NOV.
05, 2013
OBLIGATIONS AND CONTRACTS
OBLIGATIONS part is more difficult.
o REASON: provisions are intended to cover all
situations.
o The wordings of provisions are very BROAD,
GENERAL, and you have to use imagination.
Pre-law courses: accountancy and commerce.
CONTRACTS part is less difficult.
MAIN REFERENCE: Justice Jurado.
o Supplement: cases (in the original).
o To acquire working knowledge by reading the
decisions.
ADVICE TO STUDENTS: do not confine yourself in reading
only law books.
o To improve mastery of the English language and
communication skills.
Primary tool of lawyers.
To complement the law and to communicate
your thoughts to convince the judge.
EXPECTATIONS: not too many cases those that I will give
you better understanding.
Almost all provisions are IMPORTANT, unlike in PFR.
o Family Code: duties of Civil Register.
o ADVICE: to master the provisions PREREQUISITE.
Then understand them.
Read commentaries (Tolentino, Paras).
Studies will be greatly delayed; prerequisite to most subjects
(Property, Partnership, Sales).
PLEADING: CONCENTRATE AND FOCUS
Second semester is a FAST semester: TIYAGA.
Constitutional Law 2 (rights); Criminal Law 2 -- love is lovelier
the second time around.
DISCIPLINE; FOCUS.
NOV. 07, 2013
NOTE: ABSENCES: must not incur a lot of absences.
ARTS. 1156 TO 1162 are some of the most basic provisions.
ART. 1156: one of the shortest provisions.
To give, to do or not to do.
The definition at first glance is incomplete (no not to give).
But if you look closely, there is no omission or inaccuracy of the
definition.
o Not to give is included to not to do (all
encompassing).
JURIDICAL NECESSITY: principally about CIVIL obligations.
There are various kinds of obligations:
o Example: feed the hungry, help the less fortunate.
o If we do not comply with those obligations, we will be
bothered by our conscience.
We may feel embarrassed for not helping the
needy.
o But if we fail to do such obligations, there is nothing in
the law against such omission.
MORAL in character: demandable in
conscience.
CIVIL OBLIGATION: non-compliance necessitates sanctions
from the law behind them.
OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES
o If you are sued against such obligation and through
presentation of evidence you are found guilty, you are
obliged to pay DAMAGES.
o Can be enforced by reason of law.
ESSENTIAL REQUISITES OF AN OBLIGATION:
1. Juridical or legal tie.
2. Active subject: creditor.
3. Passive subject: debtor.
4. Fact, prestation or service: object.
ART. 1157: The law even enumerates the sources.
Enumeration is exclusive.
There are no other sources of obligations aside from them.
BUT there are some civilists that have argued that there are
only two sources (law and contracts ONLY).
QUESTION: if as we have stated, civil obligations are those
which are legally enforceable, does that mean in reality, all civil
obligations arise from law itself? NO.
o Such ultimate analysis is NOT correct.
o The law itself enumerated the sources.
o The problem is hen the obligation arises from the law or
OTHER sources.
o What is the RULE as regards to sources?
1. LAW: if the law itself creates the obligation.
2. ACT: if the law merely recognizes /
acknowledges or regulates the obligation.
o A good example of a law being the source (PELAYO
vs. LLAURON).
Obligation to support between spouses.
FACTS: The wife got sick while the husband
was away. Somebody else called a doctor. The
doctor treated her, thus, he is entitled to
professional fees. He tried to collect the fees
from the husband. But the husband said that he
was not the one who called the doctor in the
first place.
HELD: The husband is obliged to pay as the
obligation arose from the law itself (husband
and wife are obliged to support one another).
Medical attendance, even
transportation.
The law created the obligation, not from
a contract between the husband and the
doctor.
ART. 1159: OBLIGATIONS arising from CONTRACTS.
They have the force of law between the contracting parties and
must be complied with good faith.
Whatever is agreed upon, that is the law within the two
contracting parties.
There is a general rule, then there is an exception.
MACASAET VS. COA: this is the application of the general rule of Art.
1159.
- The petitioner is entitled of 7% of the final actual construction
cost.
- But along the way, there was an escalation in the cost: PTA
paid an additional amount to the supplier.
Page 1 Bantay
 - The agreement between PTA and petitioner was very clear it
included everything, including the escalation of costs.
AGCAOILI VS. GSIS: departure from the general law.
- GSIS, through its housing project, granted Agcaoilis
application.
- The AGREEMENT was for him to live in the house and is to
pay the cost in instalments.
o He paid the first instalment and he found out that the
house was inhabitable merely a shell of a house
without the usual amenities.
o It was not fit for human habitation.
- GSIS attempted to recede the contract.
- SC: GSIS cannot arbitrarily cancel the contract.
- Rescission of contracts only the injured, not the guilty, party.
- Did the SC, in applying Art. 1159, order GSIS to complete the
house? NO, because it was neither fair nor equitable.
- HELD: to lower the monthly instalment. Agcaoili should only
pay the value of house in its unfinished state.
- UNFAIR because there was a great change in the cost of labor
and materials.
- The Court exercised its equity jurisdiction: to adjust the rights at
the time of the rendition of the judgment.
- Although Art. 1159 seems absolute, nonetheless, there are
situations that call for the declaration from rigidity of law
matter of equity and fairness. Rather than simply what has
been agreed upon.
QUASI-CONTRACTS: negotiorum gestio and solutio indebiti.
TRADERS VS. NLRC
- The lawyer is the retained counsel of the union.
- For what services: counselling, consultation, but NOT actual
handling of cases such involves a separate agreement.
- But the union is saying that the retainer agreement covers the
fee for actual handling of cases, as well.
- Lawyer is entitled by virtue of a quasi-contract.
o Otherwise, the Union will be unjustly enriched.
- SC used the principle of quantum meruit to determine the
additional fee.
DELICTS: Art. 100 of the RPC (anyone who is criminally liable
is civilly liable as well).
o Arising from a criminal offense.
o If you kill somebody, you are to pay damages, as well.
o BEFORE: if the act is punishable by law, it cannot be
considered quasi-delict (Barredo vs. Garcia).
Justice Bocobo, one of the codifiers of the New
Civil Cide.
Previously, those which are NOT considered as
delicts are quasi-delicts (they are mutually
exclusive).
o NOW, even if an act is delict, it can still be considered
quasi-delict.
o The act involved is a negligent act.
REASONS for such change:
1. If we say that only delicts are punishable by law, then
NOTHING will be quasi-delict.
OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES
The RPC punishes all forms of negligence
(even simple ones).
Culpa aquiliania (had been existent since the
Romans): we cannot simply let it vanish.
2. In a criminal case, you cannot claim liability unless the
accused is guilty beyond reasonable doubt.
But in civil cases, you only need preponderance
of evidence.
It will be UNFAIR if we cannot do so because in
some cases, it will be very difficult to gain
liability, leaving the injured party with no
remedy.
3. Expediency in recovery by the injured party.
The injured party will have to proceed to the
criminal liability. But what if the driver is
insolvent (which is what happens in most of the
cases)?
The employer only has a subsidiary liability.
Why not allow a direct action against the
employer?
If we can hardly recover from the driver, you
can proceed directly against the owner.
ELCANO VS. HILL
- Court: even if the act is criminal, intentional and voluntary, it
can still be considered as quasi-delict.
- Man (Reginald Hill, emancipated by marriage ergo, no
longer a minor) kills somebody and was acquitted.
- The relatives of the victims, who had reserved a separate civil
action, sued on the basis of quasi-delict.
- The act can still proper.
- Court: anact can give rise to distinct liabilities: killing civil
liability (delict, quasi-delict).
The acquittal of Reginald does not mean that he was
free from liability for quasi-delict.
Fact: Atty. Hill (father) was supposed to be liable
because Reginald was emancipated.
- STRANGE CASE: a case of responsibility without any
authority; UNFAIR.
Well, the SC can also be wrong.
REMEDY: for Court expanded the idea of quasi-delicts (even
for voluntary and intentional acts).
AIR FRANCE VS. CARRASCOSO: the mere fact that there is a
contract does not preclude one party from the commission of quasi-
delict to the other party.
- BACKGROUND: there was a time when Filipinos were being
discriminated by the airlines even if their seat is confirmed,
they can still be bumped off to another seat (Lopez vs. PAN
AM).
- SC awarded huge amounts of damages to serve as a deterrent
from acts of discrimination.
- It is a common practice of airlines to overbook their flights.
- The Filipino first-class passenger was unceremoniously
bumped to an economy class seat.
OBVIOUSLY a BREACH of contract liability from
contract of air carriage.
- If you are not taken safely from one place to another breach
of contract.
- SC: quasi-delict? YES.
- Even if the nature of the relationship is contractual, both in
nature and origin, the act breaching the contract may constitute
Page 2 Bantay
 quasi-delict.
- MORAL: the contract does not prevent one of them from
committing quasi-delicts to another that will give rise to a civil
obligation.
- It does not mean that you were transferred from economy to
first-class = no liability upon compelling such transfer: there is
still BREACH of contract.
POINT: that was not what was agreed upon.
NOV. 12, 2013
ART. 1163 TO 1171: ways of committing a breach of obligation.
ART. 1163: the proper diligence of a good father of a family.
Why does the law require such until the object has been
delivered? Why does the law require it to be taken care?
ANSWER: It will ensure the compliance of the obligation.
o So that the obligation will be complied with.
o If it was lost or damaged, it cannot be delivered
anymore (qualification: determinate).
If I say deliver of a horse (generic) the obligation is
complied with upon delivery of any horse.
o Does Art. 1163 apply to this case? NO. Why? Art. 1163
only applies to determinate obligations.
GENERIC: a white horse there are thousands of white
horses in the world.
DETERMINATE: a while horse that won the Senior Grand
Derby in 1979.
Is loss possible in obligations to deliver for indeterminate
objects? NOT POSSIBLE. From the legal point of view, is it
possible for an entire genus to perish? NO.
o A genus can never be wiped out.
o Since it is legally impossible to lose an indeterminate
object, is there an obligation to take care of it with
proper diligence? NO.
If the obligation is to deliver a cow, I do not have
to take care of all of the cows in the world.
If a particular cow is the object, is it generic or
specific? SPECIFIC. Can I deliver another
horse? NO.
To ensure compliance of determinate
obligations, we apply Art. 1163.
Diligence of a good father of the family.
o Converted to a more familiar legal term: is it
extraordinary diligence? NO. Simple diligence? NO.
Ordinary diligence? YES.
o When do you say that a person is exercising ordinary
diligence?
Acts of a prudent man.
Nothing more or less that an ordinary man of
reasonable prudence would have done in
certain situations / circumstances.
Generic: there is no obligation to be take care of the object.
Determinate: loss is possible, so it is required to be taken care
of with the diligence of a good father.
In the absence of a stipulation in the contract, ordinary
diligence is the one required to be exercised.
But sometimes, the law may fix a standard of care common
carriers, medical practitioners.
o Extraordinary diligence / highest degree of care to
transport the passengers and cargos safely.
OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES
A and B entered to a contract (agreed that for Php5,000) for B to
deliver a particular horse on his yard to A the next day. The next day
came and went but no delivery was made. B made the delivery 10
days after when B learned that the cow was pregnant. B waited for the
cow to give birth before making the delivery.
1. When would A have acquired ownership of the cow? Date of
delivery.
- Actual delivery constitutes ownership.
- It is not by agreement but by delivery that ownership is
transferred.
2. Who was the owner of the cow when it gave birth? B (no
delivery to A yet).
3. Who owns the calf? A. Art. 1164.
- From the time the obligation arises (date of delivery
agreed upon), A owned the fruits already.
4. Was B already in delay? NO. No delay, no demand. Or is it
under the exceptions? Not under the exception. General rule
applies.
- If it is state in the agreement the date of the delivery,
Art. 1169 applies. BUT there are 3 exceptions.
- If the party simply agreed on the date, that does not
dispense with demand. It is still necessary.
5. When does the obligation to deliver arise? The date agreed
upon.
- Normally, when does it arise? From the perfection of
the contract; from the meeting of the minds.
- Is this case an exception? YES. Why? If the obligation
to deliver has a suspensive term or condition.
6. B delivered the calf two days after the delivery of the cow.
When did A acquired ownership? Two days after the delivery of
the cow (date of delivery of the calf).
7. What is the nature of the right to the calf before delivery?
Personal, not real right over the cow.
What is the nature of my right over my pen? REAL RIGHT: right
enforceable against the whole world / against anybody and not just
against a debtor or a specific individual.
PERSONAL RIGHT: can only be enforced against a specific or
particular person (e.g. debtor).
Lets assume that A and B entered a contract where B obliged himself
of a delivery of a specific cow.
1. What are the rights of A (creditor)?
a. To compel specific performance.
b. To recover damages if there was no delivery.
c. Entitlement to fruits and interests from the time the
obligation to deliver it arises.
d. Accessions (naturally of artificially produced or
incorporated; e.g. improvements if parcels of lands
even though not included or mentioned in the contract
to deliver) and accessories (embelishment: necessary
or convenient for the perfection of the use of the thing;
car spare tire).
- Can they be excluded? YES, upon stipulations
of the parties.
BASIC PRINCIPLE: will of the contracting parties as long as it is not
against public policy.
- EXCEPTION: a stipulation to the contrary.
- Obligations can be extinguished by the creditor (waiver).
Page 3 Bantay

