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Obligation is a juridical necessity because in case of non-compliance,

the courts of justice may be called upon to enforce its fulfi llment
An obligation as defined in Article 1156 is constituted upon the
concurrence of the four (4) essential elements thereof, namely:
(1) A passive subject (called debtor or obligor) or the person who is
bound to the fulfi llment of the obligation; he who has a duty;
(2) An active subject (called creditor or obligee) or the person who
is entitled to demand the fulfi llment of the obligation; he who has a
(3) Object or prestation (subject matter of the obligation) or the conduct
required to be observed by the debtor. It may consist in giving,
doing, or not doing. (see Art. 1232.) Without the prestation, there is
nothing to perform. In bilateral obligations (see Art. 1191.), the parties
are reciprocally debtors and creditors; and
(4) A juridical or legal tie (also called effi cient cause) or that which
binds or connects the parties to the obligation. The tie in an obligation
can easily be determined by knowing the source of the obligation. (Art.
Under a building contract, X bound himself to construct a house for
Y for P1,000,000.00.
Here, X is the passive subject, Y is the active subject, the building
of the house is the object or prestation, and the agreement or contract,
which is the source of the obligation, is the juridical tie.
Suppose X had already constructed the house and it was the
agreement that Y would pay X after the construction is fi nished. X, then,
becomes the active subject and Y, the passive subject.
Kinds of obligation according to subject matter.
From the viewpoint of the subject matter, obligation may either be:
(1) Real obligation (obligation to give) or that in which the subject
matter is a thing which the obligor must deliver to the obligee; or
(2) Personal obligation (obligation to do or not to do) or that in
which the subject matter is an act to be done or not to be done.
There are thus two (2) kinds of personal obligation:
(a) Positive personal obligation or obligation to do or to render
service (see Art. 1167.); and
(b) Negative personal obligation or obligation not to do (which
naturally includes obligations not to give )
Sources of obligations
An obligation imposed on a person and the corresponding right
granted to another must be rooted in at least any of the following
(1) Law. when they are imposed by the law itself, e.g., obligation
to pay taxes; obligation to support one s family (see Art. 195, Family
(2) Contracts. when they arise from the stipulation of the
parties (Art. 1306.), e.g., the obligation to repay a loan by virtue of an

(3) Quasi-contracts.
when they arise from lawful, voluntary and
unilateral acts and which are enforceable to the end that no one shall
be unjustly enriched or benefi ted at the expense of another (Art. 2142.),
e.g., the obligation to return money paid by mistake or which is not
due. (Art. 2154.) In a sense, these obligations may be considered as
arising from law;
(4) Crimes or acts or omissions punished by law.
when they arise
from civil liability which is the consequence of a criminal offense (Art.
1161.), e.g., the obligation of a thief to return the car stolen by him; the
duty of a killer to indemnify the heirs of his victim; and
(5) Quasi-delicts or torts.
when they arise from damage caused
to another through an act or omission, there being fault or negligence,
but no contractual relation exists between the parties (Art. 2176.), e.g.,
the obligation of the head of a family that lives in a building or a part
thereof to answer for damages caused by things thrown or falling from
the same (Art. 2193.); the obligation of the possessor of an animal to
pay for the damage which it may have caused. (Art. 2183.)
The enumeration by the law is exclusive; hence, there is no
obligation as defi ned in Article 1156, if its source is not any of those
ART. 1158. Obligations derived from law are not presumed.
Only those expressly determined in this Code or in special laws
are demandable, and shall be regulated by the precepts of the
law which establishes them; and as to what has not been foreseen,
by the provisions of this Book. (1090)
Legal obligations.
Article 1158 refers to legal obligations or obligations arising from
law. They are not presumed because they are considered a burden upon
the obligor. They are the exception, not the rule. To be demandable,
they must be clearly set forth in the law, i.e., the Civil Code or special
(1) An employer has no obligation to furnish free legal assistance
to his employees because no law requires this, and, therefore, an employee
may not recover from his employer the amount he may have
paid a lawyer hired by him to recover damages caused to said employee
by a stranger or strangers while in the performance of his duties.
(De la Cruz vs. Northern Theatrical Enterprises, 95 Phil. 739 [1954].)
1. Liability of husband for medical assistance rendered to his wife but
contracted by his parents.
Facts: X, by virtue of having been sent for by B and C, attended as
physician and rendered professional services to a daughter-in-law of B
and C during a diffi cult and laborious childbirth.
Issue: Who is bound to pay the bill: B and C, the parents-in-law of the
patient, or the husband of the latter?
Held: The rendering of medical assistance in case of illness is
comprised among the mutual obligations to which spouses are bound by
way of mutual support.

