Laws on Obligations and Contracts

Laws on Obligations and Contracts

• Obligations are juridical necessities to give, do, or not do. (Article 1156)
• Obligations referred to in Article 1156 are civil obligations.

Elements of Obligation

• Passive subject (Obligor/Debtor): The person obligated to fulfill the obligation.
• Active subject (Obligee/Creditor): The person who can demand fulfillment of the obligation.
• Prestation: The object of the obligation (to give, do, or not do).
• Juridical Tie (Vinculum): The unifying bond that binds the debtor and creditor.

Sources of Civil Obligations

• Law: Obligations arising from law are not presumed; only those explicitly determined by law are demandable.
• Contracts: A contract is a meeting of the minds whereby one person binds himself with respect to another to give something or render some service.
• Quasi-Contracts: Judicial relations arising from lawful, voluntary and unilateral acts to avoid unjust enrichment. Includes Solutio Indebiti (mistaken payment) and Negotiorum Gestio (taking charge of another's property).
• Delicts (Crimes): Acts or omissions punishable by law; any person criminally liable is also civilly liable for damages.
• Quasi-Delicts (Culpa Aquiliana): Acts or omissions that cause damage to another, with fault or negligence, without a pre-existing contractual relation. Requisites include damage suffered, fault/negligence of defendant, connection between fault/negligence and damage.

Determining the Source of Obligation

• Examples of situations and their potential sources of obligation are provided (loan, tax payments, transportation, receiving packages, assault).

Quasi-Delict Liability (Employer/Manager/Employee)

• General Rule: A person is only responsible for their own actions.
• Exceptions (Article 2180):
  • Owners and managers of establishments are responsible for damages caused by their employees in the service of their branches, or on the occasion of their functions.
  • Employers are liable for damages caused by their employees and household helpers acting within the scope of their assigned tasks.
• Other Considerations: Cases can be filed against the employer/manager even if the employee was the one actually committing the wrong. The employee must have been acting in the performance of his assigned tasks. The employer can defend themselves by proving diligence of a good father of a family to prevent damage.
• Case Example: Ramon, a truck driver, hit a car while reversing at a toll gate. He has impaired hearing but did not disclose it. Can the car owner sue the company?

Source of Damages

• Fraud (Dolo): Deliberate and intentional evasion of the normal fulfillment of an obligation.
  • Dolo Incidente: Fraud committed in the performance of an existing obligation. Damages may be claimed, but the obligation is not annulled.
  • Dolo Causante: Serious fraud committed at the beginning of a transaction to induce another party to enter the contract. The contract is voidable, and damages may be claimed.
• Negligence (Culpa): Omission of diligence required by the nature of the obligation, considering the circumstances of the persons, time, and place. Two kinds of diligence: diligence of a good father of a family, utmost diligence.
• Delay (Mora): Non-fulfillment of obligation concerning time. Requisites include: obligation being demandable and liquidated; debtor delaying performance; creditor demanding performance.
  • Exceptions to the NO DEMAND, NO DELAY rule include cases specified by law or when time is of the essence.
• Contravention of Tenor of Obligation: Failure to perform as stipulated in the obligation.

Damages That May Be Recovered

• Moral Damages: Compensatory damages to alleviate physical and mental suffering, anxiety, humiliation.
• Exemplary Damages: Corrective damages by way of example; imposed as additional to compensatory damages in cases of bad faith.
• Nominal Damages: Acknowledge that a right was violated but no actual financial loss occurred.
• Temperate Damages: Damages greater than nominal but less than compensatory; awarded when actual loss can't be proved due to uncertain circumstances.
• Actual Damages (compensatory): Damages awarded in satisfaction for loss or injury.
• Liquidated Damages: Damages agreed upon by parties for breach of a contract

Fortuitous Event (Case Fortuito)

• General Rule: Obligor is exempt from liability if cause of breach is a fortuitous event;

  • Cause must be independent of the obligor's will.
  • Event must be unforeseen or unavoidable
  • Must prevent the obligor from fulfilling his obligation in a normal manner
  • Obligor must have been free from participation in or aggravation of injury.

• Exceptions:

  • Expressly specified in the law/contract
  • Nature of obligation requires risk assumption
  • Debtor is guilty of fraud, negligence, delay, or contravenes the tenor of obligation.

• Effect:

  • Determinate Thing: Obligation is extinguished
  • Generic Thing: Obligation isn't extinguished.

Different Kinds of Obligations

• Pure Obligation: No condition/time specified, immediately demandable.
• Conditional Obligation: Performance depends on a future/uncertain event (suspensive or resolutory).
• Obligation with a Period: Performance depends on a future/certain event (e.g. a specified date.)
• Alternative Obligation: Debtor has choice among several prestations.
• Facultative Obligation: One prestation due, but debtor may substitute with another.
• Joint Obligation: Debtor/creditor is liable for proportionate part, unless otherwise stipulated.
• Solidary Obligation: Each of the debtors or creditors is liable for entire obligation.

Delivery of the Thing (Art. 1164)

• Ownership is acquired through delivery
• Real Tradition (actual delivery)
• Constructive Tradition (representative/symbolic delivery) Methods include:
  • Keys, titles
  • Instrument of conveyance (document)
  • Pointing of object
  • Tradicion Brevi Manu (continuous possession)
  • Tradicion Constitutum (continuous possession transferred with title of ownership)

Rights of Creditors

• Determinate Things: Creditor can demand specific performance, rescission/cancellation, or damages only.
• Generic Things: Creditor can demand performance or damages, and creditor can choose if third party delivers.

Obligations to Do (Art. 1167)

• If obligor fails to do what they are obliged to do, the same shall be executed at their cost.
• If they perform incorrectly or contrary to the obligation, the incorrectly performed actions must be corrected at their cost.
• Remedies for creditor include specific performance, damages or undoing if possible.

Obligations Not to Do (Art. 1168)

• If obligor does what has been forbidden, what was done shall be undone at their cost.

Delay (Mora)

• Obligation to deliver or do something incurs delay from time of judicial demand.
• Exceptions to the "No demand, no delay" rule include:
  • Expressly stated in obligation
  • Time of the essence of contract
  • Demand rendered useless
• Kinds of delay: Mora solvendi (debtor's delay), mora accipiendi (creditor's delay), compensatio morae (delay on both sides)

Mora Solvendi (Debtor's Delay)

• Requisites: a) Obligation pertains to debtor; b) Obligation is determinate, due, demandable, and liquidated; c) Obligation isn't performed on maturity date; d) Judicial(or extra-judicial) demand by creditor; e) Failure to comply with demand
• Effects: Damages; if specific thing is lost, debtor bears risk of loss, even due to fortuitous event. Rescission/resolution of obligation.

Mora Accipiendi (Creditor's Delay)

• Requisites: a) Capacitated debtor makes the offer; b) Offer is to comply in the way the prestation should be done; c) Creditor refuses without justifiable reason.
• Effects: Responsibility for loss due to fortuitous event falls on creditor; creditor is liable for damages; debtor may relieve obligation through deposit/consignment.

Compensatio Morae (Delay on Both Sides)

• Delay in both debtor and creditor in reciprocal obligations
• Neither party is initially in delay unless other party fulfills their portion of the obligation.

Fraud (Dolo)

• Deliberate or intentional act to evade obligation.
• Waiver of future fraud is invalid
• Existing fraud does not make the contract voidable, creditor can pardon the fraud by disregarding it.

Dolo Causante v. Dolo Incidente

Examples Analysis

• Case studies of various obligations are provided, highlighting the applicable principles.