- Can you do a lesser thing and waive a future right? NO.
A and B entered into a contract where B is to deliver 3 cases of a
particular red wine. B cannot produce the red wine on time. What will
As options be?
1. To recover damages.
2. Compel specific performance or the performance of a third
party on Bs expense.
What if the car is generic? Can I (debtor) compel you (creditor) to
accept a car of superior quality? Would there be any prejudice to the
creditor upon such delivery? Is there anything in the law? Stipulation?
- ART. 1246: nothing suggests something of superior quality to
be delivered.
- What is prohibited is for the creditor to demand something of
superior quality. But he can demand something of inferior in
quality.
- If the parties cannot agree thats the time the court will come
in.
- As long as B is willing and able to deliver something of superior
quality, nothing can stop him from doing so. What he cannot do
is to deliver something of inferior quality.
Lets say that I obligated myself to deliver to you a particular horse. We
agreed that the delivery is Dec. 10. On Dec. 10, you demanded the
delivery. I only got to deliver the horse on Dec. 15. While I was
delivering it, lightning struck and obliterated the horse.
1. Am I liable to damages? Yes. I am in delay.
2. What if I obligated myself to deliver that same horse to Mr.
Ticman, and on my way to its delivery, the horse was lost due
to a fortuitous event? (debtor has obligated himself to deliver
the same object to two or more persons of different interest).
GENERAL RULE: for caso furtuito, the liability is extinguished.
EXCEPTION:
1. When the obligor is in delay BECAUSE it is not the loss
that governs, it is the event that is (delayed already). If
only the debtor complied with the obligation on time,
there would have been no loss.
2. What the obligor obliged himself to deliver the object to
two or more persons BECAUSE it is not legally possible
to comply with the obligation.
- From the moment he promised to deliver the
same things, I already made it impossible to do
such delivery to the both of them.
- Regardless of the nature of the obligation.
ART. 1167: Obligations to do.
Can a creditor comply the debtor to do a specific action? The
general rule is NO!
o WHY NOW? The remedy of compulsion is an
infringement of a persons freedom.
OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES
o Might even constituted involuntary servitude.
What is the debtor does the act poorly? What are the options of
a creditor?
1. To undo what has been done.
2. Make another person do the act, at the expense of the
obligor.
CHAVEZ VS. GONZALES
- Application of Art. 1167.
- Gonzales was held liable for the cost of the repair.
TANGUILIG VS. CA
- Contractor was saying that the strong wind that caused the
damage of the windmill was caso fortuito. NO. The strong
wind in this case was not unforeseen. Precisely the winds on
that place had to be strong for the windmill to work.
- The issue of the two different tractors?
ART. 1168: Obligations NOT to do.
Remedy of the creditor:
1. To undo what has been done.
- EXCEPTIONS:
a. When the effect was permanent in nature.
b. When there is physical and legal impossibility
to undo the action.
o Example: the agreement of first to
sell. What has been sold to a third
party who is in good faith cannot be
unsold.
2. To recover damages.
ART. 1170: Breach of an Obligation.
1. Default (mora)
2. Deceit / fraud (dolo)
3. Negligence (culpa)
4. Manner that contravenes the tenor of the obligation
covers a whole multitude of things.
TELEFAST vs. CASTRO
RUFUS vs. RODRIGUEZ (not assigned)
- FACTS: Rufus was a congressman involved in an association
of law students. Later on, he organized a meeting of the world
law students in Africa (?) so he sent telegrams to the
participants about the details of the event. Rufus then flew to
Sudan and when he arrived there, there was no one there. He
had to spend the night in the airport (great inconvenience on
his part).
- The telegrams were not delivered and he sued for damages.
- SC said: do not organize an international conference by
telegrams alone.
- Still, he was awarded damages.
Page 4 Bantay

EK LEE STEEL VS. MANILA CASTOR OIL
- Delay was another way of breaching a contract.
- GENERAL RULE: no demand, no delay.
KINDS OF DEMANDS:
1. Judicial: through court action.
2. Extra-judicial: through a written or oral demand.
- A written document has more probative value.
- The law requires an act to be done (contract of
partnership) only the date for the performance assigned
DOES NOT dispense with the need for demand.
EXCEPTIONS of the necessity of demand to incur delay:
1. Stipulation or law specifically provides.
- Must categorically state that demand is not
necessary.
2. By the nature of the obligation (time is of the essence)
controlling nature.
- Certain contracts have to be performed at a
particular time.
- Milling contracts (sugar has to be milled,
otherwise it will rot), baked goods, wedding
gown.
3. Demand will be useless.
RECIPROCAL OBLIGATION: where the GENERAL RULE is the
demand is NOT necessary (but delay is possible).
The obligations are conditioned upon another.
Compliance of one party makes another in delay.
Created at the same time and same causes that result in the
mutual relation of creditor and debtor.
Would it make any difference if I agree that I deliver the object
on Dec. 10 and you pay me on Dec. 20? YES, BUT in this
case, it is an exception (so no demand, no delay applies).
If the parties agreed on the dates have been agreed upon,
demand becomes necessary. Only when there is demand that
debtor be considered in delay.
As long as performance is simultaneous, demand is NOT
necessary.
NOV. 14, 2013
LAST MEETING: the topic on different ways of breaching a contract.
FRAUD conscious, deliberate and intentional non-compliance of
obligation.
You cannot waive future fraud. Why? The creditor can easily
condone the fraud so why are waivers for future fraud void? It
seems to be an easier thing to do.
o If the law will allow that, then we are allowing
ILLUSORY actions.
o If the creditor will be allowed to do such, then in reality,
there is no longer a juridical necessity.
o What is only left is the faade of the obligation, not the
substance of the obligation.
o The result is that the debtor will be FREE not to oblige.
Only after fraud that you can waive the right to institute an
action against it.
OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES
ART. 1169: DELAY
GENERAL RULE: no demand (judicial or extrajudicial), no
delay.
EXCEPTIONS:
1. The law or stipulation expressly states so not just
fixing the date.
- Those situations where the parties specifically
agreed on automatic delay.
- without need of any demand.
- If you are the lawyer of the creditor, you should
make sure that such is stated in the contract.
- If you are the lawyer of the debtor, you should
move heaven and earth for that phrase not to
be included and make demand still necessary.
2. When time is of the essence.
3. When the obligor has rendered the object useless.
- Beyond the obligors control.
RECIPROCAL OBLIGATIONS the performance of one party
renders the other in delay only if simultaneous.
o If not, then the general rule applies: no demand, no
delay (e.g. when there are different dates of
performances).
o If neither party has delivered or performed his
obligation, there is NO DELAY.
BSP 799: prevailing rule, overturning Eastern Shipping vs. CA
(ponente: Vitug).
If parties agreed in the penalties for breach of contract, that
should be followed.
EASTERN: if there was no agreement: for loans and
forbearance of money: 12%.
o Otherwise: 6%.
o From the moment the decision was rendered by the
Court (regardless of the nature): 6%.
o BSP fixed the rate of interest so WON it is a loan and
forbearance UNIFORM RATE: 6%.
NEGLIGENCE
Omission of the diligence which is required and corresponds
with the circumstances of ART. 1173.
When a person omits the degree of care of a reasonable man
of ordinary prudence would have done.
o If yes, there is no negligence.
o If no, there is negligence.
CANGCO VS. MANILA RAILROAD CO
Cangco is always at such great hurry to reach home. So he
has a habit of alighting the train even when it is still moving.
Unfortunately for him, he did the same thing one night (it was
dark in the area) and he was injured from stepping on sacks of
melon.
Not guilty of contributory negligence.
VERSUS
RAKES VS. ALTANTIC GULF
Page 5 Bantay
 They were unloading barges. Rakes and eight other negros
were transporting rails on open railroad cars. The company has
a policy not to walk beside the car (only behind or in front of it)
as a precautionary measure. Because of a typhoon, part of the
railroad track was damaged. While transporting, the car titled
and Rakes, who was walking beside the car, was injured
(amputee).
GUILTY of CONTRIBUTORY NEGLIGENCE.
While the proximate cause was the tilting of the car, he was
NEGLIGENT for not following company rules.
PROXIMATE CAUSE: natural and continuous sequence, without
which the damage will not have been made.
In resolving negligence cases res ipsa loquitur: where a
thing is under the management of the obligor or his employees
and something happened to that thing, then there rises a
presumption that they had not been careful.
Where you were walking in front of PS and it was a sunny day (no
wind) and the electricity snapped and fell down and you were
electrocuted. You sue for damages to the local electric company for
damages. Is it case fortuito? NO, it is not a valid defense by the
company for that happened due to want of care.
- In the normal course of things, a high voltage cable will not
break if those people required to maintain it had taken due care
to ensure the maintenance of the cable.
REPUBLIC VS. LUZON STEVEDORING: caso fortuito: [1] inevitable
[2] unforeseeable.
Stevedoring was engaged of towing barges and one day, after
several days of rain, the Pasig River was swollen and its
current was strong. Stevedoring still pursued with the operation
and deployed its most powerful tugboats. It also used the most
experienced patrons to man the tugboats while towing the
barge. The barge then hit one of the supports of the Nagtahan
Bridge (made of wood during that time).
Stevedoring said they were diligent.
SC: the very precautions undertaken by the company simply
shows this is not caso furtuito.
o The company clearly FORESAW what will happen.
o FORESEEABLE.
NOTE: for caso fortuito, if the client took all necessary
precautions, such defense can be used against you.
SICAM VS. JORGE
The pawnshop was held up. The pawnshop said not liable for
loss because they were not negligent: they hired a security
guard, and they asked for safety deposit boxes.
SC: the very precautions it took showed that this is NOT caso
fortuito.
o It knew they will be robbed: so robbery is NOT
UNFORESEEABLE.
AFRICA VS. CALTEX
OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES
SC: fire is not considered a caso fortuito because it invariably
rises from ACTS OF MEN.
Rule of res ipsa loquitur: where the thing is under the
management of the defendant. such accident does not
necessarily happen when proper care was employed.
FABRE VS. CA negligent.
There was a group going to La Union and the group hired a
school bus to go there. The experience of the bus driver was
only to fetch students from their houses to the school. Then the
bus got into an accident.
SC: it is unnecessary for us to determine if there was a breach
of contract (of carriage) or quasi-delict.
AIR FRANCE: the nature of the obligation is a contract of
carriage but the issue WON an act constituted an injury.
o Was there due diligence in the selection or the
management of the driver? NO. His qualifications
should have also been examined.
o Due diligence requires that the owner must have rules
and regulations which should also be examined
constantly by supervising actual activity.
And as a common carrier: EXTRAORDINARY DILIGENCE.
o Mere diligence is not enough the law requires the
highest degree of care.
Award of damages owners are solidarily liable.
The Court cited earlier decisions: if a passenger of a public
utility has been injured because of a collision of two vehicles,
their driers ad owners of the vehicles are SOLIDARILY LIABLE.
Lets assume that you are a jeepney passenger and it collided with a
bus due the negligence of both drivers. What are your options?
1. Sue the operator: breach of contract of carriage it is very
easy to recover damages from that.
- All you need is proof of the contract and its breach,
2. Quasi-delict: driver of the jeepney, joined with the operator, and
can include the driver and the operator of the bus.
3. Civil liability based on delict by instituting a criminal case.
MMTC VS. CA
A collision between jeepney and a bus of MMTC. The accident
happened because no two things can occupy the same space
at the same time (in the intersection). The passenger was
injured (awarded damages) and the bus company appealed.
MMTC said they were diligent in supervising and managing its
employees (quasi-delict).
SC: to be freed from liability due to supposed diligence, it is not
enough that you have guidelines to be followed by your
workers. There must further be PROOF of implementation (e.g.
disciplinary actions for erring drivers, actual monitoring).
MERE ALLEGATIONS of having procedures is decidedly no
sufficient to overcome the presumption of negligence.
CASO FORTUITO: EXCEPTIONS (4)
1. Independent of the will of the obligor.
2. Unforeseeable or inevitable that even if one takes precaution,
it may still happen.
Page 6 Bantay
 3. Render impossible for obligor to fulfil his obligations.
4. Obligor must be free from participation.

