San Beda Obligations Contracts

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1CIVIL LAW MEMORY AID COMMITTEE: Chairperson : OLIVIA B. CORNEJO ; EDP : JUDITH Y. RAMOS Members: Malou Ababa, Jinky Mangantulao, Ana Liza Pural, Roderick Reyes, Ma. Janice Tejano, Anna Leah Y. Tiongson, Alwin ryan !illa"lor

MEMORY AID IN CIVIL LAWSAN BEDA COLLEGE OF LAW – 2002 CENTRALIZED BAR OPERATIONS

Re roduction in an form of this co is strictl rohibited!!!

OBLIGATIONS ANDCONTRACTS

I. OBLIGATIONS

OBLIGATION a juridical necessity to give, to do, or not to do. Requisites:

1. juridical or legal tie2. active subject (obligee or creditor

. passive subject (obligor or debtor". fact, prestation or service constituting the

object of the obligation Requisites:

1. it must be licit2. it must be possible, physically # juridically

. it must be determinate or determinable

". it must have a possible equivalent inmoney

$ources:1. %a&2. 'ontracts

. uasi)contracts". *elicts+. uasi)delicts

QUASI-CONTRACTS those juridicalrelations arising from la&ful, voluntary andunilateral acts, based on the principle thatno one shall be unjustly enriched or benefited at the e-pense of another.

rincipal /inds of uasi)contracts:1. 0egotiorum gestio arises &henever a

person voluntarily ta es charge of theagency or management of the businessor property of another &ithout any po&er or authority from the latter

2. $olutio indebiti arises &henever aperson unduly delivers a thing throughmista e to another &ho has no right todemand it.

NATURE OF OBLIGATIONS. P!"#$%&' O(')*&+)$%# obligations to do

a ositiveb 0egative

2. R!&' O(')*&+)$%# – obligations to givea *eterminate or specificb eneric

RIGHTS OF A CREDITORD!+!",)%&+! G!%!")

1. compel specificperformance32. damages, e-clusive

or in addition tospecific performance3. entitlement to fruits,

interests from the timethe obligation todeliver arises.

1.as for performanceof the obligation2. as that the

obligation be complied&ith at the e-pense of the debtor

. damages in case of breach

OBLIGATIONS OF THE DEBTORD!+!",)%&+! G!%!")

1. specificperformance32. ta e care of thething &ith the proper

diligence of a goodfather of a family3. deliver all

accessions andaccessories of thething even though theymay not have beenmentioned3". pay damages incase of breach of theobligation by reason of delay, fraud,negligence or contravention of thetenor thereof.

1. deliver the thing&hich is neither of superior nor inferior quality3

2. damages in caseof breach of theobligation by reason of delay, fraud,negligence or contravention of thetenor thereof.

EFFECTS OF BREACHP$#)+) ! P!"#$%&'

O(')*&+)$%#N!*&+) ! P!"#$%&'

O(')*&+)$%#4he creditor can:

(1 have the obligationperformed or e-ecutedat the e-pense of theobligor3(2 as that &hat hasbeen poorly done beundone3(2 recover damagesbecause of breach of the obligation (5rt.1167

4he creditor can(1 have the obligationundone at the e-penseof the obligor3 and (2 as for damages.(5rt. 1168

C&#!# / !"! + ! "!,!1 *"&%+!1 3%1!" A"+.45 )# %$+ & &)'&('!:

1 9here the effects of the act &hich isforbidden, are definite in character

2 9here it &ould be physically or legallyimpossible to undo &hat has been undonebecause of the very nature of the act itself or because of a provision of la&, or because of conflicting rights of rd persons

BREACH OF OBLIGATIONS1. V$'3%+&" debtor, in the performance of

the obligation, is guilty of:a. default #$ora%b. fraud #dolo%






c. negligence #cul&a%d. contravention of the tenor of the

obligation

debtor is liable for damages2. I% $'3%+&" debtor is unable to comply&ith his obligation because of fortuitousevent debtor is not liable for damages

DEFAULT $" DELAY non)fulfillment of the obligation &ith respect to

time Requisites:

1 bligation is demandable and alreadyliquidated

2 4he debtor delays performance

4he creditor requires performance judiciallyor e-tra)judicially /inds:

1 ;ora solvendi delay of the debtor toperform his obligation

2 ;ora accipiendi delay of the creditor toaccept the delivery of the thing &<c is theobject of the obligation'ompensatio morae delay of the parties in

reciprocal obligation 9hen incurred: '()(RAL R*L(+ 4here must be a *=;50*

(judicial or e-tra)judicial before delay may be

incurred. ( -(PT /)0+1. obligation or la& e-pressly so declares2. time is of the essence

. demand is useless as &hen obligor hasrendered beyond his po&er to perform

". there is ac no&ledgment of default

4here can be delay only in positiveobligations. 4here can be no delay in negativeobligations.

>n reciprocal obligations one party incurs indelay from the moment the other party fulfills his

obligation, &hile he himself does not comply or is not ready to comply in a proper manner &ith&hat is incumbent upon him.

FRAUD deliberate and intentional evasion of the

fulfillment of an obligation.

I% )1!%+&' F"&316doloincidente(5rt. 117?

C&3#&' F"&316 dolocausante(5rt. 1 8

1. resent during theperformance of a pre)e-isting obligation

resent during thetime of birth of theobligation

2. urpose is to evadethe normal fulfillmentof the obligation

urpose is to securethe consent of theother to enter into acontract

. Results in the non)fulfillment or breach ofthe obligation

Results in the vitiationof consent

". ives rise to a rightof the creditor torecover damages from

the debtor

ives rise to a right ofan innocent party toannul the contract

NEGLIGENCE omission of that diligence &hich is required by

the nature of the obligation and corresponds &iththe circumstances of the persons, of the timeand of the place

DILIGENCE REQUIRED1. 4hat agreed upon by the parties32. >n the absence of stipulation, that requiredby la& in the particular case3

. >f both the contract and la& are silent,

diligence of a good father of a family

FORTUITOUS EVENT an event &<c could not be foreseen or &<c

though foreseen &as inevitable Requisites:

1. cause is independent of the &ill of the debtor 2. the event must be unforeseeable or

unavoidable. occurrence must be such as to render it

impossible for the debtor to fulfill hisobligation in a normal manner

". debtor must be free from any participation in

+. the aggravation of the injury resulting to thecreditor

'()(RAL R*L(+ 0o liability in case of fortuitous event.

