LAW ON OBLIGATIONS AND CONTRACTS

Obligation - a juridical necessity to give to do or not to do.

Requisites
Active subject
Passive subject
Prestation efficient cause.
Civil obligation vs natural obligation
Civil obligation is positive law so enforcable by court
Natural obligation is based on natural law so not enforcable by court action.
Sources of obligation
Law
Contract
Quasi contract
- negotiorum gestion
-solutio indebiti
-others
Delicst/crime
Quasi delicts
NATURE AND EFFECT OF OBLIGATION
Determinate thing and generic thing.
-Determinate if specific or particually designated or physically segregated from others
-Generic if not determinate
Why to know?
Loss of determinate thing through fortitous event exthinguishes obligation.
Obligation of one Obliged to give a determinate thing
1. To take care of thing with the diligence of a good father of family unless agreement or law requires
another standard of care
2. To deliver the thing
3. To deliver the fruits
-kinds of fruits
Natural fruits
Industrial fruits
Civil fruits
The creditor has personal right to the fruit from the obligation to deliver arises but no real right to it.
When obligation to deliver arises
/if pure obligation -from the period of perfection
/if subject to suspensive period or condition- fulfillment of condition.
Rights of creditor
Personal right- can enforced of one person to other.
Real right- right or power over a specific thing
, enforcable againts the world
4. To deliver its accessions and accessories even not mentioned
/accessions - everything produced by or attached to the things
/accessory- for better use, perfection or enjoyment.
Remedies of creditor
If the debtor fails to*
*deliver determinate thing
- compel to make delivery
-demand damages
*deliver generic thing
-ask debtor to comply at debtor expense
-demand damages to debtor
*to perform obligations in obligation to do or perform it but contravened the tenor thereof
*the creditor may ask third person to do it at expense of debtorr
*may demand damages
*perform the obligation not poorly
-credito may have the same undone at expense of debtor
-may demand damages
*not do what is forbidden to him
- may demand what is done to be undone
-Demand damages from debtor.
Grounds for liability to pay damages
1.fraud
2. Negligence
3. Delay
4. Contravention of the tenor of the obligation
Damages
1.Damages
-harm done
-some of money that may be recovered in reperation for the harm done.
Injury
-wrongful unlaw ful tortious act that causes harm to others.
2. Kinds of damages
A. Actual or compensatory
B. Moral
C. Nominal
D. Temperate or moderate
E. Liquidated damages
F. Exemplary or corrective damages
3. Proof of precutionary loss
A. Actual - proof is required
B. Other damages- proof is nit required.
Fraud
Kinds of fraud
-According to meaning
1. Causal fraud or dolo causante
2. Incedental fraud or dolo incidente.
Fraud in the performance of the obligation or Evading in the fullfillment.
-according to commision
A waiver of future fraud is void, whilrle waiver of pasr fraud is valid.
Negligence
1.Negligence
-ommission of diligence which is required by the nature of the obligation
2. Test of negligence
3. Diligence to be observed
-atleast diligence of good father unless circumstances provides otherwise.
Kinds of negligence.
Culpa conrtactual
Culpa aquilana
Culpa criminal.
Delay or mora
1.Dalay or default or mora is the non fulfilment of an obligation with respect of time.
2. Kinds
A.Mora solvendi- dalay on the part of the debtor
1. Ex re- delay in real obligation
2. Ex persona- delay in personal obligation
B. Mora accipiendi -delay in part of creditor, delay in acceptance.
C. Compensatio morae
Delay in reciprocal obligation.
3. Requisites of delay in obligation to give or to do.
If the creditor demands and the obligation is demandable already, the debtor doues not perform the
obligation , the creditor demands the obligation either juridical or extra juridically and the debtor
failed to comply with that demand.
No need for demand if
The law so provides
When the obligation expressly so declares
When time is the essence
When demand is useless
In reciprocal obligation, if other party has fullfiled the obligation.
