Legal Aspects of Tourism and Hospitality in the Philippines PDF

CHAPTER 1: INTRODUCTION TO LAW ON TOURISM AND HOSPITALITY The order of any business specially affecting the tourism and hospitality is dependent on the implementation and observance of a rule, policy, standard system, and law. No enterprise or any business entity can exploit the environment and natu...

CHAPTER 1: INTRODUCTION TO LAW ON TOURISM AND HOSPITALITY The order of any business specially affecting the tourism and hospitality is dependent on the implementation and observance of a rule, policy, standard system, and law. No enterprise or any business entity can exploit the environment and natural resources as incidences to their very existence without being subjected to the regulations of the local and national governing authorities. Business minded people cannot just simply put a hotel in a feasible place without considering the legal repercussions that they may be confronting with prior to, during, and after the whole operations of their business. Law Defined Law is a system of rules that a society or government develops in order to deal with crime, business agreements, and social relationships (Collins, 2018). The law can also be used to refer to the people who work in this system. Webster (2018) has defined law as a binding custom or practice of community: a rule of conduct or action prescribed or formally recognized as binding or enforced by a controlling authority. Law is to be taken as standards or norms that every member of the community should adhere to. It must be taken seriously so that order in the community can be properly observed. Without law, there would be anarchy. Characteristics of Law 1. Rule of human conduct 2. Just and obligatory 3. Promulgated by competent authority 4. It must be observed by all. Justness of the law is about being equitable to the extent that people are obligated to obey it based on their ability to observe (e.g. people are obligated to pay taxes based on their ability to pay). Justness is about being fair and not discriminatory in a sense that the law is being applied to all regardless of race, gender, status in life, and the like. Two General Types of Law: 1. Substantive Law. It refers to the method by which the law is enforced. In this particular process, hearing is necessary before condemnation. The condemnation proceeds only upon inquiry of the needed facts, and judgment is to be given only after trial. 2. Procedural Law. It requires the fairness, justness, and reasonableness of the law itself. Arbitrary reasons and flimsy grounds are of no excuse. In the Philippines: Mixture of Anglo-American and Spanish laws Three Great Branches of Government: 1. Legislative- makes the law and it is composed of Congress 2. Executive- Executes the law and office of the president and attached agencies 3. Judiciary-interprets the law and supreme court ➤ Legislative: It is composed of two houses- upper and lower. How is a law created by the Legislative?. Bill is drafted by a legislative member Bill is read on the floor. It is subject to questioning by fellow members of the House. Then it is revised. It is subject to three readings on the floor. Transferred to the other House. Some procedure. Signing by the President Publication in the Official Gazette Legislature: Revised Penal Code of the Philippines, Corporation Code, Securities Code, Civil Code, other laws Special Case: 1987 Constitution of the Philippines ➤ Executive Branch: Enactment of laws Laws are not just words on paper Enacted by the Executive Branch RICHEL PITOGO, LPT, MSTM (CAR) PNP, military Department and sub-department Governors and mayors Barangay Officials Judiciary Branch Interpretation of laws Judiciary Supreme Court is the highest court in the land Lower Courts: Municipal Trial Cours, Regional Trial Courts, Court of Appeals Special Courts: Labor Courts and Tax Courts Constitution Defined Constitution is the basic principles and laws of a nation, state, or social group that determine the powers and duties of the government and guarantee certain rights to the people in it. It is a written instrument embodying the rules of a political or social organization. Constitution is said to be supreme among all the laws of the archipelago. In case of conflict between the on Constitution and Municipal Law, the former shall prevail. The same is true with all other special laws. the Constitution always upholds its supremacy. The Constitution is the basic and paramount law to which all other laws must conform and to which all persons, including the highest officials of the land must defer. Constitutional doctrines must remain steadfast no matter what may be the tides of time. It cannot be simply made to sway and accommodate the call of situations and much more tailor itself to the whims and caprices of government and the people who run it. PREAMBLE We, the sovereign Filipino people, imploring the aid of Almighty God, in order to build a just and humane society, and establish a Government that shall embody our ideals and aspirations, promote the common good, conserve and develop our patrimony, and secure to ourselves and our posterity, the blessings of independence and democracy under the rule of law and a regime of truth, justice, freedom, love, equality, and peace, do ordain and promulgate this Constitution. ARTICLE I: National Territory It is imperative to define as specifically as possible our national territory to make known to the whole world the areas over which we assert title or ownership to avoid future conflict with other nations. Article 1, Section 1 of the 1987 Constitution provides that the national territory comprises the