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c. delicts
Obligation - juridical necessity: art 1161: general rule in delicts: the
To give filing of the criminal action suspends civil
To do action
Not to do1 exceptions:
obligations not arising from the
Natural obligation
- obligations not based on positive law
act/omission claimed to be
- does not have a juridical tie criminal
Civil obligations violations of consti rights and
- obligations that give creditor a right under the law to liberties of individuals
enforce performance in courts of justice defamation, fraud, physical injuris
refusal or failure of members of a
Requisites of an obligation local police force to render
1. debtor – must be determined / determinable protection to life and property
2. creditor – must be determined / determinable
3. object / prestation d. quasi-delicts6 (torts)- whoever, by act or
categories: omission, causes damage to through fault or
i. to give negligence is liable for the damage, there being
a. a determinate thing no prior contractual relation-based on principles
b. a generic thing of equity
ii. to do Requisites for Negligence
iii. not to do 1. duty on the part of the defendant to protect the plaintiff
requisites: from the injury of which the latter complains
i. legally attainable 2. failure to perform that duty
ii. physically attainable 3. an injury to the plaintiff through such failure
iii. determinate Kinds of negligence
iv. determinable Culpa aquiliana/ Culpa extra-contractual (art. 1173)
v. must have monetary/pecuniary value o negligence as a source of obligation
4. juridical tie o quasi-delict
sources of obligations2: o governed by 2176-2194
i. law
* obligations derived from law are not presumed3
fault/negligence which constitutes an independent source of
a. crimes4 obligation between parties not previously bound
* WON there is a contract, person may be liable for a Culpa Contractual (art 2176)
tort5 o negligence in the performance of a contract
b. contracts o governed by 1179 and other special laws
1
A.1156 fault/negligence of the debtor as an incident in the fulfillment of an
2
A.1157 existing obligation
3
A.1158
4
A.1161
5 6
Syquia vs. CA A.1162
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Obligations and Contracts
Fraud v. negligence: in fraud, there is willfulness or deliberate intent o Result must be the natural and probable consequence such
to cause damage or injury to another; in negligence, it is not the as ought to have been foreseen as likely to flow from the
voluntary act which gives rise to responsibility but the want of care act complained of
Quasi delict Crime o It is the natural cause when either it acts directly producing
Nature of right Private right; v. Public right; v. the the injury or sets in motion other causes so producing it
violated individual state and forming a continuous chain in natural sequence down
Condition of Criminal intent is not Criminal intent is to the injury; thus, linking the negligence to the injury by a
mind necessary necessary chain of natural and consequential causation although the
former may be neither the immediate nor the direct cause
Legal basis of There is a qd in any act Punishable only
of the event
liability or omission wherein when there is a law
o If two causes operate at the same time to produce a result
fault or negligence that penalizes it
intervenes which might be produced by either independently of the
Liability for Gives rise to liability for There are crimes other, they are concurrent causes (each of them is a
damages damages to the injured which give no rise to proximate case)
party civil liability o If successive, one is remote the other, proximate
Form of redress Reparation, Fine, imprisonment
compensation, or both e. quasi-contracts7
indemnification 1. negotiorum gestio – voluntary
Amount of Preponderance of Proof beyond management of the property or affairs of
evidence evidence reasonable doubt another without the knowledge and consent
Compromise Can be compromised Cannot be of the latter8
compromised 2. solutio indebiti – when something is
received when there is no tight to demand it
Requisites of liability in quasi delict and it was unduly delivered by mistake9
1. there exists a wrongful act or omission imputable to the requisite of Quasi-Contracts:
defendant by reason of his fault or negligence 1.lawful
2. that there exists a damage or injury which must be proved 2.voluntary
by the person claiming recovery 3.unilateral
3. there must be a direct causal connection or a relation of
cause and effect between the fault or negligence and the
damage or injury or that the fault or negligence be the ii. contracts – law between the parties10
unilateral promise is a source of an obligation as a contract.
cause of the damage or injury Adherance to requirements means that there is acceptance on
Doctrine of Proximate Cause the part of the other, thus a contract.
