ALEITHEIA - Obligations & Contracts Memory Aid (Sta. Maria)

8/13/2019 ALEITHEIA - Obligations & Contracts Memory Aid (Sta. Maria)

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TITLE I - OBLIGATIONS

CHAPTER 1 GENERAL PROVISIONS

Obligation: Requisites

1. Passive Subject debtor/obligor who is bound to thefulfilment of the obligation

2. Active Subject creditor/obligee who is entitled to demandthe fulfilment of the obligation (natural/juridical persons)

3. Prestation/Object conduct required to be observed by thedebtor

4. Vinculuum Juris juridical/legal tie w/c binds or connects theparties to the obligation; enforceability of the obligation

Object/Prestation: Kinds1. to give delivery of a movable/immovable thing2. to do work/service whether physical or mental3. not to do abstaining from some act

Object/Prestation: Elements1. possible2. determinate/determinable3. susceptible of pecuniary value4. legal/licit

Legal Wrong: Elements1. legal right in favour of the plaintiff2. correlative legal obligation on the part of the defendant3. an act or omission by the defendant in violation of said right

w/ resulting damage to the plaintiff

Obligations: Kinds Accdg. to Subject Matter1. Real Obligation subject matter is a thing w/c the debtor

t d li t th dit

Quasi Contracts: Elements1. lawful2. voluntary3. unilateral

Independent Civil Actions1. obligations not arising from the act/omission claimed to be

criminal2. violations of constitutional rights & liberties of individuals3. defamation, fraud or physical injuries4. refusal/failure of members of a local police force to render

protection to life/property

Civil Liability: Scope1. restitution2. reparation for the damage caused3. indemnification

Quasi Delict: Requisites1. act/omission2. fault/negligence3. damage caused4. direct relation of cause & effect between the act or omission

and the damage5. no pre-existing contractual relation bet. the parties

Test of Negligence1. a duty on the part of the defendant to protect the plaintiff

from the injury of w/c the latter complains

2. a failure to perform that duty3. an injury to the plaintiff through such failureNegligence: Kinds

1. culpa aquilana negligence as a source of obligation2. culpa contractual negligence in the performance of a

contract3. culpa criminal negligence resulting in the commission of a

crime

QUASI-DELICT CONTRACT

The obligation arises only when

there is a breach

There is already an obligation w/c

exists prior to or even w/o abreach

It is the breach itself w/c givesrise to the obligation

The breach of the contract isimmaterial to the legal obligation

Quasi-delict & breach are Contract & breach are separable.

CIVIL OBLIGATIONS NATURAL OBLIGATIONS

Civil obligations are thosewhich give a right of action

to compel their performance

natural obligations are those whichcannot be enforced by court action

but which are binding on the partywho makes them, in conscience andaccording to equity & natural justice

binding force from positivelaw

equity and natural justice

can be enforced by courtaction or the coercive powerof public authority

cannot be compelled by court actionbut depends exclusively upon thegood conscience of the debtor


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DETERMINATE/SPECIFIC INDETERMINATE/GENERIC

- particularly designated- physically segregated fr.others of the same class- individualized

- can be identified ordistinguished from others ofits kind- debtor cannot substitute itw/ another although it is ofthe same kind & quality w/othe consent of the creditor

- refers only to a kind class/genus tow/c it pertains- cannot be pointed w particularity- the object is determinable, but the

moment it is delivered, it becomesdeterminate- debtor can give anything of thesame class of the same kind/quality*Limited Generic when thegeneric objects are confined to aparticular class

Duties of Debtor in Obligation to Give a Determinate Thing1. Preserve the thing diligence of a good father of a family2. deliver the thing itself3. deliver the fruits of the things4. deliver accessions and accessories5. answer for damages in case of non-fulfilllment/breach

Duties of Debtor in Obligation to Give a Generic Thing1. deliver the thing w/c is of the quality intended by the parties2. to be liable for damages in case of fraud, negligence, delay,

or contravention of the tenor the obligation3. in case of fortuitous event, debtor is still liable

Fruits: Kinds1. natural fruits spontaneous products of the soil & the young

& other products of animals

2. industrial fruits produced by lands of any kind throughcultivation of labor

3. civil fruits derived by virtue or juridical relation

PERSONAL RIGHT REAL RIGHT

Right/power of a person to demandfrom another the fulfilment of thelatters obligation

Right/interest of a person overa specific thing w/o a definitepassive subject against whomthe right may be enforced

Definite active subject & definitepassive subject

Definite active subject but nodefinite passive subject

Binding against a particular person Binding against the wholeworld

Creditors Remedies in Specific Real Obligations1. Specific performance/Compliance/Fulfillment performance

of the prestation itself

Liability in case of Breach1. in good faith liable for necessary/normal damages2. in bad faith liable for all kinds of damages, including

nominal, moral & exemplary

Exemption from Liability: Kinds1. a party to a contract is relieved from the effects of his fault or

negligence by a 3rdperson (e.g. insurance)2. one party to a contract renounces in advance the right to

enforce liability arising from the fault/negligence of others

DamagesMoralExemplaryNominalTemperateActual

Liquidated & attorney fees

INCIDENTAL FRAUD(ART. 1171)

CAUSAL FRAUD(ART. 1338)

Malice Deceit

Subsequent fraud Antecedent Fraud

Fraud committed in theperformance of an obligationalready existing

Fraud employed in the execution ofa contract

evades the normal fulfilmentof an obligation

uses insidious words ormachinations to induce another toenter a contract, w/o them, he

would have agreedDoes not vitiate consent Vitiates consent

Obligation/contract is valid Contract is voidable

Creditor has a right todamages because of breach

Creditor may annul the obligation

SIMPLE NEGLIGENCE GROSS NEGLIGENCE

Lack of due diligence So reckless as to amount to fraud

Waiver of future simplenegligence is allowed

Waiver of future gross negligenceis void, as it is tantamount towaiving future fraud

FRAUD NEGLIGENCEDeliberate intention to causedamage or injury

No such intention

Waiver for future fraud void May be allowedMust be clearly proved Presumed from the violation of


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GR: contributory negligence of a creditor reduces/mitigates thedamages w/c he can recoverE: if the negligent act/omission of the creditor is the proximate causeof the event w/c led to the damage/injury complained of, the creditorcannot recover damages

Delay: Kinds1. Ordinary delay failure to perform an obligation on time2. Legal Delay/Default failure to perform an obligation on time

constitutes a breach of the obligation

Default: Kinds1. Mora Solvendi delay on the part of the debtor2. Mora Accipiendi delay on the part of the creditor3. Compensatio Morae delay of obligors in reciprocal

obligations

Mora Solvendi: Requisites1. the obligation is due, demandable & liquidated2. failure of the debtor to perform his positive obligation on the

time agreed upon through his fault/negligence3. creditor makes a judicial/extra-judicial demand upon the

debtor to comply w/his obligation4. failure to comply w/ demand

Mora Solvendi: Effects1. debtor guilty of breach2. debtor is liable to the creditor for interest/damages3. Fortuitous event

a. Determinate thing debtor still liable; but if the debtorcan prove that the loss would have resulted just thesame even if he had not been in default, the court mayequitably mitigate/reduce the damages

b. Indeterminate thing debtor is not relieved from liabilityfor loss & can still be compelled to deliver a thing of thesame kind

GR:Demand is necessary. No demand, no delay.Exceptions:

1. when the obligation so provides2. when the law so provides3. when the nature & circumstances of the obligation provides;

designation of time was the controlling motive4. demand would be useless, as when the obligor has rendered

it beyond his power to perform5. there is express recognition of default by the debtor6 th i f b t i i l bli ti

Cessation of the Effects of Mora1. renunciation by the creditor express/implied2. prescription

FORTUITOUS EVENT FORCE MAJEURE

Acts of man Acts of God

Independent of the will of theobligor but not of other humanwills

Independent of the will of everyman

e.g. war, fire, robbery, murder e.g. earthquake, flood, lightning

Fortuitous Event: Kinds1. ordinary events w/c are common & w/c the contracting

parties could reasonably foresee2. extraordinary uncommon & w/c the parties could not

reasonably foresee

Fortuitous Event: Requisites1. event must be independent of the human will or at least of

the will of the debtor2. even could not be foreseen, if foreseen, inevitable3. event must be of such character as to render it impossible for

the debtor to comply with his obligation in a normal manner4. debtor must be free from any participation in the aggravation

of the injury to the creditor

GR: a person is not liable for loss or damage caused to anotherresulting from a fortuitous eventExceptions:

1. Expressly specified by lawa. Debtor is guilty of fraud, negligence, delay or

contravention of the tenor of the obligationb. Debtor has promised to deliver the same thing to 2 or

more persons who do not have the same interestsc. Obligation to deliver a specific thing arises from a crimed. The thing to be delivered is generic

2. declared by stipulation3. nature of the obligation requires the assumption of risk

Simple Loan/Mutuum: a contract whereby one of the parties deliversto another, money or other consumable thing, upon the condition thatthe same amount of the same kind & quality shall be paid

Interests: income produced by money in relation to the amount &time it cannot be utilized by the owner


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Disputable Presumptions1. Interest bearing debt presumption that interest has been

paid if the principal has been received w/o reservation re:interest

2. Debt payable in instalment presumption that earlierinstalments have been paid if the later instalment has beenreceived w/o reservation re: the previous instalment

When the Presumption Does not Apply1. w/ reservation as to the interest2. receipt w/o indication of particular instalment paid3. payment of taxes4. non-payment has been proven

Creditors Remedies for Satisfaction of their Claims1. Levy & execution of debtors non-exempt property2. Accion subragatoria3.

