OBLIGATION AND CONTRACT ARTICLE 1156-1178

Art. 1156. An obligation is a juridical necessity to give, to do or not to do.

Obligation – The requirement to do what is imposed by law, promise, or contract. Obligation is synonymous with duty.
It’s a tie which binds us to pay or to do something agreeably to the laws and customs of the country. According to Arias
Ramos, obligation is nothing more than the duty of a person (debtor or obligor) to satisfy a specific and demandable
claim of another person (creditor or obligee) which if breached is enforced in court.

Elements of Obligation

Active subject (creditor or obligee). – The person who has the right to demand the fulfillment of the obligation.

Passive subject (debtor or obligor). - The one who is bound to the fulfillment of the obligation.

Prestation or object – It may consist in giving, doing, or not doing. Without prestation, there is nothing to
perform. Object refers to the property or the things. Prestation is the subject matter of the obligation.

Efficient cause (juridical or legal tie) – that which binds or connects the parties to the obligation. The tie is an obligation
can easily determined by knowing the source of the obligation.

Right and obligation, Correlated – When there is right there is a corresponding obligation. Right is the active aspect
(credit) and obligation is the passive aspect (debt).

Prestation – Particular conduct of the debtor. It may consist in giving, doing or not doing something.

Obligation to give – consist in the delivery of a movable or immovable thing to the creditor. Example: Obligation to
deliver the thing in sale, deposit, pledge, donation, anti-crisis.

Obligation to do – covers all kinds of works or services whether physical or mental. Example: Contract for professional
services like painting, modeling, singing.

Obligation not to do – consist in refraining from doing some acts like producing aggravating noise, offensive odor,
smoke, heat.

Nature of obligations in Art. 1156; Civil and Natural Obligations Distinguished. –

The definition of obligation in Article 1156 refers to civil obligations which are enforceable in court when breached. It
does not cover natural obligations.

Kinds of Obligations

(a) As to judicial enforceability

Civil obligation – It is an when the debtor or obligor did not fulfilled its obligation to the creditor or obligee that can be
enforced through a civil suit or action in a court.

Natural obligation – It is a special kind of obligation which cannot be enforced in court but which authorizes the
retention of the voluntary payment or performance made by the debtor.
Moral obligation – It is a duty which one owes, and which he ought to perform, but not legally bound to fulfill. This is an
obligation from moral law developed by the church the church and not enforced on court. It deals with the spiritual
obligation of a person in relation to his God or Church.

(b) As to the subject matter

Real obligation – obligation to give

Personal obligation – obligation to do or not to do.

(c) As to the number of persons bound to perform

Unilateral obligation – It is when only one of the parties are bound to fulfill a prestation.

Bilateral obligation – It is when both parties are bound to perform.

Reciprocal obligation are which arise from the same cause, wherein each party is a debtor and a creditor of the other.

(d) As to the capacity of fulfillment

Possible obligation – It is when an obligation that can be fulfilled in nature or in law.

Impossible obligation – It is when an obligation that cannot be fulfilled in nature or in law.

(e) As to susceptibility of partial fulfillment

Divisible obligation – Requires the giving of definite things and the same can be partially performed.

Indivisible obligation – Requires the giving of definite things and the same cannot be partially performed.

(f) As to their dependence upon one another

Principal obligation – Main obligation created by the parties.

Accessory obligation – Secondary obligation created to guarantee the fulfillment of the principal obligation.

(g) As to the existence of a burden or condition

Pure obligation – Not subject to any conditions and no specific date is mentioned for its fulfillment but immediately
demanded.

Condition obligation – Subject to conditions, it can be suspensive and performance of which depends on an uncertainty.

Obligation with a term – Subject to the happening of an event which will surely happen, but the date is uncertain. The
obligation becomes demandable only when the term expired.

(h) As to the nature of performance

Positive obligation – When the debtor is oblige to give or to do something in favor of the creditor.

Negative obligation – When the debtor is not oblige to give or to do anything. That is, he must refrain from doing
something.

(i) As to the nature of creation of the obligation

Legal obligation – Obligation imposed by law.

Conventional obligation – Obligation established by the agreement of the parties like contracts.

(j) As to the character of responsibility or liability

Joint obligation – Obligation where creditor has the right to demand full and complete compliance of an obligation
against both of the debtors.

Solidary obligation – Obligation that are bound together, each liable for the whole performance, or obligees to be
bound together, all owed just a single performance and each entitled to the entirety of it.

(k) As to the grant of right to choose one prestation out of several, or to substitute the first one.

Alternative obligation – Obligation where the obligor may choose one out of several prestation.

Facultative obligation – Obligation where there are only one prestation. But the obligor may render one in substitution
of the first one.

(l) As to the imposition of penalty

Simple obligation – Obligation where there is no penalty imposed for violation of terms thereof.

Obligation with penalty – Obligation where there is a penalty imposed for violation of terms thereof.