Philippine archipelago, with all the islands and waters embraced therein, and all other territories over which the Philippines has sovereignty or jurisdiction, consisting of its terrestrial, fluvial, and aerial domains, including its territorial sea, the seabed, the subsoil, the insular shelves, and other submarine areas. It does not thwart the Philippines from acquiring other territories in the future through any other means such as treaty, purchases, exchange, etc. Composition of the Philippine Territory: 1. Philippine archipelago 2. All the territories in which the Philippines has sovereignty or jurisdiction Different Domains in the Philippines Territorial Jurisdiction 1. Aerial (air) 2. Terrestrial (land) 3. Fluvial (water) Three Inherent Powers of the Government 1. Police Power- It is the power of the government to regulate laws and properties for public purpose. Example: As an exercise of the police power, the government can order the closure of business establishment if it finds that such is loathsome or harmful to the public. 2. Power of Eminent Domain- it is the power of the government to forcible acquire private property for public purpose and after payment of just compensation. The government can only order the demolition of business establishment directly affected by its project after giving just compensation to the owners of the mentioned business establishment. 3. Power of Taxation. The power of taxation is the power of the government to acquire revenues. Relevant to this is the power to destroy. In order to limit the establishment of business which may be front for prostitution, the government could regulate it by means of imposing higher taxes. ARTICLE III: Bill of Rights A bill of rights, sometimes called a declaration of rights or a charter of rights is a list of the most important rights to the citizens of a country. The purpose is to protect these rights against infringement from public officials and private citizens. RICHEL PITOGO, LPT, MSTM (CAR) Section 1. No person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied the equal protection of the laws. (Explanation: Every person must be notified of the offense that he allegedly committed. He must be given an opportunity to be heard. Thus, any employee in the tourism and hospitality industry cannot be dismissed from employment without being notified of the offense he had committed. He must be given a reasonable time to explain his side. Likewise, a municipal mayor cannot order the foreclosure of any tourism business establishment without giving the owners notice and opportunity to be heard.) Section 2. The right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures of whatever nature and for any purpose shall be inviolable, and no search warrant or warrant of arrest shall issue except upon probable cause to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the persons or things to be seized. (Explanation: This right means no one can search or take their things without a good reason, and a judge has to agree that there's a good reason before allowing it. This right ensures that the hotel staff or anyone else can't just enter the room and search through their things without proper reason.) Section 3. (1) The privacy of communication and correspondence shall be inviolable except upon lawful order of the court, or when public safety or order requires otherwise, as prescribed by law. (2) Any evidence obtained in violation of this or the preceding section shall be inadmissible for any purpose in any proceeding. (Explanation: Information that may be derived thereat should be treated with confidentiality both in the point of law and business. In addition, the RA 10173 otherwise known as Data Privacy Act of 2012 is emphatic on the confidentiality of information for the protection of customers) Section 4. No law shall be passed abridging the freedom of speech, of expression, or of the press, or the right of the people peaceably to assemble and petition the government for redress of grievances. (Explanation: People have the right to speak their minds, share their opinions, and gather peacefully to express their ideas.) Section 5. No law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof. The free exercise and enjoyment of religious profession and worship, without discrimination or preference, shall forever be allowed. No religious test shall be required for the exercise of civil or political rights. (Explanation: This means that people have the freedom to believe in any religion they want and practice it without any restrictions. This is important in the tourism industry because tourists come from different cultures and religions, and they should feel free to follow their beliefs while traveling) Section 6. The liberty of abode and of changing the same within the limits prescribed by law shall not be impaired except upon lawful order of the court. Neither shall the right to travel be impaired except in the interest of national security, public safety, or public health, as may be provided by law. (Explanation: This means that people have the freedom to live where they want and move around freely, as long as it's within the rules. This is important in the tourism industry because tourists need to be able to travel to different places without unnecessary restrictions) Section 7. The right of the people to information on matters of public concern shall be recognized. Access to official records, and to documents and papers pertaining to official acts, transactions, or decisions, as well as to government research data used as basis for policy development, shall be afforded the citizen, subject to such limitations as may be provided