Accion pauliana4. Accion directa

Accion Subragatoria:the action w/c the creditor may exercise in theplace of his negligent debtor in order to preserve/recover for thepatrimony of the debtor the product of such action & then obtaintherefrom the satisfaction of his own credit; the debtor of my debtor ismy debtor

Accion Subragatoria: Requisites1. Debtor is indebted to the creditor2. Debt is due & demandable3. Failure of debtor to collect his own debt from a 3

rd

personeither through malice or negligence

4. creditor must be prejudiced by the inaction/failure of thedebtor to proceed against the 3rdperson

5. creditor must have pursued 1stor exhausted all the propertiesof the debtor w/ arent exempt from execution

6. debtors assets are insufficient to satisfy his claims7. right of account is not purely personal

Accion Pauliana: right of creditors to rescind alienations by debtorw/c are prejudicial to them to the extent of the prejudice

Accion Pauliana: Requisites1. credit in favour of the plaintiff2. debtor has performed an act subsequent to the contact,

giving advantage to other persons3. creditor is prejudiced by the debtors act w/c are in favour of

3rd & i i ill b fit th dit

CHAPTER 3 DIFFERENT KINDS OF OBLIGATIONS

Different Kinds of Obligations1. According to Demandability

a. Pureb. Conditionalc. w/ a term

2. According to Plurality of Objecta. Simpleb. Multiple

i. Alternativeii. facultative

3. According to Plurality of Subjectsa. Singleb. Multiple

i. Jointii. Solidary

4. According to Performancea. Divisibleb. Indivisible

5. According to Sanction for Breacha. No penal Clauseb. w/ penal clause

Section 1 Pure & Conditional Obligations

Pure Obligation: has neither a condition nor a term attached to it; itis subject to no contingency

Obligations Demandable at Once1. pure2. subject to a resolutory condition3. subject to a resolutory period

Condition: Characteristics1. Future & Uncertain2. Past but Unknown

KINDS OF CONDITION

SUSPENSIVE RESOLUTORY

Conditionfulfilled

Obligation arises Obligation extinguished

Does nottake place

Juridical tie doesntappear

Tie of law is consolidated

U til it t k E i t f bli ti i H th ibilit f


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Preservation of Creditors Rights1. To prevent the loss or deterioration of the things which are

the object of the obligations by enjoining or restraining actsof alienation or destruction by the debtor himself or by thirdpersons

2. To prevent concealment of the debtors properties whichconstitute the guarantee in case of non performance of theobligation

3. To demand security if the debtor becomes insolvent4. To compel the acknowledgement of the debtors signature on

a private document or the execution of the proper publicdocuments for registration so as to affect third persons

5. To register the deeds of sale or mortgages evidencing thecontract

6. To set aside fraudulent alienations made by the debtor7. To interrupt the period of prescription, by actions against

adverse possessors of the things which are the objects of theobligation

Resolutory Condition: Effects1. Obligation to give mutual restitution (includes fruits);

return to status quo; return to each other what they received2. Obligation to do/not to do discretion of the courts

Obligation: Kinds Accdg. to Persons Obliged1. Unilateral only 1 party is obliged to comply w/ a prestation2. Bilateral both parties mutually bound to each other; both

are debtors/creditors of each other

Bilateral Obligations: Kinds1. Reciprocal 2 prestations arise from the same cause; each

prestation is designed to be the counterpart of the other;mutual debtor/creditor

2. Non-Reciprocal not arising from the same cause;obligations arent dependent upon each other

Reciprocal Obligations: Remedies1. Specific Performance & Damages2. Resolution & Damages

Summary of Rulings on Resolution1. Right to resolve is inherent in reciprocal obligations2. Breach must be substantial & not slight & there must be proof

thereof3. Right of resolution can be exercised extrajudicially & will take

ff t i t b th d f lti t f th ti f

RESCISSION IN RECIPROCAL OBLIGATIONS

ARTICLE 1191: RESOLUTION ARTICLE 1381: RESCISSION

Principal remedy Subsidiary remedy

Need not show that there is no

other remedy

Must show that there is no other

remedyMay be demanded only by aparty to the contract

May be demanded by a 3rd partyprejudiced by the contract

May be denied by the court whenthere is sufficient reason to

justify extension of time to thedefendant in w/c to perform

Such reason doesnt affect theright to ask for rescission

Non performance is the onlyground for the right to rescission

There are various grounds ofequity provided as grounds forrescission (economic prejudice)

Applies only to reciprocalobligations where 1 party has

not performed

Applies w/n the contract producesunilateral/reciprocal obligations &

even when the contract has beenfully fulfilled

SIMILARITIES1. Both presuppose contracts validly entered into and existing2. both require mutual restitution when declared proper

CONTRACT OF SALE CONTRACT TO SELL

Ownership transferred upondelivery of the thing sold

Ownership reserved in the vendor &does not pass until full payment of thepurchase price

Reciprocal obligations:buyer pay sum of moneyseller deliver the thing,transfer ownership

Separate obligation to do which is toexecute a deed of absolute sale

Remedies:- Specific performance +damages- rescission + damages

Remedies:- restitutionNote: there can be no rescissionbecause obli. to execute a deed of salenever arose; obli. is non-existent

Conditional contract of sale upon fulfilment ofcondition, may compel totransfer ownership

Execution of DOS is another andseparate actionOwnership is retained by vendor

Non-payment of purchaseprice is resolutory condition

Positive suspensive condition nonpayment of the purchase price is not abreach, but an event which preventsthe obli. of vendor to convey title

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Impossible Conditions: Kinds1. Physical cannot exist/cannot be done2. Legal contrary to laws, morals, good customs, public order,

public policy

Effect of Impossible Condition:GR: the whole obligation is voidExceptions:

1. Obligation not to do an impossible thing2. If the obligation is divisible, that part of the obligation not

affected by the impossible condition is valid3. Pre-existing obligation4. Simple/Remuneratory donations5. Testamentary Dispositions

Positive condition to dosomething impossible

Void conditionVoid obligation

Negative condition not todo something impossible Disregard conditionValid obligation

Negative condition not todo something illegal

Valid conditionValid obligation

Other Kinds of Conditions1. Positive - condition involves the performance of an act2. Negative - condition involves the non-performance of an act3. Divisible condition is susceptible of partial realization4. Indivisible condition is not susceptible of partial realization5. Conjunctive there are several conditions, all of w/c must be

realized6. Alternative there are several conditions, only 1 must be

realized7. Express condition is stated expressly8. Implied condition is tacit

Application of 1189: Requisites1. obligation to give2. determinate thing3. suspensive condition4. condition fulfilled5. there is loss, deterioration, improvement of the thing during

pendency of condition

LOSS DETERIORATION IMPROVEMENT

Bydebtor

Liable fordamages to

Creditor maydemand the thing

Usufructuary(Usufruct the

Section 2 Obligations with a Period

Period/Term: length of time which, exerting an influence on anobligation as a consequence of its juridical acts, suspends itsdemandability or determines its extinguishment

Period: Requisites1. Future2. Certain3. Possible

Types of Periods:1. Suspensive (ex die) obligation begins from a day certain,

upon the arrival of the period2. Resolutory (in diem) obligation is valid up to a day certain;

terminates upon arrival of period3. Legal granted by law4. Voluntary stipulated by the parties5. Judicial fixed by the courts6. Express specifically stated7. Tacit when a person undertakes to do some work w/c can

be done only during a particular season8. Original9. Grace an extension fixed by the parties or by the court10. Definite refers to a fixed known date or time11. Indefinite refers to an event w/c will necessarily happen but

the date of its happening is unknown

PERIOD CONDITION

Ful-filment

Certain event which musthappen sooner or later at adate beforehand,

An uncertain event

As toinfluenceon theobligation

Has no effect upon theexistence of obligations butonly their demandability orperformance

Gives rise to anobligation orextinguishes onealready existing

Time Refers only to the future May refer also to a pastevent unknown to theparties

Left to the

will of thedebtor

Depends upon the will of the

debtor court to fix duration

Depends upon the sole

will of the debtor invalidates obligation

Retro-activity ofeffects

Unless there is an agreementto the contrary , arrival ofperiod does not have any

t ti ff t

Happening of conditionhas retroactive effect,


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Debtor Loses Right to Make Use of Period1. debtor becomes insolvent, unless he gives a

guaranty/security for the debt2. debtor doesnt furnish the guaranty/security promised3. debtor by his own acts has impaired the guaranty/security

after their establishment or through a fortuitous event theydisappear, unless he immediately gives a new one equallysatisfactory

