Coblaw 1 Final Exam Reviewer PDF

lOMoARcPSD|50046693 [ Coblaw 1] Final EXAM Reviewer obligations and contracts (De La Salle University) Scan to open on Studocu Studocu is not sponsored or endorsed by any college or university Downloaded by Victor Miguel Heramia ([email protected]) ...

lOMoARcPSD|50046693 [ Coblaw 1] Final EXAM Reviewer obligations and contracts (De La Salle University) Scan to open on Studocu Studocu is not sponsored or endorsed by any college or university Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 TALASALITAAN OF LAW WORDS (NEED TO REMEMBER) Omission - a failure to act EX. An expert swimmer who sits by the side of the pool and cordially enjoys watching a child drown is not perpetrating any crime by his act of omission to save the child (assuming he is not the lifeguard). Estoppel - Whenever you have altered or said something under certain circumstances, you are not allowed to deny it (Conclusive evidence) It is under the concept of conclusive evidence which states that you cannot deny or alter something once you have said it Vitiated - spoil or impair the quality or efficiency of Abscond - to evade Undertaking - to violate a promise Involuntary servitude - occurs when a person is forced to an act against his or her will Restitution - the giving of something back to its rightful owner or the giving of something of equal value (as for loss or damage) Indemnification - compensating a person for damages or losses they have incurred or will incur related to a specified accident, incident, or event. Machination - Contriving a plot or conspiracy. The act of planning or contriving a scheme for executing some purpose, particularly an evil purpose Indubitable - that cannot be doubted; patently evident or certain; unquestionable. Usufruct - right to enjoy the property of others with the obligation to preserve its form and substance, unless the title of its constitution or the law authorizes otherwise Prestations - a payment in money or in services. a duty to do or not do something in fulfillment of an obligation. Remission - also means forgiveness or condonation of an offense or injury. Onerous - something excessively burdensome or costly, it may be a contract or lease that has more obligations than advantages Ratifiable - the end of the process where both parties agree on a contract's terms and conditions Ratification - extinguishes the action to annul a voidable contract Rescission - A remedy granted by law to the contracting parties and even to a third person in order to secure reparation of damages Litigation - the process of resolving disputes by filing or answering a complaint through the public court system. INTRODUCTION ON LAW Law - is valid when it is possible that a law is valid, but it is not being implemented you cannot be excused if you are caught violating the law Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 when a law is valid, it is supposed to be implemented a violator must be punished Requisites of Law Promote the common Good for the majority, especially those that the good law would want to help Not for general welfare because some will be displeased and inconvenienced Be for the compliance of Governs our conduct so everyone should abide all by it Be promulgated by Authority should have competence other wise competent authority the regulation will be void Be reasonable rules of Must have an objective to address a particular conduct problem For it to be reasonable, it must have a connection between the means to address the problem and the problem itself Law will be null and void if the means will not solve the problem and the objective is not reasonable GENERAL CLASSES OF LAW Divine Law Prescribed by God What is right and wrong based on our decision to Moral Law follow/subscribe to a particular belief, faith, or profession Natural Law and Sciences and sense of man Physical Law Human Positive Law Enacted by the government in our democratic society or State Law Branches of Government Legislative Tasked to make laws and promulgate them (only the Congress can pass a law and require us to abide with the law) Executive Empowered under our Constitution to implement the laws made Judicial Headed by the Supreme Court and the lower courts, which Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 interpret the law and rights of people Classes of Positive Law National Law Applicable to all residents of the Philippines (national scope) Ordinances (LGUs) Regulations by local government units Administrative May be promulgated by the Executive Branch only for the Regulations (IRR or purpose of implementing a law that is already passed by Implementing Congress (ex. Empowering the President to make certain Rules and declarations depending on the current situation, such as Regulations) declaring the Philippines under different levels of community quarantine) Kinds of National Law As to Nature or Purpose Substantive Law Rights and obligations Civil Code of the Philippines and Family Code of the Philippines Procedural or Remedies and procedures Adjective Law Civil Code of the Philippines (also has procedures) As to Subject Matter Public Relationship of the state (government and citizens) Constitutional Law and Revised Penal Law Public Relationships/dealings of individuals among themselves Civil Code of the Philippines Civil Code of the Philippines An old law but it is still effective up until now Both procedural and substantive Book 4 - main source of general provisions on obligations and contracts 2 Kinds of Legal Presumptions Conclusive No evidence can destroy the presumption “Ignoratia Legis non Excusat” - “Ignorance of the law excuses no one for compliance therewith.” Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 Estoppel Prima Facie Disputable/Rebuttable Can still be overturned or disputed by evidence Nature of Obligations Civil Assume as citizens of the country When violated, parties are entitled to go to court Natural No longer enforceable through court One may still have a right to another, but the person with the right can no longer enforce his right under the courts of law Must be performed by debtor voluntarily If not, no remedy is left for creditor to enforce his natural obligation against debtor Prescription of Civil Actions period in which the law allows the creditor to enforce the right against the debtor through our courts of justice, given the essence of juridical necessity through civil obligation if you are not able to enforce your civil right through our courts, the civil obligation will be converted into a natural obligation Accrual Right of Action - from the time the creditor made the demand to perform the obligation and the debtor refuses to do so PRESCRIPTIVE PERIODS Written Contract - 10 years Oral Contract - 6 years Negligence - 4 years Obligation created by law - 10 years Not fixed by law - 5 years OBLIGATIONS CHAPTER 1 GENERAL PROVISIONS Article 1156 - An obligation is a juridical necessity to give, to do or not to do Obligation Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 derived from the Latin word obligatio (tying or binding) tie or bond recognized by law by which one is bound in favor of another to render something duty under the law of the debtor or obligor act or performance which the law will enforce Juridical Necessity - connotes that in case of noncompliance, there will be legal sanctions/consequences Requisites of an obligation Passive subject Debtor/obligor - person bound to the fulfillment of the obligation/has a duty Active subject Creditor/obligee - person entitled to demand the fulfillment of the obligation/has a right Object or Subject matter - conduct required to be observed by the prestation debtor Juridical/legal tie Efficient cause - that which binds/connects the parties to the obligation PRESTATION To Give (Real Obligation) Pay money or deliver something To Do (Positive Real Obligation) Anything that involves doing something Not To Do (Negative Real Obligation) Anything that involves not doing Obligation vs. Agreement Obligation - there is a legal or juridical tie that binds the creditor and debtor together Agreement - there is no juridical tie at all and non-compliance will not entitle/empower the creditor to go to court (ex: commit to attend a birthday party) Forms of obligations As a general rule, the law does not require any form for obligations arising from contracts for their validity Obligations arising from other sources do not have any form at all Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 Right - power which a person has under the law Wrong - act or omission of one party in violation of the legal right of another Sources of obligations Law - When they are imposed by the law itself Legal obligations - arise from law Special laws - all laws not contained in the Civil Code Contracts - meeting of minds between two or more persons whereby one binds himself, with respect to another, to give something/render service Binding force - force of law between contracting parties Breach of contract - when a party fails/refuses to comply without legal reason Compliance in good faith - performance in accordance with the terms Quasi-contracts - From lawful, voluntary, and unilateral acts which are enforceable to the send that no one shall be unjustly enriched or benefited at the expense of another There is no consent but the same is supplied by fiction of law Negotiorum gestio Voluntary management of the property/affairs of another without knowledge/consent of the latter Solutio indebiti When something is received when there is no right to demand it and it was unduly delivered through mistake Crimes/acts/omissions punished by law - act or misconduct or omission committed by a person in violation of a law that punishes non-compliance to that particular criminal law Civil liability in every person criminally liable for an act or omission is addition to criminal also civilly liable for damages suffered by the aggrieved liability party Criminal liability crimes with no cause of material damage without civil liability Civil liability without a person not criminally responsible may still be liable criminal liability civilly Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 Quasi-delicts or torts - 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 no contractual relation exists between the parties Requisites 1. Act or omission 2. Fault or negligence 3. Damage caused 4. Direct relation of cause and effect between the omission and the damage 5. No pre-existing contractual relation between parties Scope of civil liability Restitution - the giving of something back to its rightful owner or the giving of something of equal value (as for loss or damage) Reparation for the damage caused - act of repairing Indemnification for consequential damages - compensation for additional damages (moral, exemplary, etc) CRIMES DISTINGUISHED FROM QUASI-DELICT 1. Criminal/malicious intent 2. Purpose is punishment 3. Affects public interest 4. Have criminal and civil liability 5. Can not be compromised or settled by the parties themselves 6. The guilt of the accused must be proven beyond reasonable doubt CHAPTER 2 NATURE & EFFECT OF OBLIGATIONS The consequences of the two prestation (to give and to do) differ A prestation to give - there is no special skill or no talent required A prestation to do - requires talent or competencies Article 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 Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 Obligation to Give Determinate or Specific Particularly designated or physically Property segregated from others of the same class Identified by its individuality Cannot be substituted Not replaceable if lost/stolen Indeterminate or Generic Refers to a class or genus Property Cannot be pointed out with particularity Identified by its specie Debtor can give anything of the same class as long as it is one of the same kind “Genus nunquam perit” - “A generic thing never perishes” Replaceable Duties of Debtor in Obligation to Give a Determinate Thing 1. Debtor must take care of the thing before delivery with the “diligence of a good father of a family” a. “Diligence of a good father of a family” - ordinary care/reasonable diligence/diligence which an average person exercises over his property b. Extraordinary diligence - another standard of care that the law or stipulation must prevail if the law or stipulation of the parties provides it (Contract of Transportation) 2. Debtor must deliver fruits, accessions, and accessories of the thing Article 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. TYPES OF FRUITS Natural Fruits spontaneous products of the soil, young, and animals (trees and plants on land produced without