by law. (Explanation: This means that people have the right to know about things that are important for the public. This is related to the tourism industry because tourists should have access to information about places they're visiting, local rules, and any decisions that might affect their trip.) Section 8. The right of the people, including those employed in the public and private sectors, to form unions, associations, or societies for purposes not contrary to law shall not be abridged. (Explanation: This means that people, whether they work for the government or private companies, have the right to join groups that share common goals and interests. This is connected to the tourism industry because workers in the industry can come together to form groups that help them advocate for better working conditions and benefits.) Section 9. Private property shall not be taken for public use without just compensation. (Explanation: This means that if the government needs to use someone's land for a public project, like building a road or a park, they have to pay the owner fairly for it. This is linked to the tourism industry because sometimes public projects, like improving roads to tourists' sites, might involve using private late, and the landowners should be compensated fairly.) Section 10. No law impairing the obligation of contracts shall be passed. RICHEL PITOGO, LPT, MSTM (CAR) (Explanation: This means that once people agree to a contract, the government can't change the rules of the contract later. This is important in the tourism industry because contracts between tourists and businesses, like hotels or tour operators, need to be honored without unexpected changes.) Section 11. Free access to the courts and quasi-judicial bodies and adequate legal assistance shall not be denied to any person by reason of poverty. Section 12. (1) Any person under investigation for the commission of an offense shall have the right to be informed of his right to remain silent and to have competent and independent counsel preferably of his own choice. If the person cannot afford the services of counsel, he must be provided with one. These rights cannot be waived except in writing and in the presence of counsel. (2) No torture, force, violence, threat, intimidation, or any other means which vitiate the free will shall be used against him. Secret detention places, solitary, incommunicado, or other similar forms of detention are prohibited. (3) Any confession or admission obtained in violation of this or Section 17 hereof shall be inadmissible in evidence against him. (4) The law shall provide for penal and civil sanctions for violations of this section as well as compensation to and rehabilitation of victims of torture or similar practices, and their families. Section 13. All persons, except those charged with offenses punishable by reclusion perpetua when evidence of guilt is strong, shall, before conviction, be bailable by sufficient sureties, or be released on recognizance as may be provided by law. The right to bail shall not be impaired even when the privilege of the writ of habeas corpus is suspended. Excessive bail shall not be required. Section 14. (1) No person shall be held to answer for a criminal offense without due process of law. (2) In all criminal prosecutions, the accused shall be presumed innocent until the contrary is proved, and shall enjoy the right to be heard by himself and counsel, to be informed of the nature and cause of the accusation against him, to have a speedy, impartial, and public trial, to meet the witnesses face to face, and to have compulsory process to secure the attendance of witnesses and the production of evidence in his behalf. However, after arraignment, trial may proceed notwithstanding the absence of the accused provided that he has been duly notified and his failure to appear is unjustifiable. Section 15. The privilege of the writ of habeas corpus shall not be suspended except in cases of invasion or rebellion when the public safety requires it. Section 16. All persons shall have the right to a speedy disposition of their cases before all judicial, quasi-judicial, or administrative bodies. Section 17. No person shall be compelled to be a witness against himself. Section 18. (1) No person shall be detained solely by reason of his political beliefs and aspirations. (2) No involuntary servitude in any form shall exist except as a punishment for a crime whereof the party shall have been duly convicted. Section 19. (1) Excessive fines shall not be imposed, nor cruel, degrading or inhuman punishment inflicted. Neither shall the death penalty be imposed, unless, for compelling reasons involving heinous crimes, the Congress hereafter provides for it. Any death penalty already imposed shall be reduced to reclusion perpetua. (2) The employment of physical, psychological, or degrading punishment against any prisoner or detainee or the use of substandard or inadequate penal facilities under subhuman conditions shall be dealt with by law. Section 20. No person shall be imprisoned for debt or non-payment of a poll tax. Section 21. No person shall be twice put in jeopardy of punishment for the same offense. If an act is punished by a law and an ordinance, conviction or acquittal under either shall constitute a bar to another prosecution for the same act. Section 22. No ex post facto law or bill of attainder shall be enacted. Customs and Traditions as Bases of Law Customs and traditions are also considered as bases of law which also form part of the Filipino legal heritage as enshrined in the 1987 Constitution. It specifically provides that "the State shall recognize, respect, and