The Laws On Obligations And Contracts PDF

THE LAWS ON OBLIGATIONS AND CONTRACTS  Article 1156. Obligation is a juridical necessity, to give, to do, or not to do.  The obligation referred to in Article 1156 is a civil obligation.  ELEMENTS OF OBLIGATION Passive subject - is the person or party who has...

THE LAWS ON OBLIGATIONS AND CONTRACTS  Article 1156. Obligation is a juridical necessity, to give, to do, or not to do.  The obligation referred to in Article 1156 is a civil obligation.  ELEMENTS OF OBLIGATION Passive subject - is the person or party who has the duty to fulfill the obligation or prestation. Obligor or debtor. Active subject - is the person who has the power to demand the fulfilment of the obligation. Obligee or creditor Prestation - object of the obligation either to give, to do, or not to do Juridical Tie - vinculum (unifying bond) or that which binds the debtor and creditor.  SOURCES OF CIVIL OBLIGATIONS Law - Obligations arising from law are not presumed only those expressly determined by law are demandable. Contracts - Under Article 1305, a contract is a meeting of the minds whereby one binds himself with respect to the other to give something or render some services. Is a contract the same as an obligation?  SOURCES OF CIVIL OBLIGATIONS Quasi-Contracts - Judicial relation that arises through certain lawful, voluntary and unilateral acts to the end that no one shall be unjustly enriched or benefitted at the expense of another. (Article 2142, NCC) Solutio Indebti – something is received when there is no right to demand it, and it was duly delivered by mistake. Negotiorum Gestio – exists when someone voluntarily takes charge of the agency or management of the business or property of another and without any power from the latter.  SOURCES OF CIVIL OBLIGATIONS Acts or ommissions punishable by law (Delicts) - Under the Revised Penal Code, any person criminally liable is also civilly liable. The civil liability pertains to the damages that must be paid arising from the offense/crime committed.  SOURCES OF CIVIL OBLIGATIONS Quasi-Delicts (Culpa Aquiliana) - These are acts or omissions that cause damage to another, there being fault or negligence and there is no pre- existing contractial relation between the parties. Requisites: ✓ Damage suffered by the plaintiff ✓ Fault or negligence of defendant ✓ Connection of cause and effect between the fault or negligence of the defendant and the damage incurred by the plaintiff  DETERMINE THE SOURCE OF THE OBLIGATION Juliet loaned Php 5000 from Romeo. Romeo agreed. Company X must pay income taxes every 4th month following the close of the taxable year. Ramon rides a jeep to school and pays Php 20 to manong driver. Jonathan receives a lalamove package. Package has alreay been paid for. When he opened the package, he uncovered jewelry which he did not order. Joan stabbed her boyfriend because the latter cheated.  Agatha left her house unattended for days because she needed to tend to her mother who was rushed to the hospital. Her neighbor Ron noticed her dog Dipper tied to her porch. During her absence, Ron would toss food to Dipper. One night, typhoon Karina hit and flood started to rise in the property of Agatha. Ron jumped over the fence and saved Agatha’s dog. Upon Agatha’s return, does the latter have an obligation to reimburse or compensate Ron? If yes, what is the source of the obligation?  QUASI-DELICT LIABILITY General Rule - One is only responsible for his own act or omission. Thus, a person will generally be held liable only for the wrong doings committed by him and nor by another.  QUASI-DELICT LIABILITY (EMPLOYER/ MANAGER/ EMPLOYEE) Exceptions: Article 2180. The owners and managers of an establishment or enterprises are responsible for damages caused by their employees in the service of branches in which the employee is employed or on the occassion of their functions. Aricle 2180. Employers shall be liable for the damages cause by their employees and household helpers acting within the scope of their assigned tasks even though the former are not engaged in any business or industry.  QUASI-DELICT LIABILITY (EMPLOYER/ MANAGER/ EMPLOYEE) One may file a case against the employer or manager as the case may be although the latter is not the one who committed damage to another. Damage must be done by the Employee in the actual performance of his assigned tasks or duties. Vicaorious Liability Pater Familias (a good father of the family)  QUASI-DELICT LIABILITY (EMPLOYER/ MANAGER/ EMPLOYEE) Defense - Article 2180. The employer may invoke the defense that they observed all the diligence of a good father of a family to prevent the damage.  