RULE: For the debtor to be exempted due to caso, it must be the BMMC VS. CA PHILCOMSAT VS. GLOBE
SOLE and not just the PROXIMATE CAUSE of the injury.

NOT fortuitous. Fortuitous.

If negligence of the debtor mingles with the caso fortuito, then
the debtor is still liable.
ORDINARY CONTRACT TREATY

VASQUEZ VS. CA: calculated risk LIABLE.

The BMMC could have done Globe or Philcomsat can NOT do
Typhoon per se is caso fortuito. something about it. anything about its ratification
BUT there was co-mingling negligence of defendants or his the decision was between two
workers. sovereign powers.

AUSTRIA VS. CA CO VS. CA: illustrates the application of CF.

Robbery if caso fortuito (early 19602): the crime situation in
Manila was not as high as it was when the decision was
rendered (1970).
Manila was a lot more peaceful during that time so it was not
NEGLIGENT to walk with a valuable item at night, by yourself.
MIAA VS. ALA
Christmas holiday is not a fortuitous event. Of course it is not.
It is an unforeseeable event: it happens every year (duh).
Involves the application of Art. 1165 (delay has been incurred).
Maintenance of a car: the shop owner was supposed to finish
fixing it but he said the cars battery was weak. The owner of
the car bought a new battery.
o The shop owner was delayed. Result: no waiver of
liability.
The car was carnapped while it was being test-driven.
Court: NOT caso fortuito car napping (forceful taking) per se
is not caso fortuito.
o Must be established and proved as an action solely of a
third party the basis was ONLY the police report.
o The business of car maintenance invokes the risk of car
napping.
Art. 1265: if a thing is lost, it is assumed that it was the fault of
the person whos in possession of it upon its lost. EXCEPTION:
natural calamity.

JUNTILLA VS. FONTANAR

The explosion of the right rear tire is not fortuitous.

If the tire is brand new (defective): NECESITO VS. PARAS
in law, the manufacturer is an agent of the carrier.
The road was rough, and he was over speeding, aside from it
being overloaded.
o Accident was caused by defective parts.
o It does not matter if the manufacturer is reputable or
not.
SOUTHEASTERN VS. CA
Typhoon can constitute caso fortuito.
In order for petitioner to be liable, there must be PROOF of
negligence, BUT IN THISE CASE, nothing like that was
SHOWN.
There was no evidence that the proper building plans approved
by the building official were different from that which is
constructed.

BMMC VS. CA
They were to use a railroad track in Hacienda Helvetica and
their right of way has expired so respondents cannot deliver.
The expiration of the contract is NOT force majeur.
It was clearly foreseeable no other means were taken by the
petitioner to prevent the expiration of the contract.
PHILCOMSAT VS. GLOBE
USURY LAW: now in a suspended animation
ART. 1176:
Presumption No. 1: Reason normally, if the debt produces
an interest, you first pay the interest and not the principal.
o Otherwise, the interest paid will decrease, to the
detriment of a creditor.
Presumption No. 2: clearly stating the receipt of a particular
statement.

The expiration of the RP-US Military Bases Agreement NOT

ratified by the Senate.
FORTUITOUS: it is clearly foreseeable (the date of expiration
was set). But both of the parties took the risk.

OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES Page 7 Bantay

 If an obligation is pure, is it immediately demandable? YES;
MANILA TRADING VS. MEDINA characteristic of IMMEDIATE DEMANDABILITY.
Does that mean just after 5 minutes, the creditor can already
It is not enough that it is dated, it must be of a particular make his demand? NO. There must be a reasonable grace
statement.
period for the compliance on the part of the debtor.

A borrowed 1 million pesos to B and B agreed to pay A as soon as

ART. 1177: Basic rights of a Creditor:
possible / whenever his means permit him to do so.
1. Exhaustion - Period or condition? PERIOD.
2. Subrogation - What is As (creditors) remedy? Art. 1197: to ask the court to
3. Impugn / recission of acts and contracts recissory contracts. fix a period. Any action of collection before court action is
deemed premature.
ART. 1178: unless there is a law or stipulation to the contrary, rights
are transmissible.

Leasehold rights of tenants are transmissible to his heirs.

SUSPENSIVE RESOLUTORY
NOV. 21, 2013
The fulfilment of an obligation The fulfilment of an obligation
DIFFERENT KINDS OF OBLIGATIONS results to the acquisition of rights. results to the extinguishment of
rights.
ART. 1179: PURE OBLIGATIONS: when is it considered pure?

When its effectivity or extinguishment is NOT dependent in the A term / period may also be suspensive and resolutory; same effect.
fulfilment of a condition.

CONDITION

Future AND uncertain event.
o Is it the concurrence of the two? Or either of the two?
(re: Art. 1179: future or uncertain event )
o MUST BE BOTH AND
o It does not mean that as long as it satisfies either the
futurity or uncertainty of the obligation, its alright.
o This does not make Art. 1179 erroneous.
o Used the process of exclusion: condition / event.
TERM / PERIOD futurity AND certainty of an event.
A obliged himself to give B 1 million pesos if B gets a grade of 85 in
Constitutional Law 2?
a. Period or condition? CONDITION. Why? Futurity and
uncertainly. B may or may not be able to get a grade of 85.
b. Suspensive or resolutory? SUSPENSIVE. The fulfilment of the
obligation results to the acquisition of a right over the money.
c. Is that condition potestative, casual or mixed? MIXED. The
fulfilment depends partly on B, on Bs professor and any other
circumstances (e.g. being lucky / divine providence).

Something that would surely come to past.

The element of CERTAINTY, with FUTURITY. POTESTATIVE CASUAL MIXED
How can a past event satisfy futurity? It is not the past event
itself but the ascertainment of the past event which is the focus,
for that can only be done in the future. The fulfilment of the The fulfilment of the The fulfilment of the
condition depends on condition depends on condition depends
the will of either of chance / the will of partly on the will of
TERM / PERIOD CONDITION the parties. third parties. one party and partly
on chance / the will
of third parties.
Futurity and certainty. Futurity and uncertainty.

If A obliged himself to give B 1 If A obliged himself to give B 1

million pesos upon the death of
Mr. C.
- His death is certain.
million pesos if B can prove to A
that the funds of the Philippine
revolution were actually hidden in
Tarlac.
If A obliged himself to give B 1
million pesos if Mr. C died from
pneumonia.
PARKS VS. PROVINCE OF TARLAC (not assigned; in the book)
CONDITION: the local government should construct a park and
central school within six months, otherwise the donation will be
void.
What is the nature of the condition here? RESOLUTORY
(condition subsequent).
RATIO: condition of such nature could NOT be complied with
except when rights had already been transferred.
The LGU can only comply with the condition if it already
acquired ownership of the land.

OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES Page 8 Bantay

 INVALID VALID

ROMERO VS. CA
A obligated himself to give B 1 A obligated himself to give B 1
million pesos if A wants to. million pesos if B wants A to. Real parcel of land; initial payment.
Is that conditioned MIXED? YES. Dependent partly to the
- POTESTATIVE: illusory; eviction and ejectment of informal settlers and partly of the will
there is no actual of the debtor.
obligation for the fulfilment
of the debtor.

RIGHT OF FIRST REFUSAL: VALID obligation.

Whats the reason for the difference? How different are the effects of a
condition depending on the sole will of a creditor or a debtor?
The consideration is embedded in the contract of lease itself.

LIM vs. CA: Contract of lease Last month, A borrowed 1 million NOV. 26, 2013
with the tenant determining how pesos from B. today, A stipulated
long the lease will be. that he will pay B when A wants ART. 1188: intended to cover a situation where there is a
to. SUSPENSIVE CONDITION.
- Potestative; dependent to
the tenant; in violation of - Previous indebtedness.
Answers the question: what can the creditor do prior to the
the MUTUALITY ON
CONTRACTS (position of fulfilment condition to protect his intended?
relative equality. What rights of the debtor have if it fulfil his obligation by
mistake?
o JUDICIAL NATURE.
A borrowed 1 million from B and ART. 1188, PAR. 1 early remedy before condition fulfilled
A obligated himself to pay B as will be in the nature of JUDICIAL ACTION? NO.
soon as A receive funds from
o Appropriate actions.
selling his house.
Normally, when you bring an action, what does that connote?
- Mixed; depends on the will Does not necessarily always involve court action in spite the
of the debtor and of third wordings of the law (i.e. Registration).
parties (buyer). o The creditor does not necessarily have to title that land.
o A has to deliver a piece of land to B. While waiting for
the end of the academic year, B has the right to
preserve its rights. if B knew A will sell the land to
The GENERAL RULE does not apply to pre-existing another person, B can have it registered and have it
obligations. annotated at the back of the title. The third person
cannot invoke any protection as he had been notified.
o Remedies available to preserve his rights that does
SECURITY BANK VS. CA
NOT involve court action.
- The Bank engaged the services of the respondents for the
construction of its building within a definite period and agreed
cost. In the escalation provision, cost escalation will be CONDITION PERIOD
determined upon mutual agreement.
- Did the bank pay the contractor after the demand for payment
of cost escalation? No. Reason: there was no mutual Futurity and uncertainty. Futurity and certainty (even
agreement between the two. though not known exactly when.
- SC: Potestative; INVALID.
o How could that possibly be a potestative condition
when it is not dependent to the sole will of one part? ART. 1188: by its very nature, a SUSPENSIVE: is there any doubt
How do you reconcile that? condition is uncertain. at all that the obligation will be
o ANSWER: you can more or less assume that the fulfilled and be demandable?
contractor will agree to be paid the additional cost so YES, there is no doubt.
the only missing consent is of the banks.
o Ergo, dependent only to the will of the bank: INVALID.
The very life / existence of the By its very nature, a period will
obligation still hangs in a balance surely come to pass.
because if the condition is
fulfilled, then thats good. If NOT,
RUSTAN VS. IAC the obligation will be
extinguished.
It is upon Rustans decision WON delivery can be stopped.
Raw material for pulp: WOOD.
POTESTATIVE: depends on Rustans will only.
When will the deliveries will be made, stopped, resumed. If the law allows recovery of fruits and interest (Art. 1195:
Violate the mutuality of contracts. mistake of delivery), should not this law, by reason, also gives
rights to the recovery of fruits and interest? YES.

OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES Page 9 Bantay

 o Despite the silence of ART. 1188 about the return of the
fruits and interest, they should still be allowed to be
recovered by those who have delivered by mistake.
A obliged to give B a determinate car subject to the condition that
within 4 years, B will graduate with a GWA of 90. Before B could
graduate, A destroyed the car. Can B recover damages right after A
damaged the car?
Regardless of the presence of good or bad faith, D is entitled to
reimbursement.
USEFUL IMPROVEMENTS: for mere pleasure (i.e. gate).
o NO right to reimbursement.
o USUFRUCT: Art. 579; set off or compensate damages
(Art. 580).
Example of an improvement by time: WINE. The more aged
the wine is, the more expensive it becomes.

