Obligation – is a juridical necessity to do or not to do.

Art. 1156 Requisites of Obligation – PEPA

• PRESTATION – is the promise or particular conduct to be observed

by the debtor in performance of obligation and may consist of
giving, doing, or not doing a thing.

• EFFICIENT CAUSE – legal tie which binds the parties, known as

“vinculum juris” or “juridical tie”.

• PASSIVE SUBJECT – debtor, obligor – bound to the fulfillment of an

obligation.

• ACTIVE SUBJECT – creditor, obligee – entitled to demand the

fulfillment of an obligation.

Kinds of Obligation (Viewpoint)

• Sanction
o Civil Obligation – give right of action, compel performance
o Natural Obligation – base on equity, voluntary fulfillment
o Moral Obligation – conscience, natural law

• Performance
o Positive – to give or to do
o Negative – not to do

• Subject Matter
o Real Obligation – to give
o Personal Obligation – to do or not to do

• Person obligated to perform

o Unilateral – where only one party is bound
o Bilateral – where both parties are bound
• Reciprocal
• Non-reciprocal

Art 1157 Sources of Obligation – LACOQUA DE QUA

• LAW - obligation derive from law, statute legislative enactment

• CONTRACT – obligation arising from contracts have the full force
between contracting parties and should be complied with in good
faith (Art 1159, meeting of minds)
• QUASI-CONTRACT - juridical relation resulting from lawful,
voluntary and unilateral acts…no one be unjustly enriched or
benefited at the expense of another.
o Kinds
 Negotiorum Gestio – voluntary management of
properties or affairs without knowledge or consent of
the latter.
 Solutio Indebiti – received something when no right to
demand it, mistake.
• DELICT (Act or omission punishable by law) – every person
criminally liable is also civilly liable (Revised Penal Code Art. 100)
• QUASI-DELICT – acts or omission causing damages without criminal
intent.
o Culpa-Aquiliana or Tort – negligence that cause damages
without pre-existing contract.
o Culpa-Contractual – negligence in performance arising from
contracts.

Art 1163 Diligence required in preserving the thing – LAG

 L – required by law
 A – agreed upon
 G – good father of the family

Art 1164 Kinds of Fruits – NIC

 Natural fruits
 Industrial fruits – intervention of labor
 Civil fruits

DUE DATE – with demand of delivery

Right
 Personal - Domestic
 Real – REM/World

Essential elements of OBJECT

 Physically specific
 Particularly describe
 Specific
 Determinate

Kinds of Damages – MENTAL

M – Moral and physical anguish
E – Exemplary, corrective or to set an example
N – Nominal, to vindicate a right
T – Temperate, exact amount cannot be determined
A – Actual losses and unrealized profit
L – Liquidated, predetermined beforehand by agreement

Art 1169 NO Demand, NO delay, except – TOLD

 TIME is the essence of the contract

 OBLIGATION so provides
 LAW so declared
 DEMAND useless, as when the debtor has rendered it beyond his
power to perform.

Art 1170 Grounds for Liability to pay damages – CODE DONE

 CONTRAVENTION of the tenor of the agreement (violation)

 DELAY or Mora – delay in fulfillment or non-fulfillment with respect
of time
o Mora Solvency – default on part of debtor
 Ex re – to deliver something
 Ex persona – to do something
o Mora Accipiendi – defaults on part of creditor
o Conpensatio Morae – default on both parties, reciprocal
obligation
 DOLO or Fraud – with deliberate intention to cause damage
o Cannot be increase or decrease by the court
o Waiver Void
 waiver of past fraud – valid
 waiver of future fraud – not valid
 NEGLIGENCE or Culpa – failure to observe for the protection or
interest pf another person that degree of care and precaution which
the circumstances justly demand, whereby such other person
suffers injury.
o Culpa Aquiliana
o Culpa Contractual