Art. 1157. Obligation arises from:

(1) Law;

(2) Contracts;

(3) Quasi-contracts;

(4) Acts or omissions punished by law; and

(5) Quasi-delicts. (1089a)

Source of Obligation; Criticism in the inclusion of law as another source. – In Roman law, the sources of obligation are
(1) ex-contractu, (2) quasi-contractu, (3) ex-malficio and (4) quali-malficio. The fifth one was added namely; ex-
ledge (law), but was not entirely accepted.

Enumerated Source of Obligation, Exclusive – The enumeration of the sources of obligations are exclusive. No
obligation exist it its source is not one of those enumerated in Art. 1157

Illustrative of the Sources of Obligation. –

Obligation arising from law – Like the duty of the spouses to provide mutual support and respect to one another. Duty
of tax payer to pay their taxes to the government (BIR)

Obligation arising from contract – Like the duty of a contracting to fulfill his undertaking in the contract.

Obligation arising from a quasi-contract – like the duty of the recipient to return what was delivered to him by mistake.
Obligation arising from delict or crime – such as duty of the culprit to pay actual damages for causing the death of a
person.

Obligation arising from quasi-delict or tort – like the duty of the tortfeasor to pay damages for injuries of damages to
his fault, omission or negligence.

Art. 1158. Obligations derived from law are not presumed. Only those expressly determined in this Code or in
special laws are demandable, and shall be regulated by the precepts of the law which establishes them; and as to what
has not been foreseen, by the provisions of this Book. (1090)

Obligation Derived from Law, Never Presumed. – There are obligations in law such as obligation from parents to
support minor children, the obligation of lower estates to allow or receive the waters naturally descending from the
higher estates, obligation to pay taxes, the obligation of warranty of a co-owner after partition, and obligation to deliver
the presumptive legitimates of children.

Unless such obligations are expressly provided by law, they are not demandable and enforced.

Regulation of Obligations Arising from Law. – These obligation shall be regulated by the provisions of the law, which
establishes them. The civil code is applicable suppletorily.

Factor to determine whether an Obligation Arises from Law or from other sources. – This is when an obligation
generated from a contract, its only purpose was to perform on what is stated which did not arise from it, the act itself is
the source of the obligation and not the law. And, when the law obliges to act upon which it is based in nothing more
than a mere factor of determining the moment when it comes demandable, then this source of obligation is the law
itself.

When the loser has a chance to recover his lost with interest in illegal gambling indebitatus assumption

When the bank is not liable to pay the depositor made in an insolvent bank because there is no law authorizing it.

When a lessor has no obligation to allow the lessee to exercise any right of preemption or redemption of the house and
lot of the lessor, which was not built by the lessee. There is no law directing to do so.

When an employee has no right to held the employer liable to the pay the attorney’s fee. Because there is no law
requiring it.

Art. 1159 . Obligation arising from contracts have the force of law between the contracting parties and should be
compiled with in good faith.

Distinction between an Obligation and a Contract. – An obligation is a juridical necessity to give, to do or not to do. A
contract is an agreement between parties with respect to the other, to give something or render some service.

Freedom to Contract – The contracting parties may establish may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or
public policy.
Perfection of Contract – Contracts are perfected when consented, and from that moment the parties are bound to the
fulfillment of what was expressed in the contract even the consequences.

Force of Law – When the contract has been enforce to the law between the parties, both of them are bound to the
obligation expressed therein

Obligation Arising from Contract – Obligations that arises from contracts entered into by the contracting parties are
primarily govern by stipulations, clauses, terms and conditions of there agreements. If they do not violate any law,
morals, good customs, public order, or public policy and shall have the force of law and should be compiled with in good
faith.

Exceptions to the Rule – Some contracts are valid and do not violate Art. 1306 and yet, they may not be enforced
totally, if their prestation are unconscionable and unreasonable. The contract which provides for unconscionable
attorney’s fees may be disregarded by the court.

Falsification of a Valid Contract – Some provisions thereof has been added without knowledge of the contracting
parties. Only the unauthorized insertion will be disregarded.

Interpretation of a Contract involves a Question of Law – A contract is in the nature of law between parties and their
succession interest, its interpretation involves a question of law

Art. 1160. Obligation derived from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII, of this
book.

Quasi-Contract, Concept. – Quasi-Contract is a legal remedy that is imposed by the court. It does not require assent of
the parties and its creation is entirely dictated by the law for the benefit of another and for which the former must
compensate to the end.

Characteristic of a Quasi-Contract

Act(s) executed must be lawful to distinguish it from a violation or crime.

Act(s) executed must be voluntary distinguish it from quasi-delict.

Act(s) executed must be independent to distinguish it from an ordinary contract.

Principal Kinds of Quasi-Contract.

(a) Negotiorum Gestio – A juridical relation when somebody takes charge of the agency or management of the
business or property of another without consent.

-Sa batas sibil, ito ay sinumang nagkusang-loob kumilos at walang kapangyarihang umakto para sa iba
nang walang pahintulot sa layuning ingatan ang negosyo o gawain ng ibang tao.