- ANSWER: Is A liable? NO. the basic assumption for applying ART. 1190: what is the difference between Art. 1190 and 1187?
11189 is that the condition is already fulfilled. Only at the time
you graduated and got the GWA of 90 that A will be held liable.
- What if the car was lost in a fortuitous event? A not liable. ART. 1190 ART. 1187

The resolutory condition is Retroactivity of effect but the

ART. 1189: when is a thing considered lost? fulfilled. Effect: return of the parties are still deemed
status quo MUTUAL MUTUALLY COMPENSATED.
RESTITUTION.
1. Perish.
EXCEPTION: fruits and interest.
2. Goes out of commerce when it is impossible to legally Do we have to account for the
transfer or reacquire it. interest? YES. NO
3. Disappears in such a way that its existence is unknown or it EXCEPTIONS; absolute
cannot be recovered. obligation.

A obliged himself to deliver B a particular ring. While A was traveling The obligation to return is
by boat, that particular ring fell. So when is a thing considered gone out ABSOLUTE. Manresa: quite
of commerce? If a thing is no longer manufactured? radical.

- Not necessarily; when it cannot be legally acquired or The obligation ceases to be and
transferred from A B. will not leave any effects.

****ART. 1191 (VIP; five-star provision)

A obliged himself to deliver to B a carton of cigarettes (suspensive
condition). By the time the condition is supposed to be fulfilled, an RA
(law) made it illegal to possess, sell and manufacture cigarettes.
- Can cigarettes then be considered to have gone out of
commerce? YES.
RECIPROCAL OBLIGATION: each obligation is conditioned
upon each other. There must be intimate correlation upon each
other.
Refers to the power to RESCIND reciprocal obligations
implied in case one does not comply with what is incumbent
upon them.

CONTRACT OF SALE CONTRACT TO SELL

A is obliged to deliver to B a house and lot if B gets a GWA of 90 after
graduating. The only problem is that 1 year before Bs graduation, the
same house was completely wrecked by a typhoon.
Covered by Art. 1191. NOT covered by Art. 1191
- Can you recover damages? NO, fortuitous.
- Supposing the house was partially burned because of As
negligence. Is A liable for damages? YES; Art 1189. Options: Ownership is already transferred Agreement: once the payment is
1. Rescission of the obligation. to the buyer. completed (through instalment),
2. Specific performance. then the ownership can be
- Creditor would have to bear the impairment; no right to recover transferred.
damages.
Non-payment: BREACH OF Non-payment of the full payment
CONTRACT. is NOT a breach of contract.
Improvements caused by nature and time. The creditor is PAYMENT: positive suspensive
entitled without any additional costs. condition.
o If due to the efforts of the debtor he has
USUFRUCTUARY RIGHT
o Right or enjoyment of a thing.
o NECESSARY IMPROVEMENTS (vis--vis Only the injured party can have the right to rescind, not the
unnecessary expenses): expenses for the preservation infractor.
of a thing.
o You can ask for reimbursement.

OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES Page 10 Bantay


SONGCUAN VS. IAC
- P.S. clause.
- Is the obligation reciprocal? NO.
- ISSUES: WON the Alviars had forfeited their right to
repurchase. NO, Alviars have two alternative persiond (30 days
or 1 year, 10 months and 18 days. How much area Songcuan
is entitled to lease? 1/3 of 1st floor.
OBLIGATION OF SONGCUAN OBLIGATION OF ALVIARS
To reconvey the property. To lease to Songcuan the
subject premises.
NOT dependent on the Only AFTER the Songcuan had
obligation of the Alviars to lease reconveyed the realties to them.
the premises to the former.
NOT ESSENTIAL PART OF
THE CONTRACT.
The obligation to execute the lease emerges only if the Alviars had
already repurchased and obtained possession of the repurchased
properties.
If there is a contract between parties gave rise to a reciprocal
obligation, but nothing in the contract mentions the option of
rescission, is rescission still applicable? YES, despite the
stipulations in the contract are silent regarding it.
IMPORTANT NOTE: as long as the obligation is reciprocal,
rescission is always available as a remedy to the injured party.
Would there be any material different if the contract is silent
regarding rescission and when is it not? Are they the same?
NO. When there is no provision in the contract, there is a need
to file for rescission and ask the court.
Rescission can only be made for a substantial breach, not
casual or slight breach of obligation.
TAN VS. CA
- There was a few days of delay in clearing the title.
- Mere delay for a few days in clearing the title to the property:
NOT substantial breach.
- Where there is nothing in the contract empowering the
petitioner to rescind it without resort to the courts, the
petitioner's action in unilaterally terminating the contract in this
case is unjustified.
- Time not being of the essence in the agreement, a slight delay
on the part of the private respondents in the performance of
their obligation, is not sufficient ground for the resolution of the
agreement, more so when the delay was not totally attributable
to them.
BARREDO VS. LEANO
- Contract TO SELL: the buyer, aside from paying the down
OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES
payment, has to assume the amortization of the sellers loan to
SSS and Apex.
- The seller not wants to rescind the contract for buyers non-
payment of the amortization: CANNOT BE, as such is only a
minor and casual breach of the obligation.
- MAIN CONSIDERATION OF THE SALE: the payment of
P200k to the vendors within the agreed period.
PALAY, INC. VS. CLAVE
- INDISPENSABILITY OF NOTICE: the infractor must always be
informed of the rescission.
- WHY? To give him the opportunity to contest the validity and
propriety of the rescission.
o Cannot be lightly taken.
- NO written notice so resolution of petitioner of the contract was
INEFFECTIVE and INOPERATIVE.
- RA 6551: the indispensability of notice of cancellation to the
buyer.
ART. 1191: Remedies are alternative (you can only avail either of the
two).
Partial rescission, generally, NO!
EXCEPTION:
TOLENTINO VS. CA (not assigned; but discussed in class)
- Tolentino applied for a loan in a bank of P80k and mortgaged
his land of 100 hectares and the bank approved it. Although the
bank approved the loan, it only released P17k. There is a huge
unreleased amount (P63k). In the meantime, the bank was
mismanaged and was ultimately prevented to do business. The
bank tried to foreclose the property.
- SC: it is not certainly fair for the foreclosure of the entire land
for the loan when P17k was the only amount released.
o He bank cannot be compelled to give the rest of the
loan: P63k cannot be fulfilled.
o PARTIAL fulfilment; PARTIAL rescission.
RA 6552: MACEDA LAW (Sale of land through instalments).
o Mandatory 30 days of grace period.
o Rescission for 30 days from notice from notarial act.
ART. 1592: in the sale of immovable property (land): rescission
of contract.
o Even after the vendee, the buyer may pay even after
expiration when there is NO DEMAND for rescission
either judicially or through a notary.
o Once there has been demand, even a mere crossclaim
for a counterclaim will suffice to be constructively
notified.
NOV. 28, 2013
ART. 1191: the power to rescind is always there for RECIPROCAL
OBLIGATIONS (conditioned upon each other).
The moment one party does not comply, the rescission as a
remedy becomes available.
Page 11 Bantay

WITH STIPULATION
In case one of the parties does
not comply, the obligation can be
rescinded / once the breach is
made, the injured party can
exercise his right to rescind.
despite repeated demands from the latter because that that
WITHOUT STIPULATION (when land is still under contest between A and C. C won.
the contract is silent) - What will happen for the action of fulfilment of B? It will be
rendered impossible.
- Can you now opt for rescission? YES.
The injured party must first go to
court.
ART. 1192: effects of breach by both parties will be equitably
tempered by the courts.

If the infractor does not agree, When the injured party

litigation will ensue.
Since the contract itself provides
for rescission, the courts decision
will not be the operative act
only confirmatory or declaratory.
communicates (notice) to the PERIOD CONDITION
infractor the rescission, and the
latter disagrees, then they go to
court. Futurity and certainty of the fact Futurity and uncertainy: may or
or event, though sometimes not may not happen.
known exactly when.
There is a need to file for a case
for rescission to prove that the
breach was substantial and not Example: death. Example: Dies from AIDS.
merely a sight and casual breach.

ROQUE vs. LAPUZ: paid 6 out of The decision of the court will be Sometimes, the contract between parties may contain an
the 120 installments the operative act that will affect ACCELERATION CLAUSE.
SUBSTANTIAL BREACH. the rescission. o For certain payments which can be paid by instalments.
o If there is non-payment, all the remaining instalments
will immediately be due and demandable.
Infractor is liable for damages in both remedies.

VICTORIAS PLANTERS vs. VICTORIAS MILLING CO.

- No delivery can be made during the war (6 years in total; caso

PALAY, INC VS. CLAVE
- There must always be NOTICE given to the infractor.
o To give them an opportunity to contest the rescission.
o There is NO WAIVER OF NOTICE: especially in
contracts of adhesion.
fortuito). After 30 years, planters said they should make up to it.
- Should they? NO.
- Performance was excused. It is baseless for the milling
company to demand for another 6 years of delivery.

ART. 1194 = ART. 1189: only demandability is suspended, but the

obligation can still be fulfilled.
GENERAL RULE: the remedies are alternative in character,
though in either case, recovery of damages is still allowed, with
ART. 1195: ART. 1188: debtor pays something by mistake, including
the right belonging to the INJURED PARTY.
fruits and interest.
When the injured party chose rescission, only damages
compatible to rescission will be granted.
ART. 1196
o A agreed that B can occupy As property with rent for 5
years. B has not paid any rent. A filed for the action for
GENERAL RULE: whenever an obligation is subject to a
rescission after 1 year.
period, it is presumed that the benefit is for both of the parties.
o A cannot recover for the damages for rentals which
would have been paid but has not been used (for the
remaining 4 years). A will pay B P1M on Dec. 31, 2013.
o WHY? The relationship will be terminated.
- Can A compel B to accept payment? NO. Can B compel A to
pay? NO.
CENTAL BANK VS. CA - A may have his own reasons why he does not want to be paid
yet.
- Partial fulfilment / partial rescission possible only under very - Supposing the agreement is that he will pay on or before Dec.
exceptional circumstances. 31, 2013. Can A compel B to receive payment before that
date? YES. Can B compel A to pay before the date? NO.
Obviously, this period is for the benefit of the DEBTOR.

AYSON vs. ADAMOS: The injured party may still opt for rescission
when fulfilment becomes impossible.
ART. 1197
- A sold a parcel of land to B and A could not deliver the title to B

OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES Page 12 Bantay

 If a period was intended by the parties, but it has not been
fixed. What is the remedy of the creditor?
To file an action in the court for the fixing of the period. An
action for collection before that is premature.
o Only once the court has fixed the period, then the
obligation will be due and you can maintain an action
for collection.
EXCEPTION:
BORROMEO VS. CA
- FACTS: people involved here were two friends (Villamor
borrowed from Borromeo a certain amount of money). Villamor
issued a promissory note that he would pay on Nov. 29, 1933.
Since they were friends, they agreed that the borrowed money
can be paid even beyond the prescriptive period (waiver of
prescription). The complaint was filed on Jan. 7, 1953.
- Has the action prescribed? NOT YET.
- Basic principle: you cannot waive future prescription (to end
possible litigation).
- 10 YEARS: prescription for actions of written documents.
- Court: Since there was an agreement of the payment being
able to be demanded beyond the prescribed period, then the
first ten years are NOT COUNTED. It was filed within the
prescriptive period: Nov. 29, 1953.
- Did the court simply fix a period? NO. They did not require the
fixing of the period. They immediately demanded payment.
o Why not? It will further delay litigation.
o Same evidences will be presented.
- Combination of fixing a term and collection.
- The decision was rendered: Sept. 1972 a long time has
passed.
GENERAL RULE: a court must first fix a period. If an action for
collection is first filed before the fixing of a period, then that is
clearly premature.
PAR. 3: once the period has been fixed by the court, it cannot
be changed.
If A filed an action against B for fixing the period and it is granted: Dec.
01, 2013. B went to A a week before the date, and B asked for another
extension of 1 year (Dec. 01, 2014). Out of the goodness of As heart,
he agreed.
- Is that a valid agreement? YES. They are not prohibited to do
so.
- Only the court is prohibited to fix another period: res judicata.
- A can even condone the non-payment.
ART. 1198: the debtor shall lose every right to make use of a period:
1. When after the obligation has been contracted, he becomes
insolvent, unless he gives a guaranty or security for the debt;
- Debtor is considered insolvent when he has more
liabilities than he has assets.
2. When he does not furnish to the creditor the guaranties or
securities which he has promised;
3. When by his own acts he has impaired said guaranties or
securities after their establishment, and when through a
fortuitous event they disappear, unless he immediately gives
new ones equally satisfactory;
- A borrowed P500k to B and I provided a chattel
mortgage over my car. A broke the car through an
OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES
accident, then the debtor will have to give another
chattel mortgage.
GAITE vs. FONACIER: surety bond expired after two years.
- SC: there is no uncertainty that the balance will be paid its a
TERM, NOT a condition.
- Liable to pay the ore.
4. When the debtor violates any undertaking, in consideration of
which the creditor agreed to the period;
- A has 5 years to pay B, as long as A does not smoke.
One month later, he did. RESULT: A will lost the benefit
of the period. He can be demanded to pay now.
5. When the debtor attempts to abscond.
- Mere attempt is enough, even though it was not
successful.
CENTRAL PHIL. UNIV. vs. CA: after 50 ears, the condition still has
not been fulfilled.
- Petitioner was given enough time.
- There is no judicial obstacle for the rescission of the donation
(Bellosillo).
- Dissenting opinion (Davide): for the court to first fix a period.
DEC. 05, 2013
Essential differentiation of ALTERNATIVE and FACULTATIVE
obligation.
The NUMBER of object or prestation.
o Alternative: several objects are due and demandable.
o Facultative: only one object is due and demandable,
The choice is upon the discretion of the DEBTOR.
A and B agreed that A will deliver his car. If he cannot deliver his car
on the agreed date, he will deliver his motorcycle instead. One day
before the agreed date, the car was lost by caso fortuito. Can B legally
demand the delivery of the motorcycle?
- FACULTATIVE: there is only one object due.
- NO, B cannot legally demand the delivery of the object, as the
obligation has already been extinguished.
A obliged himself to deliver either Object 1, Object 2 or Object 3 on
Dec. 1. What kind of obligation is that?
- ALTERNATIVE: several objects are due.
- On Dec. 1, A brought on Dec. 1 Object 1 and tendered it to B.
Can A legally insist on the delivery of Object 1?
YES. The debtor has the right of choice in the absence
of any stipulations to the contrary.
Can the right be granted to the creditor in a facultative
obligation?
Page 13 Bantay
 o NO. Only in alternative obligation can the right be
granted to anyone besides the debtor (e.g. to the
creditor).
A obliged himself to deliver either Object 1, Object 2 or Object 3 on
Dec. 1. Then Object 1 was lost because of caso fortuito. Can the
debtor be held liable?
- NO, the debtor will not be liable.
A obliged himself to deliver either Object 1, Object 2 or Object 3 on
Dec. 1. Then Object 1 was lost because of the debtors fault. Can the
debtor be held liable?
- NO. There are still 2 other objects that can be delivered.
- The debtor will simply select Object 2 or 3.
- There is no basis for making the debtor liable.
A obliged himself to deliver either Object 1, Object 2 or Object 3 on
Dec. 1. Then all three objects were lost because of the debtors fault.
Can the debtor be held liable?
- YES. It is now impossible for him to comply with the obligation.
- In the determination of the amount of damages, its basis is the
value of the last object which was lost.
- RATIO: it was still possible for him to comply with the obligation
when he still has that last object. Only upon the loss of the
remaining object that will make him liable.
A obliged himself to deliver either Object 1, Object 2 or Object 3 on
Dec. 1. If the right of choice now belongs to B (creditor), and then
Object 1 was lost through caso fortuito, can A (debtor) be liable?
- NO. B (creditor) can still select the delivery of Object 2 or 3.
A obliged himself to deliver either Object 1, Object 2 or Object 3 on
Dec. 1. If the right of choice now belongs to B (creditor), and then
Object 1 was lost through the fault of the debtor.
- Can A (debtor) be liable? A has a choice:
1. Select the delivery of Object 2 or 3.
2. Select Object 1, with indemnity for damages.
- If A chooses Object 2, can he receive damages?
o NO, the obligation to deliver Object 2 can still be
complied with.
o It is only is the creditor has been given the right of
choice and his choice was lost due to the fault of the
debtor can he recover the value of the lost thing with
damages.
When all objects were lost due to the fault of the debtor, then
the creditor can recover: the value of any one of them +
damages.
OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES
o If they were lost through caso fortuito, then the debtor is
released from the obligation / the obligation will be
extinguished.
Assume that A and B agreed on the delivery of specific and
determinate objects: 1, 2, 3 on Dec. 1. On Nov. 27, we met, and A said
he will deliver Object 1 on Dec. 1. On Nov. 29, Object 1 was lost. On
Dec. 1.
- Can B legally demand the delivery of Object 2 instead? NO.
- Upon the communication of the choice of the debtor, the
obligation already becomes simple.
The loss of the object extinguishes the obligation.
- Once a choice has been made, the legal effect of that is that
the obligation ceases to be alternative.
A and B entered into a contract where either A will build Bs two-storey
house in Angeles City or his swimming pool in San Fernando City. Bs
lot was expropriated by the government because of the road
construction. What is the effect of such?
- The right of choice of B is lost.
- Only one option is practicable, which is to build the swimming
pool.
A and B entered into a contract where either A will build Bs two-storey
house in Angeles City or his swimming pool in San Fernando City. B
then sold his lot in Angeles City to C. What is the effect of such?
- B would have been prejudiced as he will be left of no other
choice than to build the pool.
- What are the rights of B?
1. Either choose to build the swimming pool, OR
2. The rescission of the contract with the recovery of
damages.
SOLIDARY OBLIGATION: where each creditor is bound to the entire
credit, and each of the debtors is bound to the whole debt.
A, B, C are indebted to X for an amount of P12,000. Joint or solidary
obligation?
- JOINT. There was no express stipulation of the solidary nature
of the debt.
- Can X collect the entire amount from A alone?
NO. A only has a proportionate share of P4,000 from
the whole debt.
- When parties (debtors) are jointly bound: KKB (kanya kanyang
bayad ).
A, B, C are jointly and severally indebted to X for an amount of
P12,000. How much can X collect to A?
- The entire amount (P12,000).
- Individually and collectively.
Page 14 Bantay
What if, in the promissory note, it contains: I promise to pay X.
Signed, A B C?
A, B, C obliged themselves to pay P12,000 to X and Y: JOINT
- SOLIDARY OBLIGATION: due to use of the singular I. OBLIGATION.

- How many obligations in total are there? SIX.

- A is obliged to pay P2,000 to X and P2,000 to Y. B is obliged
to pay P2,000 to X and P2,000 to Y. C is obliged to pay P2,000
A, B, C bound themselves to deliver an indivisible object, a car, to X. to X and P2,000 to Y.

- The car cannot be partially delivered.

- It is not susceptible of partial performance / delivery.
- Can the parties be jointly bound? MIXED OBLIGATION: there is solidarity on either part of the debtor or
YES. It does not follow that the object is indivisible that of the creditor.
the obligation automatically becomes solidary.
In the absence of any express stipulation of the
A X
contrary, it is presumed to be joint (indivisible).
B Y
C
D
JOINT SOL.
P12,000
In other words, if A, B, and C obligated themselves to deliver a
particular horse worth P12,000 to X and Y.
How much X, acting alone can collect from A? P3,000.
- Since the contract is silent, or there is no express stipulation
that it is solidary or provision of law, it does not matter if the Theoretically, can X collect the entire debt? YES.
object is indivisible or not. But the maximum liability is P3,000 only, his share of the debt.
- JOINT INDIVISIBLE OBLIGATION: does not make the
obligation solidary. A X
B Y
C
D
DEBATABLE: Can X acting alone compel A, B and C to SOL. JOINT
P12,000
comply? Cannot X act on behalf of Y?

How much can X acting alone collect from A? P6,000.

If an act is beneficial, rather than prejudicial, can a single creditor act
on behalf of creditors? TWO VIEWS. Theoretically, can A be made liable to all of the debt? YES. But
here, X cannot represent Y.

MANRESA: Since Art. 1209 TOLENTINO: the basic

merely provides that the right of underlying principle of joint and INCHAUSTI & CO. VS YULO (solidarity)
the creditors may be prejudiced solidary obligation. In solidary,
only by their collective acts, it there is mutual representation. A X Co.
can, therefore, be inferred that Creditor can act on behalf of B
should the act of a joint creditor others. In a joint obligation, none C
be per se beneficial to the others, of the parties can represent the D
as for instance the interruption of others. They must act together E
the period of prescription, the act and proceed to the joint debtors. F
of one would be sufficient. Otherwise, an act of one creditor P200,000
alone is legally inefficacious.
- Debt is supposed to be paid in instalments with an acceleration
clause.
More logical explanation. - They failed to pay the first instalment, so the entire payment
became demandable.
- X Co. then proceeded to demand payment from A while B, C,
and D talked to X Co. X Co. agreed for the extension of their
payment and a partial remission of the debt (P120,000).
X and Y demanded a delivery of a particular object from A, B and C - ISSUE: what effect, if any, will the agreement affect the case of
and the object was not delivered through the fault of C. Can X and Y X Co. against A?
recover the entire value of the object to C alone? - ANSWER: The extension of payment to B, C and D will also
benefit A. How? He can only be held responsible of his and E
- NO. In joint obligations, the debt is presumed to be equally and and Fs shares because B, C, and Ds shares were not yet due.
proportionally divided. Half of debt (3/6) can only be made accountable to X Co., as of
- X and Y can only recover from C his [1] share of the debt and now.
[2] damages. - What is the amount A has to pay? P60,000 only.
- If C turns out to be insolvent, then A and B are not liable for the - The partial remission of debt is also beneficial to all the
payment of his share. All X and Y can do is to hope and pray debtors.
that C will earn money. - We have to wait for the period and for the maturity of B, C, and
Ds share before the full amount can be demanded.

OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES Page 15 Bantay


MANRESA: C may collect the entire amount to any solidary debtors
minus the shares of the others shares that are not yet due.
ART. 1213
A solidary creditor cannot assign his rights to another.
PRINCIPLE: MUTUAL AGENCY AND REPRESENTATION.
o A solidary creditor can act on behalf of his co-creditors.
His acts are actually binding and the co-creditors might
be prejudiced by acts of the solidary creditor.
o If the act in in favour of his co-creditors, the law can
assume trust and confidence exist in solidary creditors.
What is the solidary creditor assigns his rights to a third
person? The law doesnt answer that.
o The parties might not accept such (Art. 5: Acts
executed against the provisions of mandatory or
prohibitory laws shall be void, except when the law itself
authorizes their validity).
o JBL Reyes: it will be better if the law makes the creditor
subsidiarily liable.
ART. 1214
Example: X demands payment from A alone, even though there are
other solidary debtors (B, C, D) and solidary creditors (Y).
- EFFECT: if A wants to pay, he should pay to X only.
- Can D pay Y? Yes, he can as there had been NO DEMAND
(thus, not bound by 1214).
- Supposing X went after A alone, but A pays to Y instead of X,
what is the consequence?
Y who has received payment, which is a VALID
PAYMENT, must give to X his corresponding share.
ART. 1215: PRINCIPLE OF MUTUAL AGENCY
NOVATION: X and Y are to receive a particular ring that is worth
P12,000 from A, B, C and D. X alone entered to an agreement that the
debtors will instead deliver a particular bracelet worth P24,000. When
the agreed date of delivery came, Y is now demanding the delivery of
the ring. Can Y legally compel A, B, C and D to do so?
- NO. Even though Y was not aware of the changes, due to
mutual representation, X can bind Y to the new / substitute
obligation.
- Once the bracelet is delivered, how much is Ys interest /
share? of the P24,000 = P12,000.
- If the thing substituted (bracelet) is worth less, he gets of the
P12,000 (value of the original object) = P6,000.
- MORAL OF THE STORY: A solidary creditor who does not
participate in the novation shares the benefits, but not the
losses.
COMPENSATION (quits): A owes you P10,000 and you owe A
P10,000, both payments due and demandable.
- TOTAL COMPENSATION: both amounts are the same.
- PARTIAL COMPENSATION: if they are not the same, only on
concurrent amount.
OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES
A X
B Y
C
D
P12,000
- X compelled A to pay P12,000 (the entire amount). Let us
assume that under a different transaction, X became indebted
to A for P12,000 and both debts became demandable
LEGAL COMPENSATION.
- The result: the obligation was completely distinguished, but that
is not the end of the story:
1. A can demand reimbursement from B, C, and D.
2. Y can ask for reimbursement from X.
CONFUSION: when one and the same person becomes the creditor
and the debtor of the same obligation.
A X
B Y
C
D
P12,000
- X and Y were brothers and they both perished in an accident. It
turns out that their nearest relative is A.
- The entire estate of X and Y now goes to A.
- RESULT: A is both a creditor and a debtor.
- A can demand reimbursement from B, C, D but the obligation
of A to X and Y is now extinguished.
REMMISSION
A X
B Y
C
D
P12,000
- X happens to be interested to the sister of A and condone the
entire debt. Can A demand reimbursement from B, C, and D?
NO. The remission of the debt if gratuitous. Di mo siya
pwedeng pagkakitaan.
RESULT if yes: unjust enrichment.
- X does not condone the entire debt but only As (P3,000). Is
that valid?
YES. Effect: the debtor A is completely released from X
and Y but he is still bound by his ties of co-solidarity.
The P3,000 will be condoned so the maximum amount
that can be collected is P9,000.
- A is still liable by his co-debtors. If B pays the P9,000, he can
claim reimbursement from C and D. IF D becomes insolvent,
the continuing liability of A comes in. The P3,000 that D cannot
pay will be borne by A, B, and C.
DEC. 10, 2013
A and B are solidary debtors of P12,000 in favour of X. When the debt
became due, A paid X P6,000. Can A claim reimbursement from B?
NO. Can you at least demand P3,000 from B? NO, because
you only paid your won share.
Actual case: no reimbursement was granted.
Page 16 Bantay
 If A paid the entire debt, is A entitled to reimbursement from B?
o YES, for the amount of P6,000.
o With interest starting from the date of the maturity of the
debt, assuming that the date of payment and the date
of maturity are the same.
If A paid 6 months before the maturation of the debt.
o Still entitled to reimbursement but without interest.
If A paid X P12,000 after the prescription. Is A entitled to
reimbursement?
o No reimbursement.
o A should not have paid for it the first place as the debt
has already prescribed.
If A paid X P12,000 upon the maturation of the debt. A week
later, X condoned the entire share of B. can I claim
reimbursement?
o YES. The obligation between A and B to X has already
been extinguished, but not the relationship between A
and B as solidary debtors.
When a solidary debtor pays a solidary creditor, does the payment of
that debt in the nature of subrogation?
NO. The debtor does not step into the shoes of the creditor.
Each debtor is still liable to pay for their respective shares,
including the debtor who paid in full.
The co-debtors only have to pay their respective share of the
debt, not the whole amount, as in the case of their obligation to
the creditor.
A X
B Y
C
P12,000
A paid the entire amount to X and Y. We do not say that A would be
subrogated to the rights of X and Y.
As rights after payment are different from those of X and Y.
A can only claim P4,000 each from B, and C (reimbursement).
Right of X and Y is to collect the entire amount.
Not a real case of subrogation.
Old principle in WILSON VS. BERKENKOTTER (NOT ASSIGNED).
Three individuals borrowed from a bank and bound themselves
in a solidary manner. Then came the war where the Japanese
occupied the Philippines. The Japanese forces issued a form of
Japanese money. In the course of their occupation and when
the liberation was fast approaching, the value of those notes
dropped. After the war, the Japanese war notes were of no
value. If you borrowed P10,000 during the war, can you pay it
in peso after the war? A scale has been made to determine the
amount and value of Japanese notes in peso at specific times
in the war. The scale was called the BALLANTYNE
SCHEDULE OF VALUES. The rule was that if a debtor has
contracted the loan during the Japanese occupation, it can be
paid with the corresponding value of the Japanese notes in
peso using the scale of values.
The obligation was contracted before the war and was paid
during the war using Japanese war notes by only one of the
solidary debtors. The bank accepted the payment. After the
war, he was asking for his co-debtors reimbursement. His co-
debtors said that they should convert the amount into peso
using the values (applying the Ballantye schedule of values).
But the debtor who paid said that the obligation to reimburse
OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES
him arose at the same time the debt was contracted (before the
war), rendering the schedule of values inapplicable.
COURT: there was no real case of subrogation when the debt
was paid during the war. The original debt to the bank was
extinguished and a new obligation had arose, which is the
reimbursement of the debtor who paid from his co-debtors
which happened during the war, making the Ballantye schedule
of values applicable.
EFFECT OF REMISSION
ENTIRE REMISSION of the debt of 1 solidary debtor his
obligation to the creditor is extinguished.
But the debtor is still liable to his co-debtors, as when there is a
case of insolvency against the remaining debtors.
ART. 1222: DEFENSES AVAILABLE TO A SLOLIDARY DEBTOR
1. Defenses derived from the nature of the obligation.
2. Defences personal to him.
3. Defences pertaining to his own share.
4. Defences personal to the others, but only as regards that part
of the debt for which the latter is responsible.
A X
B Y
C
Particular car
A, B, and C obliged themselves to deliver a particular car to X and Y
but they were not able to do so because of Cs fault. What are the
rights and obligation of the debtors?
The obligation is transformed to its monetary value (obligation
of indemnity for damages), but the solidary character of the
obligation remains.
Can X proceed to A? YES. With damages? YES.
For solidary obligations, the creditors can proceed to any,
some, or all the debtors for the entire debt with damages.
INDIVISIBLE OBLIGATIONS
The delivery or the rendering of the service must be whole,
otherwise, there will be non-compliance.
EXCEPTIONS:
1. When the obligation expressly stipulates the contrary.
2. When the different prestations constituting the objects
of the obligation are subject to different terms and
conditions.
3. When the obligation is in part liquidated and in part
unliquidated.
- UNLIQUIDATED PART: damages due to any
fault of the debtor (i.e. accident).
- LIQUIDATED PART: the exact amount is
certain (i.e. P1M + 12% interest).
Page 17 Bantay
 EXAMPLES: cannot exempt himself from the demand the fulfilment of the
performance of the principal principal obligation and demand
A X obligation by paying the stipulated the satisfaction of the penalty at
B penalty. the same time.
C
Construction of a
12km stretch of EXCEPTION: unless this right EXCEPTION: unless the right has
road. has been EXPRESSLY reserved been CLEARLY granted to him.
for him.

1. DIVISIBLE (based on metrical units); joint (no express

stipulation of otherwise).
2. A particular horse or a car: INDIVISIBLE
OBLIGATION.
PURPOSES OF PENALTY
1. Funcion coercitiva o de garantia: ever present.
2. Funcion liquidatoria: to liquidate the amount of damages to be
awarded in a case.
- From the very moment the parties agreed, they already
determined the amount of damages upon breach of
contract.
3. Function escritamente penal
A obliged himself to build B a 10-storey building worth P10M. A
has to turn over the building not later than Dec. 1, 2013. If not,
by way of penalty, A will pay B P10k/day of delay. The reason
for that is loss of income / rent. A was not able to finish the
building on time. Can B recover the agreed penalty without
proof of actual damages?
o YES, not necessary.
o If B actually suffered a loss of P100k/day because of
the loss of rentals, can B recover that amount instead?
NO. The penalty stipulated constitutes as
damages (GENERAL RULE).
NOT ABSOLUTE (penalty + damages).
EXCEPTIONS:
a. When there is a stipulation to the
contrary.
b. When the obligor refuses to pay that
penalty.
c. When the obligor is guilty of fraud.
Do you have to prove actual damages? YES.
ART. 1229: reduction or mitigating of damages when penalty is
iniquitous or unconscionable.
MEDEL VS. CA: 66%/year INIQUITOUS.
Despite the usury law being in suspended animation, the BSP
recognizes the validity of the stipulations of the parties.
Court can still intervene when the interest rate is
unconscionable.
ART. 1230: principal obligation.
If principal obligation is void, penal clause shall also be void
because the penalty the penalty is merely an accessory
obligation.
But if penal clause is void, principal obligation is NOT affected.
ART. 1227:
Express grant of rights of CREDITOR: need not be express,
just CLEAR.
GENERALLY, for a sum of money: principal + 12%/annum.
o Authorizes that debtor to pay the principal and the
interest.
But if it is express, doesnt that may it facultative?
1. YES: Justice Caguioa.
2. NO: Justice Vitug. We must put prime importance to the
intention of the parties.
o If they intend to create a penal clause, then it
must be followed.
It possesses legal consequence.
o Court has inherent power to reduce the penalty.
DEC. 12, 2013
ART. 1231: mode of extinguishment of the obligation.
Various modes of extinguishing the obligation.
Is this enumeration exclusive?
o NO, there are other ways.
Those mentioned are the PRINCIPLE ways of extinguishing an
obligation.
FIRST MODE: PAYMENT OR PERFORMANCE
Does this refer solely to the delivery of a sum of money?
o NO. There are other normal voluntary fulfilments of
obligation.
A obliged himself to deliver B something, and A did: PAID.
o A obliged himself to render a service to B, and A did:
PAID.
BASIC PRINCIPLES IN CONNECTION TO PAYMENT.
COMPLETENESS: debt not considered paid as long as to the
thing / service is not complete.
To this rule of completeness and integrity, the law admits two
modifications.
o There are situations that although the payment or the
rendering of the service is not complete, they were still
considered paid.
EXCEPTIONS:
1. Substantial performance in good faith (ART. 1234).
- If the debtor complies with the obligation in a
substantial manner in good faith, minus the
damages.
- If A obliged himself to deliver B 100 bottles of
red wines, but despite exhausting all of his
means, A was only able to provide 98 bottles,
then Art. 1234 is applicable.