If spouses are mutually bound to support each

other, there can be no question that when either of them by reason of
illness should be in need of medical assistance, the other is to render the
unavoidable obligation to furnish the services of a physician and is liable
for all expenses, including the fees for professional services.
This liability originates from the above-mentioned mutual obligation
which the law has expressly established between the married couple.
ART. 1159. Obligations arising from contracts have the force
of law between the contracting parties and should be complied
with in good faith. (1091a)
Contractual obligations
The above article speaks of contractual obligations or obligations
arising from contracts or voluntary agreements.
A contract is a meeting of minds between two persons whereby one
binds himself, with respect to the other, to give something or to render
some service. (Art. 1305.) It is the formal expression by the parties of
their rights and obligations they have agreed upon with respect to
each other.
Kinds of quasi-contracts
The principal kinds of quasi-contracts are negotiorum gestio and
solutio indebiti.
(1) Negotiorum gestio is the voluntary management of the property
or affairs of another without the knowledge or consent of the latter.
(Art. 2144.) Thus, if through the efforts of X, a neighbor, the house of Y
was saved from being burned, Y has the obligation to reimburse X for
the expenses X incurred although Y did not actually give his consent
to the act of X in saving his house on the principle of quasi-contract.
This juridical relation does not arise in either of these instances:
(a) When the property or business is not neglected or abandoned,
in which case the provisions of the Civil Code regarding
unauthorized contracts (Arts. 1317, 1403[1], 1404.) shall govern;
(b) If, in fact, the manager has been tacitly authorized by
the owner, in which case the rules on agency shall govern. (Art.
(2) Solutio indebiti is the juridical relation which is created when
something is received when there is no right to demand it and it was
unduly delivered through mistake. (Art. 2154.)
The obligation to pay money mistakenly paid arises from the moment said payment
was made, and not from the time the payee admits the obligation to reimburse. (C
omm. of Internal Revenue vs. Esso Standard Eastern, Inc., 172 SCRA 364 [1989].)
Under the principle, the government has to restore (credit or refund) to the tax
payer the amounts representing erroneous payments of taxes. (Phil. Geothermal, I
nc. vs. Comm. of Internal Revenue, 465 SCRA 308 [2005].) The quasi-contract of s
olutio indebiti is based on the ancient principle that no one shall enrich himse
lf unjustly at the expense of another.

Solutio indebiti applies where:

(a) payment is made when there exists no binding relation
between the payor, who has no duty to pay, and the person who
received the payment; and
(b) the payment is made through mistake11 and not through
liberality or some other cause.
1. Recovery of taxes paid under a mistake.
Facts: X, a tax-exempt cooperative store, paid taxes to the City of
Manila, believing that it was liable.
Issue: May X recover the payment?
Held: Yes, as it was made under a mistake. (UST Cooperative Store vs.
City of Manila, 15 SCRA 656 [1965].)

2. Recovery of backwages paid which are legally due.

Facts: X, an employee of Cebu City, sued certain offi cials of the City
for claim of backwages.
Issue: May the City of Cebu successfully recover the payment later
made by it to X on the ground that it was not made a party to the case?
Held: No, because a judgment against a municipal offi cer in his offi
cial capacity binds the city. The city was under obligation to make the
payment. It cannot, therefore, be said that the payment was made by reason
of mistake. (City of Cebu vs. Piccio and Caballero, 110 Phil. 870 [1969].)
ART. 1163. Every person obliged to give something is also
obliged to take care of it with the proper diligence of a good
father of a family, unless the law or the stipulation of the parties
requires another standard of care. (1094a)
Meaning of specifi c or determinate thing.
The above provision refers to an obligation to give a specifi c or
determinate thing.
A thing is said to be specific or determinate when it is particularly
designated or physically segregated from all others of the same class.
(Art. 1459.)
(1) The watch I am wearing.
(2) The car sold by X.
(3) My dog named Terror.
(4) The house at the corner of Rizal and Del Pilar Streets.
(5) The Toyota car with Plate No. AAV 344.
(6) This cavan of rice.
(7) The money I gave you.
Meaning of generic or indeterminate thing
A thing is generic or indeterminate when it refers only to a class or
genus to which it pertains and cannot be pointed out with particularity.

(1) a Bulova calendar watch.
(2) a 2006 model Japanese car.
(3) a police dog.
(4) a cavan of rice.
(5) the sum of P10,000.00.
Specific thing and generic thing distinguished
(1) A determinate thing is identifi ed by its individuality. The
debtor cannot substitute it with another although the latter is of the
same kind and quality without the consent of the creditor. (Art. 1244.)
(2) A generic thing is identified only by its specie. The debtor can
give anything of the same class as long as it is of the same kind.
(1) If D s obligation is to deliver to C a Bulova calendar watch, D
can deliver any watch as long as it is Bulova with calendar.
But if D s obligation is to deliver to C a particular watch, the one
D is wearing, D cannot substitute it with another watch without C s
consent nor can C require D to deliver another watch without D s consent
although it may be of the same kind and value. (see Arts. 1244, 1246.)
(2) If D s obligation is to deliver to C one of his cars, the object refers
to a class which in itself is determinate.
Here, the particular thing to be delivered is determinable without
the need of a new contract between the parties (see Art. 1349.); it becomes
determinate upon its delivery.
Duties of debtor in obligation to give
a determinate thing.
They are:
(1) To preserve or take care of the thing due;
(2) To deliver the fruits of the thing (see Art. 1164.);
(3) To deliver its accessions and accessories (see Art. 1166.);
(4) To deliver the thing itself (see Arts. 1163, 1233, 1244; as to kinds
of delivery, Arts. 1497 to 1501.); and
(5) To answer for damages in case of non-fulfi llment or breach.
(see Art. 1170.)
Obligation to take care of the thing due
(1) Diligence of a good father of a family.
In obligations to give
(real obligations), the obligor has the incidental duty to take care of
the thing due with the diligence of a good father of a family pending
delivery. The phrase has been equated with ordinary care or that
diligence which an average (a reasonably prudent) person exercises
over his own property.
(2) Another standard of care. However, if the law or the stipulation
of the parties provides for another standard of care (slight or
extraordinary diligence), said law or stipulation must prevail. (Art.
(a) Under the law, for instance, a common carrier (person or
company engaged in the transportation of persons and/or cargoes)
is bound to carry the passengers safely as far as human care and

