SH’s reminder: Please note that my focus was to give you keynotes which you can use as legal

basis in answering
possible questions. These are not exhaustive. Thank you.

1. The sources of obligations are law, contracts, quasi-contracts, delicts, or quasi-delicts. (Art. 1157 NCC)
2. A pure obligation is one whose performance does not depend upon or uncertain event or upon a past event unknown to
the parties. A pure obligation is immediately demandable.
3. Conditional obligations depend on the happening of a future and uncertain event.
4. Conditional obligations may be subject to suspensive or resolutory condition. It is suspensive if the happening of the
condition will give rise to the condition. Resolutory obligations are immediately demandable but extinguishes the
obligation is extinguished upon the happening of condition. Casual conditions are those dependent upon chance or the
will of a third person. Mixed condition occurs when it is dependent partly upon the will of a party or upon chance and the
will of a third person and the debtor.
5. In one case, the Supreme Court held that an obligation payable through salary deduction is a pure obligation and is
immediately demandable upon termination of employment. (Read Hongkong Shanghai Banking Corporation vs. Broqueza,
G.R 178610)
6. Obligation with a period is one the fulfillment of which a day certain has been fixed and demandable when that day
comes. Unlike a condition, it is certain to come although it may not be known when. Obligations with a resolutory period
take effect at once but terminate upon the arrival of a day certain.
7. Under 1180 of the civil code, when the debtor binds himself when his means permit him to do so, the obligation shall be
deemed one with a period subject to the periods of 1197. If the obligation does not fix a period, but the intention of the
parties is one with a period, the remedy is to ask the court to ask the court to fix the period.
8. Whenever a period is designated in the obligation, it is presumed for the benefit of the debtor and the creditor. Legally
speaking, both the debtor and creditor cannot demand fulfillment before the arrival of the period. Anything paid or
delivered, before the arrival of the period, the debtor not knowing the period has arrived, may recover both fruits and
interest. (Read Art. 1195, NCC)
9. The debtor losses the right to make use of a period and the obligation becomes demandable at once during instances
when he becomes insolvent, fails to furnish the creditor the guarantees and securities promised, impairs the guarantees
and securities, violates any undertaking in consideration of which the creditor agreed to the period , or if he absconds.
(Mnemonic – IFIVA, Art. 1198 NCC)
10. Potestative condition is one which is dependent solely upon the will of one of the contracting party. If it is potestative on
part of the creditor, it is valid. If it is potestative solely on the part of the debtor, the conditional obligation shall be void.
11. But the provision of 1182 will only apply if the potestive obligation will give rise to the obligation. If the obligation is pre-
existing and the payment of which or performance of which is subject to a condition that is potestative on the part of the
debtor, the obligation is valid but the condition is void. (Further reading: Catungal-Wessel vs. Rodriguez, G.R. 146839)
12. An alternative obligation is one whether there are several prostrations agreed upon but can be complied by the delivery
of only one. As a rule it is the debtor has the right to choose the prestation, he wants to deliver unless he expressly
grants it to the creditor.
13. The limitation on the debtor’s choice in an alternative obligation are: he cannot choose a prestation which is impossible or
unlawful or one among several prestations agreed upon where only one is practicable.
14. When an object of an alternative obligation is lost through a fortuitous event, then the debtor may still comply by the
delivery of the remainder.
15. When the objects of an alternative obligation are lost through the fault of the debtor, the basis of the indemnity to be
given the creditor would be the value of the thing that last disappeared.
16. If the choice in an alternative obligation was granted to the creditor, the basis for the indemnity of the loss of all of the
objects of the alternative obligation would be based on the value of any of the things which through the fault of the
debtor has disappeared.
17. In facultative obligations, once substitution has been made, the debtor would be liable to the creditor on the account of
his delay, negligence or fraud for the lost of substitute which he has given. (Read Art. 1206)
18. An obligation is presumed joint. The concurrence of two or more creditors or two or more debtors in one and the same
obligation does not imply that the creditor may demand full compliance with the obligation or that the debtor would liable
for the fulfillment of the entire obligation.