the intervention of human labor) Industrial Fruits produced by lands of any kind through cultivation or labor (rice and sugarcane) Civil Fruits derived by virtue of a juridical relation (rents of buildings and price of leases of lands and other property) Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 Personal Right - power of a person to demand from another Real Right - interest of a person over a specific thing Creditor has a “personal right” to the fruits from the time debtor is required to deliver, acquiring a “real right” once delivered Article 1166 - The obligation to give a determinate thing includes that of delivering all its accessions and accessories, even though they may not have been mentioned. ACCESSIONS ACCESSORIES Fruits of a Things joined to/included with the thing/additions/improvements principal thing for embellishment, upon a principal thing better use, or completion Ex: House on a land, rents of a Ex: Key of a house, bracelet of a building, aircon in a car watch, bow of a violin Duties of Debtor in Obligation to Give a Generic Thing 1. The debtor must deliver the things agreed upon a. Neither of superior nor inferior quality when not specified or implied from purpose or intent of parties b. In case of debtor’s failure to deliver on time, creditor can demand delivery c. In case of debtor’s failure to comply with demand, creditor may ask another to deliver at the expense of debtor with damages OBLIGATION TO DO Involves skill and expertise The debtor must perform what is expected of him/her We cannot perform something against our will or consent (Constitutional Right against Involuntary Servitude) If the debtor fails to do his obligation, the obligation is converted to indemnity for damages Article 1167 - If a person obliged to do something but fails to do it, the same shall be executed at his cost. a. The debtor fails to do it b. The debtor performs it poorly c. The debtor does it but contrary to the terms thereof (contravention of tenor) Rights of Creditor: Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 1. Request that the obligation be performed 2. Demand payment of damages if refused 3. Ask another person to do it for the account of the debtor, with damages OBLIGATION NOT TO DO The prohibition of doing something The debtor must not perform what is prohibited of him/her Article 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 Rights of Creditor: 1. Request to undo the performance 2. Demand payment of damages if refused 3. Ask the Court to task another person to undo it for the account of the debtor, or if cannot be undone anymore, obligation is converted to an indemnity for damages Irregular vs Incomplete Performance IRREGULAR INCOMPLETE Obligation was performed but Regularly performed but not totally not according to the terms or completely performed If the debtor performed the prestation but the performance was not properly done in accordance with the terms of the obligation It is considered nonperformance because it is not in accordance with the terms total nonperformance = no performance at all there is a liability if there is irregular/incomplete performance VICES OF CONSENT There are instances wherein the performance of the obligation is vitiated by certain defects or “vices” of consent or vices in the performance of the obligation to the other person VICES OF CONSENT 1. Fraud or “Dolo” Intentional/deliberate act of the debtor to evade the usual performance of an obligation Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 Uses insidious words or machination (plotted) in order to do fraud Causal fraud or Cause is fraud itself “Dolo Causante” Used fraud to get the other person’s consent for persuasion in entering the obligation/contract Creditor’s remedy: Annulment of contract Incidental fraud or Used in the performance of an obligation “Dolo Incidente” Results in a breach of contract Creditor’s remedy: Specific performance with damages Creditor can compel debtor to do what is obliged of him 2. Negligence or “Culpa” Failure to observe ordinary diligence, unless extraordinary diligence is required by law/stipulation/nature of obligation ○ Ordinary diligence = needs to be proven ○ Extraordinary diligence = prima facie Unintentional unlike fraud Causes damages due to lack of skills or foresight ○ Future negligence = can be waived as long as not coupled with bad faith, otherwise waiver is void Culpa Contractual Result in nonperformance of the obligation Ex: Being negligent in driving that you cannot deliver the car anymore. It is, thus, non performed Creditor’s remedy = Breach of contract: Liability for damages Culpa Criminal Result in a crime Ex: Driving a car in a populated street which caused someone to get physically injured Creditor’s remedy = Imprisonment or fine or both, with liability for damages Culpa Aquiliana Result from quasi-delict or tort Creditor’s remedy = Appeal to liability for damages Delay/Default or “Mora” Failure to perform an obligation “on time” AND upon demand to perform by creditor, whether judicially or extrajudicially (oral or in writing) Not a vice Irregular performance of an obligation The person will be on default if the person failed to do it on time and there is already a demand from the creditor for performance RULE: “no demand, no delay” (however, it is not absolute) Delay is not automatic when there is only failure to perform it on time Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 ○ Judicial demand - from the court ○ Extrajudicial demand - oral or writing made by you or a lawyer There must be a documentation/writing in the creation of a demand so it is not hard to prove EXCEPTIONS WHEN DEMAND IS NOT REQUIRED For example, payment of tax. The deadline for it under the law is April 15 of the following year. if you don't do that on LAW PROVIDES SO time, the government will not remind you anymore. you are automatically in default and you will have to pay a lot (charges, penalties, interest, etc) For example, I obliged myself to deliver to you a determinate computer set on feb 14 this year. Then on feb 14, i was unable to deliver it. you are not yet in default because there is no demand yet even i am late. However, STIPULATION SAYS SO when I agree on the onset that if i will not be able to deliver it to you on the date, i will automatically be in delay. if i don’t make it on time bc of the