o proximate cause is the one which in natural sequence
undisturbed by any independent cuase produces the result
complained of
o Such adequate and efficient cause as in the natural order of
events and under the particular circumstances surrounding 7
A.1160
8
the case would necessarily produce the event A.2144
9
A.1154
10
A.1159
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Obligations and Contracts
Contracts REAL RIGHT PERSONAL RIGHT
- meeting of minds between two persons whereby one binds o the power belonging to o the power belonging to
himself, with respect to the other, to give something or to person over a specific one person to demand of
render some service thing without a passive another as a definite
- law between the parties, should be complied with in good subject individually passive subject, the
faith(according to the strict stipulation of the contract) determined against fulfillment of a
(autonomy of the will) whom such right may be prestation to give, to do
exercised or not to do
why contracts are important: o gives to a person a
laws are default rules, contracts change default rules. direct and immediate
juridical power over a
Duties of debtor:obligation to give determinate thing thing, which is
(Applies to obligations to give determinate thing only) susceptible of being
1. to take care of the thing with the diligence of a good father exercised, not only
of a family11 – ordinary, due diligence-default rule against a determinate
2. to deliver fruits12, accessories and accessions13 person, but against the
natural fruits – spontaneous products whole world
industrial fruits – produced thru cultivation or labor o the rights of ownership
accessories – fruits of a thing or additions to or and possession are real
improvements upon a thing rights
accessions – things joined to or included with the **** from the time the obligation to deliver a determinate thing
principal thing for the latter’s embellishment, better arises, the creditor only has a personal right to the thing itself and
use, or completion to the fruits thereof. He can only demand that the debtor deliver
3. compliance in good faith such thing and its fruits. Delivery constitutes a necessary and
- compliance according to the terms and condition of the indispensable requisite for the purpose of acquiring the ownership
contract of the same by virtue of a contract. For the creditor to have a real
- same quality with everything in it right, it must be delivered
Rights of the creditor: obligation to give 1. demand delivery of the thing, it’s fruits, accessory and
personal right – right or power of a person to demand accessions.
from another the fulfillment of the obligation 2. demand specific performance – substitute performance at
real right – right or interest of a person over a specific expense of the debtor in case of delivery of indeterminate
thing, only acquired after delivery thing14.
3. resolution
4. damages (for fraud, gross negligence, bad faith, deceit)
11
A.1163
12
A.1164
13 14
A.1166 A.1165
3 ogie 1-e
Obligations and Contracts
15
Rights of creditor: obligation to do 2. party not in default21
1. specific performance unless amounts to voluntary servitude Contact of sale with the condition that seller would fill the land with
escombro. Seller failed to fill the land, buyer did not make payments and
(compulsion is not allowed)
seller asks for resolution. Court did not grant resolution for a party may
2. substitute performance not ask for the resolution of the contract that they themselves breached.
3. damages (Central Bank of Phil vs. Bichara)
4. to demand debtor to undo what can be undone 3. person who can return whatever may be obliged
Rights of a creditor: obligation not to do16 to restore22
1. injunction/TRO
2. to demand debtor to undo what can be undone General Rule: party must seek judicial rescission but parties
Remedies in case of breach/non-performance may agree in extra-judicial rescission and the injured party
1. specific performance may do acts (attachment, attack fraudulent alienation contracts by debtor)
2. resolution to protect its interest and to minimize its own damages23
3. damages
Criticism to the general rule:
RESOLUTION (implied in reciprocal obligation17) 1. penalizes injured party due to initial cost of filing an action
General Rule: only for SUBSTANTIAL breaches (when it totally defeats in court for rescission
the principal object/reason of entering into the contract)
2. party cannot transact with another party a new contract
When the contract price was P3,920 plus 7% interest and the debtor
stopped making payments when the payments made already reached Extra-judicial rescission requires notice to the adverse party24
P4,533.38. Creditor opt to resolve the contract, court ruled that breach
was only slight considering the principal was already paid. (Angeles vs.