foresight can provide, using utmost (extraordinary) diligence of

very cautious persons, with a due regard for all the circumstances.
(Art. 1755.) In case of accident, therefore, the common carrier will
be liable if it exercised only ordinary diligence or the diligence of a
good father of a family.
(b) Banks are duty bound to treat the deposit accounts of their
depositors with the highest degree of care where the fi duciary
nature of their relationship with their depositors is concerned. But
such degree of diligence is not expected to be exerted by banks
in commercial transactions that do not involve their fi duciary
relationship with their depositors. (Reyes vs. Court of Appeals,
363 SCRA 51 [2001].)
(c) While parties may agree upon diligence which is more or
less than that of a good father of a family, it is contrary to public
policy (see Art. 1306.) to stipulate for absolute exemption from
liability for any fault or negligence. (see Arts. 1173, 1174.) Thus, a
stipulation exempting a carrier from liability for gross negligence
is against public policy. (Heacock
(3) Factors to be considered.
The diligence required depends upon
the nature of the obligation and corresponds with the circumstances of
the person, of the time, and of the place. (Art. 1173.) It is not necessarily
the standard of care one always uses in the protection of his own
property. As a general rule, the debtor is not liable if his failure to
preserve the thing is not due to his fault or negligence but to fortuitous
events or force majeure. (Art. 1174.)
(4) Reason for debtor s obligation.
The debtor must exercise
diligence to insure that the thing to be delivered would subsist in the
same condition as it was when the obligation was contracted. Without
the accessory duty to take care of the thing, the debtor would be able to
afford being negligent and he would not be liable even if the property
is lost or destroyed, thus rendering illusory the obligation to give. (8
Manresa 35-37.)
Duties of debtor in obligation to deliver a generic thing.
They are:
(1) To deliver a thing which is of the quality intended by the
parties taking into consideration the purpose of the obligation and
other circumstances (see Art. 1246.); and
(2) To be liable for damages in case of fraud, negligence, or delay,
in the performance of his obligation, or contravention of the tenor
thereof. (see Art. 1170.)
ART. 1164. The creditor has a right to the fruits of the thing
from the time the obligation to deliver it arises. However, he
shall acquire no real right over it until the same has been delivered
to him. (1095)
Different kinds of fruits
The fruits mentioned by the law refer to natural, industrial, and
civil fruits.
(1) Natural fruits are the spontaneous products of the soil, and the
young and other products of animals, e.g., grass; all trees and plants on
lands produced without the intervention of human labor.

(2) Industrial fruits are those produced by lands of any kind

through cultivation or labor, e.g., sugar cane; vegetables; rice; and all
products of lands brought about by reason of human labor.
(3) Civil fruits are those derived by virtue of a juridical relation,
e.g., rents of buildings, price of leases of lands and other property and
the amount of perpetual or life annuities or other similar income. (Art.
When obligation to deliver arises.
(1) Generally, the obligation to deliver the thing due and, consequently,
the fruits thereof, if any, arises from the time of the perfection
of the contract. Perfection in this case refers to the birth of the contract
or to the meeting of the minds between the parties. (Arts. 1305, 1315,
(2) If the obligation is subject to a suspensive condition or period
(Arts. 1179, 1189, 1193.), it arises upon fulfi llment of the condition or
arrival of the period. However, the parties may make a stipulation
to the contrary as regards the right of the creditor to the fruits of the
(3) In a contract of sale, the obligation arises from the perfection of
the contract even if the obligation is subject to a suspensive condition
or a suspensive period where the price has been paid.
(4) In obligations to give arising from law, quasi-contracts, delicts,
and quasi-delicts, the time of performance is determined by the specifi c
provisions of law applicable.
S sold his horse to B for P15,000.00. No date or condition was
stipulated for the delivery of the horse. While still in the possession of S,
the horse gave birth to a colt.
Who has the right to the colt?
In a contract of sale all the fruits shall pertain to the vendee from the
day on which the contract was perfected. (Art. 1537, 2nd par.) Hence,
B is entitled to the colt. This holds true even if the delivery is subject to
a suspensive condition (see Art. 1179; e.g., upon the demand of B) or a
suspensive period (see Art. 1193; e.g., next month) if B has paid the purchase
But S has a right to the colt if it was born before the obligation to
deliver the horse has arisen (Art. 1164.) and B has not yet paid the purchase
price. In this case, upon the fulfi llment of the condition or the arrival of
the period, S does not have to give the colt and B is not obliged to pay
legal interests on the price since the colt and the interests are deemed to
have been mutually compensated. (see Art. 1187.)
Meaning of personal right and real right.
(1) Personal right1 is the right or power of a person (creditor)
to demand from another (debtor), as a definite passive subject, the
fulfi llment of the latter s obligation to give, to do, or not to do.
(2) Real right2 is the right or interest of a person over a specifi c
thing (like ownership, possession, mortgage, lease record) without
a definite passive subject against whom the right may be personally
enforced. (Against the whole world)