stipulation, the debtor is automatically in default. For example, I am getting married 3 months from now and I would like to engage in services for the attire of the TIME IS OF THE wedding, and I told you that. however, on the wedding ESSENCE itself, you were not ready. without me demanding it from you, you are already in default because you knew the time (3 months) from the very beginning. For example, you obliged yourself to deliver to me a determinate horse 3 months from today, but you did not DEMAND WOULD BE take care of the horse for a period of 3 months to save on USELESS costs. it was not then delivered because it died. Thus, there is no need for the horse anymore. but if it is a generic horse, you can still demand for it. IN RECIPROCAL OR For example, a contract of sale. The seller is both a debtor BILATERAL and creditor because of delivering the car and the OBLIGATIONS WHEN purchase price is concerned, and vice versa. when one ONE PARTY party performs his part and he performs it already in a PERFORMS HIS PART bilateral obligation, there is no need for a demand from another. 3 Kinds of Default Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 Mora Solvendi Committed by debtor Creditor’s remedy = Breach of contract: Liability for interest and/or damages Mora Accipiendi Committed by creditor Default in acceptance of debtor’s performance Creditor can be held for damages sustained by debtor Damages sustained can be decided if the debtor exerted too much effort in delivering something and it was just wasted because of the creditor’s non acceptance Compensatio Committed by both debtor and creditor Morae No one is liable to another Contravention of Tenor of Obligation defective performance of an obligation (not in accordance with the terms of the obligation) debtor is still liable for damages to the creditor when there is irregular/incomplete performance or total nonperformance, the debtor is liable Exempting/Justifying Circumstances for Non Performance, Irregular, or Incomplete Performance of an Obligation Fortuitous Cannot be avoided whether foreseen or not Event or Can happen without debtor’s fault “Caso Debtor is excused if he is prevented to perform the Fortuito” obligation Obligation will be canceled but only applicable to giving a generic thing and a “to do” or “not to do” Presumption Contract of pledge - borrowing money from a pawnshop of then pledge a collateral with a greater value Performance Under the law, if the pledged property is seen in the physical or Payment possession of the debtor, the presumption of performance or payment is there The law presumes that the debtor has already paid the loan, but it is a prima facie presumption Usurious Collecting interest in excess with what the usury law allows Transaction There is a cap where the creditor can charge interest, and in or Interest excess of what the law allows, the interest is not legal and Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 cannot be collected Stipulation of parties must be in writing or else it is void if interest is concerned. If parties failed to indicate interest rate, 6% must be followed CHAPTER 3 KINDS OF OBLIGATION CLASSIFICATION OF THE CIVIL CODE 1. Pure and Conditional Obligations Pure obligation One does not have a condition and a period It is immediately demandable Conditional obligation Cannot be immediately demandable, because the condition or period is being waited for. Therefore, demandability is delayed Condition Future and uncertain event that causes an obligation to arise Past event but unknown to parties Period Future and certain event that fixes the time of the obligation Constructive Fulfillment: Requisites 1. The condition is suspensive 2. The debtor actually prevents the fulfillment of the condition 3. He acts voluntarily a. The debtor’s acts could prevent fulfillment of the condition so he will not be obliged to perform the obligation b. The law will consider it fulfilled already because the debtor prevented it Suspensive Condition Suspends the effect of the obligation Fulfillment will give rise to the obligation Demandability is suspended until this happens Resolutory Condition Extinguishes the obligation and terminates rights Fulfillment will extinguish the obligation Potestative Condition A condition suspensive in nature and depends upon the sole will of the contracting parties Depends on debtor’s will = condition becomes null and void Depends on creditor’s will = condition is valid Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 Casual Condition A suspensive condition depending upon chance or (eclectic) hazard or will of a third person Mixed Condition Mix of potestative condition and casual condition Impossible Condition Physically impossible - cannot exist/be done in nature of things Legally impossible - contrary to law, morals, good customs, public order, or public policy Obligation becomes null and void If the impossible condition is negative, which is not to do an impossible thing, obligation is valid Positive Condition Occurrence of an event at a determinate time Consists the performance of an act Obligation is extinguished as soon as the time expires without the event happening OR as soon as it has become indubitable that the event will not happen although the time has not expired Negative Condition Non-occurrence of an event at a determinate time Consists of omission (failure) of an act Obligation becomes effective from the moment the time has elapsed without the event happening OR from the moment it has become evident that the event cannot happen, although the time has not yet elapsed “LID” Rules During Pendency of Suspensive Conditions Requisites for application: 1. The obligation is a real obligation 2. The object is a specific or determinate thing 3. The obligation is subject to a suspensive condition 4. The condition is fulfilled 5. There is loss, improvement, and deterioration of the thing during the pendency of the condition Loss Without the debtor’s The obligation is extinguished fault With the debtor’s fault Liable to Damages Improvement By nature or time The improvement shall inure to the creditor’s benefit Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 At expense of debtor There shall be no reimbursement (The debtor can enjoy the improvement/usufruct) Deterioration Without the debtor’s The creditor suffers fault With