Calasanz)
Resolution applies to portion affected by the breach:
In a loan agreement, bank approved 80k loan, in exchange for the
Obligation was: buyer would pay down-payment and seller would execute
mortgage of properties. Bank only released 17k. Upon failure of payment
deed of assignment. Seller failed to execute such deed, buyer asks for
of the 17k, bank foreclosed the properties. Court ruled that debtor still has
resolution. Court grants because such failure of seller is deemed a
to pay 17k and bank cannot foreclose the entire mortgaged property, only
substantial breach (de Dios vs. CA)
the property representing 17k should be foreclosed. (Central Bank of the
Exception: Phils. vs. CA)
1. time is of the essence18
2. when it is the basis of the contract
15
A.1167
16
same
17 21
A.1191 Rose Packaging Co. Inc. vs. CA
18 22
Barzaga vs. CA Co vs. CA
19 23
Ocampo vs. CA, Taguba vs. de Leon UP vs. De los Angeles
20 24
Reliance Commodities Inc. vs. IAC, Rose Packaging Co. Inc vs. CA Pulay Inc. vs. Clave
4 ogie 1-e
Obligations and Contracts
DAMAGES
DELAY / DEFAULT
When can creditor claim for damages25:
1. Fraud, Deceit, Bad Faith Ordinary delay
Fraud – include an inducement through insidious - failure to perform an obligation on time
machinations(deceitful scheme or plot with an
evil/devious purpose) Legal delay
Deceit – with intent to deceive, conceal or omits to - delay that constitutes a breach of the contract
state material facts
Bad Faith – imports dishonest purpose, does not Who may be in default: (kind of default)
connote bad judgment/negligence26 1. debtor (mora solvendi)
Gross negligence is equivalent to bad faith Effects of Mora Solvendi (debtor is in delay)
Insurance company has obligation to provide insurance for the 1. when it has for its object a determinate thing, the delay
premium paid by Areola. When payment that Areola made to the
places the risks of the thing on the debtor
manager was not remitted to the insurance company, it cancelled his
insurance policy. Court ruled that since there was breach on the part 2. he becomes liable for damages of the delay
of the insurance company, it was liable for damages due to the fraud
committed by the manager. (Areola vs. CA) remedies of creditor: resolution, specific
2. Negligence – failure to exercise due diligence 27 performance, claim for damages
Obligation in telegram service, company is obliged to transmit
message accurately for a price paid by customer. When company
transmitted offensive messages not included in the original message 2. creditor (mora accipiendi)30
that was supposed to be sent due to the negligence of its employees, Mora Accipiendi requisites
court ruled that company is liable for damages (Radio Comm vs. CA) 1. an offer of performance by the debtor who has the required
3. Delay/default capacity
4. Breach 2. the offer must be to comply with the prestation as it should
* in case both committed breach, liability of first infractor shall be
be performed
equally tempered by the courts. If it cannot be determined who first
committed the breach, parties shall bear their own damages 28 3. the creditor refuses the performance without just cause
Benefits arising from default/delay may cease upon: Excuse for non-performance: if debtor delays due to fortuitous
1. renunciation by the creditor events or force majeure, he cannot be held liable unless there is
2. Prescription an express agreement to the contrary or the law otherwise
provides in particular cases.
31 33
McLaughlin vs. CA Agcaoili vs. GSIS
32 34
A.1169 Tan vs. CA
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Obligations and Contracts
1. in which a party to a contract is relieved from the effects of
his fault or negligence by a third person (e.g. insurance)
General rule: with regard to damages in established businesses, 2. in which one party to a contract renounces in advance the
satisfactory evidence of the amount of the business transacted right to enforce liability arising from the fault or negligence
before and after the injury complained of must be submitted of the other
before damages can be awarded.
VOID!!! Stipulations exempting from liability for gross
Art 1171 negligence because, gross negligence = fraud
Prohibited Renuciation: the renunciation which is prohibited by this Not void stipulation exempting from liability for simple
article is that which is made in advance of the fraud (fraud which negligence
the malice or bad faith in performance of an existing obligation in
art 1170 and not the fraud or deceit used to procure a contract) Contracts of Adhesionor in a contract where the parties are in
manifestly in such an inequality of positions that one could not
Art 1172 freely bargain with the other in the determination of the terms of
o In culpa aquiliana, not involving a breach of existing contract
obligation, an employer or master may exculpate or
exempt himself from liability under the last par of art 2180, Irresponsibility clauses/ exempting one party from liability for
by proving that he had exercised due diligence to prevent damages due to the others negligence should be taken with
the damage, whereas his defense is not available if the caution because they may effect become an encouragement of
liability of the master arises from a breach of contractual negligence which may occasion considerable loss to society and
duty or from culpa contractual interested party
o In an accident, the non-responsibility of the driver to the
injured party is article 1170 while the owner is the party Art 1173:
directly responsible for the fulfillment of the contract Degree of diligence required: a good father of a family or “bunis
o In the matter of mitigation of damages paterfamilias”
Culpa contractual: the court is given discretion to
mitigate the liability according to the circumstance of “In contracts with specific establishments pertaining to the nature
the case under 1172 of their business, simple negligence on the part of the company
Culpa aquiliana: the court is not given the discretion with regard to factors that are integral to their business is gross
to mitigate the liability arising under 2176 negligence.”