ART. 1165. When what is to be delivered is a determinate

thing, the creditor, in addition to the right granted him by Article
1170, may compel the debtor to make the delivery.
If the thing is indeterminate or generic, he may ask that the
obligation be complied with at the expense of the debtor.
If the obligor delays, or has promised to deliver the same
thing to two or more persons who do not have the same interest,
he shall be responsible for any fortuitous event until he has
effected the delivery. (1096)
(1) In a specifi c real obligation (obligation to deliver a determinate
thing), the creditor may exercise the following remedies or rights in
case the debtor fails to comply with his obligation:
(a) demand specifi c performance or fulfi llment (if it is still
possible) of the obligation with a right to indemnity for damages;
(b) demand rescission or cancellation (in certain cases) of the
obligation also with a right to recover damages (Art. 1170.); or
(c) demand the payment of damages only (see Art. 1170.)
where it is the only feasible remedy.
In an obligation to deliver a determinate thing, the very thing
itself must be delivered. (Art. 1244.) Consequently, only the debtor
can comply with the obligation. This is the reason why the creditor is
granted the right to compel the debtor to make the delivery. (Art. 1165,
1.) It should be made clear, however, that the law does not mean
that the creditor can use force or violence upon the debtor. The creditor
must bring the matter to court and the court will be the one to order the delive
(2) A generic real obligation (obligation to deliver a generic thing),
on the other hand, can be performed by a third person since the object is
expressed only according to its family or genus.
It is thus not necessary
for the creditor to compel the debtor to make the delivery although he
may ask for performance of the obligation. In any case, the creditor has
a right to recover damages under Article 1170 in case of breach of the
ART. 1166. The obligation to give a determinate thing includes
that of delivering all its accessions and accessories,
even though they may not have been mentioned. (1097a)
Meaning of accessions and accessories.
(1) Accessions are the fruits of, or additions to, or improvements
upon, a thing (the principal), e.g., house or trees on a land; rents of a
building; airconditioner in a car; profi ts or dividends accruing from
shares of stocks; etc.
The concept includes accession in its three forms of building,

planting, and sowing (see Art. 445.), and accession natural, such as
alluvion (see Art. 457.), avulsion (see Art. 459.), change of course of
rivers (see Arts. 461-462.), and formation of islands. (see Arts. 464-465.)
Fruits of the thing

are specifi cally provided for in Article 1164.

(2) Accessories are things joined to, or included with, the principal
thing for the latter s embellishment, better use, or completion, e.g.,
key of a house; frame of a picture; bracelet of a watch; machinery in a
factory; bow of a violin.
Note that while accessions are not necessary to the principal
thing, the accessory and the principal thing must go together but both
accessions and accessories can exist only in relation to the principal.
ART. 1167. If a person obliged to do something fails to do it,
the same shall be executed at his cost.
This same rule shall be observed if he does it in contravention
of the tenor of the obligation. Furthermore, it may be
decreed that what has been poorly done be undone. (1098)
Situations contemplated in Article 1167.
Article 1167 refers to an obligation to do, i.e., to perform an act or
render a service. It contemplates three situations:
(1) The debtor
(2) The debtor
terms thereof;
(3) The debtor

fails to perform an obligation to do; or

performs an obligation to do but contrary to the
performs an obligation to do but in a poor manner.

Remedies of creditor in positive

personal obligation.
(1) If the debtor fails to comply with his obligation to do, the
creditor has the right:
(a) to have the obligation performed by himself, or by another
unless personal considerations are involved, at the debtor s
expense; and
(b) to recover damages. (Art. 1170.)
(2) In case the obligation is done in contravention of the terms of
the same or is poorly done, it may be ordered (by the court) that it be
undone if it is still possible to undo what was done.
Liability of debtor who fails to comply with an obligation to do.
Facts: A delivered to B, a typewriter repairer, a portable typewriter
for routine cleaning and servicing. B was not able to fi nish the job after
some time despite repeated reminders made by A. Finally, B returned the
typewriter unrepaired, some of the parts missing. A had the typewriter
repaired by F Business Machines, and the repair job cost him P58.75 for
labor or service and P31.10 for the missing parts or a total of P89.85.
The lower court rendered judgment ordering B to pay only P31.10.
Issue: Is B liable also for P58.75, the cost of the service expended in
the repair?