Art 1174 Liability even in case of Fortuitous Events – LD PONG

• LAW so provides
• DELAY
• PROMISED to deliver to “or more persons”
• OBLIGATIONS so provides
• NATURE of the obligation required the assumption of risk
• GENERIC thing

“No wrong is done to one who consents”

Right of Unpaid Creditor (active subject)

• Exact fulfillment
• Attachment proceeding
• Subrogatory action (accion subrogatoria)
• Rescission (accion pauliana ) Art. 1177

Classification of Obligations

1. PURE – one without condition or a term (demandable at once)

2. CONDITIONAL – when there is a condition

Condition
Potestative – depends upon the will of debtor or creditor
Debtor – Void contract
Creditor – Valid contract
Casual – depends on chance or on the will of third person
Mixed – depends partly on the will of one of the parties
and partly on chance or will of a third person.
Effects:
a. Impossible – void
b. Illegal – void
c. immoral – void
d. negative impossible, illegal & immoral - valid
• Suspensive Condition – fulfillment will give rise to the
obligation
o Condition
 future
 uncertain events
o Period – demandability is suspended
• Resolutory Condition – fulfillment will extinguish the
obligation

Art 1198 When debtor losses right to use period – FIVIA

 FAILURE to furnish guaranty or security promised

 IMPAIRMENT of guaranty or security by the ask of the
debtor or when it disappears because of fortuitous events
  VIOLATION of undertaking in consideration of which the
creditor agreed to the period
 INSOLVENCY of the debtor
 ATTEMPT to the debtor to abscond

3. WITH A PERIOD – period fixed the time for the efficaciousness or

demandability of the obligation. DAY CERTAIN – a day which must
necessarily come.
• Requisites
i. it must refer to the future
ii. it must be certain
iii. it must be possible
• Kinds of terms or period (Debtor – Creditor benefits)
i. Legal – by provision of law
ii. Convention or voluntary – by agreement by the parties
iii. Judicial – fixed by the court
iv. Ex die – period with suspensive effect
v. In diem – period with resolutory effect

4. ALTERNATIVE OBLIGATION – one where several prestation are due

but the performance of one is sufficient.
• Rules: When DEBTOR loss right to choose
1) When only one of the various thing he promised to
deliver is practicable
2) After he communicated his choice to the creditor,
because the obligation is converted to pure obligation.

 Rules on Alternative obligation:

CHOICE BELONG TO DEBTOR
o Loss is due to Fortuitous events
 if all lost, obligation is extinguished
 if two or more of the object remain, the debtor
can deliver any of the two remaining
 if one remain – pure obligation – deliver the
remaining object

o Loss is due to debtor’s fault

 if all loss, obligation converted into monetary
consideration, the loss object plus damages
 no damages
 no damages
CHOICE BELONG TO CREDITOR – should be stipulated in
agreement
 o Loss is due to Fortuitous Events – same as the choice of
the debtor
o Loss is due to debtor’s fault
o If none remains, the obligation is converted into
monetary consideration taking into consideration
the value of any of the object chosen by the
creditor because he is given the right plus
damages.
o If two or more remain, the obligation is still
alternative, the right of the creditor is to choose
the remaining object with damages, if he chooses
the lost object, the debtor is liable for the value
plus damages.
o If only one remains, the obligation is converted
into a simple one. The creditor may choose the
remaining object with damages. If he chooses
anyone of the two which where lost, the debtor
must pay the value plus damages.
Note: #1: in paragraph 2, sub-paragraph, there is
damages to be awarded because the creditor was
deprived of his right to choose
Note: #2: in all cases, there is no communication
made, for if there was already a communication
there is no more alternative obligation. These rules
are no longer applicable.

