the thing is lost without the fault of the debtor, the obligation shall be
extinguished;
(2) If the thing is lost through the fault of the debtor, he shall be obliged to
pay damages;
(3) When the thing deteriorates without the fault of the debtor, the
impairment is to be borne by the creditor;
(4) If it deteriorates through the fault of the debtor, the creditor may choose
between the rescission of the obligation and its fulfillment, with indemnity for
damages in either case;
(5) If the thing is improved by its nature, or by time, the improvement shall
inure to the benefit of the creditor;
(6) If it is improved at the expense of the debtor, he shall have no other right
than that granted to the usufructuary (Article 1189).
NOTES:
a) This article applies only if the suspensive condition is fulfilled and the object
is specific (generic).
b) The option (rescission or demand fulfillment) is given to the creditor,
regardless of the degree of deterioration caused by the debtor.
c) Improvement belongs to the creditor because once the condition is fulfilled,
the effects of the conditional obligation shall retroact to the day of the
constitution of the obligation.
d) Improvement at the expense of the debtor, right of creditor like a
usufructuary – A usufruct gives a right to enjoy the property of another with
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the obligation of preserving its form and substance unless the title
constituting it or the law provides otherwise (Article 562).
Reciprocal obligations are those which arise from the same cause and in
which each party is both a debtor and a creditor of the other, such that the
obligation one is dependent upon the other (Areola vs. CA, 236 SCRA 643).
WHAT IS THE EFFECT IF ONE OF THE OBLIGORS IN RECIPROCAL OBLIGATIONS
SHOULD NOT COMPLY WITH WHAT IS INCUMBENT UPON HIM?
The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period (Article 1191). This means that the implied
power to rescind can only be enforced through court action, in the absence of
stipulation to the contrary. The decision of the court is the revocatory act of
rescission.
The injured party may choose between the fulfillment and the rescission
of the obligation, with the payment of damages in either case. He may also seek
rescission, even after he has chosen fulfillment, if the latter should become
impossible (Article 1191). The options are alternative and not conjunctive.
4. The right to rescind needs judicial approval in certain cases as when there
has already been delivery of the object;
5. The right to rescind is implied (presumed) to exist and, therefore, need not
be expressly stipulated upon;
6. The right to rescind may be waived.
NOTES:
In case both parties have committed a breach of the obligation, the liability
of the first infractor shall be equitably tempered by the courts. If it cannot be
determined which of the parties first violated the contract, the same shall be
deemed extinguished, and each shall bear his own damages (Article 1192).
This means that if the violation can be traced to the parties and both of
them committed the beach, the article penalizes the first violator only, if in fact or
by evidence, such first violator can be determined. The subsequent violator will
not be held liable. However, the liability of the first violator shall be equitably
tempered by the court as the injury to the other party-violator might not have
been so great had it not for the subsequent infraction of such other party-violator.
The law however states that if it cannot be determined which of the parties first
violated the contract, the obligation shall be deemed extinguished, and each shall
bear his own damages.
SECTION 2
OBLIGATIONS WITH A PERIOD
a. Futurity;
b. Certainty;
c. Physical and legal possibility.
1. SUSPENSIVE OR RESOLUTORY
The period of prescription commences from the time the term in the
obligation arises, for it is only from that date that it is due and demandable.
It depends – If the event will necessarily come, although the date or time
when it will come may be uncertain, the event constitutes a day certain; hence,
the obligation is with a term (Article 1193, par. 3). However, if the uncertainty
consists in whether the day will come or not, the event constitutes a condition;
hence, the obligation is conditional (Article 1193, par. 4).
Thus:
(1) If the thing is lost without the fault of the debtor, the obligation shall be
extinguished;
(2) If the thing is lost through the fault of the debtor, he shall be obliged to
pay damages;
(3) When the thing deteriorates without the fault of the debtor, the
impairment is to be borne by the creditor;
(4) If it deteriorates through the fault of the debtor, the creditor may choose
between the rescission of the obligation and its fulfillment, with indemnity for
damages in either case;
(5) If the thing is improved by its nature, or by time, the improvement shall
inure to the benefit of the creditor;
(6) If it is improved at the expense of the debtor, he shall have no other right
than that granted to the usufructuary (Article 1189).
WHAT IS THE REMEDY OF THE DEBTOR WHO PAID OR DELIVERED BEFORE THE
ARRIVAL OF THE PERIOD?
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Anything paid or delivered before the arrival of the period, the obligor
being unaware of the period or believing that the obligation has become due and
demandable, may be recovered, with the fruits and interests (Article 1195).
This rule, however, is not absolute. If it can be proved either that the tenor
of the obligation or from other circumstances that the period has been
established for the benefit of either the creditor or the debtor, the general rule is
no longer applicable. However, the benefit of the period may be waived by the
person in whose favor it was constituted.
IF THE CONTRACT DOES NOT PROVIDED FOR A PERIOD, CAN THE CREDITOR
DEMAND ITS FULFILLMENT?
No, because an action for the court to fix the period has yet to be filed. In
the meantime, no one can ask for the fulfillment of the obligation after the court
has fixed the period for its compliance (Vda de Ungson vs. Lopez, L-10180, March
10, 1954).
WITHIN WHAT PERIOD SHOULD THE ACTION TO FIX THE PERIOD BE FILED?
a. If the obligation does not fix a period, but from its nature and the
circumstances it can be inferred that a period was intended, the courts
may fix the duration thereof (Article 1197, par. 1).
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b. The courts shall also fix the duration of the period when it depends upon
the will of the debtor (Article 1197, par. 2).
In every case, the courts shall determine such period as may under
the circumstances have been probably contemplated by the parties. Once
fixed by the courts, the period cannot be changed by them (Article 1197,
par. 3).
c. If the debtor binds himself to pay when his means permit him to do so
(Article 1180). Strictly speaking, however, this case properly falls within
the purview of the second, because in such a case the power to determine
when the obligation will be fulfilled is in effect left exclusively to the will
of the debtor.
NOTE: Article 1197 involves a two-step process. The court must first
determine that the obligation does not fix a period (or that the period is made to
depend upon the will of the debtor), but from the nature and the circumstances it
can be inferred that a period was intended. This preliminary point settled, the
court must then proceed to the second step, and decide what period was
probably contemplated by the parties. So that, ultimately, the court cannot fix a
period merely because in its opinion it is or should be reasonable, but must set
the time that the parties are shown to have intended (Gregorio Araneta, Inc. vs.
Phil. Sugar Estates Development Co., Ltd., 20 SCRA 330).
WHAT ARE THE DIFFERENT INSTANCES UNDER THE CIVIL CODE WHEN THE
DEBTOR SHALL LOSE EVERY RIGHT TO MAKE USE OF THE TERM OR PERIOD?
The debtor shall lose every right to make use of the period:
(1) When after the obligation has been contracted, he becomes insolvent,
unless he gives a guaranty or security for the debt; [Insolvency here need not be
judicially declared.]
(2) When he does not furnish to the creditor the guaranties or securities
which he has promised;
(3) When by his own acts he has impaired said guaranties or securities after
their establishment, and when through a fortuitous event they disappear, unless
he immediately gives new ones equally satisfactory; [Note that the debtor loses
the benefit of a period even if the loss is through a fortuitous event.]
(4) When the debtor violates any undertaking, in consideration of which the
creditor agreed to the period;
(5) When the debtor attempts to abscond (Article 1198).
When the laws speak of years, months, days or nights, it shall be understood
that years are of three hundred sixty-five days each; months, of thirty days; days,
of twenty-four hours; and nights from sunset to sunrise.
In computing a period, the first day shall be excluded, and the last day
included (Article 13).
SECTION 3
ALTERNATIVE OBLIGATIONS
NOTES:
Under the Civil Code, there are only three prestations namely, (1) to give;
(2) to do; and (3) not to do. Strictly speaking therefore, when the Code
speaks of different prestations, it refers only to these three prestations.
Hence, technically speaking, a person who is bound to give either a house,
a car or a truck has only one prestation which is ―to give‖. But a person
who is obliged to either deliver a house or to paint a picture has two
prestations, namely, ―to give‖ and ―to do‖. It appears however that the
phrase ―different prestations‖ in the law refers to both the strict sense and
the looses sense of the word ―prestation‖.
The creditor cannot be compelled to receive part of one and part of the
other undertaking (Article 1199).
EXCEPTIONS:
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a) When the right has been expressly granted to the creditor (Article 1200); and
b) When it has been expressly granted to a third person.
The right of choice belongs to the debtor because he is the passive subject
in an obligation. He, not the creditor, is the only obliged to give, to do or not to
do.
Any doubt as to whom the choice was given must always be interpreted
in favor of the debtor. Only an express grant of choice can a creditor have the
right to choose which prestation is to be performed.
The debtor shall have no right to choose those prestations which are
impossible, unlawful or which could not have been the object of the obligation
(Article 1200).