protect the rights of indigenous cultural communities to preserve and develop their cultures, traditions and institutions." Article X, Section 20 "Within the territorial jurisdiction and subject to the provisions of this constitution and national laws, the organic power of autonomous regions shall provide for legislative power over: Economic, social and tourism development" Tourism Laws versus Hospitality Laws Tourism Laws may be defined as a combination of state, local, and international laws that control the different facets and functions of the travel industry. The United Nations World Tourism Organization (https://www. besthospitalitydegrees.com, retrieved 2018) has maintained that tourism laws are necessary to provide a regulatory framework for the proper development and management of tourism activities to aid in the conservation of natural resources and the preservation of cultural traditions. On the other hand, Hospitality laws deal with food service, travel, and lodging industries. It is applicable to the different nuances of restaurant, hotel, country club, bar, spa, and related industries. It embraces an extensive collection of laws like contracts, torts and damages, labor, and a lot more. Hotels and restaurants are two of the most common hospitality law clients. CHAPTER 2 Introduction Establishing a business is not an easy thing. There are many factors to be considered before it could materialize. A feasibility study should be done before investing in a business. It is not wise to put up a business without any projection as to amount or capital to be invested and the time wherein the same shall be returned. The location and other competitors should also be considered as a basis for the innovation or reinvention of the products to be offered to the prospective clientele. Human resources also play as an important key for its success, must importantly, the nature of the business must be clearly established. Tourism and hospitality business like any other businesses are susceptible to being confronted with some legal issues and technicalities in their entire management. Forms of Business Organization Business entrepreneurs especially in the Tourism and Hospitality sectors must decide on the form of business that they will deal with so as to be ready when threatened by some legal concerns. The following are the different forms of business organizations: 1. Sole Proprietorship 2. Partnership 3. Corporation Sole Proprietorship Defined In this form of business, the owner is in command of his whole business and stands to lose as much as he puts in and even more to the extent of all his personal holdings. In addition to that, the establishment, operations and management of this form of business organization is not governed by a special law as compared to partnership and corporation. If this form of business is confronted by some legal issues and disputes, the proprietor can use the general laws prevailing civil obligations and contracts in the business and commercial transactions. Having the power to control the whole management of the business, the sole proprietor has limitless liability since his assets and property may be proceeded by the creditors. The law does not make any difference between the personal affairs of the proprietor and his business interest. Before the eyes of the law, they are one and the same: the business is being an extension of his being the aliens are generally not restricted or limited to form a single proprietorship business in the Philippines. However, in instance that they will not he persisted to form single proprietorship business in a precise industry, they are not stripped to have business venture through other forms of business such as corporation partnership or joint venture. Registration of a sole proprietorship business in the Philippines involves very simple procedure wherein the Department of Trade and Industry through the Bureau of Trade Regulation and Consumer Protection will just have to issue the registration to the applicant. Partnership Defined By contract of partnership, two or more persons bind themselves to contribute money, property, or industry to a common fund with the intention of dividing the profits among themselves. Two or more persons may also form a partnership for the exercise of profession (Article 1767, Civil Code of the Philippines). Partnership has a juridical personality separate and distinct from each of the partners, even in the case of failure to comply with the requirements of Art 1772 (Article 1768). It is required to operate under a firm name in order to manifest this juridical personality (Art.1815, CC). With their separate property, partner (except in limited partnership) is personally liable pro rata for the debts of the partnership (Art 1813, CC). How to form Partnership: 1. Formation of Partnership- A partnership typically begins when the partners execute a partnership agreement or contract. This is often referred to as the “legal birth” of the partnership 2. Registration with SEC is not required. However, this can vary by location, and it’s important to check the specific regulations in your jurisdiction. Prepared by: RICHEL PITOGO, LPT, MSTM(CAR) 3. Exceptions of Registration- when the partnership agreement stipulate registration as a requirement. When the partnership contributes immovable properties or real rights as part of its capital. When local laws or regulations mandate registration for specific types of partnerships or for tax purposes. General Liability of Partnership: In Partnerships: -There is also Separate Juridical personality -BUT: generally, acts of the Partner binds the whole Partnership