4. debtor violates any undertaking in consideration of w/c thecreditor agreed to the period

5. debtor attempts to abscond6. creditor is deceived on the substance/quality of the thing

pledged, the creditor may either claim another thing in itsstead, or demand immediate payment of the principleobligation (Art. 2109)

Steps involved in an Action for Fixing a Period

1.

court should determine that the obligation does NOT fix aperiod but it can be inferred that a period is intended due tothe circumstances OR the period is dependent on the debtorswill

2. court shall decide what period was probably contemplated bythe parties

Instances When Courts Can Fix a Period1. no period fixed but a period was intended2. duration of period depends upon will of the debtor3. debtor binds himself to pay when his means permits him to

do so

4. in reciprocal obligations when theres a just cause for fixing aperiod5. no period for lease, monthly rent paid, and lessee occupies

premises for over a year; if the rent is weekly, the courtsmay determine a longer period after lessees possession forover 6 months; if rent is daily, the courts may fix a longerperiod after lessees possession for over 1 month

GR: if the obligation does not fix a period, but from its nature & thecircumstances it can be inferred that a period is intended, the courtsmay fix the duration thereofExceptions:

1. Lease of rural land (Art. 1682 & 1687, 1stsentence) whenits duration has not been fixed, it shall be for the timenecessary for the gathering of the fruits w/c the whole estatemay yield in 1 year OR w/c it may yield once, although 2 ormore years have to elapse for the purpose

2 P t d t l (A t 1606) i th b f

GR: in alternative obligations, the right of choice belongs to debtorExceptions:

1. When expressly granted to the creditor2. When agreed upon by the parties that a 3rdperson shall

make the choice

Debtors Right of Choice: Limitations1. Debtor cant choose prestations that are impossible, unlawful,

or couldnt have been the object of the obligation2. debtor cant choose part of 1 & part of another prestation3. only 1 is practicable; loss of right of choice

Concentration: the act of making the choice

Notice of Choice: Form1. Orally2. Writing3.

Tacitly/Impliedly4. Other Unequivocal Means

Effect of Notice1. Ceases to be alternative & becomes simple2. choice is irrevocable & cannot be changed by either party w/o

consent of the other

ALTERNATIVE FACULTATIVE

As to thecontent

There are variousprestation all of w/cconstitute parts of the

obligation

Only the principalconstitute the obligation,the accessory being only a

means to facilitate paymentNumber ofprestations

Several are due butcompliance of one issufficient

Only one prestation is duealthough the debtor isallowed to substitute it

Right ofchoice

May be given to thecreditor or third person

Right to make substitutiondebtor only

Loss thru afortuitousevent

Loss of one or more ofthe alternatives doesntextinguish the obligation

Loss of the thing dueextinguishes the obligation

As tonullity

The nullity of oneprestation does not

invalidate the obligation

Nullity of the principalobligation invalidates the

obligation & the creditorcant demand the substituteeven when this is valid

As toeffect ofloss

Only the impossibility ofall the prestation duewithout fault of the

the impossibility of theprincipal prestation issufficient to extinguish the


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RIGHT OF CHOICE: CREDITOR

FAULT LOSS OF ONE/SOME LOSS OF ALL

Debtor Creditor may choose:1. Claim any of those

subsisting2. Price of the thing

which disappeared

Choice by thecreditor shall fallupon the price ofany one of them+ damages

Creditor Deliver remaining Obligation isextinguished

FortuitousEvent

Creditor may choose fromthose subsisting

Obligation isextinguished

Section 4 Joint & Solidary Obligations

Obligations: Kinds Accdg. to # of Parties1. Single/Individual 1 creditor & 1 debtor2. Collective 2 or more debtors and/or 2 or more debtors

a. Joint There are as many obligations as there arecreditors multiplied by as many debtors

b. Solidary any of the debtors can be held liable forthe entire obligation, and any of the creditors isentitled to demand the entire obligation

GR: The obligation is joint since joint obligations are less onerousExceptions(When Solidarity Exists):

1. obligation expressly states2. law requires solidarity3. nature of the obligation4. imposed in a final judgment against several defendants5. a large condition is imposed upon heirs & the testament

expressly makes the condition in solidum6. quasi delicts7. employer-employees8. partners in partnerships9. principal-agent10. 2 bailees in a loan

JOINT SOLIDARY

-mancommunada-mancommunadamente-pro rata-proportionatelywe promise to pay

- solidaria- in solidum-jointly and/or severally- together and/or separately- individually and/or collectively-juntos o seperadamente-I promise to pay & signed by 2 or more

JOINT DIVISIBLE JOINT INDIVISIBLE

Each can demand/is liableonly for proportionate share

Fulfillment requires concurrence of alldebtors, but each for his own shareonly

Cannot act in representationor cannot be compelled toanswer for others

Proceed against all debtors;concurrence of all creditors necessaryfor enforcement of obligation

GR:The debtor may pay any of the solidary creditorsE: If any of the solidary creditors make a demand upon a debtor, thelatter must pay only to the one demanding payment, otherwise it willtreated as payment to a 3rdperson, and the debtor can still be made topay the one who made the demand on him (the debtor can still recoverfrom the paid creditor)

Active Solidarity: Effects1. Since it is a reciprocal agency the death of a solidary creditor

does not transmit the solidarity to each of his heirs but to allof them taken together

2. Each creditor represents the others in the act of receivingpayment and in all other acts which tend to secure the creditor make it more advantageous.a. If he receives only a partial payment he must divide it

among the other creditorsb. He can interrupt the period of prescriptionc. He may render the debtor in default for the benefit of all

other creditorsd. bring suit so the obligation would produce interest

3. One creditor does not represent the others in such acts asnovation, compensation, and remission.

4. The creditor and its benefits are divided equally among thecreditors unless there is an agreement among to dividedifferently

5. The debtor may pay to an solidary creditor, but if a judicialdemand is made he must pay only to the plaintiff

6. Each creditor may renounce his right even against the will ofthe debtor and the layer need not thereafter pay theobligation to the former

Passive Solidarity: Effects1. Each debtor can be required to pay the entire obligation but

after payment he can recover from the co-debtors theirrespective shares

2. The debtor who required to pay may set up by way ofcompensation his own claim against the creditor in this casethe effect is the same as that of payment


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Acts Prejudicial by Solidary Creditor: Effects1. among co-creditors obligation extinguished w/ respect to

debtors, but doesnt prejudice the right of other creditors torecover their shares from the creditor who effected the act

2. among co-debtors co-debtor to whom obligation wasextinguished cant recover from his co-debtors

Payment by a Solidary Debtor: Effects1. bet. solidary debtors & creditors full payment extinguishes

the obligation2. among solidary debtors paying debtor may demand

reimbursement from others for their proportionate share; incase of insolvency of 1, others assume the shareproportionately

3. among solidary creditors receiving creditor is jointly liableto others for their corresponding share

Non-Performance/Loss/Impossibility: Effects1. Loss w/o fault & before delay obligation extinguished2. Loss by fault of 1 of solidary debtors or through FE after

debtor incurred in delay all shall be responsible to thecreditor, for the price & payment of damages & interest w/oprejudice to their action against the guilty debtor

3. No loss but theres breach (delay, fraud, negligence) creditor may recover from any of the solidary debtors; theguilty debtor cannot be made to shoulder the hare of the co-debtors in the original obligation

Defenses Available to Solidary Debtors

1. Real defenses - derived from the nature of the obligation;benefits all the debtors (total)2. Personal defences - personal to, or w/c pertain to the share

of the debtor sued (total/partial)3. defenses personal to other solidary debtors the debtor can

only avail himself of the these defenses only w/ regard to thepart of the debt to w/c his co-debtors are liable for (partial)

PRESCRIPTIVE PERIOD

10years - written contract- obligation created by law- upon a judgment

6years - oral-contact- quasi-contract

4years - inquiry to the rights of the plaintiff- quasi delict

GR:obligations are indivisibleExceptions (divisible obligations):

1. The parties provide otherwise2. The law so provides3. The nature of the obligation necessarily entails the

performance of the obligation in parts; when the obligation

has for its object the:a. execution of a certain number of days of workb. accomplishment of work by metrical unitsc. analogous things w/c are by their nature susceptible

of partial performanceException to the Exception: Even though the object/service may bephysically divided, an obligation is indivisible if:

1. intended by the parties2. so provided by law

Divisible Thing vs. Indivisible Thing

1.