( -(PT /)0+1 9hen e-pressly declared by la&

=.g. 5rt. ++2(2 , 116+( , 1268,1@"2, 21"7, 21"8 and 21+@ of the'ivil 'ode.

2 9hen e-pressly declared bystipulation or contract9hen the nature of the obligation

requires the assumption of ris" 9hen the obligor is in default or haspromised to deliver the same thing to2 or more persons &ho do not havethe same interest (5rt. 116+( .

EFFECT OF FORTUITOUS EVENTD!+!",)%&+!O(')*&+)$%

G!%!") O(')*&+)$%

obligation is e-tin)guished

obligation is note-tinguished based onthe rule that a genusnever perishes

REMEDIES OF CREDITOR TO PROTECTCREDIT:1 =-haustion of debtorAs property2 5ccion subrogatoria to be subrogated to

all the rights and actions of the debtor savethose &hich are inherent in his person






5ccion pauliana ) impugn all the acts &<c thedebtor may have done to defraud them.

2 nd # rd remedies are subsidiary to the first

'()(RAL R*L(+ Rights acquired by virtue of an obligation are transmissible in character

( -(PT /)0+1 9hen they are not transmissible by their

very nature e.g. purely personal right2 9hen there is a stipulation of the parties that

they are not transmissible0ot transmissible by operation of la&

PURE OBLIGATION one &hose effectivity or e-tinguishment does

not depend upon the fulfillment or non)fulfillment

of a condition or upon the e-piration of a term or period

CONDITIONAL OBLIGATION one &hose effectivity is subordinated to the

fulfillment or non)fulfillment of a future anduncertain fact or event

7)%1# $8 $%1)+)$%#:1. $uspensive fulfillment of the condition

results in the acquisition of rights arising outof the obligation

2. Resolutory fulfillment of the conditionresults in the e-tinguishments of rightsarising out of the obligation

. otestative fulfillment of the conditiondepends upon the &ill of a party to theobligation

". 'asual fulfillment of the condition dependsupon chance and<or upon the &ill of a thirdperson

+. ;i-ed fulfillment of the condition dependspartly upon chance and<or the &ill of a thirdperson

6. >mpossible condition is not capable of realiBation according to nature, la&, publicpolicy ar good customs

7. >mpossible ) condition is not capable of realiBation according to nature, la&, publicpolicy ar good customs

8. ositive condition involves theperformance of an act

@. 0egative ) condition involves the omission of an act

1?. *ivisible condition is susceptible of partialrealiBation

11. >ndivisible ) condition is not susceptible of partial realiBation

12. 'onjunctive &here there are severalconditions, all of &hich must be realiBed

1 . 5lternative &here there are severalconditions but only one must be realiBed

R3'! )% P$+!#+&+) ! C$%1)+)$%#a. >f the fulfillment of the potestative, the

condition depends upon the &ill of thedebtor, the condition as &ell as theobligation itself is void.

b. if the fulfillment depends e-clusivelyupon the &ill of the creditor, both thecondition and obligation is valid.

R3'! )% I,9$##)('! C$%1)+)$%# '()(RAL R*L(+ 4hey shall annul the

obligation &hich depends upon them. ( -(PT /)0+

1. pre)e-isting obligation2. if obligation is divisible

. in simple or renumenatory donations". in testamentary dispositions+. in case of conditions not to do an impossible

thing

E88! +# $8 S3#9!%#) ! C$%1)+)$%1. Cefore fulfillment of the condition, thedemandability as &ell as the acquisition or effectivity of the rights arising from theobligation.2. 5fter the fulfillment of the condition, theobligation arisies or becomes effective.3. 4he effects of a conditional obligation to giveonce the condition has been fulfilled, shallretroact to the day of the constitution of theobligation but not as to fruits # interest4. 9hen the obligation imposes reciprocalprestations upon the parties, the fruits #interests shall be deemed to have been mutually

compensated5. >f the obligation is unilateral, the debtor shallappropriate the fruits # interests received,unless from the nature # circumstances it shouldbe inferred that the intention of the personsconstituting the same &as different

C$%#+"3 +) ! 83'8)'',!%+ $8 S3#9!%#) !C$%1)+)$%: the condition shall be deemedfulfilled &hen the obligor prevents its fulfillment

E88! +# $8 R!#$'3+$" C$%1)+)$%1. Cefore the fulfillment of the of the condition,

the right &hich the creditor has already acquiredby virtue of the obligation is subject to a threat of e-tinction.2. Dpon fulfillment of the condition, the partiesshall return to each other &hat they received

EFFECTS OF LOSS DETERIORATION ANDIMPROVEMENT IN REAL OBLIGATIONS

. L$##a. without debtor1s "ault obligation is

e-tinguishedb. with debtor1s "ault debtor pays

damages2. D!+!")$"&+)$%

a. without debtor1s "ault impairment to beborne by the creditor

b. with debtor1s "ault creditor may choosebet&een the rescission of the obligationand its fulfillment &ith indemnity fordamages in either case

;. I,9"$ !,!%+






a. by the thing1s nature or by ti$e improvement shall inure to the benefit of the creditor

b. at the debtor1s e2&ense debtor shallhave no other right than that granted toa usufructuary

RECIPROCAL OBLIGATIONS 4hose &hich are created or established at the

same time, out of the same cause, and&hich result in mutual relationships of creditor # debtor bet&een the parties

TACIT RESOLUTORY CONDITION >f one of the parties fails to comply &ith &hat is

incumbent upon him, there is a right on the partof the other to rescind the obligation.