the debtor’s fault A. Rescission (or cancellation) with damages B. Fulfillment of the obligation with damages 2. Obligations with a Period Presumed to be for the benefit of both debtor and creditor, unless otherwise provided If there is a period agreed upon by the parties, the court cannot fix another period No period = courts can fix Impending the happening or the arrival of the period, the LID laws apply to the suspensive period. The rules in suspensive condition will also apply when these laws, with or without the fault of the debtor, take place pending the arrival of the suspensive period. Instances when obligations with a period become (changes into) immediately due and demandable When debtor becomes insolvent - When the debtor becomes unable to pay and his assets cannot pay for the liabilities When the debtor does not furnish/give guaranties or securities promised When guaranties or securities given have been impaired or have disappeared When debtor violates an undertaking or promise When debtor attempts to abscond or evade 3. Alternative and Facultative Obligations Alternative obligations One wherein among prestations given, there is only one prestation that is due and demandable The choice must be communicated to the creditor Right of choice to the prestation, as a rule, is given to the debtor The creditor cannot be compelled to receive part of one and part of another When the creditor prevented the debtor from making a choice, the debtor may rescind (extinguish) the contract with damages Facultative obligations Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 Only one has been agreed upon but there may be a substitute to the prestation that the debtor committed to give in favor of the creditor It is not alternative because there is no choice The right of choice is given only to the DEBTOR 4. Divisible and Indivisible Obligations Compound Obligation - composes of two or more obligations Divisible Obligations - conditions can be separate Indivisible Obligations - simple obligations comprising it cannot be separated 5. Obligations with a Penal Clause Penal clause - an accessory undertaking attached to an obligation to assume greater liability in case of breach, the obligation is not fulfilled, or is partly/irregularly complied with General rule - Substitute for damages and the payment of interest in case of non-compliance The debtor will have to realize that he will be paying an additional penalty on top of the principal undertaking of the obligation It is created by parties to insure the performance of the obligation on time and to substitute a penalty for the indemnity for damages and the payment of interests in case of non-compliance There are times when parties agree on certain penalties by reason of the creditor imposing it on the debtor, and because the debtor is in dire need of the benefit of the favor of the creditor, he or she will agree. Despite the agreement of the parties, it is possible that the courts will see that there is unfairness in the created obligation between the parties. There are times wherein the debtor has already partially performed the obligation but unable to fully complete the obligation, it is still considered as a breach. If it was irregularly performed, it can also be considered as a breach. The courts can equitably reduce the penalty/equity because the intention of the debtor is there. As exceptions, in addition to the damages recoverable by the creditor from the debtor, the penalty can still be demanded (both the penal clause and additional clause). If the debtor was guilty of fraud, additional damages may be collected from him by reason of the gravity of the fraud committed in the performance constituent to the breach of the obligation. If the debtor refused to pay the penalty, debtor is guilty of fraud Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 CHAPTER 4 JOINT & SOLIDARY OBLIGATIONS Article 1207 - The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestations. There is a solidary liability only when the obligation expressly states, or when the law or the nature of the obligation requires solidarity. Kind of obligation according to plurality of subjects ○ Single or individual obligation - one debtor and one creditor ○ Collective obligation - two or more debtor and two or more creditor General rule: The obligation is presumed to be joint EXCEPT when the obligation expressly so provides, when the law requires solidarity, and when the nature of the obligation requires solidarity Article 1208 - If from the law, or the nature of the wording of the obligations to which the preceding article refers, the contrary does not appear, the credit or debt shall be presumed to be divided into as many equal shares as there are creditors or debtors, the credits or debts being considered distinct from one another, subject to the Rules of Court governing the multiplicity of suits. Multiplicity of Suits: It prevents the filing of too many demands involving one single cause of action Kung pareho lang naman yung contract, pagsama-samahin na lang para isang demandahan na lang Joint Obligations Solidary Obligations Nature Debtor is only liable and Debtor is liable for the creditor is only entitled to a whole obligation and proportionate part of the creditor is entitled to debt and credit demand fulfillment for the Ex: A and B are joint debtors whole obligation of W, X, Y and Z who are joint Debtor can ask creditors to the amount of reimbursement from 1M. How much can Y another demand from the debtors? Debtor can pay any ○ Creditors’ credits: solidary creditor EXCEPT if 250k on each debtor a demand from a solidary ○ Y can demand: 125k creditor was made Payment by one debtor on A and B extinguishes the obligation Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 The credit or debt shall be If two or more debtors offer presumed to be divided into to pay, the creditor may as many equal shares as choose which offer to accept there are creditors or debtors, the credits or debts being considered distinct from one another Words to Mancomunada Solidaria indicate Mancomunadamente Jointly and/or severally Pro rata Together and/or Proportionately separately “We promise to pay” signed In solidum by two or more persons Juntos o separadamente “I promise to pay” signed by two or more persons Article 1209 - Joint Indivisible Obligation It is joint