Divisible each 1 of the parts forms a homogenous &analogous object to the other parts as well as the thing itself

2. Indivisible if divided into parts, its value is diminisheddisproportionately; if the object is physically indivisible orservice is not susceptible of partial performance, obligation isalways indivisible

Kinds of Division1. Qualitative2. Quantitative3. Ideal/Intellectual

Kinds of Indivisibility1. Legal2. Conventional3. Natural

DIVISIBLE OBLIGATION INDIVISIBLE OBLIGATION

Capable of partial fulfilment Not capable of partial fulfillment

1.Execution of certain # ofdays of work

2.Expressed by metrical units3.Nature of obli. susceptible of

partial fulfilment

1. To give definite things2. Presumption when theres only1 debtor & 1 creditor3. Provided by law4. Intention of parties

INDIVISIBLE JOINT INDIVISIBLE SOLIDARY

Debtors ready to performtheir part do not becomeliable for more than the

Every debtor liable for losses &damages, but those ready to performmay recover fr. guilty debtor


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Function of Penal Clause1. provide for liquidated damages2. strengthen coercive force

Purpose of Penal Clause1. Reparation - substitutes damages suffered2. Punishment - right to damages besides penalty

Kinds of Penal Clause1. As to its Origin

a. Legalb. Conventional

2. As to its Purposea. Compensatoryb. Punitive

3. As to its Demandability/Effecta. Subsidiary/Alternativeb. Joint/Cumulative

Characteristics of a Penal Clause1. Subsidiary/Alternative

GR: upon breach of the obligation, the creditor must choosewhether to demand principal or penaltyExceptions:- Both the principal obligation & the penalty can bedemanded when the penal clause is joint & cumulative; thisoccurs when the creditor has been clearly granted such rightexpressly/impliedly- creditor has demanded fulfilment of the principal obligation

but it cannot be performed2. ExclusiveGR: penalty clause takes place of other damagesE: Both the penalty & actual damages can be reovered if:- there is an express stipulation- debtor refuses to pay penalty- debtor guilty of fraud

When Courts May Reduce Penalty1. partial/irregular performance2. iniquitous/unconscionable penalty (contrary to good customs)

Principal Obligation vs. Accessory Obligation1. Principal can stand by itself; does not on another obligation

for its validity/existence2. Accessory cannot stand alone; attached to a principal

obligation

OBLIGATIONS W/ APENAL CLAUSE

FACULTATIVEOBLIGATIONS

Payment of the penalty in lieu ofthe principal obligation can bemade only in express stipulation

Power of debtor to makesubstitution is absolute

Creditor may be granted right todemand both prestations

Creditor can never demandboth prestations

OBLIGATIONS W/ APENAL CLAUSE

GUARANTY

Obligation to pay the penalty isdiff. from the principalobligation

Object of the obligations of theprincipal debtor & guarantor isthe same

Principal obligation & penaltycan be assumed by the sameperson

Principal debtor cant be theguarantor of the sameobligation

GR: Penalty extinguished by

nullity of principal obligationE: penal clause assumed by 3rdperson

Guaranty subsists even when

the principal obligation isvoidable/unenforceable or is anatural one

Similarities1. both to insure performance of principal obligation2. both accessory & subsidiary obligationsCHAPTER 4 EXTINGUISHMENT OF OBLIGATIONS

Modes of Extinguishment of Obligations1. payment/performance2.

loss of the thing due3. condonation/remission

4. confusion/merger5. compensation6. novation7. annulment8. rescission9. fulfillment of resolutory condition/period10. prescription11. death of a party in case of personal obligations12. renunciation by the creditor13. mutual desistance/withdrawal14. mutual/unilateral dissents15. change of civil status16. compromise17. impossibility of performance18. happening of fortuitous event19 want of interest


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Manner/Performance

1. IDENTITY the very prestation must be performed; the verything or service due must be delivered

GR: debtor of a (specific) thing cannot compel creditor to receive adifferent one, although the latter may be of the same value as, ormore valuable than that w/c is due

Exceptions the Requirement of Identity:1. when the obligee consents2. in case of waiver3. in facultative obligations debtor is given the right to render

another prestation in substitution4. substitution is allowed by stipulation w/ consent of creditor5. Dacion en Pago6. Novation

Rule of Medium Quality: if the obligation is the delivery of a genericthing, whose quality & circumstances have not been stated:

the creditor cannot demand a thing of superior quality the debtor cannot deliver a thing of inferior quality the court shall take into consideration the purpose & other

circumstances of the obligation

2. INTEGRITY the entire prestation must be performed;completeness

Exceptions to the Requirement of Integrity:

1. Substantial Compliance in Good Faith (POV of Debtor)2. Waiver (POV of Creditor)3. In application of payments, if the debts are equally onerous

Substantial Compliance in Good Faith: Requisites1. there must be substantial compliance

a. deviation is slightb. omission/defect is technical or unimportantc. must not be so material that intention of parties is

not attained2. obligor must be in good faith

a. attempt in good faith to perform w/o wilfull orintentional departure

When it will not apply:1. non-performance of material part of a contract2. when made in bad faith, knowingly & wilfully (Art. 1170)

7. if the work to be delivered partially, the price orcompensation for each part having been fixed

8. in case of several guarantors who demand the right ofdivision

9. in case of impossibility or extreme difficulty of a singleperformance

Who Pays? (PAYOR)

Creditor May be Compelled to Accept Payment From:1. the debtor, his heirs, assigns or agents2. any person who has an interest in the obligation (e.g.

guaranty/surety)3. a 3rdperson who has no interest in the obligation when there

is a stipulation that he can make payment

Donation: no intention of reimbursement & requires acceptance

if by 3rdperson w/o interest cant compel acceptance if debtor did not accept, but creditor accepted, rules of

reimbursement apply

WHO PAYS COMPELLABILITY REIMBURSEMENT

Debtor Can compel receipt No reimbursement

3r Person inInterest

Can compel receipt Reimbursement & subrogation(E: if intended to be a donation)

3rdPersonw/o Interestw/ stipulation

Can compel receipt Reimbursement & subrogation

3rdPerson

w/o Interestw/ostipulation

Cannot compel

receipt; if accepted,obli. extinguished

w/ knowledge & consent:

- reimbursement & subrogationno knowledge & no consent:- beneficial reimbursement only

MINOR EFFECTS

Minor ascreditor

Valid Payment to Incapacitated Person:1. Kept the thing delivered2. Redounded to his benefit

Minor asdebtor

GR: VOID he doesnt have capacity to alienateException: Art. 1427

To Whom? (PAYEE)

To Whom Payment Shall be Made:1. creditor/obligee - the person in whose favor the obligation

was constituted (creditor at the time payment is to be made,


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When Benefit to Creditor need not be Proved:1. subrogation of the payer in the creditors rights2. ratification by the creditor3. estoppel on the part of the creditor

To a 3rdpersonin possession of

credit

Valid if:- payment to debtor was made in good faith- creditor was in possession of the credit & notmerely the evidence of indebtedness*mere possession of the instrument does notentitle the holder to a payment nor does paymentrelease the debtor

When & Where Payment Shall be Made

When?1. payment should be made when it is due2. even if payment is due, the general rule is that demand is

still necessaryWhere?

1. with stipulationat the place designated2. no stipulation & delivery of specific thing place where the

thing was at the perfection of the contracta. exception: when its existence at the place when the

obligation was constituted was temporary, theperformance must be made at the debtors domicile

3. no stipulation & delivery of generic thing domicile of thedebtor & creditor bears expenses in going to the debtorsplace to accept payment

4. obligations of sum of money creditor is obliged to collectfrom the debtor in the debtors domicile

5. if debtor changes his domicile in bad faith or after he hasincurred in delay, additional expenses shall be borne by him

Special Rules on Monetary Obligations

Legal Tender: the currency which a debtor can legally compel acreditor to accept in payment of a debt in money when tendered by thedebtor in the right amount

Legal Tender in the Philippines: all coins & notes issued by theBangko Sentral ng Pilipinas coins are legal tender for amounts not exceeding P50 for

denominations of P0.25 and above those in amounts not exceeding P20 for denominations of

P0 10 or less

Loss of Value: So long as the notes were legal tender at the time theywere paid/delivered, the person accepting them must suffer the loss ifthey become valueless

Inflation: a sharp sudden increase of money/credit w/o a

corresponding increase in business transactions. It causes a drop in thevalue of money, resulting in the rise of the general price level. This isnot based on the exchange rate, but on the Consumer Price Index.

Deflation: reduction in volume & circulation of the available money orcredit, resulting in a decline of the general price level.

Extraordinary Inflation/Deflation: that w/c is unusual or beyondthe common fluctuation in the value of the currency, w/c the partiescould not have reasonably foreseen, or w/c was manifestly beyondtheir contemplation at the time the obligation was made.

GR: Inflation or deflation will not affect the obligation.Exception: in cases of extraordinary inflation or deflation, to bedetermined by the courts.