36
National Power Corporation vs. CA
37
Juan Nakpil & Sons vs. CA
38
A.1174
39 41
A.1165 A.1165
40 42
A.1170 A.1175
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Obligations and Contracts
CLASSIFICATIONS OF OBLIGATION
Other remedies: primary
1. pursue the leviable property 1. Pure and Conditional obligations
2. action subrogatoria – exercise all the rights and bring all the 2. Obligations with a period
actions of the debtor (i.e.if debtor is creditor to another, one may file for 3. Alternative and Facultative obligations
attachment of the right of the debtor to the debt) 4. Joint and Solidary obligation
the action which the creditor may exercise in the place 5. Divisible and Indivisible obligations
of his negligent debtor in order to preserve or recover for 6. Obligations with a Penal Clause
the patrimony of the debtor the product of such action and secondary
then obtain therefrom the satisfaction of his own creditIt is 4. Unilateral and Bilateral obligations
mainly to: 5. Real(to give) and Personal (to do) obligations
1. conserve the patrimony of the debtor by 6. Determinate and Generic obligations
bringing into it property abandoned or 7. Civil and Natural obligations
neglected by him 8. Legal, Conventional and Penal obligations
2. making the execution on such property
effective thereafter What determines demandability of an obligation:
1. condition
The Personal rights (cannot be subrogated/levied upon) of 2. term
the debtor are:
1. right to existence
2. right or relations of a public character PURE AND CONDITIONAL OBLIGATIONS
3. rights of an honorary character
4. rights consisting of powers which have not been used Pure obligation
5. non-patrimonial rights - demandable at once
6. patrimonial rights not subject to execution - not subject to suspensive condition
7. patrimonial rights inherent in the person of the debtor - may be subject to resolutory condition44
3. action pauliana – impugn the acts which the debtor may Conditional obligation
have done to defraud the creditor43 - acquisition of rights, as well as extinguishment or loss of those
**creditors are protected from debtor’s voluntary acts and judicial acquired depend upon the happening of an event which
acts constitutes the condition45
**payments of pre-existing obligations already due cannot be
impugned by an accion paulina whether natural or civil
Condition
- future and uncertain event
- past but unknown event
44
A.1179
43 45
A.1177 A.1181
9 ogie 1-e
Obligations and Contracts
numbers of condition
Kinds of condition 1. conjunctive – several conditions and all must be fulfilled
effect 2. disjunctive – several conditions and only one or some of
1. suspensive – will give rise to an obligation46 them must be fulfilled.