19. Solidary obligations are exception to the rule on joint liability. Examples of obligations, under the law which require
solidary liability among the debtors are (See 94 and 121 of the Family Code, 927 of NCC, Art. 1911 NCC, 1915 NCC, 2146,
2157 NCC, 2194 NCC)
20. Under Art. 1214, payment should be made to the demanding solidary creditor. (Important read: BPI vs. Fernandez G.R
173134). Failure to pay would render the obligor in default.
21. A surety’s liability is similar to that of a solidary creditor under Art 1216 NCC. Under 1216, the creditor may proceed
against any of the solidary creditor or all of them simultaneously but the demand made against one of them should not
be an obstacle against the demand that may be subsequently made against the others as long as the obligation has not
been fully collected.
22. A joint, indivisible obligation gives rise to indemnity for damages from the time anyone of the debtors does not comply of
his undertaking.
23. In a joint indivisible obligation, there is no mutual agency such that if anyone of the joint debtors is not ready to comply
the liability for damages shall be shouldered by the debtor who is not ready to comply.
24. Proof of actual damage is not necessary in order that the penalty may be enforced in an obligation with a penal clause.
The creditor need to prove only the non-performance of the obligation.
25. A creditor may demand indemnity on top of the penalty: when it is stipulated that on top of the penal clause that the
creditor is entitled to sue for damages, when the debtor refuses to pay the penalty, when the debtor is guilty of fraud in
the performance of his obligation.
26. Even if it is expressly stipulated by the parties the judge may equitably reduce the penalty in case the obligation has been
partly or irregularly complied with if it is iniquitous or unconscionable. (See Art 1229 NCC)
27. Every person obliged to give something is also obliged to take care of it with the diligence of a good father of the family
unless the law or stipulation of the parties requires other standard of care. (See Art 1163 NCC)
28. If a person obliged to do something fails to do it, the obligation shall be executed at his cause or if the obligor performs it
and it has been poorly done it shall be undone at his expense. (See Art. 1167 NCC)
29. Those obliged to deliver to deliver or do something incur delay from the time the obligee judicially or extra judicially
demands from them the fulfillment of the obligation. (See Art. 1169, NCC)
30. The following are exceptions to the rule of necessity of demand: when demand would be useless because the obligor has
rendered it beyond his power to perform, when time is the controlling motive for the establishment of the obligation,
when the obligation or law expressly so states that demand is not necessary to render the obligor in default (mnemonic:
UTOL)
31. The effects of delay are: debtor would be liable for damages like interest on the sum due and consequential damages
suffered by the creditor and the debtor will not be excused from liability for loss of the thing even if the loss maybe
fortuitous.
32. If there is delay on part of the creditor: the creditor is liable for damages, he bears the risk of loss of the thing due, and
the debtor is entitled to avail the remedy of consignation.
33. When there is delay on the part of both, the court will determine which of the parties first violated the contract and if it
cannot be determined, the contract shall be deemed cancelled and each will bear his own damages. (Read Fong vs.
Duenas G.R. 185592)
34. A debtor who is guilty of fraud in the performance of his obligation shall be liable for damages to his creditor and waiver
for action for future fraud is fraud. Fraud in the performance will entitle the party to ask for damages. While causal fraud,
will entitle the party to ask for the annulment of the contract.
35. There is negligence when there is failure to observe for the protection and interest of another the degree of care,
precaution and vigilance which circumstances justly demand whereby such other person suffers injury.
36. No person except when it is otherwise declared by stipulation or by law or when the nature of the obligation requires the
assumption of risk no person shall be liable for those events which could not be foreseen or even if they can be foreseen,
they are inevitable. (Art. 1174, NCC)
37. The happening of a fortuitous event will exempt the debtor from liability for non-fulfillment of the obligation provided that
the proximate cause of the loss was the fortuitous event and not the negligence of the debtor. (Other related readings:
Real vs. Belo, G.R 146224; Philcomsat vs. Globe, G.R 147324 and 147334)
38. The power to rescind obligation is implied in reciprocal ones in case the obligor should not comply with what is incumbent
upon him. The injured party may choose between fulfillment or rescission with payment of damages in either case. He
may also seek rescission even if he chosen fulfillment if fulfillment becomes impossible. (See Art. 1191, NCC)
39. Extinguishment of obligations may be made through payment or performance, loss of the thing due, condonation,
confusion, compensation, and novation.