RIGHT TO RESCIND '()(RAL R*L(+ 4he right to rescind needs

judicial approval. ( -(PT /)0+

1. >f there is an e-press stipulation of automatic rescission

2. 9hen the debtor voluntarily returned thething

Rescission &ill be ordered only &here thebreach is substantial as to defeat the object of the parties in entering into the agreement 4he remedy of rescission and fulfillment are

alternative, not cumulative

OBLIGATION WITH A PERIOD those &hose demandability or e-tinguishment

is subject to the e-piration of a term or period

TERM CONDITION. interval of time &<c

is future # certain. fact or event &<c is

future and uncertain2. interval of time &<cmust necessarilycome, although it may

not be no&n &hen

2. future and uncertainfact or event &<c mayor may not happen

;. e-erts an influenceupon the time of demandability or e-tinguishment of anobligation

;. e-erts an influenceupon the verye-istence of theobligation itself

<. does not have anyretroactive effectunless there is anagreement to thecontrary

<.has retroactive effect

=. &hen it is lefte-clusively to the &illof the debtor, thee-istence of theobligation is notaffected

=.&hen it is lefte-clusively to the &illof the debtor, the verye-istence of theobligation is affected

'()(RAL R*L(+ 9hen a period isdesignated for the performance or fulfillment of an obligation, it is presumed to have been

established for the benefit of both creditor anddebtor

( -(PT /)+ 9hen it appears from the tenor

of the period or other circumstances that it isestablished in favor of one or the other

W !% $3"+ ,& 8)> 9!")$1:1. if the obligation does not fi- a period, but

from its nature and circumstances it can beinferred that a period &as intended by theparties3

2. if the duration of the period depends uponthe &ill of the debtor3 and

. if the debtor binds himself &hen his meanspermit him to do so.

W !% 1!(+$" '$#!# ")* + +$ ,&?! 3#! $8 9!")$1: (>E F51. &hen after the obligation has been

contracted, he becomes )nsolvent, unless hegives guaranties or securities for the debt(the insolvency need not be judiciallydeclared 3

2. &hen he does not 8 urnish to the creditor theguaranties or securities he promised3

. &hen by his $ &n act he has impaired saidguaranties or securities after their establishment, and &hen through fortuitousevent they disappear, unless he gives ne&ones equally satisfactory3

". &hen d ebtor iolates any underta ing, inconsideration of &hich the creditor agreed tothe period3 or

+. &hen debtor attempts to &bscond.

FACULTATIVEO(')*&+)$%#

ALTERNATIVEO(')*&+)$%#

1. comprehends se)veral objects or prestations &hich aredue but may becomplied &ith by thedelivery or performance of onlyone of them

1. comprehends onlyone object or prestation &hich isdue, but it may becomplied &ith by thedelivery of another object or performanceof another prestation insubstitution

2. fortuitous losse-tinguishes the obli)gation

2. fortuitous loss of allprestations &ill e-tin)guish the obligation

. culpable lossobliges the debtor todeliver substitute pres)tation &ithout liabilityto debtor

. culpable loss of anyobject due &ill give riseto liability to debtor

". choice pertains onlyto debtor

". choice may pertainto creditor or eventhird person

>n alternative obligations, choice ta es effectonly upon communication of the choice to theother party and from such time the obligationceases to be alternative.






4he debtor cannot choose those prestationsor underta ings &hich are impossible, unla&fulor &<c could not have been the object of the

obligation

EFFECT OF LOSS OF OBJECT OFOBLIGATION:

5. >f right of choice belongs to debtor:1 >f through a fortuitous event debtor

cannot be held liable for damages2 >f 1 or more but not all of the things are

lost or one or some but not all of theprestations cannot be performed due tothe fault of the debtor, creditor cannothold the debtor liable for damagesbecause the debtor can still comply &ithhis obligation

C. >f right of choice belongs to the creditor:1 >f 1 of the things is lost through a

fortuitous event, the debtor shall performthe obligation by delivering that &hichthe creditor should choose from amongthe remainder, or that &hich remains if only 1 subsists

2 >f the loss of 1 of the things occursthrough the fault of the debtor, thecreditor may claim any of thosesubsisting, or the price of that &hich,through the fault of the former, hasdisappeared &ith a right to damages>f all the things are lost through the fault

of the debtor, the choice by the creditor shall fall upon the price of any 1 of them,also &ith indemnity for damages

0ote: 4hese rules shall be applied to obligationsto do or not to do.

JOINT AND SOLIDARY OBLIGATIONS '()(RAL R*L(+ bligation is presumed joint

if there is concurrence of t&o or more debtorsand<or creditors.

( -(PT /)0+

1. &hen e-pressly stated to be solidary2. &hen the la& requires solidarity

. &hen the nature of the obligation requiressolidarity

JOINT DIVISIBLE OBLIGATIONS each creditor can demand for the payment of

his proportionate share of the credit,&hile each debtor can be held liableonly for the payment of hisproportionate share of the debt

JOINT INDIVISIBLE OBLIGATIONS

1 >f there are 2 or more debtors, the fulfillmentof or compliance &ith the obligation requires theconcurrence of all the debtors, although each for his o&n share. 'onsequently, the obligation canbe enforced only by proceeding against all of thedebtors2 >f there are 2 or more creditors, theconcurrence or collective act of all the creditors,

although each for his o&n share, is alsonecessary for the enforcement of the obligation

INDIVISIBILITY SOLIDARITY1. refers to theprestation &hichconstitutes the objectof the obligation

1. refers to the legal tieor vinculum juris #consequently to thesubjects or parties of the obligation

2. plurality of subjectsis not required

2. plurality of subjectsis indispensable

. in case of breach,obligation is convertedinto 1 of indemnity for damages because of breach, indivisibility of

the obligation isterminated

. &hen there is liabilityon the part of thedebtors because of thebreach, the solidarityamong the debtors

remains

7INDS OF SOLIDARITY1. 5ctive solidarity solidarity of creditors each creditor is empo&ered to e-ercise against

the debtor not only the rights &hich correspondto him, but also all the rights &hich correspondto the other creditors, &ith the consequentobligation to render an accounting of his acts tosuch creditors2. assive solidarity

solidarity of debtors liability of each debtor for the payment of theentire obligation, &ith the consequent right todemand reimbursement from the others for their corresponding shares once payment has beenmade.