5. FACULTATIVE OBLIGATION –one where only one prestation is due

but the debtor may substitute another.
**Effects of the loss of the thing in Facultative Obligation
• BEFORE SUBSTITUTION – principal thing
o FE – obligation extinguish
o Debtors Fault – liable plus damages
 If substitute thing – obligation to deliver is
extinguished with or without his fault.
• AFTER SUBSTITUTION – principal thing
o Debtor is no longer liable whatever be the cause of the
loss, because it is no longer due
 Substitute thing - is lost to FE, obligation is
extinguished
• if due to debtor’s fault, he is liable plus
damages
Art 1178 Rights and obligations are generally transmissible except
when is transmissible by – LAN

 LAW
 AGREEMENT
 NATURE

Rules in case of loss, deterioration, or improvement of the thing:

a. If the thing is lost without the fault of the debtor, the obligation
shall be extinguished.
b. If the thing is lost through the fault of the debtor, he shall be
obligated to pay damages:
o Art 1189 when thing is lost – DIPECO
 DI – DISAPPEARS in such a way that its existence is
unknown or cannot be recovered
 PE – PERISHES
 GO – GOES out of commerce

c. When the thing deteriorates without the fault of the debtor, the
impairment is to be borne by the creditor.
d. If it deteriorates through the fault of the debtor, the creditor may
choose between the rescission of the of the obligation and its
fulfillment with indemnity for damages in either case.
e. If it is improved by nature, or by time, the improvement shall inure
to the benefits of the creditor
f. if it is improved at the expense of the debtor, he shall have no
other right than that granted to the usufructuary.

Art 1207 Kinds of Solidarity – PAM

• PASSIVE among the debtors

• ACTIVE among the creditors
• MIXED both debtors and creditors

Obligation solidarity:
• stipulated in the obligation
• law state solidarity
o all partners in the partnership if the act
complained of arises from crime or quasi-delict
o agency, if two or more persons have appointed an
agent for common transaction
o responsibility of two or more persons who are
liable for quasi-delict
 o responsibility of two or more payees, when there
has been payment of what is not due
• nature of the obligation requires solidarity

Art 1225 DIVISIBLE Obligation – MAN

• METRICAL unit
• ANALOGOUS things susceptible of division
• NUMBERS of days work

OBLIGATION WITH PENAL CLAUSE – the penalty shall substitute the

indemnity for damages and the payment of interest in case of non-
compliance, if there is no stipulation to the contrary. A penal clause is
an accessory undertaking to assume greater liability in case of breach.

It is attached to an obligation:
1) to insure their performance
2) to substitute for the indemnity of damages and the
payment of interest in case of non-compliance, and
3) to punish the debtor for the non-fulfillment of his
obligation.

Note: Art 1226 Penalties excludes damages and interest,

except – RAF
• REFUSAL of the debtor to pay the penalty
• AGREEMENT
• FRAUD in the fulfillment of debtor’s obligation

Double function of penalty

• to provide for liquidated damages
• to strengthen the coercive force of the obligation by the
threat of greater responsibility in the event of breach.
Note: Penalty may be:
• Subsidiary or alternative – in case of non-
performance, only penalty is demandable
• Joint or cumulative – both the principal undertaking
and the penalty may be demanded.

Effect of nullity of the penal clause:

If the principal obligation is void, the penalty is also void; if the
penalty is void, the principal obligation remains to subsist (Art.
1230)
Art 1231 Extinguishment of obligation – NOCOMEREPALO

1) NOVATION – it is the extinction of an obligation through the

creation of a new one which substitute the old one

Requisites of Novation:
1. Previous valid obligation
2. Capacity and intention of the parties to modify or extinguish
the obligation
3. The modification or extinguishment of the obligation
4. The creation of a new valid obligation

Obligation may be modified by:

1. Changing their object or principal condition
2. Substituting the person of the debtor
3. Subrogating a third person in the rights of the creditor

EXPROMISSION – that which takes place when a third person on

his own initiative and without knowledge or against the will of
the original debtor assumes the obligation