Held: Yes. B contravened the tenor of his obligation (see Art. 1170.)
because he not only did not repair the typewriter but returned it in
shambles. For such contravention, he is liable under Article 1167 for the
cost of executing the obligation in a proper manner, which in the case
should be the cost of the labor or service expended in its repair, because
the obligation or contract was to repair it.
ART. 1168. When the obligation consists in not doing, and
the obligor does what has been forbidden him, it shall also be
undone at his expense. (1099a)
Remedies of creditor in negative
personal obligation.
In an obligation not to do, the duty of the obligor is to abstain from
an act. Here, there is no specifi c performance. The very obligation is
fulfi lled in not doing what is forbidden. Hence, in this kind of obligation
the debtor cannot be guilty of delay. (Art. 1169.)
As a rule, the remedy of the obligee is the undoing of the forbidden
thing plus damages. (Art. 1170.) However, if it is not possible to undo
what was done, either physically or legally, or because of the rights
acquired by third persons who acted in good faith, or for some other
reason, his remedy is an action for damages caused by the debtor s
violation of his obligation.
S sold a land to B. It was stipulated that S would not construct a
fence on a certain portion of his land adjoining that sold to B. Should
S construct a fence in violation of the agreement, B can have the fence
removed at the expense of S.
ART. 1169. Those obliged to deliver or to do something incur
in delay from the time the obligee judicially or extra-judicially
demands from them the fulfi llment of their obligation.
However, the demand by the creditor shall not be necessary
in order that delay may exist:
(1) When the obligation or the law expressly so declares;
(2) When from the nature and the circumstances of the
obligation it appears that the designation of the time when the
thing is to be delivered or the service is to be rendered was a
controlling motive for the establishment of the contract; or
(3) When demand would be useless, as when the obligor
has rendered it beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the
other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. From the moment one of the parties
fulfills his obligation, delay by the other begins.
Meaning of delay.
The word delay, as used in the law, is not to be understood according
to its meaning in common parlance. A distinction, therefore, should be
made between ordinary delay and legal delay (default or mora) in the
performance of an obligation.
(1) Ordinary delay is merely the failure to perform an obligation on

(2) Legal delay or default or mora is the failure to perform an obligation
on time which failure, constitutes a breach of the obligation.
Kinds of delay (mora).
They are:
(1) Mora solvendi or the delay on the part of the debtor to fulfi ll his
obligation (to give or to do) by reason of a cause imputable to him;
(2) Mora accipiendi or the delay on the part of the creditor without
justifi able reason to accept the performance of the obligation; and
(3) Compensatio morae or the delay of the obligors in reciprocal
obligations (like in sale), i.e., the delay of the obligor cancels the delay
of the obligee, and vice versa.
No delay in negative personal obligation.
In an obligation not to do, non-fulfi llment may take place but
delay is impossible for the debtor fulfi lls by not doing what has been
forbidden him. (see Art. 1168.)
Requisites of delay or default by the debtor.
There are three conditions that must be present before mora solvendi
can exist or its effects arise:
(1) failure of the debtor to perform his (positive) obligation on the
date agreed upon;
(2) demand (not mere reminder or notice) made by the creditor
upon the debtor to fulfi ll, perform, or comply with his obligation which
demand, may be either judicial (when a complaint is fi led in court) or
extra-judicial (when made outside of court, orally or in writing); and
(3) failure of the debtor to comply with such demand.
The above presupposes that the obligation is already due or
demandable and liquidated. (see Art. 1279[4].) There is no delay if the
obligation is not yet due or demandable.
A debt is liquidated when the amount is known or is determinable by inspection o
f the terms and
conditions of relevant documents.
Effects of delay.
(1) Mora solvendi.
The following are the effects:
(a) The debtor is guilty of breach of the obligation;
(b) He is liable for interest in case of obligations to pay money
(Art. 2209.) or damages in other obligations. (Art. 1170.) In the
absence of extrajudicial demand, the interest shall commence from
the fi ling of the complaint; and
(c) He is liable even for a fortuitous event when the obligation
is to deliver a determinate thing. (Arts. 1165, 1170.) However, if
the debtor can prove that the loss would have resulted just the
same even if he had not been in default, the court may equitably
mitigate the damages. (Art. 2215[4].)
In an obligation to deliver a generic thing, the debtor is not