automatically For Commercial Agreements: -First Step- when a partnership incurs a debt, the assets of the partnerships are primarily liable to cover that obligation. This means that the partnership’s assets are used to satisfy the debt before personal assets of the individual partners are considered. -Second Step- If the partnership’s assets are not sufficient to cover the liability, the creditor can then pursue the personal properties of the individual partners to satisfy the remining debt. -Joint Obligation- when personal assets of the partners are pursued to cover a partnership debt, the obligation among the partners is typically considered join. This means that each partner is jointly responsible for the remaining debt. The creditors can seek repayment from any of the partners individually to cover the debt. For LOSS or DAMAGE: -Liability for Loss or Damage- if a loss or injury is caused to any person, who is not a partner in the partnership, due to the wrongful act or omission of any partner acting in the ordinary course of the partnership’s business or with the authority of their co-partners, the partnership is liable for the loss or injury. This means that the partnership itself is responsible for the consequences of its partner’s actions in such cases. -Solidary Liability- which means that even though only one partner may be directly at fault for the loss or damage, both the partner at fault and the partnership as a whole share the liability. The victim has the option to pursue either the partner at fault or the partnership itself to satisfy the loss or damage. This allows the victim to seek compensation from either the individual partner responsible or the partnership entity. Obligations of Partners: 1. Promise to contribute industry/services- they are typically obligated not to engage in another business that directly competes with the partnership. This is to ensure that the partner’s efforts are dedicated to the success of the partnership and not diverted to a competing venture. 2. Promise to contribute money- they may not have the same restriction on engaging in a competing business, as their contribution is financial. However, this can vary depending on the terms of the partnership agreement. Corporation Defined Under Sec. 2 of the Batas Pambansa 68, otherwise known as the Corporation Code of the Philippines, corporation was defined as an artificial being created by operation of law, having the right of succession and powers, attributes and properties expressly authorized by law or incident to its existence. Based on the definition provided by law, it can be deduced that a corporate form of business has the following attributes: it is artificial being; it is created by operation of law; it has the power of succession; it has the power, attributes and properties expressly authorized by law or incident thereto. Be it noted that artificial being pertains to the fiction of law which creates the person of the corporation. By operation of law, it becomes a being with the attributes of an individual with full capacity to enter into contractual relations. It is a legal or juridical person with a personality separate and distinct from its individual members. Creature of law on the other hand pertains to the juridical existence of a corporation which is dependent on the consent or grant of the sovereign. From a strict legal point of view, corporation cannot come into being by mere consent of the parties; there must be a law granting it. Another important attribute of a corporate form of business is the right of succession. This pertains to the capacity for continuous existence despite the death or replacement of its shareholders of members, for it has a personality separate and distinct from those who compose it. The strong legal personality of the corporation is an attribute that has made it most attractive to businessmen when compared to other media. Who makes up a corporation? 1. Incorporators- these are the individuals or group of entrepreneurs who come together to establish a company. They initiate the process of forming the corporation by filing the necessary legal documents to create a company. 2. Stockholders- these are the owners of the corporation. They purchase shares of the company’s stock, making them partial owners of the company. 3. Board of Directors- It is a group of individuals elected by the shareholders. They are responsible for making major decisions and providing oversight for the company. In the context of tourism, they would oversee the company’s strategic decisions, such as expanding into new markets, setting tour itineraries, and ensuring compliance with travel regulations. 4. Officers- individuals appointed by the board of directors to manage the day-to-day operations of the corporation including coordinating tours, managing tour guides, and customer service. (e.g. CEO, CFO, COO, etc.) Types of Corporations: In Terms of STOCK: 1. Stock Corporations- private corporations which have capital stock divided into shares and the stockholders are entitled to their shares of dividends or allotment. 