The choice shall produce no effect except from the time it has been
communicated (Article 1201). Thus the parties are bound by the choice or
selection from the very moment that it has been communicated by the party who
has the right to make it to the other party.
The debtor shall lose the right of choice when among the prestations
whereby he is alternatively bound, only one is practicable (Article 1202).
Note that the law uses the word ―practicable‖. Practicable means capable
of being done, or simply feasible (The New Lexicon Webster’s Dictionary of the
English Language, 1987 Edition, Page 787). However, prestations that are not
―practicable may also include lawful and possible prestations but, because of
some special attendant circumstances which do not necessarily make them
unlawful or impossible, they can be done. [Hence, if the debtor has the following
alternatives: to kiss a highly contagious leper, to sing a song, or not to pay taxes,
it is clear that the last alternative is not only impracticable but also unlawful. The
first alternative, although not unlawful and not impossible, is nevertheless
practicable. In this case therefore, the debtor loses his right of choice because
only one prestation is practicable which is to sing.]
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WHAT IS THE RULE WHEN THE DEBTOR CANNOT CHOOSE BECAUSE OF THE
CREDITOR’S ACTS?
If through the creditor's acts the debtor cannot make a choice according to
the terms of the obligation, the latter may rescind the contract with damages
(Article 1203).
IN OBLIGATIONS WHERE THERE ARE THREE OR MORE OBJECTS WHICH ARE
ALTERNATIVELY DUE, IF ONE, OR MORE, OR ALL OF THE OBJECTS ARE LOST OR
DESTROYED, WHAT ARE THE EFFECTS OF SUCH LOSS OR DESTRUCTION UPON THE
OBLIGATION AS UPON THE LIABILITY OF THE DEBTOR?
It depends:
If the loss is due to a fortuitous event, the effects are the same as where the
right belongs to the debtor.
NOTES:
Note that the debtor will not be liable in any way for reducing the
alternatives from three to two alternatives, provided what remains are
lawful, practicable, possible or consistent with the object of the obligation.
Likewise, the debtor will not be liable for converting his alternative
obligation to a simple one where there is only one lawful and possible
prestation. The debtor may even cause the loss of one of the things, or
render one of the services impossible.
But when the debtor is responsible for losing or rendering impossible all
his alternative prestations, the creditor is entitled to damages.
If the loss or destruction took place AFTER the substitution has been made,
undoubtedly, the debtor is liable for damages for the reason that once the
substitution is effected by the debtor by duly notifying the creditor of such fact,
the obligation is converted into a simple one with the substitute as the object of
the obligation.
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SECTION 4
JOINT AND SOLIDARY OBLIGATIONS
As a general rule, the obligation is JOINT. Article 1207 provides that: The
concurrence of two or more creditors or of two or more debtors in one and the
same obligation does not imply that each one of the former has a right to
demand, or that each one of the latter is bound to render, entire compliance with
the prestation.
If from the law, or the nature or the wording of the obligations to which
the preceding article refers the contrary does not appear –
b) The credits or debts being considered distinct from one another, subject to the
Rules of Court governing the multiplicity of suits (Article 1208).
1. If two or more heirs take possession of the estate, they shall be solidarily
liable for the loss or destruction of a thing devised or bequeathed, even
though only one of them should have been negligent (Article 927).
2. All partners are liable solidarily with the partnership for everything
chargeable to the partnership under articles 1822 and 1823 (Article 1824).
3. Even when the agent has exceeded his authority, the principal is solidarily
liable with the agent if the former allowed the latter to act as though he
had full powers (Article 1911).
4. If two or more persons have appointed an agent for a common transaction
or undertaking, they shall be solidarily liable to the agent for all the
consequences of the agency (Article 1915).
5. When there are two or more bailees to whom a thing is loaned in the same
contract, they are liable solidarily (1945).
6. The responsibility of two or more officious managers shall be solidary,
unless the management was assumed to save the thing or business from
imminent danger (Article 2146, par. 2).
7. The responsibility of two or more payees, when there has been payment of
what is not due, is solidary (Article 2157).
8. The responsibility of two or more persons who are liable for quasi-delict is
solidary (Article 2194).
9. Several and subsidiary liability of principals, accomplices and accessories
of a felony.
1. Each creditor can demand only for the payment of his proportionate share
of the credit, while each of the debtor can be held liable only for the
payment of his proportionate share of the debt (Articles 1207; 1208).
2. A joint creditor cannot act in representation of the other creditors, while a
joint debtor cannot be compelled to answer for the acts or liability of the
other debtors.
3. The demand for the fulfillment made by the creditor upon one of the
debtors does not place the other debtors in default.
4. The interruption of the prescriptive period with respect to one debtor does
not affect the rights of others.
5. The defense of one debtor is not a valid defense of the others.
It is an obligation in which the object is indivisible but the tie between the
parties is joint who are merely proportionately liable.
1. The right of the creditors may be prejudiced only by their collective acts,
2. The debt can be enforced only by proceeding against all the debtors
(demand must be made on all of them),
3. If one of the latter should be insolvent, the others shall not be liable for his
share (Article 1209).
4. If there be joint creditors, delivery must be made to all, unless one is
specifically authorized by the others.
5. Each joint creditor is allowed to renounce his proportionate credit.
1. If there are two or more debtors, compliance with the obligation requires
the concurrence of all of them, although each for his own share.
Consequently, the obligation can be enforced only be proceeding against
all of the debtors (Article 1209).
2. If there are two or more creditors, the concurrence of all of them, although
each for his own share, is also necessary for the enforcement of the
obligation. This is because the obligation is joint, and therefore, a creditor
cannot act in representation of the others, and it is also indivisible, and
therefore, not susceptible of partial fulfillment.
CAN SOLIDARITY EXIST ALTHOUGH THE CREDITORS AND DEBTORS MAY NOT
BE BOUND IN THE SAME MANNER AND BY THE SAME PERIODS AND CONDITIONS?
Solidarity may exist although the creditors and the debtors may not be
bound in the same manner and by the same periods and conditions (Article 1211).
a) Each one of the solidary creditors may do whatever may be useful to the
others, but not anything which may be prejudicial to the latter (Article 1212).
b) A solidary creditor cannot assign his rights without the consent of the others
(Article 1213).
The debtor may pay any one of the solidary creditors; but if any demand,
judicial or extrajudicial, has been made by one of them, payment should be made
to him (Article 1214).
The creditor who may have executed any of these acts, as well as he who
collects the debt, shall be liable to the others for the share in the obligation
corresponding to them (Article 1215).
The creditor may proceed against any one of the solidary debtors or some
or all of them simultaneously. The demand made against one of them shall not
be an obstacle to those which may subsequently be directed against the others, so
long as the debt has not been fully collected (Article 1216).
He who made the payment may claim from his co-debtors only the share
which corresponds to each, with the interest for the payment already made. If the
payment is made before the debt is due, no interest for the intervening period
may be demanded (Article 1217, par. 2).
STATE THE RULE IF ONE OF THE SOLIDARY DEBTORS CANNOT PAY HIS SHARE
TO THE DEBTOR WHO PAID.
HOWEVER:
3. UPON THE SOLIDARY DEBTORS – As far as the solidary debtors are concerned,
the effects of remission may be summarized as follows:
a. The remission made by the creditor of the share which affects one
of the solidary debtors does not release the latter from his
responsibility towards the co-debtors, in case the debt had been
totally paid by anyone of them before the remission was effected
(Article 1219).
b. The remission of the whole obligation, obtained by one of the
solidary debtor, does not entitle him to reimbursement from his co-
debtors (Article 1220).
If the thing has been lost or if the prestation has become impossible
without the fault of the solidary debtors, the obligation shall be extinguished.
If there was fault on the part of any one of them, all shall be responsible to
the creditor, for the price and the payment of damages and interest, without
prejudice to their action against the guilty or negligent debtor
A solidary debtor may, in actions filed by the creditor, avail himself of all
defenses which are derived from the nature of the obligation and of those which
are personal to him, or pertain to his own share. With respect to those which
personally belong to the others, he may avail himself thereof only as regards that
part of the debt for which the latter are responsible (Article 1222).
SECTION 5
DIVISIBLE AND INDIVISIBLE OBLIGATIONS
SOLIDARITY INDIVISIBILITY
1. Refers to the tie between the parties. 1. Refers to the nature of the obligation.
2. Needs at least two debtors or 2. May exist even if there is only one
creditors. debtor and only one creditor.
3. The fault of one is the fault of the 3. The fault if one is not the fault of the
bothers. others.
a. QUANTITATIVE – when the thing can be materially divided into parts and
such parts are homogeneous to each other, such as when the parts are
separated from each other as in the case of movables, or when the limits of
the parts are fixed by metes and bounds as in the case of movables. This
depends on quantity.
b. QUALITATIVE – when the thing can be materially divided, but the parts are
not homogenous to each other, such as in the partition of an inheritance.