(b) Solutio Indebiti – Where one had paid a debt, or done an act or remitted a claim because he thought that he
was bound in law to do so, when he was not. He can recover the mistake there is an implied obligation to pay back the
money.
 - Ito ay isang uri ng quasi-contract, a source of obligation. Art.1157. Nangyayari po ito kung
nakatanggap tayo ng isang bayad na hindi naman dapat, at nagkamali lang ang nagbayad. Tayo
ay may obligasyong ibalik ito.

Halimbawa, nagpapalit tayo ng Php50 at sa pagkakamali, ang naibigay sa atin ay Php60 (3pcs 20php bills).
Dapat natin ibalik ang sobrang Php10.

ART.1161. Civil obligations arising from criminal offenses shall be governed by the penal laws, subject to the
provisions of Article 2177, and the pertinent provisions of chapter 2, Preliminary title on Human Relations, and to Title
XVIII of this Book, regulating damages.

Ang mga obligasyong sibil na nagmumula sa mga criminal na opensa ay dapat pamunuan ng mga batas na pang penal, na
naayos sa mga probisyon ng Artikulo 2177 at ng mga pertenenteng probisyon ng Chapter 2, Prelimary Title sa Human
Relations at ng Title XVIII ng aklat na ito na nagsasaayos ng mg danyos.

Rules Governing Civil Obligations Arising from Criminal offenses.

1. Penal laws like the Revised Penal Code. The Penal Code contains a Chapter on civil liability (Articles 100 to 113)

2. Article 2176 (Quasi – delict)

3. Pertinent provisions of chapter 2 (Preliminary Title) on Human Relations – particularly Articles 26, 29, 30, 32, 33, 35
and 36, NCC;

4. Title XVII of this code involving damages (Articles 2195 to 2235)

ART. 1162. Obligations derived from quasi-delicts shall be governed by the provisions of Chapter 2, Title XVII of this
Book, and by special laws. (1093a)

Ang mga obligasyon na nagmula sa quasi-delicts ay nasasakupan ng probisyon ng Chapter 2, Title XVII ng Aklat na ito, at
ng mga espesyal na batas.

Discussion:

A quasi delict is an act or omission by a person which causes damage to another giving rise to an obligation to pay for
the damage done, there being fault or negligence but there is no preexisting contractual relation between the parties.
Requisites of Quasi delict.

Before a person can be held liable for quasi delict, the following requisites must be present:

1. There must be an act or omission;

2. There must be fault or negligence

3. There must be damage caused;

4. There must be a direct relation of cause and effect between the act or omission and the damage; and

5. There is no preexisting contractual relation between the parties.

Crime Distinguished from Quasi delict.

1. In crime, there is criminal or malicious intent or criminal negligence, while in quasi delict, there is only negligence;

2. In crime, the purpose is punishment, while in quasi delict, indemnification of the offended party;

3. Crime affects public interest, while quasi delict concerns private interest In crime, there are generally two liabilities:
criminal and civil, while in quasi delict, there is only civil liability;

4. Criminal liability cannot be compromised or settled by the parties themselves, while the liability for quasi delict can be
compromised as any other civil liability;

5. In crime, the guilt of the accused must be proved beyond reasonable doubt, while in quasi de1ict the fault or
negligence of the defendant need only be proved by preponderance (i.e., superior or greater weight) of evidence.

ART. 1163. Every person obliged to give something is also obliged to take care of it with the proper diligence of a
good father of a family, unless the law or the stipulation of the parties requires another standard of care. (1094a)

Ang bawat tao na obligado na magbigay ng isang bagay ay obligado rin na pangalagaan ito na may tamang pagkalinga
tulad ng isang ama ng tahanan, maliban kung ang batas o ang stipulasyon ng mga partido ay nangangailangan ng iba
pang pamantayan ng pagaalaga.

Discussion:

”The diligence of a good father of a family” is the diligence required on this article and if extraordinary diligence is
required, then the obligor shall exercise extraordinary diligence.

ART. 1164. The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises.
However, he shall acquire no real right over it until the same has been delivered to him. (1095)

And nagpautang ay may karapatan sa mga bunga ng bagay mula sa oras na ang obligasyon na ihatid ito ay nagsimula.
Ngunit, Siya ay dapat walang “real right” sa mga bagay na nasaad hanggang ang mga ito ay maihatid sa kanya.

Discussion:

The Debtor’s Obligation to deliver arises when:

1. When the obligation is based on law, quasi-delict, quasi-contract or crime, specific provisions of the applicable
law shall determine when the delivery shall be done or affected.

2. When the obligation is subject to a suspensive condition, the obligation to deliver arises from the happening of
the condition.
 3. When the obligation is subject to a suspensive term or period, the obligation to deliver arises from the lapse of
the term or period.

4. When there is no condition or term, the obligation to deliver arises from the constitution, creation or perfection
of the obligation.

ART. 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him
by Article 1170, and may compel the debtor to make the delivery.

If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor.

If the obligor delays, or has promised to deliver the same thing to two or more persons who do not have the same
interest, he shall be responsible for fortuitous event until he has affected the delivery.