2. Non-stock Corporations- these are corporations which do not issue stocks and are composed of members, not stockholders. They may be civic, charitable, religious or professional organizations. In Terms of RELATIONS TO THE STATE: 1. Public Corporations- are created by the government or a public authority through specific legislation or government action. (e.g. DOT, Tourism Board Promotions, CCP, etc.) 2. Private Corporations- are created by individuals, groups, or entities in the private sector. They are formed for profit-making purposes and are governed by corporate laws and regulations. Ownership and decision-making authority are in the hands of private stakeholders. (e.g. Large hotel chains, airlines, travel agencies, cruise companies, ABS CBN, Jollibee Good Corporation, San Miguel Corporation, etc.) In Terms of NATIONALITY: 1. Domestic Corporation- this kind of corporation obtained personality through incorporation under the Philippine laws. 2. Foreign Corporation- can operate in the Philippines if it follows certain rules. They need permission from the SEC (Securities and Exchange Commission), a certificate from the Board of Investments, and they must meet specific requirements like organization and money. The reasons for this are: (a) to treat them like local companies (b) to check on their status, and (c) to ensure they follow local laws and can be taken to court if needed. Note: SEC is a government agency responsible or regulating securities markets and protecting investors in many countries. They oversee financial disclosures, enforces securities laws, and ensures transparency and fairness in financial markets. Setting up a corporation: 1. Register the name with the SEC 2. File your Articles of Incorporation, By-Laws, and Treasurer’s Affidavit 3. Wait for any opposition 4. If none, your Certificate of Registration will be issued (birth) Prepared by: RICHEL PITOGO, LPT, MSTM(CAR) Process of obtaining permits and registration for a business: 1. Barangay Obtain barangay’s permit with the barangay of where your office is located Submit SEC Certification, plus necessary IDs You will be given a Barangay Clearance 2. Mayor’s Office In the City Hall of where your office is located Bring SEC and Barangay Certificates You will then be issued a Business Permit 3. Bureau of Internal Revenue (BIR) Go to the BIR Office of where your business is located Fill up the necessary forms (1903-Application for Reg) and pay the necessary taxes  Register Book of Accounts You will then be issued a Certificate of Registration Corporate Liability Biggest advantage of setting up a corporation: separate juridical personality - Corporation has a personality separate and distinct from the individuals comprising it -Rationale: Corporation is created by law Effect of SJP: Corporation can own property, separate and distinct from its members: -Abubot Corp. has 500 hectares of land in its name. Abubot Corp owns this land exclusively. -Anabel, the President of Abubot Corp, personally owns 2 hectares of land which she inherited from her father. Anabel owns it exclusively Corporation can enter into commercial transactions: -Contracts are signed in the name of the corporation -Contract are merely physically signed by the authorized signatories -If the signatories are not authorized, they DO NOT BIND the corporation. Exception of SJP: When a corporation is being used as a mere “conduit” to commit wrong, then the law will make the individuals comprising the corporation liable. Purpose: so, individuals do not hide behind a corporation in order to commit wrongdoing. Distinction between corporate liability for criminal acts & negligent acts 1. Liability for criminal (intentional) acts of employees: A corporation is generally not liable for the criminal acts or intentional wrongdoings of its employees. Instead, the employees who committed the criminal act is personally liable for their action. Legal Basis: SJP (which means that a corporation and its employees are legally distinct entities.) In fact, a corporation generally CANNOT commit criminal offenses because criminal liability is attributed to individuals, not he corporation itself. 2. Liability for negligent (accidental) acts of employees: Negligent acts: accidents, there is a legal presumption that a corporation is liable for the negligent acts of its employees. However, the corporation can defend itself against such liability by demonstrating that it exercised due diligence in the selection and supervision of the employee who committed the negligent act. This means that the corporation can avoid liability by showing that it took reasonable steps to hire, train and oversee its employees to prevent accidents and negligence. CHAPTER 3: UNDERSTANDING CONTRACTS AND OBLIGATIONS Managing a business is not an easy task. It involves different kinds of obligations that should be given full attention by both the debtors and creditors considering the effects that it may give to them as contracting parties. Three or four years from now, the students of hospitality management may be acquainted with different transactions involving obligations and contracts once they are already in the actual field of the hospitality world. Hence, the authors are convinced that these students should be briefed as early as now, on the basic principles of obligations and contracts. Obligation Defined Article 1156 of the Civil Code of the Philippines provides that an obligation is a juridical necessity to give, to do, or not to do. Generally, a person who has an obligation arising from whatever sources should comply with its corresponding requirements considering the damage it may produce to one of the contracting parties or even to a third person, if not complied. Non-compliance with what is demanded by the obligation may give the aggrieved party different courses of action such as demand for payment and damages. There are three kinds of obligation under the law, to wit: obligation to give, to do, or not to do. In an obligation to give, the debtor is obliged to deliver the movable or immovable thing to the creditor. Example: Obligation to deliver the thing in the sale, deposit, pledge, donation All kinds of work or services, whether physical or mental covered by the obligation to do. Example: Contract for events organizing, professional services like painting, modeling, singing. The obligation not to do means refraining from doing some acts like the obligations of a building proprietor to refrain from committing nuisance through noise, offensive odor, smoke, heat, etc. ELEMENTS OF OBLIGATION: 1. Active Subject- It is the one who is demanding the performance of the obligation. It is he who in his favor the obligation is constituted, established or created. He is called the creditor or oblige. 