This depends on quality, irrespective of quantity.
c. IDEAL OR INTELECTUAL OR MORAL – when the thing can only be separated
into ideal or undivided parts, not material parts, as in the case of
ownership. This exists only in the mind and not in physical reality.
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If the thing which constitutes the object of the obligation to give is by its
very nature indivisible, the obligation is also indivisible since it is evident that it
is not susceptible of partial compliance. This rule is absolute in character.
The nature and effect of obligations are very much different from and do
not affect the divisibility or indivisibility of the things that are the object of
obligations in which there is only one debtor and only one creditor (Article 1223).
A joint indivisible obligation gives rise to indemnity for damages from the
time anyone of the debtors does not comply with his undertaking. The debtors
who may have been ready to fulfill their promises 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 (Article 1224).
WHAT OBLIGATIONS ARE DEEMED INDIVISIBLE?
In case of a divisible contract, if the illegal terms can be separated from the
legal ones, the latter may be enforced (Article 1420).
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SECTION 6
OBLIGATIONS WITH A PENAL CLAUSE
There are three EXCEPTIONS to the rule that a penalty clause shall not be a
substitute for the payment of interest and damages:
a. AS TO ORIGIN:
b. AS TO PURPOSE:
c. AS TO EFFECT:
No. The debtor cannot exempt himself from the performance of the
obligation by paying the penalty. He can only do so if the right has been
expressly reserved for him (Article 1227).
CAN THE CREDITOR DEMAND BOTH FULFILLMENT AND THE PENALTY AT THE
SAME TIME?
No. The creditor cannot demand the fulfillment of the obligation and the
satisfaction of the penalty at the same time. He can only do so if the right has
been clearly granted him. However, if after the creditor has decided to require
the fulfillment of the obligation, the performance thereof should become
impossible without his fault, the penalty may be enforced (Article 1227).
WHAT ARE THE DIFFERENT CASES UNDER THE CIVIL CODE WHERE COURTS
MAY REDUCE THE PENALTY WHICH IS ATTACHED TO AN OBLIGATION?
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1. When the principal obligation has been partly complied with by the
debtor.
2. When the principal obligation has been irregularly complied with by the
debtor.
3. When the penalty is iniquitous or unconscionable, even if there has been
no performance (Article 1229).
WHAT ARE THE RULES IN CASE THE PRINCIPAL OBLIGATION OR THE PENAL
CLAUSE IS VOID?
1. The nullity of the penal clause does not carry with it that of the principal
obligation.
2. The nullity of the principal obligation carries with it that of the penal
clause (Article 1230).
1. The penalty shall substitute the indemnity for damages and the payment
of interests in case of noncompliance (Article 1226, par. 1), EXCEPT if there is
no stipulation to the contrary; when the obligor is sued for refusal to pay
the agreed penalty; and when the obligor is guilty of fraud in the
fulfillment of the obligation (Article 1226, par. 1).
2. The debtor cannot exempt himself from the performance of the obligation
by paying the penalty, save in the case where this right has been expressly
reserved for him. Neither can the creditor demand the fulfillment of the
obligation and the satisfaction of the penalty at the same time, unless this
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right has been clearly granted him. However, if after the creditor has
decided to require the fulfillment of the obligation, the performance
thereof should become impossible without his fault, the penalty may be
enforced (Article 1227).
3. Proof of actual damages suffered by the creditor is not necessary in order
that the penalty may be demanded (Article 1228).
CHAPTER 4
EXTINGUISHMENT OF OBLIGATIONS
GENERAL PROVISIONS
ORDINARILY BY:
a) Payment of performance
b) Loss of the thing due
c) Condonation or remission of the debt or waiver
d) Confusion or merger of the rights of creditor and debtor
e) Compensation
f) Novation (Article 1231)
a) Annulment
b) Rescission
c) Fulfillment of resolutory condition
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d) Prescription
SECTION 1
PAYMENT OR PERFORMANCE
DEFINE PAYMENT.
IF A THIRD PERSON PAYS AN OBLIGATION, WHAT ARE THE RIGHTS WHICH ARE
AVAILABLE TO HIM?
If a third person pays the obligation with the knowledge and consent of
the debtor, there are two rights which are available to him:
a. He can recover from the debtor the entire amount which he has paid
(Article 1236, par. 2);
b. He is subrogated to all of the rights of the creditor (Article 1302, No. 2).
a. He can recover only insofar as the payment has been beneficial to the said
debtor (Article 1236, par. 2).
A debt shall not be understood to have been paid unless the thing or
service in which the obligation consists has been completely delivered or
rendered, as the case may be (Article 1233).
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WHAT IS SUBROGATION?
Subrogation means the act of putting somebody into the shoes of the
creditor, hence, enabling the former to exercise all the rights and actions that
could have been exercised by the latter.
Subrogation transfers to the person subrogated the credit with all the
rights thereto appertaining, either against the debtor or against third persons, be
they guarantors or possessors of mortgages, subject to stipulation in a
conventional subrogation (Article 1303).
In obligations to give, payment made by one who does not have the free
disposal of the thing due and capacity to alienate it shall not be valid, without
prejudice to the provisions of article 1427 under the Title on "Natural
Obligations" (Article 1239); thus:
When a minor below eighteen and twenty-one years of age, who has
entered into a contract without the consent of the parents or guardian voluntarily
pays a sum of money or delivers a fungible thing in fulfillment of the obligation,
there shall be no right to recover the same from the obligee who has spent or
consumed it in good faith.
(1) If after the payment, the third person acquires the creditor's rights;
(2) If the creditor ratifies the payment to the third person;
(3) If by the creditor's conduct, the debtor has been led to believe that the
third person had authority to receive the payment (Article 1241).
Payment made to the creditor by the debtor after the latter has been
judicially ordered to retain the debt shall not be valid (Article 1243).
The judicial order in this case may have been prompted by an order of
attachment, injunction or garnishment
The debtor of a thing cannot compel the creditor to receive a different one,
although the latter may be of the same value as, or more valuable than that
which is due (Article 1244, par. 1).
EXCEPTIONS:
Legal tender, within the meaning of Article 1249, refers to such currency
which may be used for the payment of all debts, whether public or private.
RA 529 has in turn been amended by RA 4100, which took effect on June
1964 which provides that in import-export and other international banking,
financial investment and industrial transactions, the parties‘ agreement a to
currency in which an obligation will be paid is binding.
b) When through the fault of the creditor they have been impaired, as when
the check its lost its value.
c) When the creditor is in estoppel or he had previously promised he would
accept a check.
In the meantime, the action derived from the original obligation shall be
held in abeyance (Article 1249, par. 2).
Note that this article has no more application today. The article speaks of
the inflation or deflation of the currency stipulated, meaning the currency other
than Philippine legal tender as allowed by Article 1249. But since today, no
foreign currency can be stipulated under RA 529, it follows that literally
construed, Article 1250 cannot be made used of for the present. By analogy or
extension, it may be possible to include the extraordinary inflation or deflation of
the Philippine currency.
RULES:
SUBSECTION 1
Application of Payments
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It is the phrase applied to show which debt, out of two or more debts
owing the same creditor, is being paid.
The case of a solidary debtor who may have obligations other than the
solidary obligation in favor of the creditor to whom payment is made is
sometimes given as an exception. Although there is no question that such a
debtor can designate the debt to which the payment must be applied, yet, this
doe not constitute an exception because of the principle of mutual agency
existing among the solidary debtors.
A real exception is the one given in Article 1792. Under this article, if a
debtor is indebted to a partnership and also to the managing partner at the same
time and both debts are already demandable, such debtor, if he pays, may apply
the payment to his debt to the managing partner, provided that such debt is
more onerous to him. Here, actually there are two creditors since the personality
of the partnership is separate and distinct from that of the partners.
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IF THE DEBTS ARE NOT YET DUE, MAY THERE BE APPLICATION OF PAYMENT?
WHAT IS THE RULE IF THE DEBTOR ACCEPTS FROM THE CREDITOR A RECEIPT
IN WHICH AN APPLICATION OF PAYMENT IS MADE?
The law provides that if the debtor accepts from the creditor a receipt in
which an application of payment is made, the former cannot complain of the
same, unless there is a cause for invalidating the contract (Article 1252, par. 2).
It must be noted that the debtor must not only merely receive the receipt
but he must accept the receipt. Thus, if A is indebted to B for P1, 000, P2, 000 and
P900, and A pays B P500 without mentioning as to which debt the P500 will be
applied and if B is agreeable to any partial payment, and issues a receipt
indicating that the P500 shall be applied to the P1, 000 debt, and A readily
accepts the said receipt, A cannot later complain that the P500 should have been
applied to the P2, 000 debt unless there exists a cause to invalidate the contract in
connection with the indebtedness in the amount of P1, 000. This is based on the
doctrine of estoppel. However, if the indebtedness has been obtained through
fraud or intimidation which is a cause to annul the contract, the debtor is not
estopped from questioning the application.