4. Effects of delay.
On part of debtor
1. Debtor shall liable for damages
2. If delay in delivery of determinate thing, he is liable in fortitous events
On part of creditor
1. He shall bear the risk of loss and shoulder the expenses for preservation of thing
2. The debtor may resort to consignation.
Fortitous events
Fortitous events
1. Fortitous events are thoses events that cannot be forseen or if can be forseen is inevitiable.
Incluedes act of God and act of man.
2. Elements
-Must be independent of debtors will.
-impossible of foreseeing or avoiding if can be forseen
-if will impossible for the debtor to perform obligation in normal manner.
3. Liability in fortitoues events.
Gen rule: No person shall be liable for fortitous events
Exception
- Law provides for liability even for fortitous events.
-When parties have declared liab even fortitoes events
- When the nature of obligation includes assumption of risk
4. Burden of proving the loss due to fortitous events is on the one who invokes it. To claim fortitoues
event it is necessary that no negligience happened
Transmissibility of rights and exeptions thereto
Gen rule- rights are transmissible.
Exception
If law prohibits
If parties agrees againts transmission
If rights in nature are not transmissible.
Different kinds of obligation.
1Pure obligation
2 conditional obligation
3. Obligation with a period
4. Alternative obligation
5. Facultative obligation
6. Joint obligation
7. Solidary obligation
8. Divisible obligation
9. Indivisible obligation
10 obligation with penal clause
Pure and conditional obligation
Pure obligation - without tern or condition demandable at once
Conditional obligation
- demandability or extinguieshment is depends in happening of event
*condition - uncertain event which wields an infulence in legal relationship
Classification
Suspensive and resulotory
1. Suspensive -happening will give rise to a obligation
2. Resolutory - happening will extinguiesh the obligation.
Potestative , casual and mixed.
1. Potestative- condition depends on the will of one of the contracting parties.
*potestative on part of debtor
Suspensive-void
Resolutory-valid
*potestative on part of creditor- both valid.
2. Casual -condition depends on the will of one of third person or by chance.
3. Mixed -partly potestative partly casual.
Possible and impossible
1.Possible-capable of fulfillment by law and by nature.
2. Impossible- cannot be fulfilled because of nature or law.
-if the condition is not to do an impossible thing the obligation is immidiately demandable.
Positive and negative.
Positive- if happens
Negative- if not happens
Divisible and indivisible
Divisible- capable of partial performance
Indivisible- on that is not capable of partial performance.
Rights of parties before fulfillment of the condition
Creditor - he may bring appropriate actions for the preservation of his right
Debtor- he may recover what is paid by mistake.
Effect if debtor prevents fulfillment.
-obligation is deemed fulfilled.
Rules in loss and deterioration
1. Loss of the thinh
A. With out debtors fault- obligation is extinguied
B. With debtors fault -debtor must pay damages.
Loss
-when the thing perishes or goes out of commerce or disappear that its existance is unknown or it
cannot recovered.
Deterioration
A. With out debtors fault - impairment is borne of creditor
B. With debtors fault
The creditor may choose
1. Rescission and damages or 2. Fullfillment and damages.
Improvement of the thing
A. By nature or by time- benefit of the creditor
B. At expense of debtor- the debtor may remove the improvments probided taht it will not damage to
the principal thing.
Rules in case of fullfillment of resolutory condition.
1. Upon the fullfillment of the resolutory condition, the obligation is extinguied
2. The parties shall return to each other what they received
3. Incase of losss, deterioration or improvement of the thing the provisions of above rule which
pertain to debtor shallbe applied to the party who bound to return.
Reciprocal obligation
-one that arises from the same caus and in which each party is a debtor and creditor of the other.
Remedies of the injured party in reciprocal obligation
1. Ressision plus damages or
2. Fullfillment plus damages.
Obligation with a period.
-an obligation with a period is one whose demadability or extinguishement is subjected to the
expiration of the term which must necessarily come.
Concept of period and day certain.