Kapag kung ano ang upang maihatid ay isang maliwanag na bagay, ang pinagkakautangan , bilang karagdagan sa kanan
ipinagkaloob sa kanya ng Article 1170, maaaring pilitin ang may utang upang gawin ang paghahatid.

Kung ang bagay ay hindi tiyak o generic, maaari niyang hilingin na ang obligasyon na nakasunod sa sa kapinsalaan ng ang
may utang.

Kung ang obligor pagkaantala, o ipinangako upang maihatid ang parehong bagay sa dalawa o higit pang mga tao na
hindi magkaroon ng parehong interes, siya’y magiging responsable para sa di-inaasahang pangyayari hanggang sa siya ay
maapektuhan ang paghahatid.

Classification of Obligation from the view point of subject matter

1. Real Obligations (to give)

2. a specific thing

3. a generic or indeterminate thing

4. Personal obligations (to do or not to do)

Remedies of the creditor when the debtor fails to deliver a determinate thing

1. Action for specific performance

2. Action to rescind or resolve the obligation

3. Complaint for damages

Liability of the debtor for loss of the thing due to a fortuitous event

General Rule

“No person shall be responsible for those events which could not be foreseen, or which, though foreseen, were
inevitable”

Question:
If the obligee delays the performance of the obligation and a fortuitous event occurs,; the specific prestation is lost, is
the obligation extinguished?

Answer

No. the obligee has incurred delay before the specific prestation is lost so therefore he must bear the damages.

Exceptions

1. If the obligor delays

2. if the obligor is guilty in bad faith

Kinds of delay

1. Ordinary Delay – Failure to perform an obligation in a specific time

2. Extraordinary Delay/Legal delay/default – Non-fulfillment of obligation that arises after extrajudicial or judicial
demand.

ART. 1166. The obligation to give a determinate thing includes that of delivery of all its accessions and accessories,
even though they may not have been mentioned. (1097a)

Kasama sa obligasyon na magbigay ng determinadong bagay ang pagbibigay ng lahat ng accessions at accessories nito
kahit na hindi sila nabanggit.

Discussion:

Accession – includes everything produced by a thing, as well as all incorporated or attached with it, may it be natural or
artificial

Accession discreta – right to the fuits

Accession continua – includes both accession natural (i.e. alluvial deposits) and accession industrial (i.e. those built,
planted or sowed on the land of the landowner)

Accessories – includes things that are united or attached as ornaments to the principal thing, for the latter’s use or
perfection (i.e. spare tire of a car, television antennas, cellphone chargers, movie house chairs, etc.)

Note: Although the delivery of determinate thing includes all its accessions and accessories, the parties in the contract
may stipulate that certain accessions or accessories may not be included in the delivery. Both parties have the freedom
to stipulate such things.

ART. 1167. If a person obliged to do something fails to do it, the same shall be executed at his cost.
This same rule shall be observed if he does it in contravention of the tenor of the obligation. Furthermore, it may be
decreed that what has been poorly done be undone. (1098)

Kapag ang tao ay obligado na gumawa ng isang bagay ngunit hindi nya ito nagawa, ito ay maipapataw sa kanya.
Itong panuntunan na ito ay dapat obserbahan kapag ito ay ginawa nya na kontra sa tenor ng obligasyon. Ito ay masasaad
na kung ano ang napabayaang gawin ay hindi na dapat gawin.

*Coverage of Article

1. the obligor failed to fulfill a positive personal obligation, that is, “to do” something;

2. he fulfilled the obligation but in contravention of the agreement; and

3. There was fulfillment but the same is poor or inadequate.

ART. 1168. When the obligation consists in not doing, and the obligor does what has been forbidden him, it shall
also be undone at his expense.

Kapag ang obligasyon ay obligasyong hindi gawin ang isang bagay, at ginawa ng may obligasyon ang ipinagbabawal, ito
ay kailangang ipasawalang bisa ng gumawa gamit ang sariling gastos.

Discussion:

This article pertains to negative personal obligation, or the obligation not to do. In addition to the obligation of the
obligor to undo the forbidden act of thing, he may also be made liable for damages caused by doing that which was
forbidden.

ART. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extra
judicially demands from them the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary in order that delay may exist:

(1) When the obligation or the law expressly so declare; or

(2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the
thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or

(3) When demand would be useless, as when the obligor has rendered it beyond his power to perform.

In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other
begins. (1100a)

Ang mga obligadong mag hatid o magsagawa ng isang bagay ay mababalam mula sa oras na ang obligee ay judicially o
extra judicially na hiningi na maisagawa o maihatid ang bagay na ito.

Ngunit, ang paghingi o pag demand ng obligee o ng nagpautang ay hindi kinakailangan upang masabi na mayroon nang
balam sa mga sitwasyon na ito:

1. Kapag nakasaad ito sa obligasyon o sa batas.

 2. Kapag ayon sa kallikasan ng obligasyon na ang pag tatakda ng oras ay ang nag cocontrol na motibo ng pagtatala
ng kontrata.