No, unless both parties agree. Even if both parties agree, however, still the
revocation or change in the application will not be allowed if third persons
would be prejudiced.
If the debt produces interest, payment of the principal shall not be deemed
to have been made until the interests have been covered (Article 1253).
a. The debt which is most onerous to the debtor, among those due, shall be
deemed to have been satisfied.
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b. If the debts due are of the same nature and burden, the payment shall be
applied to all of them proportionately (Article 1254).
EXAMPLES:
a. Where there are various debts which are due and they were incurred at
different dates, the oldest are more onerous.
b. When one bears interest and the other does not, the former is more
onerous.
c. Where one is secured and the other is not, the former is more onerous.
d. Where the debtor is bound as principal in one and as guarantor or surety
in another, the former is more onerous.
e. Where the debtor is bound as a solidary debtor in one and as the sole
debtor in another, the former is more onerous.
SUBSECTION 2
Payment by Cession
WHAT IS PAYMENT BY CESSION?
The debtor may cede or assign his property to his creditors in payment of
his debts. This cession, unless there is stipulation to the contrary, shall only
release the debtor from responsibility for the net proceeds of the thing assigned.
The agreements which, on the effect of the cession, are made between the debtor
and his creditors shall be governed by special laws.
In order that the debtor can avail himself of this form of payment, it is
essential that:
1. The creditors do not become the owners; they are merely assignees
with authority to sell (If ownership is transferred, this becomes a
datio in solutum).
2. The debtor is released up to the amount of the net proceeds of the
sale, unless there is a stipulation to the contrary (Article 1255, 2nd
sentence). The balance remains collectible.
3. Creditors will collect credits in the order of preference agreed
upon, or in default of agreement, in the order ordinarily established
by law.
OTHER DISTINCTIONS:
SUBSECTION 3
Tender of Payment and Consignation
In order that consignation shall produce the effects of payment, it is not only
essential that it must conform with all of the requisites of payment, but it is also
essential that certain special requirements prescribed by law must be complied
with. The debtor must show:
Consignation alone shall produce the same effect in the following cases:
(1) When the creditor is absent or unknown, or does not appear at the place
of payment;
(2) When he is incapacitated to receive the payment at the time it is due;
(3) When, without just cause, he refuses to give a receipt;
(4) When two or more persons claim the same right to collect;
(5) When the title of the obligation has been lost (Article 1256).
Under the law, after the consignation has been made, it is required that
the debtor shall notify the creditor and all of the persons interested in the
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fulfillment of the obligation of such fact (Article 1258). It is at this stage that three
possible situations may arise:
1. The creditor may accept the ting or amount deposited. In such a case, the
question of payment is settled altogether. The question as to whether the
consignation is valid or not becomes moot.
2. The creditor may refuse to accept the thing or amount deposited. In such
as case, the debtor shall then bring an action against him in order to
compel him to accept said thing or amount. In order that such action shall
prosper, all of the requisites of a valid and effective consignation must be
proved.
3. The creditor may neither accept nor impugn the consignation because he
is not interested, or he is not known, or he is absent. In such a case, the
debtor shall then file a motion in court asking for the cancellation of the
obligation (Article 1260). In order that such motion shall be granted, all of
the requisites of a valid and effective consignation must be proved.
1. Once the consignation has been duly made, the debtor may ask the judge
to order the cancellation of the obligation (Article 1260).
2. The running of interest is suspended.
As a matter of right:
As a matter of privilege:
If, the consignation having been made, the creditor should authorize the
debtor to withdraw the same, he shall lose every preference which he may have
over the thing. The co-debtors, guarantors and sureties shall be released (Article
1261).
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SECTION 2
Loss of the Thing Due
In its strict sense, ―loss of the thing due‖ means that the thing which
constitutes the object of the obligation perishes or goes out of commerce of man,
or disappears in such a way that its existence is unknown or it cannot be
recovered (Article 1189, par. 2).
The courts shall determine whether, under the circumstances, the partial
loss of the object of the obligation is so important as to extinguish the obligation
(Article 1264).
1. When by law, the obligor is liable for fortuitous events, (Article 1262, par.
2).
2. When by stipulation, the obligor is liable for fortuitous events, (Article
1262, par. 2).
3. When the nature of the obligation requires the assumption of risk (Article
1262, par. 2 & 1174).
4. When the loss of the thing is due to the fault of the debtor (Article 1262,
par.1)
5. When the loss of the thing occurs after the debtor has incurred in delay
(Article 1262, par. 1 & Article 1165, par. 3).
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6. When the debtor promised to deliver the same thing to two or more
persons who do not have the same interest (Article 1165, par. 3).
7. When the obligation is generic (Article 1263); except when the generic
thing is delimited, or when the generic thing has already been segregated
or set aside..
8. When the debt of a certain and determinate thing proceeds from a
criminal offense, unless the thing having been offered by him to the
person who should receive it, the latter refused without justification to
accept it. (Article 1268).
In rare or exceptional cases, the same rule applies to obligations not to do,
such as when the obligor is compelled to do that which he had obligated himself
to refrain from performing or doing. In such cases, his obligation is extinguished
applying the same principle invoked in Article 1266.
WHAT IS THE RIGHT OF THE CREDITOR WHEN THE OBLIGATION HAS BEEN
EXTINGUISHED BECAUSE OF THE LOSS OF THE THING?
The obligation having been extinguished by the loss of the thing, the
creditor shall have all the rights of action which the debtor may have against
third persons by reason of the loss (Article 1269).
SECTION 3
Condonation or Remission of the Debt
One and the other kind shall be subject to the rules which govern
inofficious donations. Express condonation shall, furthermore, comply with the
forms of donation. (Article 1270)
2. Whenever the private document in which the debt appears is found in the
possession of the debtor, it shall be presumed that the creditor delivered
it voluntarily, unless the contrary is proved. (Article 1272)
SECTION 4
Confusion or Merger of Rights
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DEFINE CONFUSION.
In order that there will be a confusion of rights which will result in the
extinguishment of the obligation, it is essential that the following requisites must
concur:
1. The merger of the characters of creditor and debtor must be in the same
person (Article 1275);
2. It must be placed in the person of either the principal creditor or the
principal debtor (Article 1276); and
3. It must be complete or definite.
The requisite that the merger of rights of creditor and debtor must be
complete and definite does not mean that the extinguishment of the obligation
should be complete or total in character; it merely means that whether the
merger refers to the entire obligation or only a part thereof, it must be of such a
character that there will be a complete and definite meeting of all the qualities of
creditor and debtor in the obligation or in the part or aspect thereof which is
affected by the merger.
Merger which takes place in the person of the principal debtor or creditor
benefits the guarantors. Confusion which takes place in the person of any of the
latter does not extinguish the obligation. (Article 1276)
SECTION 5
Compensation
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DEFINE COMPENSATION.
AS TO CAUSE:
1. LEGAL – when it takes effect by operation of law from the moment all of
the requisites prescribed by law are present. This is the fixed type which is
regulated by Articles 1278 and 1279.
2. VOLUNTARY – when the parties who are mutually creditors and debtors
agree to compensate their respective obligations, even though all of the
requisites for compensation may not then be present.
3. JUDICIAL – when it takes effect by judicial decree. This occurs, for instance,
where one of the parties to a suit over an obligation has a claim for
damages against the other and the former sets it off by proving his right to
said damages and the amount thereof (Article 1283).
AS TO EFFECT:
When the parties may agree upon the compensation of debts which are
not yet due (Article 1282). Here the requisites mentioned in Article 1279 do not
apply.
If one of the parties to a suit over an obligation has a claim for damages
against the other, the former may set it off by proving his right to said damages
and the amount thereof. (Article 1283)
Pleading and proof of the counter-claim must be made. All the requisites
mentioned in Article 1279 must be present except that at the time of pleading, the
claim need not yet be liquidated. The liquidation (or fixing of the proper sum)
must be made in the proceedings.
Compensation takes place by operation of law, even though the debts may
be payable at different places, but there shall be an indemnity for expenses of
exchange or transportation to the place of payment. (Article 1286)
This takes place when all the requisites mentioned in article 1279 are
present, compensation takes effect by operation of law, and extinguishes both
debts to the concurrent amount, even though the creditors and debtors are not
aware of the compensation. (Article 1290)
If a person should have against him several debts which are susceptible of
compensation, the rules on the application of payments shall apply to the order
of the compensation. (Article 1289)
SECTION 6
Novation
DEFINE NOVATION.
The test of incompatibility between the old and the new obligations is to
determine whether or not both of them can stand together, each having its own
independent existence. If they can stand together, there is no incompatibility;
consequently, there is no novation. If they cannot stand together, there is
incompatibility; consequently, there is novation (Borja vs. Mariano, 66 Phil. 93;
Guerrero vs. Court of Appeals, 29 SCRA 791; Millar vs. Court of appeals, 38 SCRA
642).