QUASI-DELICT LIABILITY (EMPLOYER/ MANAGER/ EMPLOYEE) Ramon is a truck driver of Sultan Inc. He is a regular employee. One afternoon, Ramon reversed his truck while in line for the toll gate. He hit a car in the process. Despite the car honking his horn, Ramon did not hear this. Ramon is auditorily impaired. He did not disclose to his employer that he has hearing problems and cheated in his medical exam. Can the owner of the car sue Sultan, Inc.?  SOURCE OF DAMAGES Article 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,  SOURCE OF DAMAGES Fraud - deliberate and intentional evasion of the normal fulfillment of obligation. 1. Dolo Incidente - fraud committed in the performance of an obligation already existing because of contract. Damages no annulment. 2. Dolo Causante - serious fraud enough to render a contract voidable. The fraud is committed at the very beginning of the transaction in order to induce or convince the other person to enter a contract.  SOURCE OF DAMAGES Negligence or Fault - consist in the omission of that diligence which is required by the nature of the obligation which is required by the nature of the obligation and corresponds with the circumstnces of the persons, of the time and of the place. Two Kinds of Diligence ✓ Diligence of a good father of the family ✓ Utmost diligence or extraordinary diligence  SOURCE OF DAMAGES Delay - non-fulfillment of the obligation with respect to time Requisites ✓ That the obligation be demandable and already liquidated; ✓That the debtor delays the performance; and ✓That the creditor requires (demanded) the performance judicially or extrajudicially. “NO DEMAND, NO DELAY”  SOURCE OF DAMAGES Delay Exception to NO DEMAND, NO DELAY a. When the law so provides b. When the obligation so provides c. When time is of the essence d. When demand would be useless  On December 31, 2023, John entered into a contract of loan with Peter, wherein Peter agreed to lend John Php 200,000 payable after 1 year. Upon arrival of December 31, 2024, John was not able to pay. Is John in legal delay? Would your answer be the same if date of payment is specified in the contract?  SOURCE OF DAMAGES Contravention of the Tenor of the Obligation - failure to perform that which is incumbent upon him.  DAMAGES THAT MAY BE RECOVERED Moral Damages - not meant to be punitive but are designed to compensate and alleviate the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar harm unjustly caused to a person.  DAMAGES THAT MAY BE RECOVERED Exemplary Damages - corrective damages by way of example. 1. Imposed by way of example or correction only in addition, among others, to compensatory damages, and cannot be recovered as a matter of right. 2. The claimant must first establish his right to moral, temperate, liquidated or compensatory damages. 3. The wrongful act must be accompanied by bad faith, and the award would be allowerd only if the guilty party acted in wanton, fraudulent, reckless, oppressive or malevolent manner.  DAMAGES THAT MAY BE RECOVERED Nominal Damages - right of the plaintiff may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him. Temperate Damages - more than nominal but less than compensatory damages. This will be recovered when the court finds that some pecuniary loss had been suffered but its amount cannot, from the nature of the case be proved with certainty.  DAMAGES THAT MAY BE RECOVERED Actual Damages - compensatory damages, awarded in satisfaction of, or in recompense for, loss or injury sustained. Liquidated Damages - are those agreed upon by the parties to a contract, to be paid in case of breach thereof.  FORTUITOUS EVENT Article 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 forseen, were inevitable. Casa Fortuito  FORTUITOUS EVENT General Rule - Obligor is exempt from liability if the reason thereof is due to fortuitous event. a. The cause of the breach of the obligation must be independent of the will of the debtor; b. The event must either be unforseeable or unavoidable; c. The event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; d. The debtor must be free from any participation in, or aggravation of the injury to creditor. (Huibonhoa v. Court of Appeals,320 SCRA 625)  FORTUITOUS EVENT Exception 1. Expressly specified by law Debtor is guilty of fraud, negligence, delay or if he contravened the tenor of the obligation. Debtor promised to deliver to 2 or more persons Obligation to deliver a specific thing arises from a crime; The thing is generic. 2. When is it otherwise agreed upon 3. When the nature of the obligation requires the assumption of risk  EFFECT OF FORTUITOUS EVENTS (ART. 1165) Determinate thing: Generally, obligation is extinguished. Generic thing: Obligation is not extinguished.  