3. Kapag ang demand o paghingi ay walang bisa. Katulad ng pagkakataon na naisakatuparan na ng obligor ang
bagay na ito ng higit pa sa kakayahan nyang maikumpleto o maisakatuparan ito.

Sa reciprocal obligations, wala sa sino mang piging ay mababalam kung ang isa ay hindi isasakatuparan o hindi handa na
isagawa ang bagay na ito sa tamang paraan. Kapag nagawa na ng isang piging ang kanyang obligasyon, ang balam ng isa
ay magsisimula.

The delay contemplated in the article is legal delay or default and not ordinary delay. To put an obligor in default (or
more), there must be demand made upon him for the performance of the obligation either judicially or extra judicially.

Demand is not necessary to place the obligor in default under the following circumstances:

1. When the law or obligation expressly declares;

2. When from the nature of the contract, it appears that the time is of the essence and this is the motivating factor
in the establishment of the contract;

3. When demand would be useless;

4. When the debtor admits, he is in default.

Classes of Default

1. Mora solvendi – the default on the part of the debtor/obligor;

2. Mora accipiendi – the default on the part of the creditor/obligee;

3. Compensatio morae – the default on the part of both the debtor/obligor and creditor/obligee which arises in
reciprocal obligations the effect is the default of one party neutralizes the default of the other.

ART. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those
who in any manner contravene the tenor thereof, are liable for damages. (1101)

Ang mga nagsasagawa ng kanilang obligasyon na may kasalanan ng fraud, nagligence, o delay o balam at sa mga
nagsasagawa ng kanilang obligasyon na hindi ayon sa napagkasunduan ay mananagot sa mga danyos.

Fraud may be defines as the voluntary execution of wrongfull act or willful omission, knowing and intending the effects
which naturally arise from such omission. In this article fraud is referred to as the deliberate evasion from an obligation.
Fraud in this article also involves malice in the act of evasion from an obligation.

Non-performance by fault or negligence is known as Culpa Contractual or the fault of the debtor as an incident if
fulfilling an existing obligation.

Excuse for non-performance of an obligation is only valid if it is due to fortuitous event.

Damages are referred to as any damage caused in any human being. It can be in the form of money, Physical damage,
moral damage, mental damage etc.
If the damage is in the form of money and the damage to be incurred from is not indicated in the contract, a legal
interest of 6 percent per year will be observed in computing for damage.

ART. 1171. Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future
fraud is void.

Ang mga responsibilidad mula sa pandaraya ay maaaring hingin sa lahat ng obligasyon. Kahit anong pagtalikdan sa
aksyon sa pandaraya sa hinaharap ay walang bisa.

ART. 1172. CONTRACTUAL NEGLIGENCE

Responsibility arising from negligence in the performance of every kind of obligation is also demandable, but such
liability may be regulated by the courts, according to the circumstances. (1103)

LIABILITY OF THE EMPLOYER

In cases involving culpa contractual, could the employee and his employer be held both liable solidarity for damages?

The Supreme Court held that both the driver and the owner were jointly and solidary liable for the resulting damages.

The Court of Appeals held that the liability arising from culpa contractual cannot be divided nor extended to persons
who have nothing to do with the obligation.

The employee cannot be sentenced to pay for damages despite of his negligence because the responsibility for his acts
lodged on the part of his master (part 4, Art.2180 and Art.1170 of Civil Code)

MITIGATION OF DAMAGES

The court is given discretion to mitigate liability according to circumstances on cases arising from culpa contractual while
no such discretion is given by the Code in dealing with liability arising from cases involving culpa acquiliana.

In Del Prado vs. Manila Electric, the court held that the contributory negligence on the part of the plaintiff in attempting
to board a moving car although not the proximate cause of the accident was treated as mitigating circumstance under
Article 1172 since it was contributory to the said accident.

In San Pedro Bus Line, Et Al. vs. Navarro, it was held that it is enough to prove the existence of contract of carriage ; to
show that the plaintiff took the vehicle to be conducted towards his destination and that accident took place that
caused him injuries. Success of action is not necessary to prove their liability.

DEFENSE OF EMPLOYER

In liability arises from culpa acquiliana, not involving a breach of contract of existing obligation, an employer or master
may be exempt from liability( part 8, Art.2180 of Civil Code) by proving the exercise of diligence to prevent the damage.
This defense is not available in liability of the master arising from breach of contractual duty (culpa contractual).
In Gutierrez vs. Gutierrez, the court held that the father/owner of the automobile is liable for damages because the
negligence of his minor was his responsibility (part 2, Art.2180). The liability of the owner of the passenger truck for his
employee’s negligence was based on contract. Both of the defendants were held liable for the damages suffered by the
plaintiff.

In De Guia vs. Manila Electric, it was held that the defendant incurred liability for failure to comply to deliver the plaintiff
safely and securely to his destination. The delinquency involved negligence of its employee (a culpa
contractual/transportation contract). The defense of exercising due diligence in this case is not available.