There is no novation. It is clear that the first contract and the second
contract can stand together; and consequently, there can be no incompatibility
between them (Ramos vs. Gibbon, 67 Phil. 371; Padilla vs. Levy Hermanos, Inc., 69
Phil. 681; Pablo vs. Sapungan, 71 Phil. 145; Magdalena Estate, Inc. vs. Rodriguez, 18
SCRA 967; Millar vs. Court of Appeals, supra).
There is no novation. It is clear that the two contracts can stand together;
and consequently, there can be no incompatibility between them (Zapanta vs. De
Rotaeche, 21 Phil. 154; Bank of the P.I. vs. Herridge, 47 Phil. 57; Millar vs. Court of
Appeals, supra).
REQUISITES OF EXPROMISION:
a. The initiative for the substitution must emanate from the new debtor; and
b. There must be consent of the creditor to the substitution.
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REQUISITES OF DELEGACION:
a) The initiative for the substitution must emanate from the old debtor;
b) Consent of the debtor; and
c) Acceptance by the creditor.
According to Article 1293, payment by the new debtor gives him the right
mentioned in Article 1236 and 1237. Consequently –
a) If the substitution was effected with the knowledge and consent of the
original debtor; and consequently, payment is made by the new debtor
with or without the knowledge and consent of the original debtor, the
new debtor cannot demand reimbursement form the original debtor the
entire amount which he has paid and, at the same time, be subrogated to
all the rights of the creditor (Article 1236, 1237, 1302, 1303)
b) If the substitution was effected without the knowledge and consent of the
original debtor, and consequently, payment is made by the new debtor
again without the knowledge and consent of the original debtor; the new
debtor can demand reimbursement from the original debtor only insofar
as the payment has been beneficial to such debtor; but he cannot be
subrogated to the rights of the creditor. However, if payment is made with
the knowledge and consent of the original debtor, although the
substitution had been effected without his knowledge and consent, the
new debtor can still demand reimbursement from the original debtor of
the entire amount which he has paid and, at the same time, be subrogated
to all the rights of the creditor (Articles 1236, 1237, 1302, 1303).
According to Article 1293, payment by the new debtor gives him the
rights mentioned in Articles 1236 and 1237. Consequently, since the substitution
was effected with the consent of all the parties, the new debtor (delegado) can
demand reimbursement from the original debtor (delegante) of the entire amount
which he has paid (Article 1236) as well as compel the creditor (delegatorio) to
subrogate him in all of his rights (Articles 1302 and 1303).
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a) When the insolvency of the new debtor (delegado) was already existing and
of public knowledge at the time when the original debtor (delegante)
delegated his debt;
b) When such insolvency was already existing and known to the original
debtor (delegante) when he delegated his debt.
WHAT IS THE EFFECT OF NOVATION IF (1) THE NEW OBLIGATION IS VOID OR (2)
IF THE OLD OBLIGATION WAS VOID, OR (3) IF THE ORIGINAL OBLIGATION WAS
CONDITIONAL?
a) If the new obligation is void, the original one shall subsist, unless the
parties intended that the former relation should be extinguished in any
may be agreed upon. (Article 1297)
b) The novation is void if the original obligation was void, except when
annulment may be claimed only by the debtor, or when ratification
validates acts which are voidable. (Article 1298)
c) If the original obligation was subject to a suspensive or resolutory
condition, the new obligation shall be under the same condition, unless it
is otherwise stipulated. (Article 1299)
DEFINE SUBROGATION.
a) When a creditor pays another creditor who is preferred even without the
debtor‘s knowledge;
b) When a third person, not interested in the obligation, pays with the
express or tacit approval of the debtor; and
c) When, even without the knowledge of the debtor, a person interested in
the fulfillment of the obligation pays, without prejudice to the effects of
confusion as to the latter‘s share (Article 1302)
If the subrogation is partial, the same rule is applicable, but the creditor to
whom partial payment has been made may exercise his right for the remainder.
In other words, both the right of the subrogee and the right of the creditor shall
co-exist. In case of conflict between the 2, however, the right of the latter shall be
preferred (Article 1304).
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TITLE II
CONTRACTS
CHAPTER 1
GENERAL PROVISIONS
DEFINE CONTRACTS.
Contract is the cause, whereas obligation is the effect. There are five
sources of obligations, one of which is contract. Consequently, there can be an
obligation without a contract, but there can be no contract without a resultant
obligation.
a. ESSENTIAL – The essential elements are those without which there can be
no contract. The elements are, in turn, subdivided into:
b. NATURAL - The natural elements are those which are derived from the
nature of the contract and ordinarily accompany the same. They are
presumed by law, although they can be excluded by the contracting
parties if they so desire. Thus, warranty against eviction is implied in a
contract of sale, although the contracting parties may increase, diminish or
even suppress it.
c. ACCIDENTAL – The accidental elements are those which exist only when
the parties expressly provided for them for the purpose of limiting or
modifying the normal effects of the contract. They are called accidental
because they may be present or absent, depending upon whether or not
the parties have agreed upon them. Examples of these are conditions,
terms and modes.
a) Personal
b) Impersonal
The contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy (Article 1306).
It is a rule that only laws existing at the time of the execution of a contract
are applicable thereto and that later statutes do not govern contracts unless the
latter is specifically intended to have a retroactive effect. A later law which
enlarges, abridges or in any manner changes the intent of the parties to the
contract necessarily impairs the contract itself and cannot be given retroactive
effect without violating the constitutional prohibition against impairment of
contracts. However, non-impairment of contracts or vested rights clauses will
have to yield to the superior and legitimate exercise by the State of police power.
WHAT ARE THE KINDS OF INNOMINATE CONTRACTS AND HOW ARE THEY
REGULATED?
The contract must bind both contracting parties; its validity or compliance
cannot be left to the will of one of them (Article 1308).
Relativity of contracts refers to the principle of the civil law that a contract
can only bind the parties who had entered into it or their successors who have
assumed their personality or their judicial position, and that, as a consequence,
such contract can neither favor or prejudice a third person, in conformity with
the axiom res inter alios acta aliis nocet prodest (the act, declaration, or omission of
another, cannot affect another, except as otherwise provided by law or
agreement) [Vide Section 25, Rule 130, Rules of Evidence]. Thus Article 1311
declares that ―contracts take effect only between the parties, their assigns and
heirs.‖
a) Where the rights and obligations arising from the contract are not
transmissible by their nature, or by stipulation or by provision of law. The
heir is not liable beyond the value of the property he received from the
decedent (Article 1311).
b) Stipulation Pour Autrui – where a contract contains a beneficial stipulation
in favor of a third person provided he communicated his acceptance to the
obligor before its revocation. (Article 1311, par. 2).
c) In contracts creating real rights where third persons come into possession
of the object of the contract, subject to the provisions of the Mortgage Law
and the Land Registration Laws (Article 1312).
d) Where the contract is entered into in order to defraud a third person, in
which case, creditors are protected in cases of contracts intended to
defraud them (Article 1313).
e) Where the third person induces a contracting party to violate his contract.
The third person who induces another to violate his contract shall be liable
for damages to the other contracting party (Article 1314). This is called
TORT INTERFERENCE.
f) Where, in some cases, third persons may be adversely affected by a
contract where they did not participate (Articles 2150, 2151).
g) Where the law authorizes the creditor to sue on a contract entered into by
his debtor (Accion Directa).
It is not, however necessary that such third person be always named in the
contract.
Distinguish:
Contracts are perfected by mere consent, and from that moment the
parties are bound not only to the fulfillment of what has been expressly
stipulated but also to all the consequences which, according to their
nature, may be in keeping with good faith, usage and law (Article 1315).
CHAPTER 2
ESSENTIAL REQUISITES OF CONTRACTS
GENERAL PROVISIONS
When the law uses the word ―concur‖, it means that all the three (3)
requisites must be present. The absence of one requisite negates the existence of a
contract.
SECTION 1
CONSENT
It is the concurrence of the will of the offerer and the acceptor as to the
thing and the cause which constitute a contract. An offer is a manifestation of a
willingness to enter into a bargain so made as to justify another person in
understanding that his assent to that bargain is invited and will conclude it.
It is manifested by the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract (Article 1319).
The first is expressly stated in the Code; the second and third are implied.
There are actually four different theories which have been advanced in
order to pin-point the exact moment when a contract is perfected if the
acceptance by the offeree is made by a letter or telegram. They are:
None. Acceptance made by a letter does not bind the offerer except from
the time it came to his knowledge (Article 1319). Since X was already dead when
the letter of acceptance reached his residence, he could not have known the said
acceptance.
Yes, because the act of the agent or knowledge acquired by the agent duly
authorized is also the act of the principal, provided tat he acted within the scope
of his authority.
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The person making the offer may fix the time, place, and manner of
acceptance, all of which must be complied with (Article 1321).