as to liabilities of the debtors or rights of the creditors BUT indivisible as to compliance Example: A and B are solidary debtors of C to the amount of 1M. How much can C demand? ○ C can demand 1M on either A or B When does the law require solidarity? ○ Liability of principals, accomplices, and accessories in a felony ○ Obligations arising from tort/quasi delict ○ Bailees in commodatum (Lending something to two people, but the thing was damaged or neglected) ○ Payees when there has been a payment of what is not due Article 1210 (Indivisibility vs Solidarity) The indivisibility of an obligation does not necessarily give rise to solidarity, nor does solidarity of itself imply indivisibility Indivisible Solidary Prestation or object Juridical tie Only the debtor guilty of breach is liable All debtors are liable Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 Can exist although there is only one Must have at least two or more debtors debtor and creditor and creditors Others are not liable for insolvency of Others are proportionately liable one debtor Kinds of Solidarity - According to the parties bound Passive solidarity On the part of the debtors, where one of them can be made liable for the fulfillment of the entire obligation It is in the nature of mutual guaranty Active solidarity On the part of the creditors, where any one of them can demand the fulfillment of the entire obligation Mixed solidarity On the part of the debtors and creditors, where each one of the debtors is liable to render, and each one of the creditors has a right to demand entire compliance of the obligation According to the source Conventional Agreed upon by the parties Legal Imposed by the law Real Imposed by the nature of the obligation According to the legal tie Uniform When parties are bound by the same stipulations/manner Non-uniform or When parties are not subject to the same varied stipulations/manner Rule: Solidarity is not affected by diverse stipulations in the same obligation Acts of Solidary Creditor Article Solidarity may exist although the creditors and the debtors may not 1211 be bound in the same manner and by the same periods and conditions. Article A solidary creditor may do any act beneficial or useful to the others, 1212 but he cannot perform any act prejudicial to them If he performs such act and the obligation becomes extinguished, he shall be responsible to the others for damages Based on mutual agency Article A solidary creditor cannot assign his rights without others’ consent. 1213 This is because each creditor represents the others and the Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 assignee may not have the confidence of the original solidary creditors If assignment is made to a co-creditor, the consent of others is not necessary Article Debtor may pay any of the solidary creditors, but if any demand 1214 (judicial or extrajudicial), has been made by one of them, payment should be made to him Article Novation, compensation, confusion, or remission of the debt shall 1215 extinguish the obligation The creditor who executed these acts, as well as he who collects the debt, shall be liable to the others for the share corresponding to them because of prejudice The modes of extinguishment mentioned does not extinguish the obligation in a joint obligation Article The creditor may proceed against any one of the solidary debtors 1216 or some or all of them simultaneously (not applicable to joint obligation) The choice is left to the solidary creditor to determine against whom he will enforce collection Article The creditor is given the right to choose which offer to accept if two 1217 or more solidary debtors offer to pay The paying solidary debtor can demand reimbursement from his codebtors for their shares with legal interest The receiving creditor is jointly liable to the others for their shares Article If the obligation’s prescriptive period expires or becomes illegal, 1218 payment made by a solidary debtor shall not entitle him to reimbursement from his co-debtors (hindi niya pwede i-compel yung co debtors na bayaran siya ng share niya) Article Remission made by the creditor of the share, which affects one of 1219 the solidary debtors, does not release the latter from his responsibility towards the co debtors, in case the debt had been totally paid by anyone of them before the remission was effected Pag sinabi ng solidary creditor sa debtor na huwag na bayaran yung obligation, kailangan niya pa rin bayaran yung share sa co creditors) Article The remission of the whole obligation obtained by one of the 1220 solidary debtors does not entitle him to reimbursement from his co debtors Article The fault or delay of any solidary debtor shall be the fault or delay 1221 of all the solidary debtors If the thing has been lost/become impossible without fault of the Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 solidary debtors, the obligation is extinguished If there was fault, all shall be responsible to the creditor for price, payment of damages, and interest Article A personal defense is only effective to the debtor applicable of it 1222 A solidary debtor may not avail another debtor’s personal defense to not pay or reimburse shares In actions filed by the creditor, avail himself of all defenses which are derived from the nature of the obligation and of those which are personal to him, or pertain to his own share. CHAPTER 5 EXTINGUISHMENT OF OBLIGATIONS Extinguishment - when an obligation is extinguished, the obligation is canceled in such manner that there are no more rights that will arise at any of the parties MODES OF EXTINGUISHMENT 1. Payment or Performance Delivery of money or performance in any other manner of an obligation. Its requirements are: ○ The debtor must have the free disposal of the thing due (ownership) ○ The debtor must have the capacity to alienate (right to dispose) ○ Will not extinguish the obligation unless complete Partial payment gives the creditor the right to accept or reject the partial performance General rule: In order to fully extinguish the obligation, payment/performance must pertain to the entire terms EXCEPTIONS: Substantial performance (good faith) - when the debtor cannot anymore perform the obligation entirely without his fault and with a valid reason Creditor’s acceptance (no objections) - when the creditor has categorically