E88! + $8 N$ &+)$% 39$% S$')1&" O(')*&+)$%1. >f the novation is prejudicial, the solidarycreditor &ho effected the novation shallreimburse the others for damages incurred bythem2. >f it is beneficial and the creditor &hoeffected the novation is able to secureperformance of the obligation, such creditor shallbe liable to the others for the share &hichcorresponds to them, not only in the obligation,but also in the benefits

. >f the novation is effected by substitutinganother person in place of the debtor, thesolidary creditor &ho effected the novation isliable for the acts of the ne& debtor in case theis deficiency in performance or in case damagesare incurred by the other solidary creditors as aresult of the substitution.". >f the novation is effected by subrogating athird person in the rights of the solidary creditor responsible for the novation, the relationbet&een the other creditors not substituted andthe debtor or debtors is maintained.

E88! + $8 C$,9!%#&+)$% &%1 C$%83#)$% 39$%S$')1&" O(')*&+)$%






1. >f the confusion or compensation is partial,the rules regarding application of payment shallapply.

2. >f the confusion or compensation is total, theobligation is e-tinguished, &hat is left is theensuing liability for reimbursement &ithin eachgroup:

a. 4he creditor causing the confusion or compensation is obliged to reimburse theother creditorsb. 4he debtors benefited by thee-tinguishments of the obligation is obligedto reimburse the debtor &ho made theconfusion or compensation possible

E88! + $8 R!,)##)$% 39$% S$')1&"O(')*&+)$%:1. >f the remission covers the entireobligation ,the obligation is totally e-tinguishedand the entire juridical relation among thedebtors is e-tinguished all together 2. >f the remission is for the benefit of one of the debtors and it covers his entire share in theobligation, he is completely released from thecreditors but is still bound to his co)debtors

. >f the remission is for the benefit of one of the debtors and it covers only a part of his sharein the obligation, his character as a solidarydebtor is not affected.

D!8!%#!# & &)'&('! +$ & S$')1&" D!(+$":1. *efenses derived from the very nature

of the obligation2. *efenses personal to him or pertaining

to his o&n share. *efenses personal to the others, but

only as regards that part of the debt for &<c the latter are responsible

DIVISIBLE AND INDIVISIBLE OBLIGATIONS '()(RAL R*L(+ 4he creditor cannot be

compelled partially to receive the prestation in&hich the obligation consists3 neither may the

debtor be required to ma e partial payments. ( -(PT /)0+1. 9hen the obligation e-pressly stipulates

the contrary2. 9hen the different prestations

constituting the objects of the obligationare subject to different terms andconditions

. 9hen the obligation is in part liquidatedand in part unliquidated

OBLIGATIONS WITH A PENAL CLAUSE one to &hich an accessory underta ing is

attached for the purpose of insuring itsperformance by virtue of &hich the obligor isbound to pay a stipulated indemnity or perform astipulated prestation in case of breach urpose of enalty:

1 4o insure the performance of the obligation

2 to liquidate the amount of damages to bea&arded to the injured party in case of breach of the principal obligation

in certain e-ceptional cases, to punish theobligor in case of breach of the principalobligation

'()(RAL R*L(+ 4he penalty fi-ed by theparties is a compensation or substitute for damages in case of breach.

( -(PT /)0+1. stipulation to the contrary1. debtor is sued for refusal to pay the agreed

penalty2. debtor is guilty of fraud

4he debtor cannot e-empt himself from theperformance of the principal obligation by payingthe stipulated penalty unless &hen the right hasbeen e-pressly reserved for him

4he creditor cannot demand the fulfillment of the principal obligation and the satisfaction of thestipulated penalty at the same time unless theright has been clearly granted him

W !% 9!%&'+ ,& (! "!13 !1:1. >f the principal obligation has been partly

complied &ith2. >f the principal obligation has been

irregularly complied &ith. >f the penalty is iniquitous or

unconscionable even if there has beenno performance

MODES OF E@TINGUISHMENT OFOBLIGATIONS (%E' 05R 2

1. Loss of the thing due2. Fulfillment of resolutory condition

. Compensation". Condonation or remission of the debt+. Confusion or merger of rights of the creditor

and debtor 6. Novation7. Annulment8. Rescission@. P rescription1?. P ayment or performancePAYMENT OR PERFORMANCE means not only the delivery of money but also

the performance in any other manner of anobligation I%+!*")+ $8 P& ,!%+

'()(RAL R*L(+ 5 debt shall not beunderstood to have been paid unless the thingor service in &hich the obligation consists has

been completely delivered or rendered, as thecase may be.

( -(PT /)0+1 9hen the obligation has been substantially

performed in good faith






2 9hen the obligee accepts performance,no&ing its incompleteness or irregularity #

&<out e-pressing any protest or objection

9hen there is an e-press stipulation" 9hen the debt is in part liquidated and inpart unliquidated

I1!%+)+ $8 P& ,!%+ - requires that the verything, service or forbearance, as the object of the prestation, must be performed or observed

P!"#$%# / $ ,& 9& + ! $(')*&+)$%:1 the debtor himself or his legal representative2 any third person

'()(RAL R*L(+ 'reditor is not boundto accept payment or performance by athird person.

( -(PT /)0+1.&hen made by a third person &ho hasan interest in the fulfillment of theobligation2.stipulation to the contrary

Rights of rd person &ho paid theobligation:1. >f payment &as &ith no&ledgeand consent of the debtor:

a. can recover entire amount paidb. can be subrogated to all the

rights of the creditor 2. >f payment &as &ithout

no&ledge or against the &ill of thedebtor: can recover only insofar aspayment has been beneficial to the debtor

T$ / $, 9& ,!%+ ,3#+ (! ,&1!:1. the person in &hose favor the obligation has

been constituted2. his successor in interest

. any person authoriBed to receive it.

'()(RAL R*L(+ >f payment is made to aperson other than those enumerated, it shall notbe valid.

( -(PT /)0+1. ayment made to a rd person, provided

that it has redounded to the benefit of the creditor.

2. ayment made to the possessor of thecredit, provided that it &as made in goodfaith.

R3'!# )% M$%!+&" O(')*&+)$%#:1. ayment in cash must be made in thecurrency stipulated3 if not possible, then in thelegal tender in the hilippines.