relieved from liability for loss due to a fortuitous event. He can still
be compelled to deliver a thing of the same kind (see Art. 1263.) or
held liable for damages. (Art. 1170; see Lee vs. De Guzman, Jr., 187
SCRA 276 [1990].)
(2) Mora accipiendi.
The effects are as follows:
(a) The creditor is guilty of breach of obligation;
(b) He is liable for damages suffered, if any, by the debtor;
(c) He bears the risk of loss of the thing due (see Art. 1162.);
(d) Where the obligation is to pay money, the debtor is not
liable for interest from the time of the creditor s delay; and
(e) The debtor may release himself from the obligation by the
consignation of the thing or sum due. (see Art. 1256.)
(3) Compensatio morae. The delay of the obligor cancels out the
effects of the delay of the obligee and vice versa. The net result is that
there is no actionable default on the part of both parties, such that as if
neither one is guilty of delay.
If the delay of one party is followed by that of the other, the
liability of the fi rst infractor shall be equitably tempered or balanced
by the courts. If it cannot be determined which of the parties is guilty
of delay, the contract shall be deemed extinguished and each shall bear
his own damages.
ART. 1170. Those who in the performance of their obligations
are guilty of fraud, negligence, or delay, and those who
in any manner contravene the tenor thereof, are liable for damages.
Grounds for liability
Article 1170 gives the four grounds for liability which may entitle
the injured party to damages (see Art. 2197.) for all kinds of obligations
regardless of their source, mentioned in Article 1157, whether the obligations
are real or personal. (supra.) It contemplates that the obligation
was eventually performed but the obligor is guilty of breach thereof.
Here, the breach of the obligation is voluntary; in Article 1174, it is involunt
As used in Article 1170, it is the deliberate
(1) Fraud (deceit or dolo).
or intentional evasion of the normal fulfi llment of an obligation. (see 8
Manresa 72.)
(a) As a ground for damages, it implies some kind of malice
or dishonesty and it cannot cover cases of mistake and errors of
judgment made in good faith. It is synonymous to bad faith in that
it involves a design to mislead or deceive another.6 (O leary Macondray
& Co., 45 Phil. 812 [1924]; Solid Bank Corp. vs. Mindanao
Ferroalloy Corp., 464 SCRA 409 [2005].) Moral damages may be
recovered in addition to other damages. (see Art. 2220; Far East
Bank & Trust Co. vs. Court of Appeals, 241 SCRA 671 [1995].)
(b) Article 1170 refers to incidental fraud (dolo incidente) committed
in the performance of an obligation already existing because
of contract. It is to be differentiated from causal fraud (dolo causante) or fra
ud employed in the execution of a contract under
Article 1338, which vitiates consent and makes the contract voidable


to incidental fraud under Article 1344 also employed for

purpose of securing the consent of the other party to enter into
contract but such fraud was not the principal inducement to
making of the contract.

(c) Under Article 1170, the fraud is employed for the purpose
of evading the normal fulfi llment of an obligation and its existence
merely results in breach thereof giving rise to a right by the
innocent party to recover damages. The Civil Code refers to civil
fraud. Criminal fraud gives rise to criminal liability.
S obliged himself to deliver to B 20 bottles of wine, of a particular
brand. S delivered 20 bottles knowing that they contain cheaper wine. S
is guilty of fraud and is liable for damages to B.
If B bought the 20 bottles of wine on the false representation of S that
the wine is that as represented by the labels, the fraud committed by S is
causal fraud. Without the fraud, B would not have given his consent to
the contract. He has the right to have the contract annulled or set aside on
the ground of the fraud. (Arts. 1390, 1391.)
In the first situation, the remedy of B is not annulment of the
contract of sale which is not affected by the incidental fraud but to claim
If the fraud employed by S to
principal inducement that led
also incidental under Article
action for damages. (see Art.

get B s consent was not the

B to enter into the contract, the fraud is
1344 and it will likewise give rise only to an
1344, par. 2.)

(2) Negligence (fault or culpa). It is any voluntary act or omission,

there being no malice, which prevents the normal fulfi llment of
an obligation.7 (see Arts. 1173, 1174.)
(3) Delay (mora).
This has already been discussed under Article
1169 which determines the commencement of delay. It has been ruled
that the delay in the performance of the obligation under Article 1170
must be either malicious or negligent. Thus, where the omission of
the buyer to sign a check, one of 24 post dated checks which were
delivered to the seller who did not bother to call the buyer to ask him
to sign the check, was mere inadvertence
on the part of the buyer,
the latter was held not liable for damages resulting from the delay in
the payment of the value of the unsigned check. (Rizal Commercial
Banking Corp. vs. Court of Appeals, 305 SCRA 449 [1999].)
(4) Contravention of the terms of the obligation.
This is the
violation of the terms and conditions stipulated in the obligation. The
contravention must not be due to a fortuitous event or force majeure.
(Art. 1174.) The unilateral act of terminating a contract without legal
justification by a party makes him liable for damages suffered by the
other pursuant to Article 1170. (Pacmac, Inc. vs. Intermediate Appellate
Court, 150 SCRA 555 [1987].)
ART. 1171. Responsibility arising from fraud is demandable
in all obligations. Any waiver of an action for future fraud is
void. (1102a)
Responsibility arising from fraud

This article refers to incidental fraud which is employed in the
fulfi llment of an obligation. (Art. 1170.)
Waiver of action for future fraud void.
According to the time of commission, fraud may be past or future.
A waiver of an action for future fraud is void (no effect, as if there
is no waiver) as being against the law and public policy. (Art. 1409[1].)
A contrary rule would encourage the perpetration of fraud because the
obligor knows that even if he should commit fraud he would not be
liable for it thus making the obligation illusory.
Waiver of action for past
fraud valid.
What the law prohibits is waiver anterior to the fraud and to the
knowledge thereof by the aggrieved party.
A past fraud can be the subject of a valid waiver because the waiver
can be considered as an act of generosity and magnanimity on the part
of the party who is the victim of the fraud. Here, what is renounced
is the effects of the fraud, that is, the right to indemnity of the party
entitled thereto.
ART. 1172. Responsibility arising from negligence in the
performance of every kind of obligation is also demandable, but
such liability may be regulated by the courts, according to the
circumstances. (1103)
Validity of waiver of action arising
from negligence.
(1) An action for future negligence (not fraud) may be renounced
except where the nature of the obligation requires the exercise of
extraordinary diligence as in the case of common carriers. (see Art.
(2) Where negligence is gro
ss or shows bad faith, it is considered
equivalent to fraud. Bad faith does not simply connote negligence or
bad judgment causing damages to another. Any waiver of an action for
future negligence of this kind is, therefore, void.
Kinds of negligence according
to source of obligation.
Culpa or negligence may be understood in three different senses.
They are:
(1) Contractual negligence (culpa contractual) or negligence in contracts
resulting in their breach Article 1172 refers to culpa contractual.
This kind of negligence is not a source of obligation. (Art. 1157.) It
merely makes the debtor liable for damages in view of his negligence
in the fulfi llment of a pre-existing obligation resulting in its breach or
non-fulfi llment. (Arts. 1170-1174, 2201.) It is a kind of civil negligence
if it does not amount to a crime;
(2) Civil negligence (culpa aquiliana) or negligence which by itself
is the source of an obligation between the parties not formally bound
before by any pre-existing contract. It is also called tort or quasidelict.