DIFFERENT KINDS OF OBLIGATIONS From the view point of subject matter, Real (Obligations to give) and Personal (Obligations to do or not to do) 1. Pure Obligation - one whose performance or extinguishment is not subject to any condition or period. As a consequence, this kind of obligation is demandable at once.  DIFFERENT KINDS OF OBLIGATIONS 2. Conditional Obligation - an obligation the performance or extinguishment of which is dependent upon the happening of the condition. 3. Obligation with a Period - is one that has a fixed day certain for its fulfillment. This obligation is demandable only when that day comes. The term “a day certain” refers to “that which must necessarily come, although it may not be known when”.  PURE AND CONDITIONAL OBLIGATIONS Art. 1179 Every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once. Every obligation which contains a resolutory condition shall also be demandable, without prejudice to the effects of the happening of the event.  PURE AND CONDITIONAL OBLIGATIONS Pure obligation – one which is not subject to any condition and no specific date is mentioned for its fulfillment and is, therefore, immediately demandable. Ex. Upon demand, or without a term.  PURE AND CONDITIONAL OBLIGATIONS Condition – a future and uncertain event, upon the happening of which, the acquisition or extinguishment of an obligation subject to it depends.  PURE AND CONDITIONAL OBLIGATIONS Potestative Condition - a condition which depends upon the will of the contracting parties. Invalid because they do not create an obligation. Characteristics of a condition: ✓Future and uncertain; ✓Past but unknown; ✓A condition must not be impossible.  PURE AND CONDITIONAL OBLIGATIONS Two principal kinds of condition: a. Suspensive – fulfillment of which gives rise to an obligation; and b. Resolutory – fulfillment of which will extinguish an obligation already existing.  PURE AND CONDITIONAL OBLIGATIONS Effects of Fulfillment of Suspensive Conditions: Real Obligations - Retroacts to the date of the constitution of the obligation except for fruits and interests. Personal Obligations - the court determines the retroactive effect of the condition fulfilled.  PURE AND CONDITIONAL OBLIGATIONS Effects of Fulfillment of Resolutory Conditions: Real Obligations - Parties shall return to each other what they have received. Obligation is extinguished. Personal Obligations - the court determines the retroactive effect of the condition fulfilled.  OBLIGATIONS WITH A TERM/PERIOD Art. 1180 When the debtor binds himself to pay when his means permit him to do so, the obligation shall be deemed to be one with a period xxx.  OBLIGATIONS WITH A TERM/PERIOD A period is a future and certain event upon the arrival of which, the obligation subject to it either arises or is extinguished.  OBLIGATIONS WITH A TERM/PERIOD Effects: a. When it is for the benefit of the creditor - Creditor may demand the performance of the obligation at anytime but the debtor cannot compel him to accept payment before the period expries. e.g. on demand b. When it is for the benefit of the debtor - Debtor may oppose any premature demand on the part of the creditor for performance of the obligation, or if he so desires he may renounce the benefit of the period by performing his obligation in advance.  WHAT KIND OF OBLIGATION? John and Luke entered into a loan agreement that indicates that Luke, debtor may pay when he is already a millionaire and already has enough funds to pay back the money. Romeo will stop giving roses to Juliet once she turns 70 years old. Christian entered into an agreement with Marcus today. In the agreement it was stated that Marcus will give a house to Christian if Ninoy Aquino becomes president. Jonathan will paint the house of Joel when a woman is elected as a Philippine President.  DIFFERENT KINDS OF OBLIGATIONS 4. Joint Obligation - debtor is liable only for a proportionate part of the debt, and the creditor is entitled to demand only a proportionate part of the credit from each debtor. Obligations are presumed joint unless stated otherwise. Pro-rata, Proportionate and Mancomunada  DIFFERENT KINDS OF OBLIGATIONS 5. Solidary Obligation - each of the debtors is liable for the entire obligation, and each of the creditors is entitled to demand the satisfaction of the whole obligation from any or all of the debtors. Solidary when: - The obligation expressly so states; - When the law so provides; or, - When the nature of the obligation so requires. In solidum, Jointly and Severally, Individually and Collectively, Mancomunada Solidaria, together or separately  Lisa, Jennie, Rose and Jisoo are roommates. They rented a studio apartment in the amount of Php 20,000 a month. After a month, their landlord Joel, wants to collect payment. How much can he demand from each? What if the rental contact states that the all four students are liable jointly and severally, how much can Joel ask from each?  