Period is the space of time which determines the effectivity or extinguishment of an obligation.
Day certain is that which must necessarily come although it may not be known then.
Period vs condition
As to fulfilllment
Condition- may or may not happen.
Period- must necesarry come.
As to time
Condition- may refer to future or to past event.
Period always refer to future.
As to influence on the obligation.
A condtition causes an obligation to arises or ceases , period is the time the obligation is
effaciousness.
As thr will of debtor.
Condition- that depends on the will of debtor if suspensive must be annuled
Period depends upon the will of the debtor.
Kinds of period.
Ex die- period with suspensibe effect
Indiem - period with resolutory effect.
Others.
Legal- fixed by law
Voluntary- fixed by parties
Juridical- fixed by court.
Who has benefit of period?
Silent both.
Period is for benefit of debtor- he cannot be compelled before the day lapse
Period on benefit of creditor - he cannot be compelled to accept performance before date.
When the debtor can have the benefit of period if is not his benefit
1 he become.insolvent
2. He fails yo furnish the guaranties
3. When the guaranties is impaired
4. When he violates any under taking in consideration of which the creditor agreed to the period.
5. When he attempts to abscond.
Alternative obligation and facultative obligation
Kinds of obligation according to the number of prestation.
1. Simple - one where there is only one prestation
2. Compound - have several prestation
A. Conjunctive - several prestation all must be peformend
B. Distributive or disjunctive - either althernative of facultaive.
Alternative obligation
An alternative obligation is one with several prestation but performace of one of them will extinguish
the obligation.
The right to choose is in debtor unless provided.
Limitation of right to choose.
1. Debtor must completely perfor prestation chosen, he cannot compel the creditor to receive part of
one and part of another undertaking.
2. Debtor cannot choose prestation that is impossiblr in nature and in law.
When obligation ceases to be an alternative and starts to be a simple
1. When the debtor has communicated the choices to creditor.
2. When only 1 prestation is practicable.
3. If creditor has thre right of choice, if the creditpr has communicated the choice to the debtor.
Rules in case of loss of things or impossibility of services which are alternative.
When the right of choice is to debtor
If lost though fortitous events
1. Deliver the any of the remainder, or the last one.
2. If none ramains , the obligation is extinguished
If loss through debtors fault.
1. If all are loss, the debtor must pay the value of last remaining plus damages
2. If all except one are loss through debtors fault, then the last one is loss through fortitous event the
obligation is extinguished
3. If all except one is loss through fortitous events and the last one is lost through debtors fault, the
debtor must pay damages.
When the creditor has the right of choice.
1. If one or some are loss, the creditor must choose among the remainder
2. If all are lost through fortitous event , the obligation is extinguish.
3. If some are loss by debtors fault the creditor may choose any from ramainder, or any of those
which are loss in debtors fault plus damages
4. If all are loss by debtors fault, the creditor may choose the price of any of them plus damages.
Facultative obligation
An obligation with one prestation but the debtor may render another for subtitution.
Rules in loss of principal thing and subtitute
1. Before subtitution
Principal thing
- if loss due to fortitous event, the obligation is extinguished.
-if because of debtors fault, the debtor shall pay damages.
Subtitute
-no effect
2. After subtitution
Principal thing
-no effect
Subtitute
- if loss due to fortitous event, the obligation is extinguished.
-if because of debtors fault, the debtor shall pay damages.
Joint and solidary obligation
Joint and solidary obligation happens if there is 2 or more debtor and/or 2 or more creditor.
Joint obligation-
Debtor- each debtor is liable only in proportionate share of the liab.
Creditor- each creditor is entitled only in proportionate amount.
Solidary obligation-
Debtor- liable to whole amount and then collect to others
Creditor - entitled to whole amount but will repay others.
Divisible and indivisible obligation.
Divisible obligation, one is capable of partial performance.
Indivisible obligation, not capable of partial performance
Obligation with penal clause
Obligation with penal clause- imposes a greater liability to debtor in case of non conpliance.