2. ayment in chec or other negotiableinstrument not considered payment3 notconsidered legal tender and may be refused bythe creditor. >t shall only produce the effect of payment:

a. &hen it has been cashed3 or b. &hen it has been impaired through the

fault of the creditor

< S9! )&' F$",# $8 P& ,!%+:a 5pplication of payment

b *ation in aymentc ayment by 'essiond 4ender of payment and 'onsignation & A99') &+)$% $8 P& ,!%+ designation of the debt to &hich the payment

must be applied &hen the debtor has severalobligations of the same ind in favor of the samecreditor. Requisites:

1. there must be only 1 debtor # only 1 creditor 2. there must be 2 or more debts of the same

ind. all of the debts must be due

". amount paid by the debtor must not besufficient to cover the total amount of all thedebts

'()(RAL R*L(+ 4he right to designate thedebt to &hich the payment shall be appliedprimarily belongs to the debtor.

( -(PT /)+ >f the debtor does not avail of such right and he accepts from the creditor areceipt in &hich the application is made.

>f the above rule is not applicable:1. 4he debt most onerous to the

debtor shall be deemed satisfied.2. >f the debts due are of the same

nature and burden, payment shall be appliedto all proportionately.

( D&+)$% )% P& ,!%+ DACION EN PAGO transmission of o&nership of a thing by the

debtor to the creditor as an accepted equivalentof the performance of the obligation. Requisites:

1. e-istence of a money obligation2. alienation to the creditor of a property by the

debtor &ith the consent of the former . satisfaction of the money obligation of the

debtor

P& ,!%+ ( C!##)$% debtor abandons all of his property for the

benefit of his creditors in order that from theproceeds thereof, the latter may obtain paymentof their credits. Requisites:

1. plurality of debts2. partial or relative insolvency of the debtor

. acceptance of the cession by the creditors

DATION IN PAYMENT PAYMENT BYCESSION

1. one creditor 1. plurality of creditors

2. not necessarily instate of financialdifficulty

2. debtor must bepartially or relativelyinsolvent






. thing delivered isconsidered as equi)valent of performance

. universality of pro)perty of debtor is &hatis ceded

". payment e-tin)guishes obligation tothe e-tent of the valueof the thing deliveredas agreed upon,proved or implied fromthe conduct of thecreditor

". merely releasesdebtor for net proceedsof things ceded or assigned, unless thereis contrary intention

1 T!%1!" $8 P& ,!%+ &%1 C$%#)*%&+)$%

T!%1!" $8 P& ,!%+ manifestation of he debtor to the creditor of his

decision to comply immediately &ith hisobligation

C$%#)*%&+)$% deposit of the object of the obligation in a

competent court in accordance &ith the rulesprescribed by la& after refusal or inability of thecreditor to accept the tender of payment. $pecial Requisites:

1. 4he debt sought to be paid must be due2. 4here must be a valid and unconditional

tender of payment or any of the causesstated by la& for effective consignation&ithout previous tender of payment e-ists

. 4he consignation of the thing due must firstbe announced to the persons interested inthe fulfillment of the obligation

". 'onsignation shall be made by depositingthe things due at the disposal of judicialauthority

+. 4he consignation having been made, theinterested parties shall also be notifiedthereof

=ffect: '()(RAL R*L(+ 'onsignation shall produce

effects of payment only if there is a valid tenderof payment.

( -(PT /)0+1. creditor is absent or un no&n, or does not

appear at the place of payment2. creditor incapacitated to receive payment at

the time it is due. &hen t&o or more persons claim the right to

collect". &hen the title of the obligation has been lost+. &hen &ithout just cause creditor refuses to

give a receipt

>t is the consignation &hich constitutes a formof payment and must follo&, supplement or complete the tender of payment in order todischarge the obligation

LOSS OF THE THING DUE1. n 3eter$inate /bligations to 'i4e

'()(RAL R*L(+ bligation is e-tinguished. ( -(PT /)0+

a. &hen by la&, obligor is liable even for fortuitous event3

b. &hen by stipulation, obligor is liable

even for fortuitous event3c. &hen the nature of the obligationrequires the assumption of ris 3

d. &hen the loss of the thing is due partlyto the fault of the debtor3

e. &hen the loss of the thing occurs after the debtor incurred in delay3

f. &hen the debtor promised to deliver thesame thing to t&o or more persons &hodo not have the same interest3 and

g. &hen the debt of a certain anddeterminate thing proceeds from acriminal offense.

2. n 'eneric /bligations to 'i4e '()(RAL R*L(+ bligation is not

e-tinguished because the genus of a thingcannot perish.

( -(PT /)+ >n case of generic obligations&hose object is a particular class or group &ithspecific or determinate qualities (%imited eneric

bligations

. n /bligations to 3o '()(RAL R*L(+ bligation e-tinguished

&hen prestation becomes legally or physicallyimpossible.

CONDONATION OR REMISSION OF THEDEBT an act of pure liberality by virtue of &hich the

obligee, &ithout receiving any price or equivalent, renounces the enforcement of theobligation, as a result of &hich it is e-tinguishedin its entirety or in that part or aspect of thesame to &hich the remission refers. Requisites:

1. >t must be gratuitous2. >t must be accepted by the debtor

. 4he obligation must be demandable

CONFUSION OR MERGER OF RIGHTS merger of the characters of the creditor and the

debtor in one and the same person by virtue of &hich the obligation is e-tinguished. Requisites:

1. that the characters of creditor # debtor mustbe in the same person

2. that it must ta e place in the person of either the principal creditor or the principal debtor

. it must be complete # definite

COMPENSATION e-tinguishment in the concurrent amount of the

obligation of those persons &ho are reciprocallydebtors and creditors of each other. Requisites:

1. there must be 2 parties, &ho, in their o&nright, are principal creditors # principaldebtors of each other






2. both debts must consist in money, or if thethings due are fungibles, they must be of thesame ind # quality

. both debts must be due". both debts must be liquidated # demandable+. there must be no retention or controversy

commenced by rd persons over either of thedebts # communicated in due time to thedebtor

