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Al Jun A. Baron Mr.

BSBA 3-1

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

Juridical necessity – the court can be asked to order the obligor to perform the obligation.

Contract – is a meeting of minds between two persons whereby one binds himself, with respect to the other, to
give something or to render some service.

Essential elements

1. Passive subject (debtor or obligor) – the person who is bound to the fulfillment of the obligation
2. Active subject (creditor or obligee) – the person who is entitled to demand the fulfillment of the
3. The object or prestation (subject matter of the obligation) – the conduct required to by observe by the
debtor. It may consist of giving, doing or not doing.
4. A juridical or legal tie (efficient cause) – that which binds or connecs the parties to the obligation. The
tie in an obligation can easily determine by knowing the source of obligation.

Sources of obligations

a. Law – is define as a rule of conduct, just and obligatory, promulgated by the legitimate authority, for
common observance and benefit.
– It is governed by the law itself.
– Agreement of the parties are not necessary
– Not presumed, only those expressly provided are enforceable.
b. Contrasts – is a meeting of minds between two persons whereby one binds himself, with respect to the
other, to give something or to render some service.
c. Quasi contracts – is a lawful, voluntary and unilateral acts based on the maxim that no one shall unjustly
enriched himself at the expense of another.
d. Quasi delicts – is any acts or omissions which causes damage to another, there being fault or negligence
and there being no pre-existing contractual relations between the parties.
e. Acts or omissions punishable by law – when they arise from civil liability which is the consequence of a
criminal offense.

Delay or default - Those obliged to deliver or to do something incur in delay from the time the obligee judicially
or extra-judicially demands from them the fulfilment of their obligation. In reciprocal obligations, neither party
incurs in delay if the other does not comply in a proper manner with what is incumbent upon him. From the
moment one of the parties fulfills his obligations, delay by the other begins.

Condition for default and consequences to attach

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

a. Ex re – default in real obligations (to give)

b. Ex personae – default in personal obligations (to do)

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

3. Compensatio morae – default on the part of both the debtor and creditor in reciprocal obligations
Al Jun A. Baron Mr. Cartagena
BSBA 3-1

Demands or requisites

1. Obligation must be due, demandable and liquidated;

2. Debtor fails to perform his positive obligation on the date agreed upon;

3. A judicial or extra-­­judicial demand made by the creditor upon the debtor to fulfill, perform or comply with
his obligation; and

4. Failure of the debtor to comply with such demand. Note: In reciprocal obligations, the moment one party is
ready to comply with his obligation, delay by the other begins. There is no need for demand from either party.

General Rule:

The penalty fixed by the parties is a compensation or substitute for damages in case of breach.


Damages shall still be paid even if there is a penal clause if:

1. there is a stipulation to the contrary

2. the debtor refuses to pay the agreed penalty

3. the debtor is guilty of fraud in the fulfillment of the obligation. (Art. 1126, NCC)

Negligence is defined as the failure to observe for the protection of the interests of another person that degree
of care, precaution, and vigilance which the circumstances justly demand, whereby such other person suffers

Standard of care - the watchfulness, attention, caution and prudence that a reasonable person in the
circumstances would exercise. If a person's actions do not meet this standard of care, then his/her acts fail to
meet the duty of care which all people (supposedly) have toward others.

Business judgement rule – is a legal principle which grants directors, officers, and agents of a company immunity
from lawsuits relating to corporate transactions if it is found that they have acted in good faith. The rule assumes
that a company’s officers act in the best interest of the company when making decisions.

Test of negligence - The test by which to determine the existence or negligence in a particular case may be stated
as follows: Did the defendant in doing the alleged negligent act use that reasonable care and caution which an
ordinary person would have used in the same situation? If not, then he is guilty of negligence.

Fortuitous event means an event happening by chance or accident. It is an occurrence or failure to occur which
is, or is assumed by the parties to be adversely affected by the happening of such event.
Al Jun A. Baron Mr. Cartagena
BSBA 3-1
Act of God - may be interpreted as an implied defense under the rule of impossibility or impracticability. If so,
the promise is discharged because of unforeseen occurrences, which were unavoidable and would result in
insurmountable delay, expense, or other material breach.

Forced Majeure - refers to a clause that is included in contracts to remove liability for natural and unavoidable
catastrophes that interrupt the expected course of events and restrict participants from fulfilling obligations.

The general rule is that there is no liability in case of a fortuitous event. The exceptions are the following:

1.) When the law itself expressly declares so (ex. Arts. 552(2,) 1165(3,) 1268, 1942, 2147 and 2159 of the Civil

2.) When expressly stated in the contract

3.) When the obligation's nature requires the assumption of risk (Art. 1174)

4.) When the obligor/debtor is in default or has promised to deliver the same thing to 2 or more persons who
don't have the same interest

A fortuitous effect will not affect a generic obligation, because a generic object can always be replaced by
another. It will, however, affect a determinate/specific obligation because the object of the obligation is specified
-but the exceptions must still be observed.

Some other exceptions are listed here:

1.) When it's expressly stipulated that the obligor/debtor is liable even if non-performance is due to a fortuitous
event (Art. 1174, Civil Code)

2.) The obligor/debtor is in delay (Art. 1165)

3.) The possessor is in bad faith and the thing is lost or deteriorates because of the fortuitous event (Art. 552)

4.) The obligor/debtor contributed to the loss of the thing (Tan vs Inchausti, 22 Phil 152)

5.) The obligor/debtor is guilty of fraud, negligence or delay or if he violated the tenor of the obligation (144
SCRA 596, 160 SCRA 334)

Common carriers must pay heed to the following:

1.) Mechanical defects in vehicles or vessels are not fortuitous events (Sweet Lines vs. CA 121 SCRA 769, Necesito
vs. Paras 104 Phil 75)

2.) Blowout of a passenger bus tire is not a fortuitous event (La Mallorca vs. de Jesus 123 Phil 875, Juntilla vs.
Fontanar 136 SCRA 624)

3.) Defective brakes of the vehicle do not constitute a fortuitous event (Vergara vs. CA 154 SCRA 564)

Kinds of obligations

1) Condition – future and uncertain event upon which the existence or extinguishments of an obligation is
made to depend.
2) Pure Obligation – one which does not contain any condition or term upon which its fulfillment is made
to depend.
Al Jun A. Baron Mr. Cartagena
BSBA 3-1
3) With a term or period
 a period is a future and certain event.

 a condition is an uncertain event.

Conditional Obligation – kind of obligation which is subject to condition.

 Suspensive (condition precedent/antecedent) – its fulfillment gives rise to the obligation, if not fulfilled,
no obligation will arise.
 Resolutory (condition subsequent) – extinguishes the obligation which is already existing
 Mixed – depends partly upon the will of a party to the obligation and partly upon chance and/or the will
of a third person.
 Potestative – depends upon the will of the debtor.