Penal clause is accessory undertaking.
Function of penal clause
A penal clause is attached to an obligation in order to insure performance amd has double function.
1.To provide for liquidated damages.
2. To streghthen the coercive force of obligation.
Kinds of penal clause.
1. Legal and conventional
Legal- Imposed by law
Conventional - by agreement of parties.
2. Subsidiary and joint
subsidiary- when only penalty can be imposed
Joint- when both obligation and penalty may be imposed.
Rules if obligation has penal clause.
General rule . The penalty takes place of the damages and interest of non compliance.
Exception.
1. When there is stipulation
2. When the debtor refuse to.pay penalty
3. When the debtor is guilt of fraud in the performance of the obligation.
The court may reduce the penalty if
The obligation is partly performed
The obligation has been irreularly complied
When penalty is too high.
Effect of nullity of principal obligation, penal clause
1. The nullity of principal obligation carries with the nullity of penal clause.
2. The the penal clause is null , the principal obligation is still not eextinguied
Extinguishment of obligations
Causes of extinguishment of obligation
1. Payment or performance
2. Loss of the thing due
3. Condonation or remission of the debt
4. Confusion or merger of rights of creditor and debtor.
5. Compensation
6. Novation
7. Annulment
8. Rescission
9 fullfillment of resolutory condition
10 prescription
11 others
Payment or performance
-not only in money but also in performance or in any mannner of an obligation.
How payment id made?
1. There must br delivery of the hing or rendition of service.
/ the debtor of cannot compel the creditor to accept a thing of different item other that what is in the
contract.
/ the debtor cannot do or not do things other than what is in the contract if it is obligee's will
/ in obligation to deliver generic thing, the creditor cannot demand a superior quality, a debtor cannot
deliver a thing with inferior quality.
/in obligation to pay monetary obligation , the payment must be in legal tender.
* Legal Tender, is the monetary or currency which debtor may compel his creditor to accept in
payment of his debt.
2. The payment or performance must be complete.
*when partial payment can be made?
-if there are stipulation to that effect.
* if the obligation is partly liquidated and partly not.
Who must make yhe payment
The debtor must posses
1. Free disposal of the thing.
2. The capacity to alianate the thing.
Payment by third person.
The creditor is not bound to accept a pyment by a third person except
There is stipulation
When third person has interest in the contract. Example guarantor.
Rights of 3rd person who makes payment.
a. Payment with knowledge and consent of debtor.
1. He can recover what he has paid.
2. He is entitled to be subrogated in rigbts of the creditor such as those aeising from mortgage
guaranty or penalty.
B. Payment with out knowledge of againts the will of the debtor.
He can recover payment that is in sofar beneficial to the debtor.
3. Payment of a third person does not want to be reimbured the payment -
-shall be deemed as a donation, the debtor must concentt.
- if the debtor does not concent back to letter b.
To whom shall the payment is made.
1.To the creditor.
-payment to incapaciatated creditor
The payment should be to a capacitated to make the payment valid, except
A. When he has kept the thing delivered or the paymen became beneficial to him.
2. The creditors successors in interest, such as heirs or assigns
3. To any person that is authorized to received payment.
Where payment must be made.
1. If there is stipulation , there.
2. If none
-to give determinate thing - place of the thing
-to do or give generic thing- place of debtor.
Special forms of payment
1. Dation in payment
2. Application of payment
3. Payment by cession
4. Tender of payment and consignation
*Dation in payment or dacion en pago
Payment by thing other than money
Apllication of payment
Concept.
If there are several debt, it designantion of debt where the payment is applied
Requisites
A debtor owes 2 or more debt of same kind which is due on same creditor.
How application is made???
The debtor will choose which debt must be paid.
Payment by cession
Abandonment or assigment by debtor of all of his property in favor of his creditors so the creditor can
sell it and apply as payembt to debts.
Kinds
Voluntary- agred upon
Legal- cession by operation of law.