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SIENNA A.FLORES OBLIGATIONS &CONTRACTS

DACION EN PAGO APPLICATION OF PAYMENTS PAYMENT BY CESSION TENDER OF PAYMENT CONSIGNATION

Definition - Property is alienated by the debtorto the creditor in satisfaction of adebt in money- transmission of the ownership of a

thing by the debtor to the creditor asan accepted equivalent of the

performance of an obligation

The designation of the debt to w/cpayment must be applied when thedebtor has several obligations ofthe same kind in favour of the

same creditor

Assignment/abandonment of all theproperties of the debtor for thebenefit of his creditor in order thatthe latter may sell the same &

apply the proceeds thereof to thesatisfaction of their credits

Manifestation of thedebtor to the creditor ofhis decision to complyimmediately w/ his

obligation**extrajudicial

**preparatory act

deposit of the object of the obligation in acompetent court in accordance w/ the rulesprescribed by law after refusal or inability ofthe creditor to accept the tender of

payment**judicial

**principal act

Requisites Conditions for a Valid Dacion:1. if creditor consents, for a sale

presupposes the consent of bothparties

2. if dacion will not prejudice theother creditors

3. if debtor is not judicially declaredinsolvent

1. one debtor & one creditor2. 2 or more debts3. debts must be of the same kind4. all of the debts must be due5. payment made must not be

sufficient to cover all the debts

Exceptions:Applications as to debts not yet due:

1. parties so stipulate2. made by the party for whose

benefit the period was constituted

1. two or more creditors2. 2 or more debts3. debtor is partially insolvent4. all of the properties of the debtor

are to be aliented5. cession accepted by creditors6. Creditors agree who will be paid

1stor the to the proportioning ofpayment among themselves

1. tender of paymentmust comply w/ the

rules of payment2. lawful currency3. must be unconditional

& for the whole

amount

4. must actually bemade

5. fusion of intent,ability & capability to

make good such offer

1. there is a debt due2. the consignation has been made because

the creditor refused, w/o just cause, toaccept it

3. prior notice of the consignation to theperson interested in the performance of

the obligation

4. actual deposit; amount due was placed atthe disposal of the court

5. subsequent notice was made afterconsignation

**(absence of any requisites - void)

Effects Effect:-extinguishes obligation to the extent

of the value of the thing delivered,unless the parties agree that the

entire obligation is extinguished

Limitations:1. creditor cannot be compelled to

accept partial payment2. if there is only 1 obligation

bearing stipulated interest, hemust 1st apply the payment to

interest before the principal3. debtor cannot apply the payment

to the debt that is not yet

liquidated4. he cannot choose a debt w/ a

period for the benefit of thecreditor, when the period has not

yet arrived

Effects:1. Creditors dont become the

owner, they are merely assigneesw/ authority to sell

2. the debtor is released from hisobligation only up to the net

proceeds of the sale of theproperty assigned

3. the debtor is still liable if there isa balance

4. creditors will collect credits in theorder of preference agreed upon,or in the order ordinarily

established by law

Effects:1. debtor may ask judge to order

cancellation of obligation2. running of interest is suspended3. deterioration, loss of the thing/amount

consigned w/o fault of debtor is borne by

the creditor4. increase in value inures to benefit of

creditor

5. creditor bears expenses of consignation6. before creditor accepts or before judge

declares consignation has been properlymade, obligation remains

OtherNotes

- governed by the law on sales- may be partial or full dation

Traditional view: it is a sale

Modern view: it is a novation

**Does not comply w/ the requisite

of identity.

Rules in application of payment:1. apply accdg. to the agreement2. if there is no agreement, debtor

has the right to apply

3. if the debtor does not choose, thecreditor can choose

4. if the creditor has not also madeapplication, or if application is not

valid, apply to the most onerousdebt (legal application)5. if the debts due are of the same

nature & burden, applyproportionately

More Onerous Obligations:

1.bound as principal than as surety2.solely bound than in solidary ones

3.oldest debt of various debts4.one w/ interest than w/o interest

5.one w/ higher interest rate6. unsecured debt w/ interest than

secured one w/o interest7.liquidated than unliquidated debt8.one w/ a penal clause

9.Secured than one unsecured

2 Kinds of Insolvency:1. Legal judicial, governed by

insolvency law (totalextinguisment)

2. Voluntary agreement ofcreditors (generally liable for the

balance left)

Property Exempt1. debtor must reserve amountneeded for support in case of

donations2. assignment cannot include family

home

**There is no completeness of

performance integrity.

Consignation deemed properly made:1. creditor accepts the thing/sum deposited,

w/o objection, as payment2. creditor questions its validity & the court,

after hearing, declares that it has beenproperly made

3. creditor neither accepts nor questions itsvalidity & the court, after hearing, orders

the cancellation of the obligation**anytime beforehand, debtor maywithdraw

Consignation w/o Prior Tender:

1. creditor absent or unknown/does notappear at the place of payment

2. incapacitated to receive payment at thetime it is due

3. refuses to issue receipt w/o just cause4. 2 or more creditors claiming the same

right to collect5. Title of obligation has been lost

**payment is made not to the creditor but to

the court


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LOSS OF THETHING DUE

CONDONATION/REMISSION

CONFUSION/MERGER

COMPENSATION NOVATION

Definitionof Terms

- The thing w/c constitutes theobligation perishes, goes out ofcommerce, or disappears in such a

way that existence is unknown or itcannot be recovered

- impossibility of compliance w/ theobligation through any cause

An act of liberality of the obligee,who w/o receiving any equivalent,renounces the enforcement of the

obligation, as a result of w/c it isextinguished in its entirety or in

part-; gratuitous abandonment bythe creditor of his right

Meeting in one personof the qualities ofcreditor & debtor w/

respect to the sameobligation

Mode of extinguishing in their concurrentamount those obligations of persons whoin their own right are creditors & debtors

of each other

Substitution/change of an obligation byanother, resulting in itsextinguishment/modification, either by

changing its principal conditions, or bysubstituting another in place of the debtor,

or by subrogating a 3rdperson in the rightsof the creditor

Requisites 1. the thing w/c is lost is determinate2. the thing is lost w/o any fault of the

debtor (If lost through fault of

debtor, its becomes an obligation toindemnify the creditor for damages)

3. the thing is lost before the debtorhas incurred in delay

1. debt must be existing2. it must be gratuitous3. must be accepted by the obligor4. parties must have capacity5. must not be inofficious

(infringes on the legitime of the

compulsory heirs)6. formalities of donation are

required in express remission

1. must take place bet.creditor & principaldebtor

2. merger must beclear & definite

3. the very sameobligation must beinvolved

4. confusion must betotal

1. 2 parties, who are principal creditors/debtors of each other in their own right

2. both debts consist in money, or if thethings due are fungibles, they are of thesame kind/quality

3. both debts must be due4. both debts liquidated & demandable5. no retention/controversy commenced by

3rdperson (neither debt is garnished)6. compensation not be prohibited by law

1. previous valid obligation2. agreement of all the parties to the new

contract

3. capacity & intention of the parties tomodify/extinguish the obligation

4. modification or extinguishment of oldobligation

5. new valid obligation

Kinds Physical:the obligor is not physically

capacitated to perform the obligationLegal:obligation is rendered

impossible by provision of law

As to Time:1. Original impossibility already

exited when the contract was made;the result is not extinguishment butinefficacy of the obligation; the

contract is void2. Supervening impossibility must be

subsequent to the execution of thecontract to extinguish the obli.

As to Nature:

1. Objective the act cannot be doneby anyone; extinguishes the

obligation2. Subjective obligation is impossible

only w/ respect to the obligor

As to Form:

1.express donation- Art. 748: movables

- Art. 749: immovables2. implied waiverAs to Extent:

1. total covers entire obligation2. partial does not cover entire

obligation

As to Constitution:

1. inter vivos/agreement takeseffect during lifetime of donor

2. mortis cause/will takes effectupon death of donor

Confusion in Joint

Obligations:- confusion taking

place in the person ofany debtor does not

affect the others

Confusion in SolidaryObligations:- merger in the

person of one of thesolidary debtors shall

extinguish the entireobligation

As to Cause:

1. Legal operation of law; when allrequisites concur

2. Voluntary/Conventional/Contractual agreement of the parties is enough

3. Judicial set off; final judgement ofthe court (e.g. counterclaim)

4. Facultative claimable by only 1 ofthe parties but not of the other

Facultative:1. Commodatum by the bailor2. Depositary by the depositor3. Future support (support in arrears can

be compensated)4. Civil liability fr. a penal offense

offended party

As to Effect:1. Total 2 debts are of the same

amount2. Partial 2 debts are not of the same

amount

As to Essence:

1. objective/real change in the object orprincipal conditions

2. subjective/personal change of thesubjects

a. Subrogation change of creditor-Legal operation of law-Conventional all parties agree

b. Substitution change of debtor-Expromision initiative fr new debtor-Delegacion initiative fr old debtor

3. mixed combination of subjective &objective novation

As to Form/Constitution:1. express declared in unequivocal terms2. tacit the old & new obligation are

incompatible w/ each other

As to Extent/Effect:

1. total obli. extinguished2. partial obli. merely modified

When NotAllowed When Debtor is still liable:1.when by law, the obligor is liable forfortuitous event

2.when by stipulation, the obligor isliable for fortuitous events

3.when the nature of the obligationrequires the assumption of risk

4.when the loss of the thing is duepartly to the fault of the debtor

5.when the loss of thing occurs afterthe debtor has incurred in delay

6.when the debtor promised to deliverthe same thing to 2 or more persons

who dont have the same interest7.when the obligation is generic8.when the obligation to deliver a

specific thing arises from a crime

Inofficious Donation: infringes onthe legitime of the heirs of thedonor. No on can give more than

that which he can give by will.The excess shall be reduced by

the court accordingly.