GENERAL RULE: the debtor GENERAL RULE: creditor cannot

OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES Page 18 Bantay


DIESEL VS. UPSI:
- The construction company has finished 97.56% of the building,
the SC held that such is already a substantial compliance.
- If only 60% was finished, then probably Art. 1234 cannot be
invoked.
2. The creditor accepts without any objection the payment
despite the irregularity or incompleteness (ART. 1235).
- Based on the principle of estoppel.
- If the creditor said, okay na yan, then the
debtor is deemed to have complied with the
obligation.
The creditor is not allowed to change his
mind.
WHO CAN PAY THE OBLIGATION?
1. The debtor himself or his legal representative.
2. Any third person.
CAN A THIRD PERSON PAY AN OBLIGATION?
o A owes B P1M. C paid the obligation to A. Can B legally
refuse to accept Cs payment?
YES. Whats wrong with that? TRUST and
CONFIDENCE.
Why does the law give prerogative to B not to
accept payment from a third person?
REASON: the creditor might not want anything
to do with the third person.
Its a matter of trust: fake money,
bouncing checks.
The creditor might have his own
personal reasons for his refusal, and
such cannot be taken against him.
CAN A CREDITOR ACCEPT PAYMENT FROM A THIRD
PERSON?
o YES. If here is no compulsion, then the payment is
valid.
o Different from persons interested: debt secured by a
mortgage as a security for debt. Valid? YES (as in
guarantors, sureties).
Supposing the third person is a joint debtor with me, can the
third person compel the creditor to receive the payment?
o YES. Joint debtors are persons interested.
If the third person is not a person interested but offered to pay
As debt in full and B agreed. WHAT RIGHTS DOES THE
THIRD PERSON HAVE?
o With As consent: full reimbursement and subrogation.
If the debt is secured by a guarantor, then the
third person can also ask for full reimbursement
and subrogation of rights against the guarantor.
o Without As consent.
D C
G X
1. Payment of X to C with the knowledge and consent of D:
subrogation and reimbursement.
2. Payment of X to C without the knowledge and consent of D:
OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES
a. X D: payment was to the benefit of the debtor:
subrogation.
b. If D had earlier paid P4k out of his debt of P12k:
i. X D: only P8k was beneficial to him, despite
X paying P12k. what X can claim is only what
was beneficial to D (P8k only).
ii. X C: X can recover the excess payment from
C; unjust enrichment.
c. Can X G? NO. there was no subrogation of Cs
rights to X. The third person, having not obtained the
consent of the debtor, certainly cannot be subrogated to
the rights of C, which includes the right to go after G.
D C
G X
There was no partial payment and the payment of X was made
with the knowledge of D. X intended his payment of Ds debt as
a gift. X told D, do not worry about it. You do not even have to
reimburse it. But D does not want to accept the gift for some
reason. Will there be a valid gift in the light of Ds refusal?
- NO. Basic principle of donation: there is a right to
refuse for no one can force a gift down your throat
(personal human dignity).
- NO VALID DONATION.
- Can X return to C to ask his money back?
o NO. C has already accepted in. X cannot
demand its return.
- Can X now go after D?
o YES.
- Will X be subrogated to the rights of C?
o NO, since Xs payment is done without Ds
knowledge.
***ART. 1239: in obligations to give, payment made by one who does
not have the free disposal of the thing due and capacity to alienate it
shall not be valid.
Without prejudice to Art. 1427 (natural obligation).
Minor between 18 to 21 the age of majority has already
been lowered so this is no longer a valid exception.
ART. 1240: answers the question to whom payment must be made.
1. The person in whose favour the obligation has been constituted
(creditor).
2. His successor in interest.
3. Any person authorized to receive it by law or by the creditor
at the time when payment is due and not when the obligation
was constituted.
Is the creditor the only one authorized to appoint a person to
receive payment?
o NO. The law can also appoint such.
HAW PIA VS. CHINA BANKING:
- Petitioner borrowed from the bank. When the WWII broke out,
China Bank was considered as an enemy asset and was
sequestered by the Japanese authorities. They designated the
Bank of Taiwan (liquidator bank) and it was authorized to
Page 19 Bantay
 accept payments. The petitioner paid to the Bank of Taiwan his
debt during the war. After the war, China Bank is trying to
collect from the petitioner.
- Under the norms of international law: VALID.
- MORAL OF THE STORY: the authority need not come from the
creditor. In this case, it came from international law.
PAYMENT MADE TO SOMEBODY ELSE NOT VALID.
o A has a business and was getting goods from B, so A is
indebted to B. C came to A, saying that he was Bs
collector, so A paid C. it turned out, C was an impostor
A was required to pay B again.
o MORAL: make sure that the persons claiming as
agents of your creditor are real agents
Supposing A borrowed P10M to B. when the debt became due,
A went to B with a bayong of money. A left it to B. Unknown to
A, B was already crazy during that time. B then used the
money as pangatong, all of it. Can A be required to pay again?
o YES. Art. 1241: when payment is valid:
1. Kept.
2. Beneficial (but using the money as pangatong is
not the rational use of money).
If payment is made to a 3rd person, GENERALLY, the payment
is VALID if it redounded to the benefit of the creditor.
o EXCEPTIONS (RES):
1. Ratification.
2. Estoppel.
3. Subrogation.
Payment made to a third person in possession of the credit:
VALID.
o A was indebted to B. To whom will A pay? To B.
o Unknown to A, B assigned the credit to C. will A be
justified to still pay to B? YES; good faith.
A will still be released from his debt as he made
a VALID PAYMENT, despite not being able to
pay C.
ART. 1243: One needs to follow a court order asking him not to pay
(as in a notice of garnishment or attachment).
Otherwise, he needs to pay again.
MORAL: follow court orders.
ART. 1244: if the object is particular the same one agreed upon
must be delivered.
DATION: happens when the debtor has outstanding debt of money
and he is having liquidation problems.
If A is indebted to B, and A does not have cash, one of As property
can be alienated B.
- As the accepted equivalent of the monetary obligation:
1. There must be an agreement.
2. There is no dation unless ownership is transferred from
the debtor to the creditor.
- If there is none, then, such is only a security.
DEC. 17, 2013
OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES
TOPIC: payment / performance as a mode of extinguishing an
obligation.
ART. 1246: different types of objects.
a. Specific or determinate objects: no substitute.
b. Generic: delivery of something of the same genus.
A creditor cannot demand a thing of superior quality.
NOT IN THE LAW: that debtor cannot deliver a thing of
superior quality.
o WHAT IS IN THE LAW: he cannot deliver a thing of
inferior quality.
o So there is nothing in the law that prohibits the debtor to
deliver a thing that is better.
ART. 1248: rule on partial payments, subject to 3 EXCEPTIONS:
1. When the obligation expressly stipulates the contrary.
2. When the different prestations constituting the objects of the
obligation are subject to different terms and conditions.
3. When the obligation is in part liquidated and in part
unliquidated.
ART. 1249
A borrowed P1K from B and they entered into an agreement that A will
pay B in US dollars. Is such stipulation valid?
- YES, it is valid.
- Can B legally insist on being paid in US dollars? YES.
- Is RA 4100 still in effect? Not anymore; repealed.
It is NOT impossible for parties to stipulate such (as of
July 1996).
There is no legislative prohibition in the currency of
payment.
When there is no currency stipulated by the parties or when it
becomes impossible to deliver such currency; CURRENCY TO
BE USED: currency which is legal tender in the Philippines.
Are all notes and coins issued by the Central Bank legal tender
of all types of debts (public and private)? YES.
o If A owes B P10M, can A pay B using P20 bills? YES.
o Can A pay B using P10 coins? NO.
o Circular No. 537:
a. P1, P5, P10 coins: only until P1,000.
b. Centavo coins: only until P100.
o If I ride a taxi, and my fare amounted to P98, can I pay
using centavo coins alone? YES.
o If I buy 1kg of meat (P140), can I use centavo coins to
pay? NO, it is not legal tender. The price is higher than
P100.
A owes B P1M and when it became due, A issued a check worth P1M.
Can B refuse the check?
- YES, why? A check is not a legal tender.
- Will there be a difference if it is a cashiers check? NO.
Whatever kind of check NOT legal tender.
- A check is not legal tender and may thus be validly refused.
Page 20 Bantay
 If As debt of P10M becomes due and A paid using a check to
B, and B accepted such, as of that moment, is the debt paid
already?
o NOT YET. When is the debt considered paid?
1. When it has already been encashed.
2. When due to the creditors fault, the check was
impaired.
A issued a check for P10M. B did not encash it and instead, kept it in
his drawer, where every morning, he looks at it for the next 8 months.
- DISHONORED: stale validity of a check (6 months).
- Since it was impaired because of the failure of the creditor to
present it, does that mean the debt is already paid? NO; no
prejudice to the debtor.
- If A issued a check, with the amount due deposited in the bank,
but B failed to enchash it within 6 months. STILL, there is no
impairment on As part.
EXCEPTION: when the bank was closed (bank run). In
that case, the debt is considered paid in such a way
that B cannot go after A anymore.
IMPAIRMENT: more applicable with merchantile documents
(issued by third persons).
o Ordinarily, impairment happens to checks and
documents issued by third persons. If there is such due
to the creditors fault, then the debt is considered paid.
ART. 1250: EXTRA-ORDINARY INFLATION
A owed B so they entered a contract that A will pay B in US dollars,
where the prevailing exchange rate of Peso and US dollars is 40:1.
When the payment became due, the exchange rate became 44:1. Is
such inflation extraordinary?
- NO. The value of any currency would usually fluctuate on a
daily basis ORDINARY FLUCTUATIONS only.
- The change must be SO BIG and completely
UNFORESEEABLE / totally beyond the contemplation of the
parties.
Many of our cases: no extraordinary inflations, MOSTLY
ORDINARY.
EXAMPLES OF EXTRAORDINARY INFLATION:
1. FILIPINO PIPE VS. NAWASA: when Germany lost in
WWI. They were forced to pay huge reparations so the
value of their currency spiralled down/
2. Japanese war notes during the WWII.
NOTE: according to (someone) there is a need for official
government declaration of the existence of an extraordinary
inflation.
ART. 1251: PLACE OF PAYMENT
1. In the place stipulated by the parties.
2. If there is NO express stipulation:
a. DETERMINATE THING: where the thing is located.
- NOT LITERAL: not the precise place where it is
at.
If A obliged himself to deliver a
particular car to B, and when the agreed
OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES
date of sale came, the car was being
driven by As brother to La Union
difficult to locate precisely.
- WHAT IT MEANT: where it is habitually kept.
b. Domicile of the debtor.
If you are the lawyer of the creditors, you need to make sure
that there is a stipulation for the place of payment.
o You need to stipulate payment must be made in the
residence or office of your client to avoid
inconveniences on your clients part.
JAN. 07, 2014
APPLICATION OF PAYMENT
IMPORTANCE: why is there a need for these provisions?
A owed B 3 debts (1 creditor; 1 debtor but several debts of the same
kind): P500k, P1M, P500k = P2M. All of them are due and
demandable. If A pays B P1M and there are no provisions in the
Civil Code about application of payment, then there will be a
problem.
- Which debt/s had already been paid, then?
- Its possible that the 2nd debt was paid in full, or the 1st and
3rd debts.
Payment of P1M does not mean its for the 2nd debt
(P1M), considering the identity of the payment and of
the debt.
The mere fact that the amount pain is identical to one
of the debts does not mean it should be applied for
that debt.
There is still room for Application of Payment.
- When there are provisions about application of payment, the
creditor and debtor will know which debt/s will be paid.
- Applicable only when the debts are of the same kind /
nature.
- If the debts are not of the same kind (P500k, delivery of a
particular car), then there is no doubt which is paid.
If A paid B P500k, then that payment is for the P500k
debt.
REQUISITES:
1. ONE CREDITOR and ONE DEBTOR.
- Remember: there are still some situations when there
will be more than one creditors or debtors, yet AP is still
applicable.
A. Is A is a debtor of B for P500k in one
transaction and in another, A became solidary
liable to B, with other debtors C and D.
o There is one creditor, but there are more
than one debtors.
o AP is possible if A pays B P500k.
B. ART. 1792 (PARTNERSHIP): if A is a managing
partner (one that manages the affairs), then by
its very nature, there must be trust and
confidence among its partners.
o WHY? The actions of the managing
partner can bind his partners.
Here is a person who is a debtor of a partnership, X. That same person
Page 21 Bantay
also owes the managing partner = debtor has 2 debts. o Pro-rata: of the same nature and burden.

- If the debtor pays and the managing partner issued a receipt of

payment for his (not the partnership) debt alone = cannot be A owed B P500K and P800K. A paid P500K. can there be in reality a
done. partial payment in AP? YES. Pro-rata.
- The payment made must be applied to the two debts in
proportion to their amount. - RESULT: partial payment.
WHY? To protect the welfare of the partnership.
RESULT: both debts are to be partially extinguished.

As to which amount is more onerous, it does not follow that a

debt that is of bigger amount is more onerous than the one with
2. TWO OR MORE DEBTS OF THE SAME KIND. a smaller amount.
3. ALL OF THE DEBTS MUST BE DUE. The question will depend on other circumstances: interest,
4. AMOUNT PAID BY THE DEBTOR NOT SUFFICIENT TO PAY security.
THE TOTAL AMOUNT OF THE DEBT.

TYPES OF DEBTS WHICH IS MORE ONEROUS

A owes B in 1 transaction P500K and A said he will pay on or before

Dec. 1, 2014. Under another transaction, A was indebted for another Incurred at different dates. Older ones.
P500k, due on or before Dec. 1, 2014. Which debt is due and
demandable as of today?
- Can A make AP? YES. The term or benefit of the period was Debts bearing interest against Debt which incurs the interest.
for the debtor. those which are not.
- If it only says on Dec. 1, 2014, then AP is not possible.

2 debts both incurring interest. Debt with higher interest.