In a contract of lease with option to purchase, a condition for the sale divisibility
is that the lessors obtain a TCT in their favor. Lessor failed to obtain 3. divisible – susceptible of partial performance
such TCT and seeks for the rescission of the contract to sell. Court
ruled that parties cannot resolve such obligation to purchase because
4. Indivisible – not susceptible for partial performance
the condition was not fulfilled, thus the obligation to purchase is Kinds of potestative condition
inexistent. There can be no resolution of a non-existent obligation 1. the simple potestative condition (presupposes not only a
(Gonzales vs. Heirs of Thomas and Paula Cruz) manifestation of will but also the realization of an external
2. resolutory – extinquishes the obligation47 act such as If you sell your house)
*when resolutory condition fulfilled, the parties shall return to each other 2. the purely potestative condition (depends solely and
what they have received48
exclusively upon the will)
form
1. express – clearly stated
2. implied – merely inferred
o simple potestative condition on the part of the debtor does not
possibility – physically or legally
prevent the formation of a valid obligation ( I agree to make
1. possible
the first offer to you should I decide to sell my house)
2. impossible
o purely potestative condition destroys the efficacy of the legal
cause or origin
1. potestative – depends upon the will of one of the parties. tie
o if potestative condition depends exclusively upon the will of the
2. casual – depends upon chance or a third person debtor, that the conditional obligation is void; to sanction such
3. mixed – depends partly upon chance and partly upon a third is to sanction illusory obligations
person o in purely potestative condition depends exclusively on the
mode debtor, not only is condition void, but the whole obligation is
1. positive – based on the happening of an event void as well
* condition deemed not fulfilled and obligation o when the fulfillment of the condition does not depend upon the
extinguished: will of the obligeor but on that of a third person who can in no
1. time expires without the event taking place
2. as soon as it has become indubitable that the event will not take way be compelled to carry it out, and its found by the court
place although the time specified has not expired 49 that the obligor has done all in his power to comply with the
2. negative – based on the event not happening obligation, the other party may be ordered to comply with his
* condition deemed fulfilled and obligation shall become part of the contract.
effective:
1. time indicated has elapsed without the event taking place
2. from the moment it has become evident that the event cannot
occur, although the time indicated has not yet elapsed 50
52
A.1182, Rustan Pulp and Paper Mills Inc. vs. IAC
53 56
A.1183 A.1188
54 57
A.1187 A.1189
55 58
A.1194 and A.1195 A. 1191
11 ogie 1-e
Obligations and Contracts
Term/period: space of time which exerting an influence on
obligations as a consequence of a juridical act, suspends their definiteness
demandibility or determines their extinguishments 1. definite – fixed or known when it will come
2. indefinite – not fixed when it will come
Period / Term
– future and certain event59 Test for detemining the constitutionality of a moratorium
- presumed to be for the benefit of both party60 law(postponement of the fulfillment of an obligation or
When debtor loses the right to use period extension decreed by a statute): The determination of the
1. insolvency Unless a guarantee or security is provided period of suspension of the remedy. It is required that such
2. if he does not give the guarantee or security promised suspension be definite and reasonable otherwise it would be
3. when he impairs the guarantee or security unconstitutional
4. if debtor violates any of the reason of the creditor for Condition Term/period
entering into the contract Fulfillment Uncertain; even when must necessarily come
5. debtor attempts to abscond. an event must whether on a date
necessarily happen, the known before hand or at
Kinds of period obligation will be a time which cannot be
Effect conditional when the pre-determined.
1. Suspensive period – obligations begins from arrival of the condition is that such
period event shall or shall not
2. Resolutory period – obligation is valid up to the day certain and happen within a certain
terminates upon the arrival of the period time
Influence Gives rise to an No effect upon the
Source on obligation or existence of obligations
1. legal period – provided by law obligation extinguishes existing but only upon their
2. conventional/voluntary – agreed upon by the parties obligations demandibility or
3. judicial – fixed by courts performance; does not
* presupposes a valid contract61 carry retroactive effect
* Courts cannot fix the rental, they can only fix the period 62 unless otherwise agreed
a. If obligation does not fix a period, but from it’s nature upon
and circumstances, it can be inferred that a period was Time May refer to a past even Always refers to the