A contract of adhesion is one where its terms are prepared by only one
party while the other party merely affixes his signature signifying his adhesion
thereto. Such contracts are not void in themselves. They are binding as ordinary
contracts. However, contracts of adhesion are construed against the party
preparing such contracts.
WHAT IS AN OPTION?
When the offerer has allowed the offeree a certain period to accept, the
offer may be withdrawn at any time before acceptance by communicating such
withdrawal, except when the option is founded upon a consideration, as
something paid or promised (Article 1324).
a) Unemancipated minors;
b) Insane or demented persons, and deaf-mutes who do not know how to write
(Article 1327) ;
c) Deaf-mutes who do not know how to write;
d) Married women of age in cases specified by law;
e) Persons suffering from civil interdiction; and
f) Incompetents under guardianship (Rules 93-94, Rules of Court).
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Under the Family Code, emancipation takes place by the attainment of the
age of majority and, unless otherwise provided, majority commences at the age
of eighteen years.
WHAT ARE THE EXCEPTIONS TO THE RULE THAT A CONTRACT ENTERED INTO
BY AN UNEMANCIAPTED MINOR WITHOUT THE CONSENT OF HIS PARENTS OR
GUARDIAN IS VOIDABLE?
a) Where the contract is entered into by a minor who misrepresents his age,
applying the doctrine of estoppel;
b) Where the contract involves the sale and delivery of necessaries to the
minor (Article 1489, par. 2);
c) Where it involves a natural obligation and such obligation is voluntarily
fulfilled by the minor (Articles 1426 and 1427);
Contracts entered into during a lucid interval are valid. Contracts agreed
to in a state of drunkenness or during a hypnotic spell are voidable (Article 1328).
Lucid interval is that period of time when an insane person acts with
reasonable understanding, comprehension and discernment with respect to what
he is doing.
There is mistake of fact when one or both of the contracting parties believe
that a fact exists when in reality it does not, or that such fact does not exist when
in reality it does. On the other hand, there is a mistake of law when one or both
of the contracting parties arrive at an erroneous conclusion regarding the
interpretation of a question of law or the legal effects of a certain act or
transaction.
a) MISTAKE AS TO THE OBJECT OF THE CONTRACT (Error in re) – This may refer
to:
b) MISTAKE AS TO PERSON:
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To determine the degree of intimidation, the age, sex and condition of the
person shall be borne in mind.
a) The force employed to wrest consent must be serious and irresistible; and
b) It must be the determining cause for the party upon whom it is employed
in entering into the contract.
a. the confidential, family, spiritual and other relations between the parties,
or
b. the fact that the person alleged to have been unduly influenced was
suffering from mental weakness, or was ignorant or in financial distress
(Article 1337).
a) Improper advantage
b) Power of the will of another
c) Deprivation of the latter‘s will of a reasonable freedom of choice
WHAT ARE THE REQUISITES OF FRAUD [DOLO CAUSANTE] WHICH WILL RENDER
A CONTRACT VOIDABLE?
Dolo causante (Article 1338) and Dolo incidente (Article 1344) may be
distinguished from each other in the following ways:
a) The first refers to a fraud which is serious in character, whereas the second
is not serious;
b) The first is the cause which induces the party upon whom it is employed
in entering into the contract, whereas the second is not the cause;
c) The effect of the first is to render the contract voidable, whereas the effect
of the second is to render the party who employed it liable for damages.
Failure to disclose facts, when there is a duty to reveal them, as when the
parties are bound by confidential relations, constitutes fraud (Article 1339).
This refers to causal fraud. If the fraud is merely incidental fraud, it only
obliges the person employing it to pay damages.
SECTION 2
OBJECT OF CONTRACTS
The object of a contract may be defined as the thing, right or service which
is the subject matter of the obligation which is created or established.
a) Things which are outside the commerce of men, including future things;
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If the parties enter into a contract with respect to the above contracts, the
contract is void or inexistent.
SECTION 3
CAUSE OF CONTRACTS
In general, cause is the why of the contract or the essential reason which
moves the contracting parties to enter into the contract. In other words, it is the
immediate, direct or proximate reason which explains and justifies the creation
of an obligation through the will of the contracting parties.
In particular:
The cause must not be confused with the object of the contract. Of course,
there can be no question about the difference between the two cases of
remuneratory and gratuitous contracts; thus, in the first, the cause is the service
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or benefit which is remunerated, while the object is the thing which is given in
remuneration, and in the second the cause is the liberality of the donor or
benefactor.
a) Whereas the cause is the direct or most proximate reason of the contract,
the motives are the indirect or remote reasons;
b) Whereas the cause is the objective or juridical reason of a contract, the
motives are the psychological or purely personal reasons;
c) Whereas the cause is always the same, the motives may differ for each
contracting party.
d) The motive may be unknown to the other, the cause is always known.
e) The presence of motive cannot cure absence of cause.
In order that there will be a sufficient cause upon which a contract may be
founded, it is essential that the following requisites must concur:
WHAT IS LESION?
CHAPTER 3
FORM OF CONTRACTS
1. When the law requires that a contract be in some form in order that it may
be valid or enforceable, or
2. That a contract be proved in certain way.
If the law requires a document or other special form, as in the acts and
contracts enumerated in the following article, the contracting parties may compel
each other to observe that form, once the contract has been perfected. This right
may be exercised simultaneously with the action upon the contract (Article 1357).
This article is applicable only when form is needed only for CONVENIENCE,
not for validity or enforceability. In other words, before the contracting parties
may be compelled to execute the needed form, it is essential that the contract be
PERFECTED (valid) (Article 1357) and ENFORCEABLE under the Statute of Frauds
(Article 1356).
The right to compel under Article 1357 cannot be exercised if the law
requires that a contract be in some form in order that it may be VALID and
ENFORCEABLE, because Article 1356 provides that that requirement is ABSOLUTE
and INDISPENSABLE.
WHAT ARE THE FORMALITIES WHICH ARE MERELY FOR THE CONVENIENCE OF
THE CONTRACTING PARTIES?
(1) Acts and contracts which have for their object the creation, transmission,
modification or extinguishment of real rights over immovable property; sales of
real property or of an interest therein are governed by articles 1403, No. 2, and
1405;
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All other contracts where the amount involved exceeds five hundred
pesos must appear in writing, even a private one. But sales of goods, chattels or
things in action are governed by articles 1403, No. 2 and 1405 (Article 1358).
Note that the necessity for the public document in the contracts
enumerated above is only for CONVENIECE, not for VALIDITY or ENFORCEABILITY.
Formal requirements are for the benefit or third parties. Noncompliance
therewith does not adversely affect the validity of the contract or the contractual
rights and obligations of the parties thereunder (Fule vs. CA, G.R. No. 112212,
March 2, 1998)
WHAT ARE THE FORMALITIES WHICH ARE NECESSARY FOR THE VALIDITY OF
CONTRACTS?
CHAPTER 4
REFORMATION OF INSTRUMENTS (N)
1. Whereas the first presupposes a perfectly valid contract in which there has
already been a meeting of the minds of the contracting parties, the second
is based on a defective contract in which there has been no meeting of the
minds because the consent of one of the contracting parties has been
vitiated.
2. Reformation does not invalidate a contract; annulment invalidates a
contract.
WHAT IS THE RULE IN CASE OF CONFLICT BETWEEN THE CIVIL CODE AND THE
PRINCIPLES OF GENERAL LAW ON REFORMATION?
1. When a mutual mistake of the parties causes the failure of the instrument
to disclose their real agreement, said instrument may be reformed (Article
1361).
2. If one party was mistaken and the other acted fraudulently or inequitably
in such a way that the instrument does not show their true intention, the
former may ask for the reformation of the instrument (Article 1362).
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3. When one party was mistaken and the other knew or believed that the
instrument did not state their real agreement, but concealed that fact from
the former, the instrument may be reformed (Article 1363).
4. When through the ignorance, lack of skill, negligence or bad faith on the
part of the person drafting the instrument or of the clerk or typist, the
instrument does not express the true intention of the parties, the courts
may order that the instrument be reformed (Article 1364).
5. If two parties agree upon the mortgage or pledge of real or personal
property, but the instrument states that the property is sold absolutely or
with a right of repurchase, reformation of the instrument is proper (Article
1365).
When one of the parties has brought an action to enforce the instrument,
he cannot subsequently ask for its reformation (Article 1367).
WHO ARE THE PERSONS WHO MAY ASK FOR REFORMATION OF INSTRUMENT?
CHAPTER 5
INTERPRETATION OF CONTRACTS
RULES:
1. If the terms of a contract are clear and leave no doubt upon the intention
of the contracting parties, the literal meaning of its stipulations shall
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DEFECTIVE CONTRACTS
CHAPTER 6
RESCISSIBLE CONTRACTS
DEFINE RESCISSION.