accepted the partial performance by the debtor regardless if there is a valid reason or not. Dacion en pago or There is an existing monetary obligation to pay in Dacion in payment terms of money (money debt ←→ Debtor has agreed with creditor that instead of property) completing the obligation by paying, he will deliver an equivalent property which will be a substitute form of payment Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 Obligation is extinguished if creditor agrees Payment by Cession Debtor is in a state of insolvency (debt ←→ sale More than 1 debt and 1 creditor proceeds) Debtor abandons all his properties to the creditors, who sells the remaining properties as payment of the obligation Sale proceeds shall be considered as complete payment of the obligation Tender of Payment First phase: Tender of payment - when debtor and Consignation offers the payment to the creditor but creditor refuses without just cause Second phase: Consignation - when debtor brings the prestation to court and deposits it there After consignation, the obligation is extinguished Application of Takes place when there is only one debtor and Payments (Debtor’s creditor choice) Owed by the same debtor in favor of the same creditor Debtor has several debts which are of the same kind and are all due Debtor may choose from several debts which one shall be extinguished, provided that the payment is sufficient, full, and complete to extinguish the obligation Only those that are fully covered by the payment and chosen by debtor shall be extinguished 2. Loss of the Thing Due Applies to things which are only determinate Cause of loss must be fortuitous and beyond the debtor’s fault Subrogation - The right of the creditor to be subrogated to the right of the debtor against third persons who caused the loss Creditor will be subrogated into the rights of the debtor to go after whoever caused the loss that resulted to the obligation’s extinguishment 3. Condonation or Remission In the form of “gratuitous donation” which must be accepted by the debtor Debtor must express or imply acceptance because the law does not want people to have “utang na loob” in favor of the person without consent Must not deprive the right of the compulsory heirs under the law who have reserved rights of inheritance from the creditor Creditor cannot condone an obligation if the debtor’s obligation has not yet become due Must conform with the rules ○ More than 5k = in writing Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 ○ Immovable property = public document 4. Confusion or Merger Creditor and debtor become one person Rights of two parties merge in one person Merger must pertain to the principal obligation (can stand on its own) and to the entire obligation (complete confusion) ○ Loan = principal ○ Mortgage = accessories Must refer to the entire obligation (cannot be partial extinguishment) 5. Set off or Compensation When two persons, in their own right, become debtors and creditors of each other (involves TWO persons only) Voluntary or Mutually agreed upon Conventional Legal Mandated by law (ex: contract of agency) Judicial Dictated by courts of justice after due process and hearing of a particular case 6. Novation (substitution) Total or partial extinguishment by modifying the following aspects: ○ Real or objective novation - changing the object/principal condition ○ Personal or subjective novation on the part of the debtor - substituting the person of the debtor ○ Personal or subjective novation on the part of the creditor - subrogating a third person in the rights of the creditor ○ Mixed or eclectic novation - combination of real and personal novation CONTRACTS CHAPTER 1 GENERAL PROVISIONS Contract - meeting of minds between two persons whereby one binds himself with respect to the other to give something or to render some service Form of Contracts As a general rule, contracts can be in any form Writing Oral Public instrument Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 ○ If a law requires a certain form, the reason may be for validity, enforceability, or convenience ○ A contract may be valid but may not be enforceable Characteristics of Contracts 1. Obligatory Force - once it is perfected, parties are bound to comply with respective obligations and enforce rights 2. Autonomy of Contracts - freedom of parties to agree on any terms or conditions as long as that stipulation is not contrary to law, morals, good customs, public order 3. Mutuality of Contracts - binding of both parties to the stipulation and parties are equally bound to the terms of the agreement 4. Relativity of Contracts - as a contract binds two parties, it cannot favor or prejudice third persons unless the parties have expressed it Kinds of Contracts Principal when the contract can stand alone independently Accessory when the contract is dependent on the validity of another contract. for example, loan contracts and collateral contracts Preparatory entered into for the purpose of entering into further contracts or other additional different contracts or transactions. for example, contract of agency Elements of a Contract 1. Consent of the contracting parties Offer made or achieved from both parties when somebody initiates (offer to enter a contract) the offer must be certain and definite. the moment that the offer is accept by a party, consent is achieved note: acceptance of the other party must be absolute the moment that it is made known, consent is achieved if acceptance is qualified, it is a counter-offer. no consent is attained in this instance Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 Necessary at least 18 years old Legal not insane Capacity be able to express freely their will or agreement or consent by not being deaf-mute who does not know how to write using sign language does not disqualify in giving consent and acceptance Persons suffering from civil interdiction - Prisoners Wards under guardianship - people who can’t take care of themselves. No “Vice” 1. Fraud - dolo causante (bad faith) = which makes the (defect) of giving of consent defective Consent if dolo incidente = damages can be collected 2. Mistake - refers to object or conditions which have principally moved one or both parties to enter into the contract (good faith). had the parties known, they would not have given consent. they must not know about