2. Passive Subject- The on bound to perform the presentation to give, to do or not to do. He is called the debtor obligor. 3. Presentation or Object- it is the subject matter of the obligation which has an economic value or susceptible of pecuniary substitution in case of noncompliance. 4. Efficient Cause- it is the juridical tie or vinculum by virtue of which the debtor has become bound to perform the presentation. Kinds of Obligation as to Number of Persons Bound to Perform: 1. Unilateral Obligation- it is a kind of obligation in which only one of the parties is bound to fulfill a prestation. (e.g. Parents have unilateral obligation to provide the basic necessity of their children, such as: Food, shelter, medicine and education.) 2. Bilateral Obligation- this is a kind of obligation in which both parties are bound to perform a part in the obligation. (e.g. In sale, the customers are obliged to pay for any food that they ordered. On the other hand, the restaurant is obliged to deliver the food to the customers. The obligations of the parties here are reciprocal. They are dependent to each other) Sources of Obligation 1. Obligations arising from Law- the obligation of a party to fulfill an obligation arises from the law itself, rules and regulations, jurisprudence. (e.g. It is the duty of the spouses to render mutual support and respect to one another, the taxpayer’s duty to pay taxes) 2. Obligations arising from contracts- this is the duty of the party to fulfill his undertaking in the contract such as the payment for the breakage of utensils used in the catering services as stipulated in the contract. 3. Obligations arising from Quasi-Contracts- It is a juridical relation which arises from a lawful, voluntary and unilateral act or acts executed by somebody for the benefit of another and for which the former must be indemnified to the end and that no one shall be enriched or benefited at the expense of another. It is a kind of contract created without the consent of one party but whose missing consent is given by the law. (e.g. Duty of the recipient to return what was deliver to him by mistake.) 4. Obligation arising from delicts or acts or omissions punishable by law- the penal provision of the law specifically provides the obligation to be done by the culprit on his/her victim (e.g. Duty of the culprit to pay actual damages for causing the death of a person) 5. Obligation arising from Quasi-delicts or tort. (e.g. Duty of the tortfeasor to pay damages for injuries or damages due to his fault, omission or negligence. RICHEL PITOGO, LPT, MSTM (CAR) Other Types: 1. Pure Obligation- this is an obligation where there are no conditions or terms attached to the performance of the duty. 2. Conditional Obligation- it is one that depends on certain conditions or terms being met before the obligation becomes binding. 3. Obligation with a period- it is subject to a specific timeframe or period within which it must be fulfilled. 4. Joint Obligation- there are multiple debtors who are each responsible for a portion of the obligation. 5. Solidary Obligation-there are also multiple debtors, but each debtor is individually responsible for the entire obligation. Modes of Extinguishing Obligation 1. In a fine dining restaurant, the obligation of the customer to the management who served them sumptuous food shall be extinguished upon payment by the customer of the exact amount of the food consumed; obligation by the entertainer to the events manager may be extinguished upon the performance of the obligation for which the entertainer was commissioned. 2. Obligation arising from a contract may also be extinguished upon the loss of the thing due. “Loss” it is understood that the thing is lost when it perishes or goes out of commerce, or disappears in such a way that its existence is unknown or it cannot be recovered. 3. Condonation or remission pertains to the act of liberality on the part of the creditor wherein she/ he forgive or remits a debt. Even if the proprietor is indebted to his supplier of beef and chicken, the obligation shall be extinguished if the supplier will gratuitously give the amount in issue to the proprietor as advance gift for the latter’s continuous patronage to its supplies. 4. Compensation as a means of extinguishing an obligation is the offsetting of the respective obligations of two persons who stand as principal creditors and debtors of each other, resulting to the extinguishment of their obligations to their concurrent amount. 5. Novation pertains to the change or modification of an obligation by another, resulting to the extinguishment of an obligation. The following are the requisites for valid novation. There must be a previous valid obligation; there must be an agreement by the parties to extinguish or modify the old obligation; the validity of the new obligation. 6. Death when either the creditor (the person to whom the obligation is owed) or the debtor (the person who owes the obligation) passes away, it can extinguish certain types of obligations. In some cases, the obligation may be inherited by the debtor’s estate or passed on to heirs, but it depends on the specific legal rules in the jurisdiction and the nature of the obligation. 