intended unknown to the parties future
In a case wherein the payment should be made after the
Tobacco was sold, it was held that there was a valid period but must show proof on
stipulated: when the Tobacco was sold. The courts need not knowledge of past event
fix a period. (Lim vs. People) Will of A condition which a period left to the
b. Period that depends upon the will of the debtor63 debtor Depends exclusively on debtor’s will merely
59
the will of the debtor empowers the court to
annuls the obligation fix such period
60
A.1196
61
Millare vs. Hernando Article 1195:
62
Roxas vs. Alcantara
63
A.1197 as to 1180
12 ogie 1-e
Obligations and Contracts
o the creditor who accepts payment in bad faith or with
knowledge that the period has not yet arrived shall pay legal Alternative Obligations
interest if a sum of money is involved or shall be liable for - several prestations are due but the performance of one is
fruits received or which shold have been received if the thing sufficient
produces fruits; if creditor acted in good faith, he is only liable - creditor cannot be compelled to receive part of one and part of
for the fruits in so far as they benefited him the other65
Debtor may refuse payment: payment to the wrong party cannot extinguish the obligation
rd 111
1. from 3 persons
112 of such debtor to its creditor117
2. from incapacitated - this will be valid to the extent he is
benefitted(intelligent use of the proceeds, purchase of necessaries)
General Rule: Payment to 3rd person is invalid
Effect of payment of 3rd person/
Except:
accepted by creditor/
1. payment to the “bearer” of promissory note
against the will of the debtor:
2. valid to the extent creditor has benefited
1. 3rd person may recover up to the extent debtor was
benefited113 Burden of proof on the debtor: creditor benefited
2. 3rd person cannot compel creditor to subrogate him of the Except when there is presumed benefit118:
rights of the debtor114 1. 3rd party acquired the rights of the creditor after payment
2. creditor ratifies payment
3. acts of creditor led debtor to believe that 3rd person has
authority to receive payment
106
A.1244
107
Hahn vs. CA Payment after judicial order of retention of
108
A.1248 debt shall be invalid119 (debtor’s remedy is to consign)
109
A.1234
110 115
A.1235, Azcona vs. Jamandre A.1238
111 116
A.1236 A.1251
112 117
A.1239 Arañas vs. Tutaan
113 118
A.1236 A.1241
114 119
A.1237 A. 1243
19 ogie 1-e
Obligations and Contracts
- if there is stipulation, the one for whom the benefit is
Payment of monetary obligation constituted may waive the right to choose
1. currency stipulated - if there is interest, payment applied to interest first before the
2. Philippine currency w/c is legal tender debt123
c25 and above – up to P50
c10 and below – up to P25
- if debtor does not choose/default rule does not apply, must be
applied to the most onerous124
3. checks – after it has been cashed, cleared or deposited in
the account of the creditor eg. Manager’s check/ cashier’s check120 - if all debts are the same nature, application to all
Check for payment not legal tender and creditor has option to proportionately125
accept or reject121
Dacion
- delivery of property in exchange of payment of the obligation
“may use New Pacific as ground of validity of payment in - conveys ownership
check or Tibajia as ground for invalidity of payment in - borrower has control of the assets so he has bargaining power
check, whichever may be the case”
“Dacion is governed by the law on sales (subject to
warranties for buyer) if property delivered is to pay for
money obligations”
Tender of payment:
Application of payment default rule:
- debtor must be willing and able to pay
- debtor has the right to apply / choose unless stipulated
120 123
New Pacific Timber vs. Seneris, McLaughlin vs. CA A. 1253
121 124
Tibajia Jr. vs. CA, Far East Bank vs. Diaz Realty A. 1254
122 125
Sangrador vs. Valderama A. 1254
20 ogie 1-e
Obligations and Contracts
- must have actual offering of the payment 126
Requisites of consignation:132
- preserves the right, debtor not considered in default127 1. debt due
- does not extinguish obligation therefore debtor still has to pay 2. tender of payment unless no longer needed
3. previous notice of consignation133
interest128 or rent129
4. deposit of amount in court
5. notice after consignation
consideration for a valid tender of payment
Ability to pay
For every monthly rental, tender of payment and notices are
Intent to pay
Actual payment required for each month134
Requisites Kinds
1. takes place between creditor and principal debtor 2. legal – when all requisites are present, automatic
2. only 1/same obligation is involved 3. facultative – there is one lacking requisite/ one who
3. confusion is total/covers entire obligation benefits waives right
4. conventional – by agreement, when requisites are lacking
Confusion in principals extinguishes obligation 138 5. judicial- declared by court i.e. when there is counter claim
Confusion in subsidiaries (guarantors, security) does not