STIPULATION ON LIABILITY FOR NEGLIGENCE

Types:

1. Graduating responsibility of the debtor by determining the degree of diligence which may be more or less than
the standard fixed by law (Para 2 Art.1173)

2. Imposing a liability for fault or negligence where the law does not impose it. Valid, unless law dispenses fault or
negligence as a matter of public policy.

EXEMPTION FROM LIABILITY

Two Kinds of Stipulation Exempting from Liability

1. A party to a contract is relieve from the effects of his fault or negligence by a third person;

2. One of the party to the contract renounces in advance the right to enforce liability arising from fault or
negligence of the other.

Stipulations exempting from liability for gross negligence are void because such negligence amounts to a fraud.
Stipulation exempting from liability for simple negligence can be accepted as a general principle subject to the
discretionary regulation of the court regarding such liability. However, no stipulation exempting from liability for
negligence shall be sanctioned when there is strong reason against it, for instance, if it amounts to a stipulation by virtue
of which the validity and fulfillment of the contract are left to the will of one of the parties.

It is only limited to cases where there is real equality in the bargaining power of the contracting parties.

Contract of Adhesion – a contract where the parties are manifestly in such an inequality of positions that one could not
freely bargain with the other in the determination of the terms in contract.

Examples:

Contracts with transportation Companies

Contracts of Employment

Irresponsibility clauses or stipulations exempting one party from liability for damages due to other’s negligence,
should, therefore be taken with great caution, because they may in effect become an encouragement of negligence
which may occasion considerable loss to society and to the interested party. They might create opportunity for bad faith
and left the wrong doer laughing at the law with impunity.
ART. 1173. The fault or negligence of the obligor exists in the omission of that diligence which is required by the
nature of obligation.

NEGLIGENCE- consists in the omission of that diligence which is required by the nature of that particular obligation and
corresponds with the circumstances of the persons, of the time, and of the place.

1. Minimum benchmark- DILIGENCE OF A GOOD FATHER OF A GOOD FAMILY.

2. The parties to a contract are free to set a higher standard of care.
3. Contracts of carriage/Transportation contracts- extraordinary diligence.

2 kinds of Negligence

1. Culpa Contractual
-exists when there is a pre-existing obligation and the debtor is negligent.

2. Culpa Aquiliana

-civil negligence

-wrongful negligent act which creates a vinculum juris

(Legal bound)

Liability for employee’s negligence- if the negligence of an employee causes damages to a third party, the employees
can be made liable to the third party.

Contributory Negligence- conduct on the part of the injured party, contributing as legal cause to the harm he has
suffered. Negligent party’s liability may be mitigated.

ART. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when
the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could
not be foreseen, or which, though foreseen, were inevitable. (1105a)


Maliban sa mga kasong nasasaad sa batas, o ayon sa mga napagusapan, o kung ang kalikasan ng pananagutan ay
nangangailangan ng nakikinitang panganib, walang sinumang tao ang may pananagutan ukol sa mga pangyayaring hindi
inaasahan o kung ito man ay inaasahan ay hindi mapipigilan o maiiwasan. 


Discussion:


This article is a continuance to ART. 1173. ART. 1174 explains a fortuitous event that may have arise during the event of
doing the obligation. It is an event which cannot be foreseen such as sudden coming of a storm which considered an
Acts of God or known as majeure or any other unexpected event such as robbery, insurrection which is considered Acts
of man.


The Philippine Civil Code distinguishes between two kinds of fortuitous events namely:
1. Ordinary fortuitous events or those which are common and which the contracting parties could reasonably foresee
e.g. rain.

2. Extra-ordinary fortuitous events which are uncommon and which the contracting parties could not have reasonably
foreseen e.g. earthquake, fire, unusual flood.

To be declared that such circumstances are fortuitous events the following must be considered:

1. The event must be independent of the human will or the debtor

2. The event could not be foreseen, or if foreseen, is inevitable

3. The event must be of such a character as to render it impossible for the debtor to comply with his obligation in a
normal manner

4. The debtor must be free from any participation in, or the aggravation of, the injury to the creditor, that is, there is no
concurrent negligence on his part.

In case of fortuitous event there are still rules to be observed: 
When expressly specified by law. : a) the debtor is guilty
of fraud, negligence, or delay, or contravention of the tenor of the obligation. (Arts. 1170. 1165, par.3)

ART. 1175. Usurious transactions shall be governed by special laws.

Ang mga usurious transactions ay papamamahalaan ng mga special laws.

Discussion:

What is Usury?

Usury, as defined in Black’s Law Dictionary, is the charging of exorbitant and unconscionable rate of interest, higher than
the interest allowed by law. In layman’s term, it means loan sharking.