(Art. 2176.10);
(3) Criminal negligence (culpa criminal) or negligence resulting in the
commission of a crime. (Arts. 3, 365, Revised Penal Code.) The same
negligent act causing damages may produce civil liability arising from
a crime under Article 100 of the Revised Penal Code (supra.), or create
an action for quasi-delict under Article 2176, et seq., of the Civil Code.
(see Barredo vs. Garcia and Almario, 73 Phil. 607 [1942]; Elcano vs.
Hill, 77 SCRA 98 [1977].)
ART. 1174. Except in cases expressly specifi ed by the law,
or when it is otherwise declared by stipulation, or when the nature
of the obligation requires the assumption of risk, no person
shall be responsible for those events which could not be foreseen,
or which, though foreseen, were inevitable. (1105a)
Meaning of fortuitous event.
A fortuitous event is any extraordinary event which cannot be
foreseen, or which, though foreseen, is inevitable. In other words, it is
an event which is either impossible to foresee or impossible to avoid.
The essence of a fortuitous event consists of being a happening
independent of the will of the obligor and which happening, makes
the normal fulfi llment of the obligation impossible.
Fortuitous event distinguished
from force majeure.
(1) Acts of man.
Strictly speaking, fortuitous event is an event
independent of the will of the obligor but not of other human wills,
e.g., war, fi re, robbery, murder, insurrection, etc.
(2) Acts of God. They are those events which are totally
independent of the will of every human being, e.g., earthquake, fl ood,
rain, shipwreck, lightning, eruption of volcano, etc. They are also called
force majeure. The term generally applies to a natural accident.
In our law, fortuitous events and force majeure are identical in so far
as they exempt an obligor from liability. Both are independent of the
will of the obligor. (Republic vs. Luzon Stevedoring Corp., 21 SCRA
279 [1967]; University of Santo Tomas vs. Descals, 38 Phil. 287 [1918].)
Kinds of fortuitous events.
In speaking of the contract of lease, our Civil Code distinguishes
between two kinds of fortuitous events, namely:
(1) Ordinary fortuitous events or those events which are common
and which the contracting parties could reasonably foresee (e.g., rain);
(2) Extraordinary fortuitous events or those events which are
uncommon and which the contracting parties could not have
reasonably foreseen (e.g., earthquake, fi re, war,19 pestilence, unusual
flood). (see Art. 1680, par. 2.)
Requisites of a fortuitous event.
Whether an act of man or an act of God, to constitute a fortuitous
event, it is essential that:
(1) The event must be independent of the human will or at least of
the obligor s will;

(2) The event could not be foreseen (unforeseeable), or if it could

be foreseen, must have been impossible to avoid (unavoidable);
(3) The event must be of such a character as to render it impossible
for the obligor to comply with his obligation in a normal manner; and
(4) The obligor must be free from any participation in, or the aggravation
of the injury to the obligee. (see Lasam vs. Smith, 45 Phil. 657
[1923]; see General Enterprises, Inc. vs. Lianga Bay Logging Co., Inc.,
11 SCRA 733 [1964]; Tugade vs. Court of Appeals, 85 SCRA 226 [1978];
Juntilla vs. Fontaner, 136 SCRA 624 [1985].)
The absence of any of the above requisites (all of which must be
proved) would prevent the obligor from being exempt from liability.
Facts: In an action for collection of a sum of money, X obtained a
preliminary attachment on three (3) carabaos of B. To secure the release
of the carabaos, C and D executed a bond guaranteeing the delivery by B
or in the event that he should fail to do so, the payment of their value in
case judgment should be against B.
The carabaos died of a prevailing disease in the locality. Final
judgment was rendered against B.
Issue: Are C and D liable for the value of the carabaos?
Held: No. The death of the carabaos being fortuitous, it results upon
the one hand, that the obligation contracted by C and D to return or
deliver up the said carabaos was extinguished as a matter of fact and of
Rules as to liability in case of fortuitous
A person is not, as a rule, responsible for loss or damage resulting
from fortuitous events. In other words, his obligation is extinguished.
The exceptions are enumerated below.
(1) When expressly specifi ed by law.21
In exceptions (a), (b), and (c) below, t
he special strictness of the law is justified.
(a) The debtor is guilty of fraud, negligence, or delay, or
contravention of the tenor of the obligation. (Arts. 1170, 1165, par.3.)
(b) The debtor has promised to deliver the same (specifi c)
thing to two or more persons who do not have the same interest for
it would be impossible for the debtor to comply with his obligation
to two or more creditors even without any fortuitous event taking
place. (Ibid.)
(c) The debt of a thing certain and determinate proceeds
from a criminal offense, unless the thing having been offered by
the debtor to the person who should receive it, the latter refused
without justifi cation to accept it. (Art. 1268.)
(d) The thing to be delivered is generic (Art. 1263.) for the
debtor can still comply with his obligation by delivering another
thing of the same kind in accordance with the principle that genus
never perishes (genus nunquam perit).