Requisites of payment by cession
/ atleast 2 creditors
/ debtor insolvent
/ the debtor abandons all his properties those expempt from executions
/ the creditors accept the abandoment.
Tender of payment and consignantion
Tender or payment- act of debtor of offering to his creditor what is die.
Consignantion- act of depositing the sum of thing due with the juridical authorities..
Requisites.
A. Valid tender of payment
B credito refure with out just cost
C. Notice to persons interested in fulfillmen that there is tender
D. The sum of thing due is deposited
E.Notice to persons interested in fulfillment that there is consignantion.
Effect of consignation
If proper consignation is made the debtor may ask the judge to order the cancellation of the
obligation. The obligation shall be extinguised after the creditor accepted the consignantion of the
judge declares that proper consignation is made.
Debtors right to withdraw the sum being consigned.
A. Before acceptance of declaration of judge.
The debtor may withdraw and will effect that the obligation will be still inforces and those secondarily
liable is not yet release.
B. After the acceptance of creditor or declaration of judge.
The debtor may withdraw and will effect that
1. The obligation is revived
2. The creditor loae preference on thing
3. The secondarily liable is released from liab.
When consignation even no tender of payment will produce samw effect.
A. When the creditor is missing
B. Wheb the creditor is incapacitated on time due.
C. When creditor refuse to give receipt
D. When 2 or more persons claim same right
E when title of the obligation has been lost.
Lost of things due.
A thing is los if it perishes or goes out of commerce or disapprears in such way that its existense is
unknown or cannot be recovered. Includes physical or legal imposibility.
Loss effect on obligation
1. Loss of determinate thing
Gen rule: will extinguished the obligation except
When the loss due to fault of debtor
When debtor incures delay
When law so provides
When stipulayed of parties
When nature ob obligation includea assumption of risk.
When debts proceeds from criminal offenses.
2. Loss of a generic thing.
- will not extinguish obligation exept on delimited generic.
3. Loss in personal obligation(obligation to do)
-When the prestation became legally or physically impossible with out fault of debtor the obligation is
extinguished.
- when the service has become so dificult as to tbe manifestly beyond the contemplation of parties,
the onligor will be released wholely or partly in the ibligation.
Effect of partial lass
- the court will decide.
Creditors rigby if thr loss is caused by third person.
The debtor is released in liab, but will have the rights in action the the third person who cost the loss.
Condonation or remission
- gratitoues abandonment by creditor of his rights.
Kinds of condonation
As to amount
Total- when total obligation
Partial - when part only or accessory only
As to form
Express- made orally or in writing
Implied - by inference.
If the private document of the debt is found in the debtor, the presumption is the creditor is the one
who voluntary deliver it
If the thing pledged after the delivery to creditor is found in the possesion of creditor , the
presumption is the accessory obligation is extinguished but not nesecarily the principal.
Effect of condonation of principal obligation to accessory contract and vice versa.
If principal obligation is condoned, accesory contract is also released
But if the accesory contract only is condoned, it will not take effect to principal contract
Confusion or merger
- meeting in one person on qualities of creditor and debtor.
Effect of merger when there is guarantor.
1. If the obligation is merged and the principal debtor and principal creditor is in one person, the
guarantor are released in obligation.
2. Merger takes place in the person on guarantor, the principal obliation is not extinguish only the
guaranty
Merger in a joint obligation
- extinguish only the share of joiny debtor or joint creditor
Merger in a solidarily obbligation.
- extinguished whole obligation, and must demand/reimburse to others.
Compensation
- when 2 persons become creditors and debtor of each other.
Kinds of compensation.
- as to amount or expent
Total - debts are of same amount
Partial - debts are of diffrent amount
- as to origin
Legal
Voluntary/conventional
Juridical
Facultative.
Novation
-modification or extinguishemnt of an obligation by another.
Kinds
According to object
A. Real or objective
B personal or subjective
According to form
Express
Implied
According to extent
Total or extintive
Partial or modificatory.