Special Laws Regulating Usury:

Central Bank Circular No. 905 which took effect on January 1, 1983 made the Usury Law legally non-existent, as declared
in the case of Liam Law vs. Olympic Sawmill Co. 129 SCRA 439 (1984). An excerpt from the case goes:

The special laws that used to govern usury are:

1. Act No. 2655 as amended by Act No. 3998

2. Commonwealth Act No. 399

3. Republic Act No. 337 and

4. Presidential Decree No. 116, 858 and 1684

Rules governing interest rates in relation to usurious transactions:

1. CBC No. 905 does not repeal the Usury Law. Only a law can repeal a law. The circular merely suspended the
law’s effectivity.
 2. While the Usury Law ceiling on interest rates was lifted by the CB Circular 905, nothing in the said circular could
possibly be read as granting carte blanche authority to lenders to raise interest rates to levels which would
either enslave their borrowers or lead to a hemorrhaging of their assets (Almeda vs. CA, 256 SCRA 292 [1996]).

3. Increase of interest rate unilaterally without the consent of the debtor is illegal for it violates the principle of
mutuality of contracts.

4. The determination of the illegality of a stipulated interest rate depends on the circumstances of the case.

5. Jurisprudence shows that an interest rate of 12% to 25% per annum is considered legal.

ART. 1176. The receipt of the principal by the creditor without reservation with respect to the interest, shall give
rise to the presumption that said interest has been paid.

The receipt of a later installment of a debt without reservation as to prior installments, shall likewise raise the
presumption that such installments have been paid. (1110a)

Ang pagtanggap ng prinsipal ng pinagkautangan nang walang reserbasyon sa interest ay magbibigay ng pag-aakala na na
ang nabanggit Na interes ay bayad na.

Ang pagtanggap ng pabaha-bahagyang kabayaran nang walang reserbasyon sa naunang installment ay magbibigay rin ng
pag-aakala na ang installment ay bayad na.

Discussion:

A receipt issued by the lessor dated June 1, 1904 to the lessee convering the rent for the month, shows that the rent for
the prior month (May) had already been paid. The presumption is rebuttle and not conclusive.

Two kinds of presumption

1) Conclusive presumption- one which cannot be contradicted, like the presumption that every is conclusively presumed
to know the law.

2) Disputable (or rebuttable) presumption– One which can be contradicted by presenting proof to the contrary.

ART. 1177. The creditors, after having pursued the property in possession of the debtor to satisfy their claims, may
exercise all the rights and bring all the actions of the latter for the same purpose, save those which are inherent in his
person; they may also impugn the acts which the debtor may have done to defraud them.

Rights of the Creditors

1. To levy attachment and execution upon all the property of the debtor, with exceptions.

2. to exercise all the rights and actions of the debtor, except such are inherently personal to him;

3. to ask for the rescission of the contracts made by the debtor in fraud of their rights

Liability of Debtor’s property

Article 2236. The debtor is liable with all his property, present and future for the fulfilment of his obligations, subject to
the exemptions provided by the law.

Exercise of Debtor’s Right with exceptions

1. the creditor has an interest in the right or action, because of the insolvency of the debtor,

2. malicious or negligent inaction of the debtor as to endanger the claim of the creditor

3. the credit is demandable and liquidated

4. the debtor’s right must be patrimonial, or susceptible of being transformed to patrimonial value

Exceptions

1. right to existence

2. rights or relation of a public character

3. Rights of consisting powers.

 power to administer

 power to carry out an agency or deposit,

 power to accept an offer for a contract

 non-patrimonial rights, (rights arising from family relations)

 patrimonial rights subject to execution, such as pension or government gratuity

 patrimonial rights inherent in the person of the debtor, ( right to revoke a donation by reason of ingratitude)

ACCION Subrogatoria – In ACCION SUBROGATORIA, once the creditor has exhausted the property of debtor, he can
step into the shoes of the debtor and sue the debtor’s debtor. The requirement is that, there must be a prior exhaustion
of property.

1. The debtor’s assets must be insufficient to satisfy claims against him

2. The creditor must have pursued all properties of the debtor subject to execution

3. The right of action must not be purely personal

4. The debtor whose right of action is exercised must be indebted to the creditor.

Accion Pauliana:-impugn the acts which the debtor may have done to defraud them (1177) – This has the same concept
as Art1381 P3 (Rescissible Contracts): “Those undertaken in fraud of creditors when the latter cannot in any other
manner collect the claims due them. “This allows the creditor to attack contracts contracted by a debtor towards
another: Significance:(1) If the debtor has no property(2) but, saw transactions by the debtor as regards the sale of his
property.
Art. 1178. Subject to the laws, all rights acquired in virtue of an obligation are transmissible, if there has been no
stipulation to the contrary.

Naaayon sa batas, lahat ng karapatang nakamtan sa pamamagitan ng isang obligasyon ang maaaring ilipat, kung walang
nakasaad na taliwas dito.

Unless expressly provided, all rights acquired from an obligation are transmissible in accordance with the law.

Classification of obligations are as follows, to wit;

1. Pure

2. Conditional

3. With a term

4. Alternative

5. Joint

6. Solidary

7. Divisible

8. Indivisible

9. with penal clause

Other provisions of the Civil Code, however impliedly admit other classes of obligations, to wit;

1. Unilateral and bilateral

2. Determinate and generic

3. Legal, conventional and penal

General Rule:

All rights that are acquired by virtue of an obligation are transmissible.