6. compensation must not be prohibited by la&

C$,9!%#&+)$% C$%83#)$%1. t&o persons &ho

are mutual debtorsand creditors of eachother

1. one person &herequalities of debtorand creditor aremerged

2. there must be atleast t&o obligations 2. only oneobligation

D!(+# %$+ #3( ! + +$ C$,9!%#&+)$%:1. debts arising from contracts of deposit2. debts arising from contracts of

commodatum. claims for support due by gratuitous title

". obligations arising from criminal offenses+. certain obligations in favor of government

4a-es are not subject to set)off or legalcompensation because the government #ta-payers are not mutually creditors # debtors of each other (Erancia vs. >5'

NOVATION substitution or change of an obligation by

another, resulting in its e-tinguishment or modification, either by changing its object or principal conditions, or by substituting another inplace of the debtor, or by subrogating a thirdperson in the rights of the creditor. Requisites:

1. a previous valid obligation2. agreement of the parties to the ne&

obligation. e-tinguishment of the old obligation

". validity of the ne& obligation /inds:

1. 5s to its essencea bjective<Real refers to the change

either in the cause, object or principalconditions of the obligations

b $ubjective< ersonal refers to thesubstitution of the person of the debtor or to the subrogation of a rd person inthe rights of the creditor

c ;i-ed2. 5s to its form<constitution

a =-press &hen it is declared inunequivocal terms that the old obligationis e-tinguished by a ne& one &<csubstitutes the same

b >mplied &hen the old # ne& obligationare incompatible &< each other on everypoint

2 F$",# $8 S3(#+)+3+)$% $8 D!(+$"#:1. (2&ro$ision effected &ith the consent of

the creditor at the instance of the ne&debtor even &ithout the consent or evenagainst the &ill of the old debtor.

2. 3elegacion effected &ith the consent of the creditor at the instance of the old debtor,&ith the concurrence of the ne& debtor.

5 change in the incidental elements of, or anaddition of such elements to an obligation,unless other&ise e-pressed by the parties, &illnot result in its e-tinguishment

C$% !%+)$%&'S3("$*&+)$%

A##)*%,!%+ $8 R)* +#

1. governed by 5rts.1 ?? to 1 ?"

1. governed by 5rts.162" to 1627

2. debtorAs consent isrequired

2. debtorAs consent isnot required

. e-tinguishes theobligation and givesrise to a ne& one

. transmission of rightof the creditor to thirdperson &ithoutmodifying or e-tinguishing theobligation

". defects and vicesin the old obligationare cured

". defects and vices inthe old obligation arenot cured

+. ta es effect uponmoment of novation or subrogation

+. as far as the debtor is concerned, ta eseffect upon notification

'()(RAL R*L(+ $ubrogation cannot bepresumed.

( -(PT /)0+1. 'reditor pays another creditor &ho is

preferred, &ithout debtorAs no&ledge32. 5 third person not interested in the obligation

pays &ith the e-press or tacit approval of thedebtor3 or

. =ven &ithout debtorAs no&ledge, a personinterested in the fulfillment of the obligationpays &ithout prejudice to the effects of confusion as to the latterAs share.

II. CONTRACTS

CONTRACT =lements: (' '

1. 'onsent2. bject or $ubject ;atter

. 'ause or 'onsideration

N$,)%&+! $%+"& +# those &hich have their o&n distinctive

individuality and are regulated by specialprovisions of la&.

I%%$,)%&+! $%+"& +#






those &hich lac individuality and are notregulated by special provisions of la&. regulated by the stipulations of the parties by

the general provisions of the 'ivil 'ode onobligations and contracts, by rule governing themost analogous nominate contracts and by thecustoms of the place " /inds:

1. 3o ut des > give that you give2. 3o ut "acias > give that you do

. 5acio ut des > do that you give". 5acio ut "acias > do that you do

C &"& +!")#+) # $8 C$%+"& +#:(R ;51. Relativity (5rt. 1 112. Obligatoriness and 'onsensuality (5rt.

1 1+. Mutuality (5rt. 1 ?8". Autonomy (5rt. 1 ?6

R!'&+) )+ '()(RAL R*L(+ 'ontract is only valid

bet&een parties, assigns and heirs. ( -(PT /)0+

1. $tipulation &our atrui ) stipulation in favor of athird person.

Requisites:a. the stipulation must be part, not &hole

of the contract3

b. the contracting parties must haveclearly and deliberately conferred afavor upon a third person3

c. the third person must havecommunicated his acceptance3 and

d. neither of the contracting parties bearsthe legal representation of the thirdperson.

2. 9hen a third person induces a party toviolate contract (5rt 1 1"

Requisites:a. =-istence of a valid contractb. no&ledge of contract by third personc. interference by third person &ithout

justification. 4hird persons &ho come into possession of

the object of the contract creating real rights". 'ontracts entered into in fraud of creditors

M3+3&')+ 4he contract must bind both parties3 its validity

or compliance must not be left to the &ill of oneof them. (5rt. 1 ?8

A3+$%$, 4he parties are free to stipulate anything they

deem convenient provided that they are notcontrary to la&, morals, good customs, publicorder and public policy.

C$%#!%#3&')+ 'ontracts are perfected by mere consent and

from that moment, the parties arebound not only to the fulfillment of &hat has been e-pressly stipulatedbut also to all consequences &hich,according to their nature may be in

eeping &ith good faith, usage andla&.

CONSENT manifested by the meeting of the offer and

acceptance upon the thing and thecause &hich are to constitute thecontract.

Requisites:1. %egal capacity of the contracting parties2. ;anifestation of the conformity of the

contracting parties. 4he partiesA conformity to the object,

cause, the terms and conditions of thecontract must be intelligent,spontaneous and free from all vices of consent

". 4he said conformity must be real andnot simulated or fictitious

O88!" a proposal made by one party to another to enter into a contract

A !9+&% ! manifestation by the offeree of his assent to the terms of the offer

4he offer must be certain and the acceptanceabsolute

-onsensual contracts are perfected from themoment there is a manifestation of concurrencebet&een the offer and the acceptance regardingthe object and the cause.

Real contracts li e deposit, pledge andcommodatum requires delivery of object for perfection.