When Compensation shall not take place:1. the law prohibits it2. debts arising from contracts of

depositum3. debts arising from contracts of

commadatum4. claims for support due by gratuitous title5. obligations arising from criminal

offenses

6. certain obligations in favour of the govt7. there is renunciation of the effects of

compensation8. there is a period w/c has not yet arrived9. there is a suspensive condition w/c has

not yet happened10. obligation cannot be sued upon

(natural obli.)

GR: No novation where new obligation is voidE: parties stipulate to extinguish the old 1 inany event

GR: novation can take place where new

obligation is voidableE: when it is annulled, novation is considered

as not having taken place

Old Obligation has a condition:- resolutory & it occurred: old obligation is

extinguished; no new obligation since theresnothing to novate

- suspensive & it never occurred: noobligation arises; also nothing to novate


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LOSS OF THETHING DUE

CONDONATION/REMISSION

CONFUSION/MERGER

COMPENSATION NOVATION

Effects Effect of Impossibility in obli. to do:- debtor is released if impossibility wasnot due to his fault & it took place

before he was in delay (supervening &not original impossibility)

Effect of Partial Loss:

- Loss significant: enough to extinguish

the obligation- Loss insignificant: not enough toextinguish obli.

Effect of Loss on Creditors Rights:- creditor shall have all the rights of

action w/c the debtor may haveagainst the 3rdperson by reason of the

loss

Effect of Partial Remission:1. renunciation of the principal

debt shall extinguish the

accessory obligations2. renunciation of the accessory

obligation shall leave theprincipal in force

3. obligation of guarantor isextinguished at the same timeas that of the debtor

4. guarantors are released fromtheir obligation whenever by

some act of the creditor theycannot be subrogated to the

rights of the latter

Effect in the person ofprincipal debtor orcreditor:

- extinguishes theobligation as well as

the accessoryobligation

Effect in the person ofguarantor:- extinguishment of

accessory obligation

doesnt carry w/ itthat of the principal

obligation

1. both debts are extinguished to theconcurrent amount

2. interests stop accruing3. period of prescription stops4. all accessory obligations of the principal

obligation are also extinguished

1. if old obligation has condition, must becompatible w/ new obligation; if new isw/o condition deemed attached to new

2. if new obligation has condition- if resolutory: valid

- if suspensive & didnt materialize, oldobligation is enforced

Effect of Total Subrogation: transfer to thenew creditor the credit & all the rights &actions that could have been exercised by the

former creditor, either against the debtor or

3rdpersons

Effect of Partial Subrogation: the creditor towhom partial payment has been made by the

new creditor remains a creditor to the extentof the balance of the debt

Rules Presumption: then the thing is lost in

the possession of debtor, it is due tohis fault (res perit domino)

E:- natural calamity, earthquake, flood

- debtor not in possession of thing lost

- there is proof to the contrary

GR: debtor still liable for loss ofgeneric thing

E:- delimited generic thing

- the thing becomes illegal

GR: impossibility of performancereleases the obligor

- service has become so difficult as tobe manifestly beyond contemplation of

parties

GR: waivers arent to bepresumed

Presumptions:1. if a private document is found in

the possession of the debtor, it

is presumed that the creditorvoluntarily delivered it to him

2. since the creditor voluntarilydelivered the private document,

then there is a presumption ofremission

3. it is presumed that theaccessory obligation of pledge

has been remitted when thething pledged, after its delivery

to the creditor, is found in thepossession of the debtor, or of

3rdperson who owns the thing

Rules on Assignment of Credit to 3rd

Person:

1. assignment after compensation:- no effect because obligation has already

extinguished

2. assignment before compensation:- w/ consent of debtor: debtor is estoppedunless he reserves his right & gave notice

to assignee- w/ knowledge but w/o consent:

compensation may be set up as to debtsmaturing prior to assignment

- w/o knowledge: compensation may beset-up on all debts prior to his knowledge

GR:Novation is never presumed

E (legal subrogation presumed)1. the creditor pays another creditor who is

preferred, even w/o the debtorsknowledge

2. a 3rd person, not interested in theobligation, pays w/ the express/tacitapproval of debtor

3. w/o knowledge of the debtor, a personinterested in the fulfilment of the

obligation pays, w/o prejudice to theeffects of confusion as the latters share

GR: Extinguishment of the principal carries

w/ it that of accessory obligationsE: those created in favour of a 3rd person

unless the latter gives consent to thenovation; in active subjective novation, the

guarantors/pledgors/mortgagors are notreleased

Other

Notes

Rebus Sic Stantibus/Doctrine of

Extreme Difficulty: agreement is valid

only if the same conditions prevailingat the time of contracting continue to

exist at the time of performance

Requisites:1.the event/change could not have

been foreseen at the time ofexecution of contract

2.performance is extremely difficult,but not impossible

3.event was not due to the act of anyof the parties

4.contract is for a future prestation

**Pledge: a contract where the

debtor delivers to the creditor or

to a 3

rd

person a movable orinstrument evidencing incorporeal

rights for the purpose of securingthe fulfilment of the principal

obligation; the thing deliveredshall be returned w/ all its fruits &

accessions

Usual Causes:

1. succession2.

donation3. negotiation ofnegotiableinstrument

Novation by Substitution:

1.Expromision: a 3

rd

person of his owninitiative & w/o knowledge or against

the will of the old debtor assumes the

latters obli. w/ consent of creditor

- initiative from 3rdperson/new debtor

- w/ consent of creditor & new debtor- w/o knowledge/against will of old debtor

- old debtor released fr. obligation- beneficial reimbursement

- if new debtor is insolvent, not responsiblesince w/o his consent

Novation by Substitution:2. Delegacion: a creditor accepts a 3rdperson

to take the place of the debtor at theinstance of the latter

- initiative/with consent of old debtor- all parties must consent

- reimbursement & subrogation- GR: if new debtor insolvent, old debtor not

responsible because obli. extinguished - E:- insolvency already existing & of public

knowledge or known to him at time ofdelegacion

- new debtor is only secondarily liable- 3rdperson is only an agent of the debtor

- new debtor is bound solidarily w/ old debtor


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TITLE II - CONTRACTS

CHAPTER 1 GENERAL PROVISIONS

Contract: Meeting of the minds between 2 contracting parties w/c

takes place when an offer by one party is accepted by the other. Oneor more persons bind himself/themselves w/ respect to another, orreciprocally, to the fulfilment of a prestation to give, to do or not to do.

Contracts: Essential Elements1. Consent2. Object3. Cause

CONTRACT OBLIGATION

One of the sources ofobligations

The legal tie/relation itself that existsafter a contract has been entered into

There can be no contract ifthere is no obligation

An obligation may exist even w/o acontract

CONTRACT AGREEMENT

Agreementsenforceablethroughproceedings

Agreements which cannot be enforced by actionin the courts of justice are not contracts butmerely moral/socialagreements

Elements:consent, object,cause

An agreement is broader than a contract becausethe former may not have all the elements of acontract

All contractsare agreements Not all agreements are contracts

CONTRACT PROMISE

Establishes & determines theobligations arising therefrom

Tends only to assure and pave theway for the celebration of a contractin the future

Until the contract is actually made, the rights and obligations arenot yet determined. An imperfect promisealso constitutes a mere

unaccepted offer.

Characteristics of Contracts

1. Autonomy - The contracting parties may establish suchstipulations as they may deem convenient, as long as theyare not contrary to law, morals, good customs, public order,or public policy

2. Mutuality contract must be binding upon both contracting

CLASSIFICATION OF CONTRACTS

Degreeof

Depen-dence

Preparatory: its object is theestablishment of a condition in laww/c is necessary as a preliminarystep towards the celebration ofanother subsequent contract

AgencyPartnership

Principal: can subsist independentlyfrom other contracts

Lease,Sale

Accessory: can exist only as aconsequence or, or in relation w/,another prior contract

Pledge,mortgage,Suretyship

PerfectionConsensual: perfected by mereconsent

Purchase, sale

Real: perfected by the delivery of thething

Commo-datum

Form

Common/Informal: does notrequire some particular form

Loan, lease

Special/Formal: requires someparticular form

Donation,chattelmortgage

Purpose

Transfer of Ownership Sale

Conveyance of Use CommodatumDeposit,pledge

Rendition of Service Agency

Subject-Matter

Things Sale, pledge,mortgage

Service Deposit,agency,

Nature ofObligation

Bilateral: gives rise to reciprocalobligations for both parties

Purchase, sale

Unilateral: gives rise to anobligation for only 1 of the parties

Commo-datum,gratuitousdeposit

Cause

Onerous: each of the parties aspiresto procure for himself a benefitthrough the giving of an equivalent

Purchase, sale

Gratuitous: one of the partiesproposes to give to the other a

benefit w/o any equivalent

Commo-datum

Remuneratory: purpose is to rewardthe service that had been previouslyrendered by the party remunerated