(1) Those which are entered into by guardians whenever the wards whom
they represent suffer lesion by more than one-fourth of the value of the things
which are the object thereof;
(2) Those agreed upon in representation of absentees, if the latter suffer the
lesion stated in the preceding number;
(3) Those undertaken in fraud of creditors when the latter cannot in any other
manner collect the claims due them;
(4) Those which refer to things under litigation if they have been entered into
by the defendant without the knowledge and approval of the litigants or of
competent judicial authority;
(5) All other contracts specially declared by law to be subject to rescission.
(Article 1381)
(6) Payments made in a state of insolvency for obligations to whose
fulfillment the debtor could not be compelled at the time they were effected, are
also rescissible. (Article 1382)
Before a contract can be rescinded on the ground that it has been entered
into in fraud of creditors, it is indispensable that the following requisites must
concur:
WHO ARE THE PERSONS WHO MAY INSTITUTE AN ACTION FOR THE
RESCISSION OF A RESCISSIBLE CONTRACT?
The law presumes that there is fraud of creditors in the following cases:
Rescission creates the obligation to return the things which were the object
of the contract, together with their fruits, and the price with its interest;
consequently, it can be carried out only when he who demands rescission can
return whatever he may be obliged to restore. (Article 1385)
WHAT IS THE LIABLITY OF ONE WHO ACQUIRES IN BAD FAITH THE THINGS
ALIENATED IN FRAUD OF CREDITORS?
If there are two or more alienations, the first acquirer shall be liable first,
and so on successively. (Article 1388)
For persons under guardianship and for absentees, the period of four
years shall not begin until the termination of the former's incapacity, or until the
domicile of the latter is known. (Article 1389)
CHAPTER 7
VOIDABLE CONTRACTS
Voidable contracts are those in which all of the essential elements for
validity are present, but the element of consent is vitiated either by lack of legal
capacity of one of the contracting parties, or by mistake, violence, intimidation,
undue influence, or fraud.
(1) Those where one of the parties is incapable of giving consent to a contract;
(2) Those where the consent is vitiated by mistake, violence, intimidation,
undue influence or fraud.
These contracts are binding, unless they are annulled by a proper action in
court. They are susceptible of ratification. (Article 1390)
The action for annulment shall be brought within four years. (Article 1391)
On the other hand, there is a tacit ratification if, with knowledge of the
reason which renders the contract voidable and such reason having ceased, the
person who has a right to invoke it should execute an act which necessarily
implies an intention to waive his right. (Article 1393)
Ratification does not require the conformity of the contracting party who
has no right to bring the action for annulment. (Article 1395)
a. Ratification cleanses the contract from all its defects from the moment it
was constituted. (Article 1396) There is retroactive effect of ratification,
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thus, once ratification has taken place, annulment based on the original
defects cannot prosper.
b. The action to annul is extinguished (Article 1392), thus the contract
becomes a completely valid one.
The action for the annulment of contracts may be instituted by all who are
thereby obliged principally or subsidiarily. However, persons who are capable
cannot allege the incapacity of those with whom they contracted; nor can those
who exerted intimidation, violence, or undue influence, or employed fraud, or
caused mistake base their action upon these flaws of the contract. (Article 1397)
a. The plaintiff must have an interest in the contract in the sense that
he is obliged thereby either principally or subsidiarily; and
b. The victim and not the party responsible for the vice or defect must
be the one who must assert the same.
a. If the contract has not yet been complied with, the parties are
excused from their obligation.
b. If the contract has already been performed, the contracting parties
shall restore to each other the things which have been the subject
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matter of the contract, with their fruits, and the price with its
interest, except in cases provided by law.
c. In obligations to render service, the value thereof shall be the basis
for damages. (Article 1398)
When the defect of the contract consists in the incapacity of one of the
parties, the incapacitated person is not obliged to make any restitution except
insofar as he has been benefited by the thing or price received by him. (1399)
WHAT IS THE EFFECT ON THE RIGHT TO ANNUL IF THE THING WHICH IS THE
OBJECT OF THE CONTRACT IS LOST?
If the right of action is based upon the incapacity of any one of the
contracting parties, the loss of the thing shall not be an obstacle to the success of
the action, unless said loss took place through the fraud or fault of the plaintiff.
(Article 1401)
As long as one of the contracting parties does not restore what in virtue of
the decree of annulment he is bound to return, the other cannot be compelled to
comply with what is incumbent upon him. (Article 1402)
CHAPTER 8
UNENFORCEABLE CONTRACTS (N)
(1) Those entered into in the name of another person by one who has been
given no authority or legal representation, or who has acted beyond his powers;
(2) Those that do not comply with the Statute of Frauds as set forth in this
number. In the following cases an agreement hereafter made shall be
unenforceable by action, unless the same, or some note or memorandum, thereof,
be in writing, and subscribed by the party charged, or by his agent; evidence,
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Under the new Civil Code, all three terms are now uniformly called
RATIFICATION.
CHAPTER 9
VOID OR INEXISTENT CONTRACTS
Inexistent contracts, on the other hand, are those contracts which lack
absolutely one or some or all of thoser requisites which are essential for validity.
Void and inexistent contracts may be distinguished from each other in the
following ways :
a) Void contracts refer to those where all of the the requisites of a contract
are present but the cause, object or purpose is contrary to law, morals,
good customs, public order or public policy, or the contract itself is
prohibited or declared by law to be void ; inexistent contracts, on the other
hand, refer to those where one or some or all of those requisites which are
essential for validity are absolutely lacking (Liguez vs. Court of Appeals, 102
Phil. 577).
b) The principle of in paru delicto is applicable in the first, but not in the
second. Consequently, the first may produce effects (Articles 1411, 1412),
but the second does not produce any effect whatsoever.
The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good
customs, public order or public policy;
(2) Those which are absolutely simulated or fictitious;
(3) Those whose cause or object did not exist at the time of the transaction;
(4) Those whose object is outside the commerce of men;
(5) Those which contemplate an impossible service;
(6) Those where the intention of the parties relative to the principal object of
the contract cannot be ascertained;
(7) Those expressly prohibited or declared void by law. (Article 1409)
These contracts cannot be ratified. Neither can the right to set up the
defense of illegality be waived.
a. Those which are direct results of previous illegal contract (Article 1422);
b. Those where there is no concurrence between offer and acceptance with
regard to the object and the cause of the contract; and
c. Those which do not comply with the required form where such form is
essential for validity.
When the defect of a void contract consists in the illegality of the cause or
object of the contract, and both parties are at fault or in pari delicto, the law
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refuses them every remedy and leaves them where they are. This rule, which is
embodied in Articles 1411 and 1412, is what is commonly known as the principle
of in pari delicto. It is a rule which is expressed in the maxims: “Ex dolo malo non
oritur action” and “In pari delicto potior est condition defendentis”. The law will not
aid either party to an illegal agreement; it leaves then where they are.
When the nullity proceeds from the illegality of the cause or object of the
contract, and the act constitutes a criminal offense, both parties being in pari
delicto:
This rule shall be applicable when only one of the parties is guilty; but the
innocent one may claim what he has given, and shall not be bound to comply
with his promise. (Article 1411)
a. Payment of usurious interest. In such a case, the law allows the debtor to
recover the interest paid in excess of that allowed by the usury laws, with
interest thereon from the date of payment (Article 1413).
b. Payment of money or delivery of property for an illegal purpose, where
the party who paid or delivered repudiates the contract before the
purpose has been accomplished, or before any damage has been caused to
a third person. In such a case, the courts may allow such party to recover
what he ahs paid or delivered, if the public interest will thus be subserved
(Article 1414).
c. Payment of money or delivery of property by an incapacitated person. In
such a care, the courts may allow such person to recover what he ahs paid
or delivered, if the interest of justice so demands (Article 1415).
d. Agreement or contract which is not illegal per se but is merely prohibited
by law, and the prohibition is designed to the protection of the plaintiff. In
such a case, such plaintiff, if public policy is thereby enhanced, may
recover what he has paid or delivered (Article 1416).
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If the act in which the unlawful or forbidden cause consists does not
constitute a criminal offense, the following rules shall be observed:
(1) When the fault is on the part of both contracting parties, neither may
recover what he has given by virtue of the contract, or demand the performance
of the other's undertaking;
(2) When only one of the contracting parties is at fault, he cannot recover
what he has given by reason of the contract, or ask for the fulfillment of what has
been promised him. The other, who is not at fault, may demand the return of
what he has given without any obligation to comply his promise. (Article 1412)
WHAT IS THE RULE IF THE CONTRACT IS DIVISIBLE AND THE ILLEGAL TERMS
CAN BE SEPARATED FROM THE LEGAL ONES?
In case of a divisible contract, if the illegal terms can be separated from the
legal ones, the latter may be enforced (Article 1420).
TITLE III
NATURAL OBLIGATIONS
Natural obligations, not being based on positive law but on equity and
natural law, do not grant a right of action to enforce their performance, but after
voluntary fulfillment by the obligor, they authorize the retention of what has
been delivered or rendered by reason thereof (Article 1423).