'ontracts under the 'ivil 'ode generallyadhere to the 'ognition 4heory, &hiletransactions under the 'ode of 'ommerce usethe ;anifestation 4heory.

VICES OF CONSENT (;>FDE1. M istake should refer to the substance of the thing &hich is the object of the contract, or tothose conditions &hich have principally movedone or both parties to enter into the contact2. I nti$idation &hen 1 of the contractingparties is compelled by a reasonable # &ell)grounded fear of an imminent # grave evil uponhis person or prop of his spouse, descendants or ascendants, to give his consent

. V iolence &hen in order to &rest consent,serious or irresistible force is employed






". U ndue in"luence &hen a person ta esimproper advantage of his po&er over the &ill of another, depriving the latter of a reasonable

freedom of choice+. F raud &hen, through insidious &ords or machinations of 1 of the contracting parties, theother is induced to enter into a contract &hich,&ithout them, he &ould not have agreed to.

OBJECT Requisites:

1. >t must be &<in the commerce of man2. >t must be licit or not contrary la&, morals,

good customs, public order or public policy. >t must be possible

". >t must be determinate as to its ind

CAUSE the immediate, direct and most pro-imate

reason &hich e-plains and justifies the creationof obligation. Requisites

1. 'ause should be in e-istence at the time of the celebration of the contract

2. 'ause should be licit or la&ful. 'ause should be true

Rules:1. >n onerous contracts, the cause is

understood to be, for each contracting party,the prestation of promise of a thing or service by the other

2. >n remuneratory contracts, the service or benefit &<c is remunerated

. >n contracts of pure beneficience, the mereliberality of the benefactor

CAUSE EFFECT

1. 5bsence ofcause

the contract confers noright and produces nolegal effect

2. Eailure of cause does not render thecontract void

. >llegality ofcause

the contract is null andvoid

". Ealsity of cause the contract is void,unless the partiessho& that there isanother cause &hich istrue and la&ful

+. %esion does not invalidate thecontract, unless (1there is fraud, mista eor undue influence3 or (2 &hen the partiesintended a donation or some other contract

FORM OF CONTRACTS '()(RAL R*L(+ 'ontracts shall be

obligatory, in &hatever form they may have beenentered into, provided all the essential requisitesfor their validity are present.

( -(PT /)0+

1. 9hen the la& requires that a contract bein some form in order that it may bevalid

2. 9hen the la& requires that a contractbe in some form in order that it may beenforceable

. Eor the convenience of the parties

arties may compel each other to comply &iththe form required once the contract has beenperfected. (5rt 1 +7

R5 87@2 (=) ' ;;=R'= 5'4 provides thatthe formal requirements to ma e contractseffective as against third persons and toestablish the e-istence of a contract are deemedcomplied &ith provided that the electronicdocument is unaltered and can be authenticatedas to be usable for future reference.

REFORMATION OF INSTRUMENTS Requisites:

1. meeting of the minds to the contract2. true intention is not e-pressed in theinstrument by reason of mista e, accident,relative simulation, fraud, or inequitable conduct

. clear and convincing proof of mista e,accident, relative simulation, fraud, or inequitable conduct

I%#+&% !# / !% + !"! &% (! %$ "!8$",&+)$%:1. $imple unconditional donations inter vivos32. 9ills3

. 9hen the agreement is void3". 9hen one of the parties has brought an

action to enforce the instrument nosubsequent reformation can be as ed.






COMPARATIVE TABLE OF DEFECTIVE CONTRACTSVOID VOIDABLE RESCISSIBLE UNENFORCEABLE

. *efect is caused bylac of essentialelements or illegality

*efect is caused byvice of consent

*efect is caused byinjury< damage either toone of the parties of to a

rd person

*efect is caused bylac of form, authority,or capacity of bothpartiesnot cured byprescription

2. *o not, as a general

rule produce any legaleffect

Falid and enforceable

until they areannulled by acompetent court

Falid and enforceable

until they are rescindedby a competent court

'annot be enforced by

a proper action in court

;. 5ction for thedeclaration or nullity or ine-istence or defenseof nullity or ine-istencedoes not prescribe

5ction for annulmentor defense of annulability mayprescribe

5ction for rescission mayprescribe

'orresponding actionfor recovery, if there&as total or partialperformance of theunenforceable contractunder 0o. 1 or of 5rt.1"? may prescribe

<. 0ot cured byprescription

'ured by prescription 'ured by prescription 0ot cured byprescription

=. 'annot be ratified 'an be ratified 0eed not be ratified 'an be ratified4. 5ssailed not only bya contracting party buteven by a third person&hose interest isdirectly affected

5ssailed only by acontracting party

5ssailed not only by acontracting party but evenby a third person &ho isprejudiced or damagedby the contract

5ssailed only by acontracting party

. 5ssailed directly or collaterally

5ssailed directly or collaterally

5ssailed directly only 5ssailed directly or collaterally

RESCISSIBLE CONTRACTS 'ontracts validly agreed upon but, by reason of

lesion or economic prejudice, may be rescindedin cases established by la& 9hat contracts are rescissible:

1. those entered into by guardians &here the&ard suffers lesion of more than G of the valueof the things &hich are objects thereof32. those agreed upon in representation of absentees, if the latter suffer lesion by more thanG of the value of the things &hich are subjectthereof3

. those underta en in fraud of creditors &henthe latter cannot in any manner claim &hat aredue them3". those &hich refer to things under litigation if they have been entered into by the defendant&ithout the no&ledge and approval of thelitigants and the court3+. all other contracts especially declared byla& to be subject to rescission3 and6. payments made in a state of insolvency onaccount of obligations not yet enforceable Requisites:

1. the contract must be rescissible

2. the party as ing for rescission must have noother legal means to obtain reparation for thedamages suffered by him

. the person demanding rescission must beable to return &hatever he may be able to return&hatever he may be obliged to restore if rescission is granted". the things &<c are the object of the contractmust not have passed legally to the possessionof a rd person acting in good faith+. the action for rescission must be brought&<in the prescriptive period of " years

B&1*!# $8 F"&31:1. consideration of the conveyance is

inadequate or fictitious32. transfer &as made by a debtor after a suit

has been begun and &hile it is pendingagainst him3

. sale upon credit by an insolvent debtor3". evidence of indebtedness or complete

insolvency+. transfer of all his property by a debtor &hen

he is financially embarrassed or insolvent36. transfer made bet&een father # son, &here

there is present any of the abovecircumstances






7. failure of the vendee to ta e e-clusivepossession of all the property

VOIDABLE CONTRACTS 9hat contracts are voidable:1. those &here one of the parties is incapable

of giving consent to a contract2. those &here the consent is vitiated by

mista e, violence, intimidation, undueinfluence or fraud.