40. The creditor cannot be compelled to accept a thing different from that which is stipulated. However under Art. 1244, if
subsequent to the due date of the contract the parties agree that the debtor will deliver a thing in satisfaction of the
obligation and the creditor accepts, that is dacion en pago which will be permitted.
41. If the creditor accepts performance knowing its incompleteness or irregularity, without protest or objection, the obligation
shall be deemed complied with.
42. A creditor is not bound to accept payment from a third person. However, if a third person pays, and the creditor accept
the payment, that payment is valid as far as the creditor is concerned and it would entitle the third person who paid the
right to seek beneficial reimbursement from the debtor.
43. Payment should be made to the creditor or to the person in whose favor the obligation has been constituted. Payment to
the wrong person will not extinguish the obligation and consequently the debtor may be made liable to pay the obligation
all over again.
44. If the creditor is incapacitated to receive payment when the obligation is due, the creditor may avail of the remedy of
consignation.
45. Payment is valid if made to person in possession of the credit. (See Napocor vs. Ibrahim G.R. 168732)
46. As a rule before making the consignation, valid tender of payment is required prior antecedent to consignation.
47. However, consignation alone without tender of payment shall be made when two or more persons claim the right to
collect, the creditor refuses to issue a receipt, creditor is incapacitated to receive the payment due, or if the creditor is
absent at the place of payment, or lost title to the obligation. (Mnemonic: TRIAL, Art. 1286, NCC)
48. Liability is extinguished if the thing is lost only if the thing is determinate because genus never perishes.
49. For loss to extinguish an obligation, the thing must be specific or determinate, and the loss must have occurred due to a
fortuitous event, and there must be no negligence, delay, or fraud as well as assumption of risk on the part of the debtor.
50. Condonation of the debt must also comply with the form prescribed for donations under Art 748 and 749, NCC and
subject to the limitation that no person may give by way of donation more than what he may give or receive by will.
51. Requisites of a legal compensation are 1) each creditor must be pound principally, 2) both debts must consist in the
payment of sum of money or if they be of consumable thing, they may be of the same kind or quality, 3) both debts
must be due, liquidated and demandable, 4) and that over neither of them there be any retention or controversy
commenced by third person and communicated in due time to the creditor. (Art. 1279 NCC)
52. When one of the debts arise from the obligation of a depositary, or a bailee in a contract of commodatum, or when one
of the debts arises from a criminal offense, or when the creditor has the right to support by gratuitous title, compensation
is not appropriate as a mode of extinguishing an obligation.
53. Extinctive novation ensues either by objective novation – by changing the object of the obligation; subjective meaning
there is a change of debtor or subrogating a third person to the rights of the creditor.
54. In order to extinguish the obligation by novation, there must be the following requisites: there must be a previous valid
obligation, agreement of all the parties to the new contract, there must be extinguishment of old obligation, and birth of
new or valid obligation. (Read Salazar vs. J.Y Brothers G.R 171998 regarding incompatibility of the previous and the new
obligation)
55. In delegacion, it is the original debtor himself who proposes to the creditor a third person as the new debtor and he is
accepted by the creditor. In expromission, it is the new debtor himself who goes to the creditor and proposes himself as
the new debtor and he is accepted by the creditor.
56. Once the creditor accepts the third person or the new debtor, it will not revive the action against the original debtor
because by accepting the new debtor, the obligation is novated and therefore is extinguished. Except in case of
delegacion, the original debtor can still be held liable by the creditor if the insolvency of the new debtor was of public
knowledge and known to the old debtor at the time he delegated his debt.