DELEGATION – one which takes place when the creditor accepts

a third person to take the place of the debtor at the instance of
the latter

Two forms of Novation by Subrogating a third person in the

rights of the creditor
 Conventional subrogation taking place by the agreement of
the original creditor, the third person substituting the
original creditor, and the debtor.
 Legal subrogation – taking place by operation of law, legal
subrogation cannot be presumed, except in cases provided
by law
o when presumed:
 when creditor pays another creditor who is
preferred even if without the debtor’s
knowledge
 when a third person not interested in the
obligation pays with the express or tacit
approval of the debtor
 when, even without the knowledge of the
debtor, a person interested in the fulfillment of
the obligation pays, without prejudice to the
effects of confusion as to the latter’s share.
 Effects of subrogation
Subrogation transfer to the person subrogated the credit
with all the rights thereto pertaining either against the debtor or
against third person, be they guarantors or possessors of,
mortgages, subject to stipulation in a conventional subrogation
(Art 1303)

2) COMPENSATION – it is the extinguishment to the concurrent

amount of the debts of two persons who, in their rights are debtors
and creditors to each other.

Kinds of Compensation
As to their effects:
• Total – same amount
• Partial – not equal
As to Origin:
• Legal – by operation of law
• Facultative – one party can claim compensation, the other
cannot
• Conventional – by agreement of the parties
• Judicial – decreed by the court, in a case where there is
counterclaim

Art 1279 Requisite of Legal Compensation - PRIMO DUE LINO

• PRI – PRINCIPAL debtors and creditors of one another
• MO – both MONEY or if consumable, same kind and quality if
so agreed
• DUE – both DUE
• LI – both LIQUIDATED and demandable
• NO – NO controversy or retention by third person

Art 1287 – 1288 When compensation not proper – CODE SUCI

• CO – COMMODATUM
• DE – DEPOSIT
• SU – gratuitous SUPPORT
• CI – CIVIL liability arising out of crime
Note: In #2, is relation of a depositor with a bank is considered
debtor-creditor relation, so the bank may set up compensation.

3) MERGER or Confusion – it is the meeting in one person of the

qualities of creditor and debtor with respect to the same obligation
(Art 1275)
 Requisites for a valid merger:
• It must take place between the principal debtor and creditor
• The merger must be clear and definite
• Obligations are the same or identical

4) REMISSION or condonation – it is gratuitous abandonment by the

creditor of his right (Art 1270)

Requisites of Remission:
• There must be an agreement
• The parties must be capacitated
• There must be a subject matter
• The cause or consideration is generosity
• Obligation is demandable at the time of remission
• Remission must not be inofficious.

5) PAYMENT – means not only the delivery of money but also

performance, in any other manner, of an obligation.

Person from whom the creditor must accept payment

• The debtor
• Person who has an interest in an obligation
• Person stipulated in the contract to make the payment

Person to whom the payment must be made

• Creditor
• successor in interest
• person authorized to receive payment

Legal Tender (PD No. 82, November 29, 1972)

• One (1) centavo and the 5 centavo coin up to Ps 20.00
• Other coins (10, 25, 50, 1.00) are valid legal tender up to Ps
50.00
• All bills are valid legal tender for any amount

Acceptance of this commercial document is equivalent to

payment when:
• The creditor is in estoppel or had previously promised he
would accept a check
• When the check has lost its value because of the fault of the
creditor
• When the check has been encashed (Art 1249)
Place where obligation shall be paid
1. If there is a stipulation – at the place designated.
2. If there is no stipulation
a. delivery of a specific or determinate thing – payment
shall be made at the place where the thing was, at the
time of perfection
b. delivery of indeterminate thing – delivery or payment
must be made at the domicile of the debtor (Art 1251)

Special Mode of Payment

1. DATION IN PAYMENT (dation en pago) – in the conveyance of
ownership of a thing as an accepted equivalent of
performance (Art 1245)

2. CESSION IN PAYMENT – an assignment or abandonment of all

the properties of the debtor for the benefit of his creditors in
order that the latter may sell the same and apply the proceed
thereof to the satisfaction of their credits (Art 1255)