- Who makes the AP? The DEBTOR.

o When? At the time he makes the payment. Secured and not secured debts. Secured ones.
- If the debtor does not tell the creditor which debt will be
paid upon his payment, then the initiative passes to the
Principal vs. surety. Debt covering that of the
creditor where the latter can propose an AP.
principal.
o How? By issuing a receipt which must be
accepted by the debtor. Solidary debtor vs. sole debtor. JURADO: Solidary debtor.
o Mere statement of accounts does not constitute TOLENTINO: Sole debtor.
the acceptance and the receipt contemplated by
law. Example: table.

PACULDO VS. REGALADO Indemnity vs. penalty obligation. Indemnity.

- TWO OBLIGATIONS: rentals to a wet market and the payment

for the purchases of heavy equipment. Liquidated vs. unliquidated. Liquidated (because it is already
- Paculdo made payments not sufficient to cover all of his debts determined. Unliquidated ones
and Regalado applied some of those payments to the formers still need to be agreed upon, or
purchases of heavy equipment, which not seems that some of settled by the courts).
the rentals were not paid.
- SC emphasized:
1. The debtor has the right to make AP.
2. Mere silence of the debtor as regarding to AP does not Sometimes, it is not easy to determine which is more onerous.
constitute consent. What is contemplated is not mere REMEDY: apply the payment proportionately.
silence not it estoppel. PARAS: two debts:
3. A mere statement of account not the receipt 1. P4,000 with 12% interest per annum, secured by a
contemplated by law.
mortgage, and the debt is relatively new.
- In fact, the more onerous obligation was that of the rentals, not
the payment of the purchases for the former is an on going 2. P6,000, with 24% interest per annum, unsecured, and
business. comparatively an old debt.
o If the debtor pays P4K, then the payment will be
applied proportionately: P2,000 each.

***ART. 1254: ART. 1253

1. When the payment cannot be applied in accordance with the If the payment made by the debtor bears interest, the interest
preceding rules, or has to be paid first before the principal.
2. If application cannot be inferred from other circumstances. NOT MANDATORY.
If the creditor agrees with the payment of the principal first,
Then payment is to be applied to the most onerous ones. then its alright.

OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES Page 22 Bantay

ART. 1255 GENERAL RULE: tender of payment must precede
consignation.
Payment by CESSION. o ART. 1256: EXCEPTIONS:
Happens when the debtor has too many obligations and 1. When the creditor is absent or unknown, or
surrenders all of his assets to his creditors. does not appear at the place of payment;
o The creditors can then dispose of the property. 2. When he is incapacitated to receive the
payment at the time it is due;
Art. 1241. Why? Is payment to an
CESSION VS. DATION incapacitated person generally valid?
NO, it is a dangerous thing to do.
EXCEPTIONS:
Plurality of creditors NUMBER OF There may be only
is essential. PARTIES one creditor. a. Redounded to the benefit of the
creditor.
b. He kept/retained it.
Debtor is in partial or FINANCIAL Debtor not 3. When, without just cause, he refuses to give
relative insolvency. CONDITION OF THE necessarily in a receipt;
PARTIES financial difficulty. Does that not presuppose a previous
tender? NO. Example: When even
Assignment gives the EFFECT Transfer of beforehand the creditor said he will not
power to the ownership accept the payment.
creditors to possess (alienation) as an 4. When two or more persons claim the same
and dispose them. accepted equivalent right to collect;
of the object. You might tender payment to the wrong
individual.
REMEDY: wait for those two people to
settle things out / to litigate.
JAN. 09, 2014
5. When the title of the obligation has been lost.
Example: promissory note.
TENDER OF PAYMENT AND CONSIGNATION
Mere tender does not extinguish an obligation.
o But does that mean there is absolutely no legal
Can mere tender of payment produce extinguishment?
consequence or effect of tender of payment? Is tender
Generally, NO.
of payment totally useless? NO.
o It is a preliminary act alone: must be followed by
consignation.
Can you resort to consignation before making a tender of A borrowed B P1M with 12% interest. A tendered payment and B
payment? Generally, NO. refused without any justifiable cause. Should A continue paying the
o TENDER OF PAYMENT: manifestation of the debtor to interest?
immediately comply with the obligation.
- NOT ANYMORE.
- Debt of money.
If A owes B P1M. How can A make tender of payment? - The debtor is exempted from that point on he tried tendering
payment.
- A actually offers B the P1M. the debtor manifest his ability and
willingness to comply with the obligation.
- Assuming, instead, A tried offering B a personal check. B
refused. Is a personal check a valid tender? NO. o When what is involved is a RIGHT and not an
What if the personal check is a certified check? Does obligation.
that make any difference? Isnt that already good as Thats when mere tender of payment is
cash? enough to preserve a right.
NO (ROMAN CATHOLIC BISHOP OF MALOLOS VS.
But when A owes B P1M, such is an obligation. Mere tender of
IAC).
- As long as what is being offered is not legal tender, the creditor payment is not sufficient. There must be consignation.
has the perfect right to refuse the tender.

A sold B a parcel of land with the right to repurchase.

- Mere tender is enough.

A owed B P1M. A then gave B P100K only. Is that valid tender? - It is enough to preserve the right to repurchase if tender was
made within the period of redemption.
- NO. For tender to be valid, it must be of the exact amount.
- Must also be in the currency stipulated or the legal tender in
the Philippines.
IMPOTANT NOTE: mere tender is sufficient to preserve a right
is made in a timely manner.

Mere tender of payment is enough. CONSIGNATION

OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES Page 23 Bantay

 There must be strict compliance of its requisites (5).
But sometimes, based on considerations of justice and equity,
non-compliance with any of them can be justified.
RURAL BANK VS. CA
- FACTS: an old woman was borrowing from the petitioner bank,
and she was not the well-educated kind. There was a good
Samaritan (Valencia) who helped her borrow P3,000 with the
old womans property as its security. It turns out that the good
Samaritan also used the old womans property as collateral.
The properties were foreclosed. When the old woman learned
about it, she resorted to consignation without any tender of
payment made. The record of deposit served as the notice to
the Bank.
- Is that a valid consignation even without tender? YES.
- Court: justified under the liberal consideration of equity as time
was already running out.
That was what the best the old woman could do.
Generally, property as tender of payment is NOT VALID.
Supposing you deposited it in the bank. Is that valid?
o NO. It was not deposited to a competent court (with
judicial authority).
A is the debtor of B a sum of money. T extinguish As obligation, what
should A do first?
- REQUISITES OF A VALID CONSIGNATION.
1. As debt must be already due.
2. A must make a tender of payment.
If B accepts the tender, well and good. The
obligation will be extinguished.
If B does not, then litigation will ensue.
3. There must be previous notice to the creditor and to the
other interested parties.
What is the tenor of the notice?
Can you give notice simultaneously with tender
of payment? YES. Kapag di mo to tinanggap,
idedemanda kita.
REASON OF SUCH NOTICE: to allow the
creditor to rethink his refusal.
OTHER FORMS OF NOTICE: you file a case.
4. Consignation: Debtor vs. Creditor.
House and lot: immovable property.
Deposit the documents (registration)
and the court will appoint a receiver.
Money: deposit to the court.
5. Subsequent notice to the creditor.
REASON: for the creditor to withdraw the
money or to pursue with litigation.
SUMMONS: where the creditor is directed to file
an answer.
Sufficient as notice.
Defenses of the CREDITOR:
1. Question the tender of payment.
2. That there has been no previous notice.
3. The debt is not yet due.
PRAYER: of the DEBTOR upon filing the case: extinguishment
of the obligation.
In the meantime, during the pendency of the case, can the
debtor change his mind? YES.
OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES
o Before the court has decided, the debtor can simply
withdraw the deposit and the obligation will still remain
in force.
o Matter of PRIVILEGE.
When the court has already rendered a judgment, can the
debtor still withdraw the deposit? YES, but this time with the
CREDITORS CONSENT.
NOTE: when the creditor filed in his answer as a prayer that the
thing be adjudicated in his favour, the court will deem such as
an acceptance on the part of the creditor.
o The debtor can no longer withdraw the consignation
without the consent of the creditor.
Effects of a valid consignation made and AUTHORIZATION OF
BY THE CREDITOR TO THE DEBTOR TO WITHDRAW THE
MONEY:
1. The creditor loses any preference.
2. Co-debtors shall be released.
3. Solidary debtors: solidary liability only, not their shares
of the obligation.
JAN. 16, 2014
LOSS OF THE THING DUE:
QUIZ:
1. Action of C will prosper because money is generic: its loss will
not extinguish the obligation.
2. Doctrine of UNFORESEEN EVENTS (ART. 1267): you cannot
invoke this doctrine anytime there are changes in
circumstances.
o If you can, that will give rise to the instability of
contractual relations.
o Can only be applied if change is so radical and
fundamental (affect the juridical loss of the contract).
NAGA TELEPHONE CO. INC:
- FACTS: it entered into an agreement with CASURECO II. Naga
Tel. will provide CASURECO 10 telephones, and CASURECO
will allow Naga Tel. to use CASURECOs electric posts for their
telephone wires. As time passed, the wires became heavier
and heavier due to their growth of subscribers. CASURECO
now filed an action for reformation of their contract.
- HELD: for Naga Tel. to pay the prevailing rate: P10/post and
for CASURECO to pay for the telephones due to such a great
change in the situation of the parties.
- Only in the case on absolute and exceptional changes, when
equity would really demand the application of this doctrine.
PNCC VS. CA
- FACTS: ONCC is a company (Marcos crony) who could not
pay for its rent for a property it was leasing for a rock crushing
project. It argued a great change in the political climate after
the EDSA Revolution.
- Court: mere pecuniary inability to fulfil an engagement does not
discharge a contractual obligation or does it constitute a
defense to an action for specific performance.
Page 24 Bantay
 - REMEMBER: the Court emphasized that Art. 1267 is not Presumption: if the thing is in possession of the debtor, its loss
applicable to obligations to give. was due to his fault.
o Only in obligations to do. UNLESS there is proof to the contrary.
EXCEPTION: when the loss happened during a natural
ART. 1266 calamity.

Obligations to do: if there is a legal impossibility, then the ART. 1268

debtor is released.
If A obliged himself to do a personal service to B, but A was Obligations arising from a criminal offense.
called to active military responsibility, then there is a legal Example: in a crime of theft, one is ordered to return the thing
impossibility of As performance. he has stolen.
o If its lost, it was his fault.
o EXCEPTION: when one tried to return it and the injured
LABAYEN (see Jurado) party refused to accept it without just cause.

- There was a standard miller contract signed by the planter and

the milling company. There was a provision in the contract that
the milling company will extend its railroad lines. Later on, it
turned out that due to the contour of the land, it will be very - END -
dangerous to life in extending the railroad lines.
- Art. 1266 applicable.

ART. 1262

Generally, loss: obligation that involves the delivery of a

specific or a determinate thing extinguishes the obligation.
EXCEPTIONS (6).
1. Stipulation.
2. By law.
3. Nature.
4. Negligence on the part of the debtor for the loss must
be not due at all to the debtor (sole and proximate
cause).
5. In delay.
6. 2 or more persons.
What would be the effect of loss in a reciprocal obligation?
Example: If A is obliged to deliver to B a car and B will render a
kind of service to A in return. Unfortunately, the car was loss
due to caso fortuito. Is B still obliged to render his service?
A. REYES: Art. 1191, the non-fulfillment must be due to
his negligence for the other party to rescind the
contract.
o The other obligation remains.
o Three exceptions:
i. Art. 1504: sale f personal property when
the goods are lost before delivery.
ii. Art. 1655: leases extinguishment of
the payment.
iii. Art. 1717: contract for a piece of work.
B. TOLENTINO: he who does not give anything does not
have the right to receive anything.
o The other obligation becomes extinguished.
o We can deduce such (proof) from the
exceptions mentioned by REYES.

ART. 1264

Partial loss is equal to the complete loss based on the

circumstances it is for the court to decide.
Example: A certain race horse or a fighting cock. When a leg or
wing is broken, its considered lost.

ART. 1255:

OBLIGATION AND CONTRACTS AUF SOL MIDTERMS NOTES Page 25 Bantay