Subject to such laws, all rights acquired by virtue of an obligation are transmissible. Heirs shall be liable only to the
extent of what they stand to inherit.

Transmissibility is that character whereby an act, a deed or a title whereby it passes on to one’s heirs or assigns.

In transmissible rights are rights that do not pass on to one’s heirs or assigns.

Exceptions:

(1) Prohibited by law. — When prohibited by law, like the rights in partnership, agency, and commodatum which are
purely personal in character.
(a) By the contract of partnership, two or more persons bind themselves to contribute money, property or industry to a
common fund, with the intention of dividing the profits among themselves. (Art. 1767.)
(b) By the contract of agency, a person binds himself to render some service or to do something in representation or on
behalf of another, with the consent or authority of the latter. (Art. 1868.)
(c) By the contract of commodatum, one of the parties delivers to another something not consumable so that the latter
may use the same for a certain time and return it.

(2) Prohibited by stipulation of parties. — When prohibited by stipulation of the parties, like the stipulation that upon
the death of the creditor, the obligation shall be extinguished or that the creditor cannot assign his credit to another.
The stipulation against transmission must not be contrary to public policy. Such stipulation, being contrary to the
general rule, should not be easily implied, but must be clearly proved, or at the very least, clearly implied from the
provisions of the contract itself.

What is determinate thing in law?

The requisites that a thing be determinate is satisfied if at the time the contract is entered into, the thing is
capable of being made determinate without the necessity of a new or further agreement between the
parties. Determinate thing.

What is generic or indeterminate thing?

Generic or Indeterminate refers only to a class or genus to which it pertains and cannot be pointed out with
particularity . - it is identified only by its specie - the debtor can give anything of the same class as long as it is
of the same kind. *Duties of debtor in obligation to give a determinate thing.

“DELIGINCE OF A GOOD FATHER TO A FAMILY”

"The responsibility treated of in this article shall cease when the persons herein mentioned prove that they
observed all the diligence of a good father of a family to prevent damage." ... "Guardians are liable for
damages done by minors or incapacitated persons subject to their authority and living with them.

NATURE AND EFFECT OF OBLIGATIONS

*2 Kinds of Thing1. Specific or Determinate

– Particularly designated or physically segregated others of the same class.- it is identified by its individuality-
the debtor cannot substitute it with another although the latter is of the same kind and quality without the
consent of the creditor.

2. Generic or Indeterminate

– refers only to a class or genus to which it pertains and cannot be pointed out with particularity .-it is
identified only by its specie- the debtor can give anything of the same class as long as it is of the same kind.

*Duties of debtor in obligation to give a determinate thing

1. Preserve the thing. Diligence of a good father of a family – with ordinary care or diligence which an average
person exercises over his own property. Another standard of care – slight or extraordinary diligence. Factors
to be considered –

Force majeure
/ Fortuitous events. Reason for debtor’s obligation. Deliver the fruits of the thing3. Deliver the accessions and
accessories4. Deliver the thing itself. nwer for damages in case of non-fulfillment or breach

*Duties of debtor in obligation to deliver a generic / indeterminate thing

1. To deliver a thing this is of the quality intended by the parties taking into consideration the purpose of the
obligation and other circumstances.2. To be liable for damages in case of fraud, negligence, or delay, in the
performance of his obligation

*Kinds of Fruits

1. Natural fruits – spontaneous products of the soil, and the young and other products of animals.

(E.g. Grass, all trees and plants on lands without the intervention of human labor )

2. Industrial fruits – produced by lands of any kind through cultivation or labor

(E.g. sugar cane, vegetables, rice)

3. Civil fruits – those derived by virtue or juridical relation

(E.g. rent of buildings, price of leases of lands and other property)

*Kinds of Rights

1. Personal right – right or power of creditor to demand from debtor, as a definite passive subject, the
fulfillment of the latter’s obligation to give, to do, or not to do.- there is a definite active subject and a definite
passive subject2. Real right – right or interest of a person over a specific thing (like ownership, possession,
mortgage),without a definite passive subject against whom the right may be personally enforced.- there is
only a definite active subject without any definite passive subject

*Remedies of creditor in real obligation

1. in a specific real obligation

(Obligation to deliver a determinate thing)

– The creditor may exercise the following remedies or rights in case the debtor fails to comply with his
obligation: a. Demand specific performance or fulfillment of the obligation with a right to indemnity for
damages; orb. Demand rescission or cancellation of the obligation also with a right to recover damages; orc.
Demand payment of damages only, where it is the only feasible remedy2. A generic real obligation

(Obligation to deliver an indeterminate thing)

– can be performed by a third person since the object is expressed only according to its family or genus.
The creditor has the right to recover damages in case of breach or violation of the obligation.>>

An indeterminate/generic thing cannot be the object of destruction by a fortuitous event because

Genus nunquam perit

(Genus never perishes)

*Accessions and Accessories

1. Accessions – fruits of a thing or additions to or improvements upon a thing (the principal)

(Examples: House or trees on a land, Rents of a building, Air conditioner in a car )