DIFFERENT KINDS OF OBLIGATIONS 6. Alternative Obligations - type of obligation where the debtor has the choice on how to fulfill the obligation. Choice of one precludes the other prestations. One wherein various prestations are due but the performance of one of them is sufficient. Choice usually belongs to debtor. 7. Facultative Obligations - Type of obligation where the debtor can choose to perform a substitute action instead of the originally agreed upon action. When only one prestation has been agreed upon, but the obligor may render another in substitution.  Phoebe entered into a contract with Joey wherein Joey promised to deliver a cake to Phoebe in either her birthday, Christmas or New Year’s eve. On December 25, Phoebe called upon Joey to deliver the cake. Joey obliged. After a month on Phoebe’s birthday, she demanded again the delivery of the cake. Is the demand of Phoebe valid? Why? What kind of obligation?  DIFFERENT KINDS OF OBLIGATIONS 8. Divisible Obligations - Prestation is susceptible of partial performance. 9. Indivisible Obligations - Prestation is not susceptible of partial performance. 10. Obligations with a Penal Clause GR: The creditor cannot demand fulfillment of the obligation and satisfaction of the penalty. XPN: When the right has been clearly granted to the creditor or if the creditor has decided to require the fulfillment of the obligation, the performance thereof should become impossible without his default.  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.  DUTIES OF DEBTOR IN OBLIGATION TO GIVE A DETERMINATE THING: 1) Preserve or take care of the thing with a diligence of a good father; Except when extraordinary diligence is required Factors to be considered in the diligence required: Depends upon the nature of the obligation; and Corresponds with the circumstances of The person The time The place  Reason for debtor’s obligation -- without taking care of the thing, what do you think will happen? “rendering the obligation to give illusory”  DUTIES OF DEBTOR IN OBLIGATION TO GIVE A DETERMINATE THING: 2) Deliver the fruits, accessions and accessories even though these are not mentioned in the contract. The creditor shall have the right to claim the fruits only from when the obligation to deliver arises. (Art. 1164) Generally, upon perfection of contract, or meeting of the minds. Parties may stipulate in the contract when fruits should be delivered. Accessions – everything produced by the thing, i.e. fruits, including those built, planted, or sowed. Accessories – united or attached to the thing Ex. Spare tire, chairs in a movie house, cellphone case, shoelace, etc.  DUTIES OF DEBTOR IN OBLIGATION TO GIVE A DETERMINATE THING: 3) Deliver the thing itself; and 4) Answer for damages in case of non-fulfillment or breach.  DELIVERY OF THE THING (ART. 1164) Ownership is acquired through delivery. Without delivery, the creditor only has a right over the thing. Modes of delivery: Real or Actual Tradition – actual delivery Constructive Tradition – not actual but with representative or symbolic in essence Keys, Titles (Tradicion Symbolico) Instrument of conveyance (Tradicion Instrumental) Pointing of the thing (Tradicion longa manu) Tradicion Brevi Manu – continuous possession of grantee, but now with title of ownership Tradicion Constitutum – continuous possession of the owner of the property which he sold to another, and the he now becomes the lessee or renter.  RIGHTS OF CREDITORS - TO GIVE (ART. 1165) When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by Art. 1170, may compel the debtor to make the delivery. Art. 1170 relates to the right of the creditor to damages due to fraud, negligence, or delay.  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 [debtor] shall be responsible for any *fortuitous event until he has effected the delivery.  RIGHTS OF CREDITORS (ART. 1165)  Determinate thing: Demand for specific performance + indemnity for damages; Demand rescission or cancellation + recovery of damages; or Demand for damages only, where it is the only feasible remedy. Generic thing: same as the above, but the creditor can choose whether he will ask the debtor to delivery or a third party to deliver but cost to be borne by the debtor. 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 decreased that what has been poorly done be undone.  