extinguish obligation139 Cannot be applied to the ff:
If security(mortgage) is acquired by the creditor, the 3. deposits of safekeeping – involves trust relationships
obligation is not extinguished but merely becomes 4. support – except support in arrears
unsecured.140 5. civil liability arising from penal offense
6. taxes – not a contractual debt but a duty143
7. obligation arising from gratuitous title
COMPENSATION except when parties agree
- offsetting of 2 obligation of the parties who are mutual
debtor/creditor to each other. guarantee/surety may claim/invoke compensation with regard
to obligations of the principals to each other because it benefits
Requisites141 of legal Compensation (automatic by operation them144
of law)
1. obligors are bound principally/parties principal debtor and
creditor debt consist of money/things of the same kind or banks has no duty to compensate debt of depositor from his
quality account145 (depositum146)
2. both debt are due/subject to resolutory condition/voidable
obligation offsetting, even legal which is automatic, can exist prior to
*rescission/condition has retroactive effect to the compensation so declaration of nullity of void contracts due to its dependence
there must be payment of principal (interest no longer needed)
142
EGV Realty vs. CA
138 143
A. 1276 Fransia vs. IAC
139 144
ID A. 1280
140 145
ID BPI vs. CA
141 146
UyTong vs. Silva A. 1287
23 ogie 1-e
Obligations and Contracts
on demandability. A contract that is void can not be - delegacion, accepted by creditor: no liability from old debtor
demandable, thus the question of validity has to be settled - delegacion, insolvency already existing and known to old
first. After declaration of nullity and restitution is declared, debtor: old debtor is liable
there may be set off to the extent only of the value of the
thing to be restituted; i.e. the benefit inured to the aggrieved Modes of Novation
party.147 1. Express – stipulated in the contract/agreement
2. Implied – old and new obligations are incompatible (very
If obligation is subject to resolutory condition, there may be hard to prove)
offsetting while the obligation is demandable with prejudice to *Consolidated loan did not novate the original 3 separate loans
*No implied novation when promissory note was assigned to a 3 rd person
the resolutory condition. *Discount offered for a period of time did not novate old contract after
the lapse of the period.
Compensation to be applied to multiple debts applicable using
rules in application of payment Assignment of Credit
- process of transferring the rights to proceed against debtor
Compensation cannot be claimed against civil liability from - there are no standing obligation on the part of the assignor
delicts148 - consent of debtor not needed
Subrogation
NOVATION - transfer of all the rights of the creditor to 3rd persons
- extinguishment of obligation by substitution or changing the - happens when in the assignment, there is a standing obligation
object or the parties on the part of the assignor
- needs consent of all the parties
Kinds
1. Subjective/personal – change of subject Requisites of novation
a. passive – change of debtor 1. old obligation must be valid/voidable but not yet
a.1. expromission – upon the instance and annulled
with consent of creditor and 3 rd party as new 2. valid new obligation – maybe subject to a condition
debtor. consent/ knowledge of debtor not 3. all parties should agree: except expromission
needed 4. old obligation must be extinguished (definitely
a.2. delegacion – upon the instance of the declared in express novation or totally incompatible
debtor. Consent of all parties needed with new one in implied novation149)
b. active – change of creditor/ subrogatorys
*3 consents needed for all: debtor, creditor, 3 rd persons. Except for Test for existence of Novation:
expromission Whether the old and new obligation with essential (i.e. object,
2. Objective/Real – change of principal obligation parties, conditions, circumstances) changes can stand together,
each one having an independent existence.
Rules on insolvency of new debtor i.e. increase in debt is novation, decrease in debt is not but merely
- expromission, no consent/against will/no knowledge of debtor: partial condonation
no liability from old debtor
147 Legal Subrogation
A. 1284
148 149
A. 1288 A. 1292
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Obligations and Contracts
1. Creditor pays another creditor who is preferred even w/o 2. Perfection – offer is accepted and there is an agreement
debtor’s knowledge 3. Consummation – fulfillment of the terms of obligations;
2. when 3rd person, not interested in the obligation pays w/ death of the contract
tacit/express approval of the debtor
3. person w/ interest in the fulfillment of the obligation pays Autonomy of Contracts
even w/o knowledge of the debtor - contracting parties may stipulate anything except those
*When solidary debtor pays, there is no legal subrogation. Paying contrary to law, public policy, morals, customs
debtor only has the right to reimburse.