C&3#!# $8 !>+)% +)$% $8 & +)$% +$ &%%3':1. rescription the action must be commenced &ithin "

years from:a. the time the incapacity ends3b. the time the violence, intimidation or undue influence ends3 or c. the time the mista e or fraud isdiscovered.

2. Ratification Requisites:

a. there must be no&ledge of thereason &hich renders the contractvoidable3

b. such reason must have ceased3 andc. the injured party must have e-ecuted

an act &hich e-pressly or impliedlyconveys an intention to &aive his right.

. Cy loss of the thing &hich is the object of thecontract through fraud or fault of the person &hois entitled to annul the contract.

UNENFORCEABLE CONTRACTS 9hat contracts are unenforceable:

1. those entered into in the name of another byone &ithout or acting in e-cess of authority32. those &here both parties are incapable of giving consent3 and

. those &hich do not comply &ith the $tatuteof Erauds.

A*"!!,!%+# /)+ )% + ! # $9! $8 + ! S+&+3+!$8 F"&31# (e-clusive list :1. 5greements not to be performed &ithin one

year from the ma ing thereof32. $pecial promise to ans&er for the debt,

default or miscarriage of another3. 5greement in consideration of marriage

other than a mutual promise to marry3". 5greement for the sale of goods, etc. at a

price not less than +??.??3+. 'ontracts of lease for a period longer than

one year36. 5greements for the sale of real property or

interest therein3 and

7. Representation as to the credit of a thirdperson.

4he contracts<agreements under the $tatuteof Erauds require that the same be evidenced bysome note, memorandum or &riting, subscribedby the party charged or by his agent, other&ise,the said contracts shall be unenforceable

4he statute of frauds applies only toe-ecutory contracts, not to those that arealready partially or completely fulfilled.

R&+)8) &+)$% $8 $%+"& +# )% )$'&+)$% $8 + !S+&+3+! $8 F"&31#

1. Eailure to object to the presentation of oral evidence to prove the same

2. 5cceptance of benefits under them

VOID CONTRACTS 9hat contracts are void:

1. 4hose &hose cause, object or purpose iscontrary to la&, morals good customs, publicorder or public policy32. 4hose &hose object is outside thecommerce of men3

. 4hose &hich contemplate an impossibleservice3". 4hose &here the intention of the partiesrelative to the principal object of the contractcannot be ascertained3 and+. 4hose e-pressly prohibited or declared voidby la&.

INE@ISTENT CONTRACTS 9hat contracts are ine-istent:

1. 4hose &hich are absolutely simulated or fictitious3 and2. 4hose &hose cause or object did not e-ist atthe time of the transaction.

P")% )9'! $8 P&") D!') +$ '()(RAL R*L(+ 9hen the defect of a void

contract consists in the illegality of the cause or object of the contractand both of the parties are at faultor in pari delicto, the la& refusesthem every remedy and leavesthem &here they are.

( -(PT /)0+1. ayment of usurious interest2. ayment of money or delivery of property for

an illegal purpose, &here the party &ho paidor delivered repudiates the contract beforethe purpose has been accomplished, or before any damage has been caused to a rd

person.. ayment or delivery made by an

incapacitated person". 5greement or contract &hich is not illegal

per se # the prohibition is designed for theprotection of the plaintiff

+. ayment of any amount in e-cess of thema-imum price of any article or commodityfi-ed by la&

6. 'ontract &hereby a laborer underta es to&or longer than the ma-imum H of hoursfi-ed by la&

7. 'ontract &hereby a laborer accepts a &agelo&er than the minimum &age fi-ed by la&.

R3'!# / !% $%' $%! $8 + ! 9&"+)!# )# &+ 8&3'+: A. (2ecuted -ontracts+






1. uilty party is barred from recovering&hat he has given to the other party isbarred from recovering &hat he has given

to the other party by reason of the contract.2. >nnocent party may demand for the returnfor the return of &hat he has given.

. (2ecutory -ontracts+ 0either of thecontracting parties can demand for the fulfillmentof any obligation from the contract nor may becompelled to comply &ith such obligation

NATURAL OBLIGATIONS 4hey are real obligations to &hich the la&

denies an action, but &hich the debtor mayperform voluntarily >t is patrimonial, and presupposes a prestation 4he binding tie of these obligations is in the

conscience of man, for under the la&, they donot have the necessary efficacy to give rise to anaction =-amples of natural obligations enumerated

under the 'ivil 'ode:1. erformance after the civil obligation has

prescribed32. Reimbursement of a third person for a debt

that has prescribed3. Restitution by minor after annulment of

contract3". *elivery by minor of money or fungible thing

in fulfillment of obligation3+. erformance after action to enforce civil

obligation has failed36. ayment by heir of debt e-ceeding value of

property inherited3 and7. ayment of legacy after &ill has been

declared void.

ESTOPPEL 5 condition or state by virtue of &hich an

admission or representation is renderedconclusive upon the person ma ing it andcannot be denied or disproved as against theperson relying thereon. /inds:

1. =stoppel in ais (by conduct a. =stoppel by silence

b. =stoppel by acceptance of benefits2. 4echnical =stoppel

a. =stoppel by deedb. =stoppel by record

. =stoppel by judgment". %aches

LACHES PRESCRIPTION1. concerned &itheffect of delay

1. concerned &ithfact of delay

2. question of inequity of permittingthe claim to beenforced

2. question or matter of time

. not statutory . statutory

". applies in equity1. not based on a

fi-ed time

". applies at la&based on a fi-ed time

San Beda Obligations Contracts

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