Commutative: each of the partiesi i l t f hi

Lease


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Persons Affected by a ContractGR: Principle of Relativity - contracts take effect only bet. the parties,their assigns & heirsException: the contract is effective only between the parties when therights & obligations arising from a contract are not transmissible

1. By their nature (contract involving personal qualifications)2. By stipulation (principle of freedom to contract)3. By provision of law (agency, partnership, commodatum,

when death extinguishes the legal relationships)

Cases when a Stranger/3rdPersons are Affected by a Contract1. Stipulation pour autrui: contracts containing a stipulation in

favour of a 3rdperson2. contracts containing real rights3. contracts entered into to defraud creditors (accion pauliana)4. contracts w/c have been violated at the inducement of a 3 rd

person5. accion directa

Stipulation Pour Autrui: a stipulation in a contract clearly &deliberately conferring a favour upon a 3rdperson who has a right todemand its fulfilment provided he communicates his acceptance to theobligor before its revocation

Stipulation Pour Autrui: Requisites1. a stipulation in favour of a 3rdperson2. which should be a part, not the whole, of the contract3. the contracting parties must have clearly & deliberately

conferred a favour upon a 3rdperson, not a mere incidental

benefit4. the favourable stipulation should not be conditioned orcompensated by any kind of obligation

5. the 3rd person must have communicated his acceptance tothe obligor before its revocation

6. neither of the contracting parties bears the legalrepresentation or authorization of the 3rdparty, otherwise therules on agency will apply

Liability of a 3rdPerson for Breach of Contract: Requisites1. existence of a valid contract2. knowledge of by the 3rd person of the existence of the

contract3. interference by the 3rdperson in the contractual relation w/o

legal justification

Stages in the Life of a Contract1 P ti liti i ti ti ti ti

Offer: unilateral proposition w/c 1 party makes to the other for thecelebration of the contract

Offer: Requisites1. definite2. complete3. intentional

Requisites for Silence to Produce Effect of Tacit Acceptance1. There is a duty or possibility to express oneself2. The manifestation of the will cannot be interpreted in any

other way3. There is a clear identity in the effect of the silence & the

undisclosed will

Acceptance of Offer: Forms1. express oral or written2. implied inferred from act or conduct

Matters That May be Fixed by the Offeror1. time2. place3. manner of acceptance4. terms5. conditions

When Offer becomes Ineffective1. death2. civil interdiction3.

insanity4. insolvency

5. express/implied revocation of the offer by the offeree6. qualified/conditional acceptance of the offer (counter offer)7. subject matter becomes illegal/impossible8. expiration of the period fixed in the offer for acceptance

Rule on Advertisements as Offers1. business advertisements not a definite offer, but a mere

invitation to make an offer unless it appears otherwise2. advertisements for bidders only invitation to make

proposals & advertiser is not bound to accept the highest or

lowest bidder, unless it appears otherwise

Option Contract: giving a person for a consideration a certain periodw/in w/c to accept the offer of the offeror; & binds the person who hasgiven the option not to enter into the principal contract w/ any other

d i th d i t d i d it i ti i ff


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Amplified Acceptance: an acceptance of the original offer, plus anew offer w/c is contained in the amplification

Persons Who Cannot Give Consent1. minors2. insane/demented persons3. deaf/mutes who do now know how to write4. intoxicated5. under hypnotic spell

Special Disqualifications: Incompetents1. persons suffering the accessory penalty civil interdiction2. hospitalized lepers3. prodigals (spendthrifts)4. deaf & dumb who are unable to read and write5. those of unsound mind even though they have lucid intervals6. those who, by reason of age, disease, weak mind and other

similar causes, cannot w/o outside aid, take care ofthemselves & manage their property, becoming thereby aneasy prey for deceit & exploitation

INCAPACITY TO GIVECONSENT

SPECIALDISQUALIFICATIONS

Restriction upon the exercise ofa right

Restriction upon the very rightitself

Renders the contract voidable Makes the contract void

Based upon subjectcircumstances of certain persons

Based upon public policy &morals

Contracts entered into arevoidable

Contracts entered into are void

GR: contracts entered into by incapacitated persons are voidableExceptions:

1. 1. when necessaries such as food, are sold & delivered to aminor or other person w/o capacity to act, he must pay areasonable price therefore

2. a minor 18 years old or above may contract for life, healthand accident insurance, provided the insurance is taken onhis life & the beneficiary appointed is the minors estate or

the minors father, mother, husband, wife, child, brother orsister

3. valid if entered into through a guardian/legal rep.4. valid where minor misrepresented his age & convincingly led

the other party to believe in his legal capacity

UndueInfluence(even ifemployed by3rdperson)

When a person takesimproper advantageof his power over thewill of another,depriving the latter ofa reasonable freedom

of choiceFraud(if employedby 3rdperson,remedy isdamages)

False representationof a material factmade by word orconduct w/knowledge of itsfalsehood or recklessdisregard of its truth,in order to induceanother to execute anact

1.misrepresentation orconcealement2.must be serious3.employed by only 1 of theparties4.made in bad faith or w/intent to deceive5.induced the consent of theother6.resulted in damage/injury7.proved by clear &convincing evidence

CAUSES VITIATING CONSENT CAUSES OF INCAPACITY

Temporary More or less permanent

Refers to the contract itself Refers to the person entering intothe contract

Both make a contract voidable only, and not void

IGNORANCE MISTAKE

Complete absence of any notionabout a particular thing

wrong/false notion about such amatter, a belief in the existence

of some circumstance, fact oreven w/c in reality doesnt exist

There is a lack of full & correct knowledge about the thing

Juridically, they produce the same effect

Mistake of Fact Which Vitiates Consent1. Substance of the thing w/c is the object of the contract2. mistakes re: the nature of the contract, in w/ case is an

essential mistake, because it is one w/c has determininginfluence upon the will of the party

3. principal condition of the thing as its essential/substantialcharacter, w/o w/c the thing ceases to be what it is4. Identity/qualifications of 1 of the parties provided the samewas the principal cause of the contract

Mistake of Fact Which Does NOT Vitiate Consent1 incidents of a thing or accidental qualities not taken as the


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Factors to Determine Degree of Intimidation1. age2. sex3. condition

Undue Influence: Circumstances to be Considered

1. confidential/family/spiritual, & other relations bet. the parties2. mental weakness3. ignorance4. financial distress of the person unduly influenced

Causal Fraud: How Committed1. insidious words or machinations2. concealing/omitting facts where there is a duty to reveal

them, as when the parties are bound by confidential relations3. opinion of an expert & the other party relied on the formers

special knowledge

Requisites for an Opinion to Amount to Fraud1. must be made by an expert2. the other contracting party has relied on the experts opinion3. the opinion turned out to be false/erroneous

FRAUD VIOLENCE/INTIMIDATION

Doesnt annul the contract unless itproduces a substantial mutual mistakeon the part of both contracting parties

Contract is annulled

The party has nothing to do w/ fraud by

a 3rd

person & cannot be blamed for it

Can easily be more

resisted than fraudIt has been advocated that both fraud & violence nullify the

consent, whoever may have employed the same. Where there is thesame necessity, the remedy must likewise be the same.

Simulation of a Contract: The act of deliberately deceiving others, byfeigning or pretending by agreement, the appearance of a contract w/cis neither non-existent or concealed.

Simulation: Kinds1. Absolute/Simulados Void because he contract doesnt really

exist and the parties do not intend to be bound at all

2. Relative/Disimulado - When the contract entered into by theparties is different from their true agreement; The parties arebound by their real agreement provided it does not prejudicea 3rd person and is not intended for a purpose contrary tolaw, morals, good customs, public order or public policy

Objects: Kinds1. things not outside the commerce of man2. rights not intransmissible3. services not contrary to law, morals, good customs, public

order or public policy

Things Which cannot be the Object of the Contract1. things outside the commerce of man2. services w/c are contrary to law, morals, good customs,

public order or public policy3. impossible things/services (original & not supervening)4. objects w/c are not possible of determination as to their kind5. intransmissible rights6. future inheritance

Things Outside the Commerce of Man1. Services w/c imply an absolute submission by those who

render them, sacrificing their liberty, their independence orbeliefs, or disregarding in any manner the equality & dignityof persons (e.g. perpetual servitude/slavery)

2. Personal rights (e.g.patria potestasor marital authority, thestatus & capacity of persons, & honorary titles & distinctions)

3. Public offices, inherent attributes of the public authority, &political rights of individuals (e.g. right of suffrage)

4. Property while they pertain to the public domain (e.g. roads,plazas, squares, & rivers

5. Sacred things, common things (e.g. the air, the sea, and resnullius, as long as they havent been appropriated)

EMPTIO REI SPERETAE EMPTIO SPEIConditional sale; there is asuspensive condition

Sale of hope

If the condition does not comeinto existence, there is notcontract of sale

Even if the future thing does notmaterialize, the buyer must paysince the buyer is taking achance (e.g. sale of lotto ticket)

Impossibility: Kinds1. physical the thing/service in the very nature of things

cannot exist or be performeda. Absolute: the act cannot be done in any case so

that no one can perform it; nullifies the contractb. Relative: it arises from the special circumstances or

special conditions/qualifications of the obligor; iftemporary, it doesnt nullify the contract