This article refers to obligations to do. 3 situations: Debtor fails to perform Debtor performs but contrary to what was agreed upon Debtor performs but in a poor manner  RIGHTS OF CREDITORS - TO DO Remedies of the creditor: (ART. 1167) 3 situations: Debtor fails to perform Perform, cost to debtor + damages Debtor performs but contrary to what was agreed upon Debtor performs but in a poor manner Undo what was done, if still possible, cost to debtor + damages  Involuntary servitude: Nobody can be compelled to do something.  RIGHTS OF CREDITORS - TO DO (ART. 1167) What if an obligation can only be performed by that specific person? He cannot be compelled to perform. The remedy is indemnification for damages due to his failure to perform. 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.  DELAY (ART. 1169) “Those obliged to deliver or to do something incur in delay from the time the oblige judicially demand from them the fulfillment of their obligation.” No demand, no delay. Except: “However, the demand by the creditor shall not be necessary in order that delay may exist: When the obligation or the law expressly declares; or When from the nature and 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 “time is of the essence” When demand would be useless as when the obligor has rendered it beyond his power to perform. Ex. Impossible prestation – debtor destroyed a specific thing supposed to be delivered.  KINDS OF DELAY Mora solvendi – default by debtor Mora accipendi – default by the creditor to accept performance of the obligation Compensatio morae – default on both debtor and creditor  MORA SOLVENDI Default by debtor Requisites: a. Obligation pertains to the debtor; b. Obligation is determinate, due and demandable and liquidated; c. Obligation has not been performed on its maturity date; d. There is a judicial or extrajudicial demand by the creditor; and, e. Failure of debtor to comply with such demand.  MORA SOLVENDI Effects: a. Debtor may be liable for damages b. When the obligations has for its object a determinate thing, the debtor may bear the risk of loss of the thing even if the loss is due to fortuitous event; and, c. Rescission or Resolution  MORA ACCIPIENDI Default by the creditor to accept performance of the obligation Requisites: a. Offer of performance of capacitated debtor; b. Offer must be to comply with the prestation as it should be performed; and c. Refusal of the creditor without just cause.  MORA ACCIPIENDI Effects: a. Responsibility of debtor is limited to fraud or gross negligence. b. Debtor is exempted from risk of loss of thing; creditor bears risk of loss. c. Expenses by debtor for preservation of thing after delayis chargeable to creditor. d. If the obligation bears interest, debtor does not have to pay it from time of delay. e. Creditor liable for damages. f. Debtor may relieve himself of obligations by consigning the thing.  COMPENSATION MORAE Default on both creditor and debtor. “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 fulfils his obligation, delay by the other begins.” Ex. In a sale, generally the seller has the obligation to deliver the thing first, before the buyer pays. Therefore, without delivery, the buyer cannot be considered delayed in his payments.  FRAUD Fraud is the deliberate and intentional evasion of the faithful performance of the obligation. Any waiver of an action for future fraud is void. If fraud was already committed by the debtor, the creditor may forgive him by disregarding such fraud.  DOLO CAUSANTE V. DOLO INCIDENTE Dolo Causante Dolo Incidente It occurs before or simultaneous It occurs after the valid execution with the creation or perfection of of the contract. Consent is free the obligation. Consent is vitiated and not vitiated. by serious deceptionor misrepresentation. It renders the contract voidable. It does not affect the validity of the contract. Action for annulment with Contract remains valid. Remedy is damages. to claim for damages only.  Jenny, a chemistry student was approached by her friend Serena with the latter selling whitening tablets. Jenny bought 10 bottles of the whitening tablets. After finishing the whole bottle, her skin was not fairer. As an aspiring chemist, Jenny evaluated the tablets with her chemist teacher and they both discovered that the tablets were just vitamin c tablets. What fraud was committed by Serena? What are the remedies of Jenny.  FRAUD V. NEGLIGENCE Fraud Negligence There is deliberate intention None. to cause damage. Waiver of liability for future Liability may be waived. fraud is void. Must be clearly proved by Presumed, unless proven by the person who alleges fraud. the person who allegedly was negligent. Liability cannot be reduced. May be reduced depending on the circumstances.