Voluntary fulfillment means that the debtor complied with the same even
if he knew that he could not have been legally forced to do so. In the case of
partial voluntary fulfillment, the balance cannot be recovered, since on said
balance, there has not been created a legal obligation.
If a debt that has prescribed is paid not knowing it has prescribed, the
payor can recover on the ground of undue payment. But if it is paid knowing
that it has prescribed already, the payor cannot recover for this would be a case
of a natural obligation.
of the obligation, there shall be no right to recover the same from the
obligee who has spent or consumed it in good faith (Article 1427).
5. When, after an action to enforce a civil obligation has failed the defendant
voluntarily performs the obligation, he cannot demand the return of what
he has delivered or the payment of the value of the service he has
rendered (Article 1428).
6. When a testate or intestate heir voluntarily pays a debt of the decedent
exceeding the value of the property which he received by will or by the
law of intestacy from the estate of the deceased, the payment is valid and
cannot be rescinded by the payer (Article 1429).
7. When a will is declared void because it has not been executed in
accordance with the formalities required by law, but one of the intestate
heirs, after the settlement of the debts of the deceased, pays a legacy in
compliance with a clause in the defective will, the payment is effective
and irrevocable (Article 1439).
TITLE IV
ESTOPPEL (N)
WHAT IS ESTOPPEL?
a. Estoppel in pais or by conduct is that which arises when one by his acts,
representations or admissions, or by his silence when he ought to speak
out, intentionally or through culpable negligence, induces another to
believe that certain facts to exist and such other rightfully relies and acts
on such belief, as a consequence of which he would be prejudiced if the
former is permitted to deny the existence of such facts.
b. Estoppel by deed is a type of technical estoppel by virtue of which a party
to a deed and his privies are precluded from asserting as against the other
party and his privies any right or title in derogation of the deed, or from
denying any material fact asserted therein. On the other hand, estopel by
record is a type of technical estoppel by virtue of which a party and his
privies are precluded from denying the truth of matters set forth in a
record, whether judicial or legislative.
c. Laches, in general sense, is failure or neglect, for an unreasonable and
unexplained length of time, to do that which, by exercising due diligence,
could or should have been done earlier; it is negligence or omission to
assert a right within reasonable time, warranting a presumption that the
party entitled to assert it either has abandoned it or declined to assert it
(Tijam vs. Sibonghanoy, supra; Heirs of Lacamen vs. Heirs of Laruan, 65 SCRA
605). It is therefore, a type of equitable estoppel which arises when a party,
knowing his rights as against another, takes no step or delays in enforcing
them until the condition of the latter, who has no knowledge or notive
that the former would assert such rights, has become so changed that he
cannot, without injury or prejudice, be restored to his former state.
6 Nielson & Co., Inc. v. Lepanto Consolidated Mining Co., 18 SCRA 1040, December 17,
1966, per Zaldivar, J. See also Heirs of Batiog Lacamen v. Heirs of Laruan, 65 SCRA 605, 609, July
31, 1975; Radio Communication of the Philippines, Inc. v. NLRC, 223 SCRA 656; June 25, 1993;
Jimenez v. Fernandez, 184 SCRA 190, 196, April 6, 1990; Santiago v. Court of Appeals, 278 SCRA
98, August 21, 1997, per Hermosisima, Jr. J.
7 Republic vs. Court of Appeals, 204 SCRA 160 [1991].
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This type of estoppel must not be confused with res judicata. Estoppel by
judgment bars the parties from raising any question that might have been put in
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issue and decided in a previous litigation, whereas res judicata makes a judgment
conclusive between the same parties as to the matter directly adjudged (Phil.
Nat’l. Bank vs. Barreto, 52 Phil. 818; NAMARCO vs. Macadaeg, 52 Off. Gaz. 182).
WHAT IS THE EFFECT IF A PERSON WHO IS NOT THE OWNER OF A THING SELLS
OR ALIENATES AND DELIVERS IT AND LATER THE SELLER OR GRANTOR ACQUIRES
TITLE THERETO?
When a person who is not the owner of a thing sells or alienates and
delivers it, and later the seller or grantor acquires title thereto, such title passes
by operation of law to the buyer or grantee (Article 1434).
TITLE V
TRUSTS (N)
CHAPTER 1
GENERAL PROVISIONS
DEFINE TRUST.
Trust may be defined as the legal relationship between one person having
an equitable ownership over a certain property and another having the legal title
thereto.
A person who establishes a trust is called the trustor (or settler); one in
whom confidence is reposed as regards the property for the benefit of another
person is known as the trustee (he holds the property in trust for the benefit of
another); and the person for whose benefit the trust has been created is referred
to as the beneficiary or cestui que trust (Article 1440). The trustor may at the same
time be the beneficiary.
EXPRESS TRUSTS are created by the intention of the trustor or of the parties.
IMPLIED TRUSTS come into being by operation of law (Article 1441). They
are those which, without being expressed, are deducible from the nature of the
transaction as matters of intent, or which are superinduced on the transaction by
operation of law as matters of equity, independently of the particular intention of the
parties. They are ordinarily subdivided into resulting and constructive trusts.
Express trust and implied trust may be distinguished from each other in
the following ways:
a) Express trust is one created by the intention of the trustor or of the parties,
while an implied trust is one that comes into being by operation of law.
b) Express trusts are those created by the direct and positive acts of the parties,
by some writing, or deed, or will, or by words evidencing an intention to
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create a trust. On the other hand, implied trusts are those which, without
being expressed, are deducible from the nature of the transaction by
operation of law as matters of equity, independently of the particular
intention of the parties.
c) Thus, if intent to establish a trust is clear, the trust is express; if the intent to
establish a trust is to be taken from the circumstances or other matters
indicative of such intent, then the trust is implied (Cuaycong vs. Cuaycong, 21
SCRA 1192).
d) No express trust concerning an immovable or any interest therein may be
proved by parol evidence (Article 1443), while the existence of an implied
trust may be proved by parol evidence.
e) Laches and prescription do not constitute a bar to enforce an express trust, at
least while the trustee does not openly repudiate the trust, and make known
such repudiation to the beneficiary, while laches and prescription may
constitute a bar to enforce an implied trust, and no repudiation is required
unless there is a concealment of the facts giving rise to the trust (Fabian vs.
Fabian, 21 SCRA 213).
a. It is a fiduciary relationship.
b. It is created by law or by agreement.
c. It is one where the legal title is held by one, and the equitable title or
beneficial title is held by another.
CHAPTER 2
EXPRESS TRUSTS
No trust shall fail because the trustee appointed declines the designation,
unless the contrary should appear in the instrument constituting the trust.
(Article 1445)
CHAPTER 3
IMPLIED TRUSTS
a) There is an implied trust when property is sold, and the legal estate is granted
to one party but the price is paid by another for the purpose of having the
beneficial interest of the property. The former is the trustee, while the latter is
the beneficiary. However, if the person to whom the title is conveyed is a
child, legitimate or illegitimate, of the one paying the price of the sale, no
trust is implied by law, it being disputably presumed that there is a gift in
favor of the child. (Article 1448)
b) There is also an implied trust when a donation is made to a person but it
appears that although the legal estate is transmitted to the donee, he
nevertheless is either to have no beneficial interest or only a part thereof.
(Article 1449)
c) When land passes by succession to any person and he causes the legal title to
be put in the name of another, a trust is established by implication of law for
the benefit of the true owner. (Article 1451)
d) If two or more persons agree to purchase property and by common consent
the legal title is taken in the name of one of them for the benefit of all, a trust
is created by force of law in favor of the others in proportion to the interest of
each. (Article 1452)
e) When property is conveyed to a person in reliance upon his declared
intention to hold it for, or transfer it to another or the grantor, there is an
implied trust in favor of the person whose benefit is contemplated. (Article
1453)
a. If the price of a sale of property is loaned or paid by one person for the
benefit of another and the conveyance is made to the lender or payor to
secure the payment of the debt, a trust arises by operation of law in favor
of the person to whom the money is loaned or for whom it is paid. The
latter may redeem the property and compel a conveyance thereof to him.
(Article 1450)
b. If an absolute conveyance of property is made in order to secure the
performance of an obligation of the grantor toward the grantee, a trust by
virtue of law is established. If the fulfillment of the obligation is offered by
the grantor when it becomes due, he may demand the reconveyance of the
property to him. (Article 1454)
c. When any trustee, guardian or other person holding a fiduciary
relationship uses trust funds for the purchase of property and causes the
conveyance to be made to him or to a third person, a trust is established
by operation of law in favor of the person to whom the funds belong.
(Article 1455)
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It depends:
However, if (1) he repudiates the right of the beneficiary; and (2) such act
of repudiation is brought to the knowledge of the beneficiary, and (3) the
evidence thereon is clear and conclusive, he may be able to acquire absolute
ownership over the trust but only (4) after the lapse of the period fixed by law.
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