158 163
A. 1340 A. 1344
159 164
A. 1341 ID
160 165
A. 1342 A. 1348
161 166
A. 1343 ID
162 167
A. 1339 A. 1349
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Obligations and Contracts
168
- Pure Beneficience-mere liberality
- if contract is unilateral: cause is the liberality of the benefactor Contract of adhesion does not always mean that is should be
- on an option to purchase in contract of lease: cause is the construed against the one who prepared the contract
undertaking of the lessee in the lease contract
- cause is presumed Written stipulations prevail over printed ones173
A contract without cause or with cause that is contrary to
law, morals, good customs, public policy and order has no When courts cannot resolve ambiguity…
effect. … if ambiguity refers to cause: contract is void
… if contract onerous: greatest reciprocity of interest prevails
General Rule: … if contract gratuitous: construed in favor of the least
Motive does not affect the validity of the contract transmissible rights
Except: *rationale: to preserve the property of the donor. Assumes that a person will
Motive is so intertwined with the cause that it predetermined the only part with his property for equal consideration
cause
REFORMATION
FORM Requisites:
1. there is a valid and enforceable contract
Default Rule: There is no form required in a contract 2. written document does not express the true intention of the
Exception: Unless law requires a form for its parties
validity/enforceability169 3. there is meeting of minds but there is failure to express
true intention due to
Party may compel the other party to execute necessary form a. Fraud
required for contract to be enforceable (Art. 1357) b. Mistake
Does not apply for contract that lacks form required for its c. Accident
d. Inequitable Conduct
validity
“but if a-d prevented meeting of minds, proper action is
Art. 1358 enumeration are not requirements for validity or annulment”174
enforceability. Only for convenience or to bind 3rd persons.
First filed for specific performance and then filed reformation
INTERPRETATION after: cannot prosper except if specific performance based on
unenforceability/ nullity of the contract
Rule: If the contract is clear, there is no room for interpretation First filed for reformation and then filed for specific
Considerations in interpreting intent of parties:
performance: will prosper
Contemporaneous and subsequent acts170
Primary consideration is the intention of the parties171
* Contracts in behalf of minors and absentees shall be valid Effect of Annulment: Mutual restitution. Parties must
if it is approved by the court181 restore to each other what was received
* All gratuitous alienation of property contracts as well as … to minors/incapacitated: may only restore to the extent
onerous title by person adjudged or attached even if they were benefited (intelligent use)183
property attached or adjudged may be different shall be
presumed to be in fraud of creditors182 If property to be returned to the minor was lost: the other
party presumed to be at fault (one who is in control of the
Prescriptive period: 4 years (for absentees and minors, start object is presumed at fault): he is liable for the value of the
when right of action accrues) thing
If annulment based on fraud, object to be returned is lost due
VOIDABLE CONTRACTS to fortuitous event: no need to return the value of the thing
- valid until annulled lost.184
Kinds If the aggrieved party loses the thing at his own fault: he may
1. consent vitiated by fraud, mistake, violence, undue not file for annulment
influence, intimidation, threat If aggrieved party loses the thing due to fortuitous event: he
2. 1 party is incapacitated can still file for the return of the value of the thing185
Value to be based on price at the time of decree of annulment
Fraud must be done by 1 of the parties
Prescriptive period: 4 years (from when right of action accrues
If fraud is done by 3rd person: causes mistake in case of mistake, fraud(discovery), intimidation, violence, undue
influence(when it ceases), minority(when it ceases)
General Rule: Fraud is proved by the 1 alleging it
Except: if the one alleging it is illiterate, the other party must
prove that the contract was fully explained to the illiterate
Kinds:
1. acquisitive
– mode of acquiring property
ESTOPPEL
- admission /representation is binding to the one who made it
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Obligations and Contracts
types:
1. by deed – estoppel by record
2. in pais – estoppel by conduct
a. admission
b. representation
c. silence when one should have spoken
Requisites:
1. there is a representation/concealment of material facts
2. representation is w/ the knowledge of the true state of
facts
3. party who acted must no know the facts are false
4. representation/concealment made w/ the intention of
making the other act based on wrong state of facts
LACHES
- based on delay in filing an action
- rule based on equity
Requisites:
1. party have right of action
2. party know of such right
3. party slept on his right/ did not file an action for no reason
at all
4. lead the other party to believe that no action was
forthcoming
NATURAL OBLIGATION
- obligation w/o a juridical tie
- assumes that obligation was done by obligor knowing there is
no juridical tie
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