risk, doubt, or contingency present on the conditions or principal object 3. Violence - serious or irresistible force (physical) employed by one party against another to secure a giving of consent 4. Intimidation - no serious or physical force yet but rather a reasonable and well grounded fear of an imminent and grave peril/danger if the party will not provide consent 5. Undue Influence - when someone exercises moral ascendancy to exude an improper advantage or power over the will of another. consent, even if given, is defective because of this. The law does not want to tolerate this as well. for example, a professor entering a contract with a student. Stimulated Contracts (still under Consent) you make it appear that there is a contract despite the reality that either there is an absolute or relative simulated contract Absolute parties do not intend to be bound at all both of us gave consent but both of us do not intend to be bound at all the contract is void and no consent is given at all Relative parties have an underlying “real” agreement and they are bound by it if it is not prejudicial and not contrary to law, morals, good customs, public order, or public policy it is valid because parties have given consent despite there is an underlying reason why they gave consent ○ for example, i sold to you a determinate condo unit Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 for 6m pesos. if you will base the 6% on the 6m pesos, it will be high in terms of capital gains tax. but if we will agree as buyer and seller that the real agreement is I will sell it to you for 6m but the writing indicated that it will only be 1m, that is an example of relative simulation. this contract is thus valid, and both of us will still be bound by it. however, there may be corresponding consequences if the BIR discovers it. the parties will be assessed to additional taxes and criminally charged for tax evasion 2. Object certain, defined, and fixed Subject matter of the contract (thing, right, or service) Thing Not outside the commerce of man Existing Licit - accepted by law Determinate/determinable Not impossible Right Intransmissible Service Law, morals, good customs, public order, or public policy Possible Determinate/certain 3. Cause or consideration of the obligation which is established reason why both parties have given consent to the perfection of the contract it is the “why” in a contract (existing, lawful, true) In a contract of sales the why for the buyer (debtor) is the land or what he is getting/buying and for the seller (creditor) it's the cash or what he is receiving from the buyer. CHAPTER 2 DEFECTIVE CONTRACTS It does not automatically mean “invalid” Reformation on the Document/Remedy in Equity If a contract is defective because it does not truly reflect the meeting of minds in the object and cause of consideration, the parties may still remedy the written contract to truly reflect what they agreed upon through REFORMATION Meeting of minds Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 Instrument does not express true intention of the parties Failure of the instrument to express true intention was due to mistake, fraud, inequitable conduct or accident 4 General Kinds of Defective Contracts 1. Rescissible Valid contract but not perfectly valid because of the slight defect a. Lesion (Economic Injury or Damage) of more than 1/4 of the value of the property → guardian-ward or representative-absentee b. Undertaken in Fraud of creditors when the latter cannot in any other manner collect the claims due them c. Things Under Litigation; or payments made in Insolvency d. No other legal remedy = default is to enact recession of the contract 4 years - period to claim rescission Least defective contract Remedy/Actions a. Ratifiable = (valid) OR b. Rescission (Restoration to the extent necessary to cover the damage caused) - restoration of the situation as if no contract was entered into c. Approval of the court by sale 2. Voidable Only one of the parties has consent and is present but defective Defects: ○ Lack of legal capacity ○ Vitiated consent which is due to fraud, mistake, violence, intimidation, undue influence 4 years - period to institute annulment Remedy/Actions ○ Ratifiable (valid) OR ○ Annullable (cancel) valid until annulled Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 3. Unenforceable Defects ○ Unauthorized contract - when one of the parties abused the authority conferred on him or her or that person does not have authority to represent another ○ Two parties are incapable of giving consent or gave consent but is defective ○ Failed to comply with Statute of Frauds Can be seen on the contract of agency Remedy/Actions ○ Ratifiable (valid) OR ○ Unenforceable (cannot be enforced) Statute of Frauds The contract must be in writing so that the parties will be clear on the terms of conditions of the contract in order to avoid fraud if not in writing, the contract will be considered as unenforceable It must be in writing if: ○ Agreement is not to be performed within a year ○ Promise is to answer for the debt or default of another ○ Agreement is made in consideration of marriage, other than a mutual promise to marry ○ Sale of movable property is for not less than 500 pesos ○ Leasing is for a longer period than 1 year ○ Sale of real property or of an interest therein ○ Representation as to the credit of a third person 4. Void or Invalid Void from the very beginning = void ab initio Invalid or inexistent It never became a perfected contract Consent is absent Contrary to law, morals, good customs, public order or public policy Absolutely simulated or fictitious Cause/object did not exist at the time of the transaction Object is outside the commerce of men (Ex. your vote for elections) Impossible service Intention of the parties relative to the principal object cannot be ascertained - if parties gave consent but do not really know what the consent is all about Expressly prohibited or declared void by law Remedy/Actions ○ Cannot be ratified ○ Effect of Divisibility: if separable, enforce the legal parts of the contract ○ Only the void contracts will be treated as void, and those portions that Downloaded by Victor Miguel Heramia ([email protected])  lOMoARcPSD|50046693 are legal will not be treated as void SUMMARY Downloaded by Victor Miguel Heramia ([email protected])