2. legal - the thing/service is contrary to law, morals, good


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CAUSE CONSIDERATION

The why of contracts, theessential reason w/c impels thecontracting parties to celebratethe contract

The reason, motive, orinducement, by w/c a man ismoved to bind himself by anagreement

Need not be material at all, &

may consist in a moralsatisfaction of the promissor

Requires a legal detriment to

the promise w/c must be morethan a moral duty

CAUSE MOTIVE

Proximate why Ultimate why

Objective, intrinsic & juridicalreason for the existence of thecontract itself

Psychological, individual orpersonal purpose of a partyto the contract

Essential or more proximatepurpose w/c the contractingparties have in view at the time of

entering into the contract

Purely personal/privatereason which a party has inentering into a contract

The cause of each kind of contractis always the same

Motive differs w/ eachperson

Immediate/direct reason Remote/indirect reason

Always known to the othercontracting party

May be unknown

Essential element of a contract Not an essential element

Its illegality affects the validity ofa contract

Its illegality does not renderthe contract void

Motive Affects the Contract if:1. motive becomes a suspensive condition2. realization of the motive is the cause for the contract & there

is an intervening serious mistake of fact

When Motives of a Party may Affect the Juridical Act1. rescissible when the motive of a debtor in alienating

property is to defraud creditors2. voidable when the motive of a person in giving his consent

is to avoid a threatened injury, (i.e. intimidation),3. voidable when the motive of a person induced him to act on

the basis of fraud or misrepresentation by the other party

Absenceof Cause Void produces no legal effect

Illegalityof Cause

Void produces no legal effect

Falsityf C

Voidable the party must prove that cause isl f l ti f lidit b t b tt bl

CHAPTER 4 REFORMATION OF INSTRUMENTS

Reformation: That remedy by means of w/c a written instrument isamended/rectified so as to express or conform to the realagreement/intention of the parties when by reason of mistake, fraud,inequitable conduct, or accident, the instrument fails to express suchagreement or intention

Effect of Reformation: takes effect from it original execution

Reformation: Requisites1. meeting of the minds of the parties to the contract2. written instrument doesnt express the true agreement/intention

of the parties3. the failure to express the true intention is due to mistake, fraud,

inequitable conduct (i.e. any act/omission w/c is unjust/unfair), oraccident

4.

the facts upon w/c relief by way of reformation of the instrumentis sought are put in issue by the pleadings5. clear & convincing evidence of the mistake, fraud, inequitable

conduct, or accident

REFORMATION ANNULMENT

There has been a meeting of the minds ofthe parties

There has been nomeeting of the minds

A contract exists but the writteninstrument purporting to embody thecontract doesnt express the true intentionof the parties by reason of mistake, fraud,

inequitable conduct or accident

The consent of one ofthe parties wasvitiated by mistake,fraud, violence,

intimidationGives life to it upon certain corrections Complete nullification

of the contract

Cases Where Reformation is Proper1. when mutual mistake of the parties causes the failure of the

instrument to disclose the real agreement2. if one party was mistaken & the other acted fraudulently or

inequitably in such a way that the instrument doesnt showthe true intention

3. when one party was mistaken & the other knew or believedthat the instrument didnt state their real agreement, butconcealed that fact from the former

4. when through the ignorance, lack of skill, negligence or badfaith on the part of the person drafting the instrument or ofthe clerk or typist, the instrument doesnt express the trueintention of the parties


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DEFECTIVE CONTRACTS: MORE NOTES

CHAPTER 6: RESCISSIBLE CONTRACTS

RESCISSION SIMULATION

There is real alienation,but its fraudulent

There is in fact no alienation but a merepretense that one has been made

Can be alleged only bycreditors prior to the act

Can be alleged by all creditors, before orafter the simulation

Impossibility of satisfyingthe plaintiffs claim isrequired

Impossibility of satisfying the plaintiffsclaim is NOT required

Accion pauliana anaction to set aside a validcontract

Does not seek to set aside the simulatedcontract, but merely to declare itsinexistence

Right of Transferee

1. Gratuitous - the creditor will have a better right than the transfereewho has given nothing & would unjustly be enriched at the expense ofthe creditor if the transfer were upheld

A. Good faith:o transferee obliged to restore the thingo but he isnt obliged to pay the fruits received by himo he is entitled to reimbursement for necessary & useful

expenses incurred on the thingo he returns the thing in the condition that it may be foundo he isnt liable for losses or deteriorations, except in cases

in w/c its proved that he has acted w/ fraudulent intentor negligence after judicial summonsB. Bad faith: Transferee isnt entitled to indemnity for damagesfrom the debtor, in the even that rescission is decreed

2. Onerous - the transferee in good faith is protected; as between 2persons who both stand to suffer loss, the possessor of the propertyshould be preferred in that possession, the ownership having beentransferred by delivery

Badges of Fraud:1. consideration of the conveyance is inadequate/fictitious2. transfer was made by a debtor after a suite has begun &while its pending against him3. sale upon credit by an insolvent debtor4. evidence of indebtedness or complete insolvency5. transfer of all his property by a debtor when he is financially

b d i l t

CHAPTER 7 VOIDABLE CONTRACTS

LOSS OF THINGBY PLAINTIFF

LOSS OF THINGBY DEFENDANT

Due to

his Faultor Fraud

he cannot ask for annulment &the action is extinguished, even

if at the time of the loss theplaintiff was still a minor or wasinsane

he must return thefruits received, the

value of the thingat the time of itsloss, w/ interest fr.the same date

Due to aFortui-tousEvent

action for annulment isntextinguished

but the defendant cannot beobliged to make restitution tothe plaintiff

until annulment of the contract,it is valid & produces legaleffect

res perit domino(ownerbears the loss): plaintiff whowas in possession of the objectat the time of its loss, must stillbe considered the ownerthereof & must bear the loss byfortuitous event

Since the plaintiff cannot returnwhat he is bound to restore,the defendant cannot becompelled to make restitution

But if the plaintiff offers to paythe value of the thing as asubstitute for the thing itself,the defendant should beobliged to make restitution,except plaintiff need not payinterest

Action forannulmentcannot beextinguished forany event notimputable to thefault/fraud of theplaintiff

Defendantrequired to paythe value of thething at the timeof the loss byfortuitous event,but w/o interestbecause the losswasnt due to hisfault

Defendant mustsuffer the lossbecause he isstill the owner atthe time of theloss


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RESCISSIBLE VOIDABLE UNENFORCEABLE VOID

Defect

Defect consists in injury/damage either to1 of the contracting parties or to 3rdpersons; may be set aside in whole/part, tothe extent of the damage caused

- (defect is in the effects)

Defect consists in the vitiation of consent orin the legal incapacity of 1 of thecontracting parties

Defect consists in the fact that theywere entered into in excess or w/o anyauthority, or they do not comply w/Statute of Frauds, or both contracting

parties are legally incapacitated

All requisites prescribed by law are present, but thecause/object/purpose is contrary to law, morals,good customs, public order or public policy, or areprohibited by law, or are declared by law to be void

- (defect is inherent)

Kinds

1. those entered into by guardianswhenever the wards whom they

represent suffer lesion by more than of the value of the things w/c are the

object thereof2. those agreed upon in representation of

absentees, if the latter suffer the lesionstated in the preceding #

3. those undertaken in fraud of creditorswhen the latter cannot in any othermanner collect the claims due them

4. those w/c refer to things under litigationif they have been entered into by the

defendant w/o the knowledge & approvalof the litigants or of competent judicial

authority5. contracts specifically declared by law to

be subject to rescission6. payments made in a state of insolvency

for obligations whose fulfillment the

debtor could not be compelled at thetime they were effected

Note: No rescission is allowed if the

contract/transaction is approved by thecourt

1. those where 1 of the contracting parties isincapable of giving his consent to a

contracta. minors

b. insane/demented personsc. deaf/mutes who do not know how to

writed. intoxicated

e. under hypnotic spell

2. those where the consent is vitiated bymistake, violence, intimidation, undue

influence or fraud

1. Unauthorized or no sufficientauthority:

a)no authority conferredb)in excess of authority conferred

2. Curable by Acknowledgement:Those that do not comply with the

Statute of Fraudsa) agreement is not to be performed

w/in a year from the making thereof

b) special promise to answer for thedebt/default/miscarriage of another

c) agreement in consideration ofmarriage other than a mutual promise

to marryd)An agreement for the sale of goods,

chattels or things in action, at a pricenot less than P500

e) agreement for leasing for a periodlonger than one year, or for the sale of

real property or of an interest therein

f) representation as to the credit of a3rdperson

3.Curable by ratification: both partiesare incapable of giving consent to a

contract***Statute of Frauds: statute w/c

requires certain classes of contracts tobe in writing to prevent fraud

- applicable only to executorycontracts (wher

ALEITHEIA - Obligations & Contracts Memory Aid (Sta. Maria)

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Transcript of ALEITHEIA - Obligations & Contracts Memory Aid (Sta. Maria)