Art 1255 Requisites of payment in cession – DIOS

• D - DELIVERY of all debtor’s property
• I - INSOLVENCY of the debtor
• O – ONE DEBTOR and several creditor
• S – SELLING of debtor’s property by creditors

3. TENDER OF PAYMENT AND CONSIGNATION – if the creditor to

whom tender of payment has been made refuses, without just
cause, to accept it, the debtor shall be released from
responsibility by consignation of the thing due. Consignation
alone shall provide the same effect in the following cases:

TENDER OF PAYMENT – it is the act, on the part of the

debtor, of offering to the creditor the thing due or amount
due. The debtor must show that he has in his possession
the thing or money to be delivered at the time of the offer.
(EXTRAJUDICIAL)

CONSIGNATION – it is the act of depositing the thing or

amount due with the proper court when the creditor does
not desire or cannot receive it, after complying with the
formalities required by law. (JUDICIAL)

Art 1256 When consignation proper – TRIAL

• T – TWO or more claiming same right to collect
 • R – RECEIPT unjustly refuse
• I – INCAPACIY of the debtor at the time of payment
• A – CREDITOR ABSENT or unknown, or does not appear at
the place of payment
• L – title of the obligation LOST

Requisites of valid consignation

• Existence of a valid debts which is due
• Tender of payment by the debtor and refusal without
justifiable reason by the creditor to accept it
• Previous notice of consignation to persons interested in
the fulfillment of the obligation
• Consignation of the thing or sum due
• Subsequent notice of consignation made to the
interested parties.

4. APPLIACTION OF PAYMENT – it is the designation of debt to

which should be applied the payment made by the debtor
who owes several debts in favor of one and the same
creditor. (Art 1252)

Art 1252 Requisites of Application of Payment – DOKS

• D – all DUE
• O – ONE DEBTOR and ONE CREDITOR
• K – same KIND
• S – SEVERAL debtors

6) LOSS of the thing due

Art 1189 when thing is lost – DIPECO

• DI – DISAPPEARS in such a way that its existence is unknown or
cannot be recovered
• PE – PERISHES
• GO – GOES out of commerce

RULES IN CASE OF LOSS:

a. When thing is determinate and is lost due to FE or without the
fault of the debtor, the obligation is extinguished.
b. When the thing is indeterminate and is lost due to FE or even
without the fault of the debtor, the obligation is not extinguished
c. When the debt of a thing certain and determinate proceeds from
criminal offense, the debtor shall not be exempted from the
payment of its price, whatever may be the cause for the loss,
 unless the thing having been offered by him to the person who
should receive it, the latter refused without justification to accept
it. (Art 1268)
d. The court shall determine whether, under the circumstances, the
partial loss of the object of the obligation is so important as to
extinguish the obligation (Art 1264)
e. If the obligation has been extinguished by the loss of the thing,
the creditor shall have the right of action which the debtor may
have against third persons by reason of the loss (Art 1269)

OTHER MODES OF EXTINGUISHING AN OBLIGATION

7) Annulment
8) Rescission
9) Fulfillment of a resolutory condition
10) Prescription (10 years – passage of time)
11) Death of a party in case the obligation is personal (in nature)
12) Mutual desistance
13) Compromise
14) Impossibility of fulfillment
15) Happening of fortuitous event

Art 1291 How Obligations modified – SSC

• S – SUBTITUTING the person of the debtor
• S – SUBROGATING a third person in the right of the creditor
• C – CHANGING the object or principal conditions

Art 1199 Kinds of obligations according to number of prestation –

SCAF
• S – SIMPLE – only prestation
• C – COMPOUND or conjoint – several prestation are due
• A – ALTERNATIVE – several prestation are due but delivery of one
is enough
• F – FACULTATIVE – only one prestation has been agreed upon but
debtor may render another in substitute.