(2) When declared by stipulation.

The basis for this exception
rests upon the freedom of contract. (See Art. 1306.) Such a stipulation
is usually intended to better protect the interest of the creditor and
procure greater diligence on the part of the debtor in the fulfi llment of his o
bligation. But the intention to make the debtor liable even in case
of a fortuitous event should be clearly expressed.
ART. 1175. Usurious transactions shall be governed by
special laws. (n)
Meaning of simple loan or mutuum.
Simple loan or mutuum is a contract whereby one of the parties
delivers to another money or other consumable thing, upon the
condition that the same amount of the same kind and quality shall be
paid. It may be gratuitous or with a stipulation to pay interest. (Art.
Meaning of usury.
Usury is contracting for or receiving interest in excess of the
amount allowed by law for the loan or use of money, goods, chattels,
or credits. (Tolentino vs. Gonzales, 50 Phil. 558 [1927].)
Kinds of interest.
They are:
(1) Simple interest. when the rate of interest is stipulated by the
parties (Art. 2209.);
(2) Compound interest. when the interest earned is upon interest
due (Arts. 2212, 1959.);
(3) Legal interest.
when the rate of interest intended by the
parties is presumed by law, as when the loan mentions interest but
does not specify the rate thereof. (Art. 2209.) The same rate is allowed
in judgments where there is no express contract between the parties
in anticipation of the same. Its use is not justifi ed where there is a
stipulated rate of interest in the loan contract;
(4) Lawful interest. when the rate of interest is within the
maximum allowed by (usury) law (Secs. 2, 3, Usury Law, Act No. 2655,
as amended.); and
(5) Unlawful interest. when the rate of interest is beyond the
maximum fixed by law.
OBLIGATIONS Interest rules
Under the Usury Law, they are:
(1) Legal rate.
12% per annum. (see Sec. 1, Ibid.) The legal rate
is 12% (from default until fully paid) if the transaction is a loan or
forbearance of money, goods, or credits or the judgment involves a
loan or forbearance of money, goods or credits, as prescribed in Central
Bank Circular No. 416 (infra.); otherwise (e.g., indemnity for damages
occasioned by an injury to person or loss of property), it is only 6% as
provided in Article 2209 of the Civil Code. (infra.)
(2) Maximum rate:
(a) 12% per annum if the loan is secured in whole or in
part by a mortgage upon real estate with a Torrens Title or by any
agreement conveying such real estate (also registered) or an interest
therein. For purposes of the ceiling, loans secured by government
securities such as treasury bills, CB certifi cates of indebtedness,

etc., qualify as secured loans; and

(b) 14% per annum
above; or

if the loan is not secured as provided

(c) The rate prescribed by the Monetary Board of the Central

ART. 1176. The receipt of the principal by the creditor, without
reservation with respect to the interest, shall give rise to the
presumption that said interest has been paid.
The receipt of a later installment of a debt without reservation
as to prior installments, shall likewise raise the presumption
that such installments have been paid. (1110a)
Meaning of presumption.
By presumption is meant the inference of a fact not actually known
arising from its usual connection with another which is known or
D borrowed P1,000.00 from C. Later, D shows a receipt signed by C.
The fact not actually known is the payment by D. The fact known is the
possession by D of a receipt signed by C.
The presumption is that the obligation has been paid unless proved
otherwise by C as, for example, that D forced C to sign the receipt.
ART. 1177. The creditors, after having pursued the property
in possession of the debtor to satisfy their claims, may exercise
all the rights and bring all the actions of the latter for the same
purpose, save those which are inherent in his person; they may
also impugn the acts which the debtor may have done to defraud
them. (1111)
Remedies available to creditors for the
satisfaction of their claims.
In case the debtor does not comply with his obligation, the creditor
may avail himself of the following remedies to satisfy his claim:
(1) exact fulfi llment (specifi c performance) with the right to
(2) pursue the leviable (not exempt from attachment under the
law) property of the debtor;
(3) after having pursued the property in possession of the
exercise all the rights (like the right to redeem) and bring all
the actions of the debtor22 (like the right to collect from the debtor of
his debtor) except those inherent in or personal to the person of the
latter (such as the right to vote, to hold offi ce, to receive legal support,
to revoke a donation on the ground of ingratitude, etc.); and
(4) ask the court to rescind or impugn acts or contracts which the
debtor may have done to defraud him when he cannot in any other
manner recover his claim.23 (see Arts. 1380-1389.)
The debtor is liable with all his property, present