57. The principle of autonomy or freedom of contract under Art. 1306 gives the parties the freedom to include or incorporate
stipulations, terms and conditions as they may deem convenient provided that they are not contrary to law, morals, good
customs, public order, or public policy. (Read Tiu vs. Platinum Plans G.R 163513 – non-involvement provision in contract
is considered valid. Acol vs. PCCI, G.R 135149 – provision in the credit card agreement making card holder liable despite
verbal notice of loss was held invalid for being contrary to public policy. )
58. Principle of mutuality under 1308 provides that contract must bind both contracting parties and its validity or compliance
cannot be left to the will of one of them. (Read MIAA vs Ding Velayo Sports Center, G.R 161718, nothing wrong with
giving lessee the option to renew the lease because the lessor was free to give it or to not give it to the lessee but since it
chose to give it to the lessee, it cannot reneg on its promise)
59. Contracts take effect between contracting parties, their assigns, their heirs and their rights and obligations are generally
transmissible to the heirs of the contracting parties except if they are not transmissible by stipulation, by nature, or by
law. (Art 1311, NCC)
60. The principle of relativity is subject to exceptions provided in Art 1312,1313, and 1314, and on 1311 itself on stipulation
pour autri.
61. If the contract should contain some stipulation in favor of a third person, he may demand its performance provided he
communicated his acceptance prior to the revocation of the stipulation in his favor by the contracting parties. (Stipulation
Pour Autri)
62. The basic principle of relativity of contracts is that contracts can only bind parties who entered into it, and cannot favor or
prejudice a third person, even if he is aware of such contract and has acted with knowledge thereof. (PNB vs. Tan Dee
G.R. 182128)
63. As an exception to the principle of relativity of contracts, any third person who induces a party to violate his contract shall
be liable for damages to the other contracting party (Art. 1314, see Gilchrist vs. Cuddy G.R No. L-9356)
64. As an exception to the principle of relativity of contracts, the third person purchaser cannot prevent the foreclosure of the
property if the mortgage is registered. (Art. 1312 NCC)
65. As an exception to the principle of relativity of contracts, a creditor may sue for rescission of contracts entered by parties
to defraud him.(Art 1313 in relation to Art. 1381 par 3)
66. A contract is perfected generally by mere consent but if the contract is a real contract, it is only perfected by delivery of
the object of the obligation.
67. Examples of real contracts: pledge, mutuum, commodatum.
68. Sale is a consensual contract.
69. The essential requisites of a contract are: consent, object, and cause.
70. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to
constitute the contract. The offer must be certain and the acceptance must be absolute.
71. Acceptance by letter or telegram does not bind the offerer except from the time that it came to his knowledge. (Art.
1319)
72. The elements of consent are concurrence of the offer; acceptance upon the thing and the cause which are to constitute
the contract; the parties must have legal capacity; the consent must be intelligent, free, and spontaneous.
73. If one of the parties have no legal capacity, the contract will be voidable. (Art. 1390 NCC)
74. Intelligent consent is vitiated by mistake or error. Free consent is vitiated by force, intimidation. Spontaneous consent is
vitiated by fraud. The presence of the vices of consent will render a contract voidable.
75. The Death, civil interdiction, or insanity, or insolvency of one the contracting parties before acceptance is conveyed will
render the offer ineffective. (Art. 1323)
76. When an offer is made and accepted, there is a perfected contract.
77. When the offerer allows the offeree the certain period to accept, the offer may be withdrawn at any time before
acceptance. (Art. 1324 NCC)
78. When one enters in to an option contract, the purchaser acquires the privilege to buy. The privilege to buy is the time to
decide whether to buy or not. Under Art. 1479, if it the promise is unilateral, it is valid and binding if it is supported by
cause or consideration distinct to the purchase price of the property. Thus, when a offerer bounds himself to an option
contract, he cannot withdraw his offer during the agreed period otherwise he would be liable for damages. (Read Art.
1324 in relation to Art. 1479)
79. To be valid the object must be: within the commerce of man, it must exist at the time of the celebration of the contract,
it must be licit or lawful, determine or capable of being made determinate without the need of a new agreement between
the parties.
80. Contracts are presumed to be for a cause or consideration. While the cause is not stated in the contract, it is presumed to
exist and is lawful. (See Art. 1354, Mangahas vs. Brovio G.R. 138352)
81. Contracts should be considered obligatory in whatever form they may be found provided that all the essential requisites
for their validity are present. However, if the law requires a contract to be in a particular form in order for it to be valid or
enforceable or that the contract be proved in a certain way then that requirement is absolute and indispensable. (Related
articles: 748 & 749 on donations; 1771,1772,1773 on partnership; 1744; 1874; 1956; 1403 on statute of frauds; 2134 on
antichresis; 1051 on repudiation of inheritance)