7. Force Majeure refers to unforeseeable and unavoidable events or circumstances that make it impossible or extremely difficult to fulfill an obligation. If a force majeure event occurs, it can lead to the extinguishment of the obligation, as it becomes impracticable to perform. Contracts often include force majeure clauses to address how obligation are affected in such situations. Contract Defined It is the meeting of the minds between two persons whereby one binds himself with respect to the others, to give something or to render some service. Essential Elements of Contract: 1. Consent- signifies the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. There should be an acceptance and an offer to manifest consent. The offer must be certain and, whether the acceptance is expressed or implied, it must be absolute. The offeror may fix the details of the offer including the date, time, place, and mode of acceptance, in which all must be complied with. It must be noted that the following incapacitated to give consent: 1. Minors; 2. Insane or demented; 3. Deaf-mutes who do not know how to write; 4. Married women of age in cases specified by law; 5. Civil interdicted persons; 6. Incompetents under guardianship. 2 Object Certain- It relates to the subject matter or the specific thing, right, and service that the contract deals with. For a contract to be valid, the objective of the contract must be clear, definite and capable of being determined. In other words, both parties must have a clear understanding of what is being exchanged or promised in the contract. 3. Cause- also known as consideration, it is the reason or purpose or why behind the contract. It involves what each party give or received in return for their promises or obligations under the contract. Cause ensures that there is a lawful and valid reason for entering into the contract. Consideration is an essential element that distinguishes a contract from a gift or a one-sided promise. RICHEL PITOGO, LPT, MSTM (CAR) Characteristics of Contracts: 1. Obligatory force- Once the contract is perfected, it shall be of obligatory force upon both of the contracting parties. 2. Autonomy of the contracts- Contracting parties are free to enter into a contract and to establish such stipulations, clauses, terms and conditions as they may deem convenient. 3. Mutuality of the contracts- The contract must bind both parties. 4. Relativity of the contracts- contract takes effect only between the parties, their assigns and their heirs. Common Contracts: 1. Preparatory Contracts- these are contracts that are made in preparation for a future contract or event. They are not typically standalone contracts but are instead designed to pave the way for the execution of another contract. For example, a letter of intent or a memorandum of understanding can be considered preparatory contracts because they outline the intentions of the parties before they enter into a more detailed and binding agreement. 2. Principal Contracts- are the main or primary contracts that define the core obligations and rights of the parties involved. They stand on their own and are not dependent on any other contract. Examples of principal contracts include sales contracts, lease agreements, employment contracts, and loan agreements. 3. Accessory Contracts- are secondary contracts that are related to and dependent on a principal contract. They are often created to provide additional security or support for the fulfillment of the obligations in the principal contract. Common examples of accessory contracts include guarantees, surety agreements, and collateral agreements. Most Common Contracts in the Philippines: 1. Lease Contract- this is an agreement where one party (the landlord or lessor) allows another party (the tenant or lessee) to use their property (like an apartment or office) for a specific period in exchange for rent. The tenant doesn't own the property but has the right to use it. 2. Employment Contract- this is a deal between an employer and an employee. It outlines the terms of employment, such as salary, work hours, duties, and benefits. It's like a mutual agreement on how the employer and employee will work together. 3. Contracts of Carriage- these are agreements between transportation companies (like airlines or shipping companies) and passengers or cargo shippers. They detail the terms of transportation, including fares, schedules, and responsibilities during the journey. 4. Commercial Contracts Between Hotels and Airlines- these are agreements between hotels and airlines for services like accommodating airline crew or providing rooms for airline passengers during layovers. It's a partnership between the two businesses to meet the needs of travelers. Tour Operator Contracts- these are agreements between tour operators and hotels, transportation companies, or other service providers. Tour operators organize and sell travel packages, and these contracts define the terms of the services provided within those packages. Hotel Contract- is an agreement between a hotel and a guest, group, or event organizer. It outlines the terms and conditions for booking rooms or event spaces, as well as the responsibilities and expectations of both parties. Hotel contracts can cover aspects like room rate, check-in/check-out times, cancellation policies, and any special requests or services. 5. Charter Agreements- it involves the rental of an entire vehicle, like a plane or a boat, for a specific trip or period. It's like hiring the entire vehicle for a private or group use rather than buying individual tickets.