Law on Obligations and Contracts PDF

The Law on Obligations and Contracts Compiled and Edited By: Prof. Thad Aquino (Faculty-in-Charge) Academic Lecture Notes No. 1 Exclusively For: First Semester, AY 2024-2025, PLMar PART I – Brief Introduction to Law A. Law – Any rule of action, or any system of uniformity. B. Characterist...

The Law on Obligations and Contracts Compiled and Edited By: Prof. Thad Aquino (Faculty-in-Charge) Academic Lecture Notes No. 1 Exclusively For: First Semester, AY 2024-2025, PLMar PART I – Brief Introduction to Law A. Law – Any rule of action, or any system of uniformity. B. Characteristics of law It is: 1. A rule of conduct – the law tells us what shall be done and what shall not be done. 2. Obligatory – the law is considered a positive command that imposes a duty to obey. 3. Promulgated by competent authority – in this jurisdiction, the competent authority is the legislature which under the present Constitution is vested in the Congress of the Philippines consisting of the Senate and the House of Representatives, except to the extent reserved to the people by the provision on initiative and referendum. (GEN. RULE: potestas delegata non potest delegari meaning, what has been delegated cannot be further delegated). 4. For common observance and benefit – intended by man to serve man. It regulates the relations of men to maintain harmony in society. Thus, law must be observed by all for the benefit of all. C. Sources of law 1. Constitution – 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. It is often referred to as the fundamental law or supreme law or highest law because it is promulgated by the people themselves. Testament to this is the Preamble to the Constitution. 2. Legislation – consists in the declaration of legal rules by a competent authority. The preponderant source of law in the Philippines. Acts passed by the legislature are called statutes. Legislation includes ordinances enacted by local government units. 3. Administrative or executive orders, regulations, and rulings – issued by administrative officials under legislative authority. Administrative rules and regulations are intended to clarify the law and carry into effect its general provisions. EXEMPTION to potestas delegata non potest delegari. 4. Judicial decisions/jurisprudence – the decisions of the courts, particularly the Supreme Court, interpreting the laws or the Constitution form part of the legal system of the Philippines. Under the doctrine of precedent or stare decisis, the decisions of the Supreme Court on points of law are binding on all lower courts. 5. Custom – consists of practices and habits which through long and uninterrupted usage have become acknowledged and approved by society as binding rules of conduct. 6. Other sources (supplementary) – principles of justice and equity – decisions of foreign tribunals – opinions of legal luminaries PART II – General Provisions/The Law on Obligations (Arts. 1156-1162, NCC) A. Definition of an Obligation Art. 1156. An obligation is a juridical necessity to give, to do or not to do. - The above article gives the definition of obligation in its passive aspect. It stresses the duty of the debtor or obligor or the one who has the duty of giving, doing, or not doing. - Accordingly, this is not a complete definition of obligation. - Obligation is a juridical necessity because in case of non-compliance, the courts of Justice may be called upon by the aggrieved party to enforce its fulfilment. - Prof. Eduardo Labitag of the UP College of Law defines obligation as "a juridical relation whereby a person called the creditor can compel another person called the debtor the performance of the prestation and in case of breach, the debtor is liable with all of his properties, present and future, that are not exempt from execution. B. Elements of an Obligation 1. Active subject (creditor/obligee) – the one who has a right/possessor of right; The one in whose favor the obligation is constituted. 2. Passive subject (debtor/obligor) – one who is bound to fulfil the obligation; one who has the obligation to give, to do or not to do. 3. Prestation/Object (the subject matter of the obligation) – the conduct required to be observed by the debtor; the juridical necessity to give, to do or not to do; VERY IMPT-w/o this, there is nothing to perform. 4. Vinculum/Juridical or Legal tie (the efficient cause) – the reason why the obligation exists; binds/connects the parties to the obligation. Illustration: Under a Construction Contract, A binds himself to build a residential house for B for ZM payable upon completion of the house. Active subject – B Passive subject – A Prestation – the house Vinculum – the Construction Contract *When the construction of the house is done, A becomes the active subject, while B acquires the status of a passive subject. C. Sources of Obligations 1. Law – When they are imposed by law – Called legal obligations – Not presumed – Demandable only when expressly determined in NCC/special laws – Ex. Obligation to pay taxes; obligation to support one's family 2. Contracts – When they arise from the stipulation of the parties – Art. 1305. A contract is a meeting of minds between 2 persons whereby one binds himself, with respect to the other, to give something or to render some service  – Force of law between contracting parties – Should be complied with in good faith – Ex. The obligation to repay a loan 3. Quasi-contracts – When they arise from lawful, unilateral and voluntary acts which are enforceable because of the ancient mantra that: (1) no one shall enrich himself at the expense of another; (2) if one benefits, he must reimburse; and (3) justice and equity. – No meeting of the minds – Negotiorum gestio: (officious mgt/informal/unofficial/unauthorized) - unauthorized management of the abandoned or neglected business or property of a person. Ex. A went to Bagulo, fire broke out, through efforts of B (officious manager/gestor), A's house was saved. A is obliged to reimburse B's expenses in so saving the house. – Solutio indebiti (payment by mistake/undue payment) receipt of something not due or when there is no right to demand it. Ex. Lessor continued to collect rental payments which are no longer due in view of the expiration of the lease contract. Lessor must return the erroneous payment made by the lessee. 4. Delicts (acts or omissions punished by law) – When they arise from civil liability arising from a criminal offense – Art. 100, RPC. Every person criminally liable for a felony is also civilly liable. – Civil liabilities include: (1) Restitution (means "to return". Ex. Obligation of the robber to return the car stolen by him); (2) Reparation of the damage caused {means "to pay" the value of the thing if restitution is not possible. Ex. The obligation of the robber to pay the value of the car he stole); and (3) Indemnification for consequential damages (means the "damages suffered by the victim and his family or a third person. Ex. The obligation of the robber to indemnify his victim). 5. Quasi-delicts/Torts – When they arise from damage caused to another through an act/omission, there being fault or negligence, but no pre-existing contractual relation existing between the parties (Art. 2176, NCC). – Negligence is hard to prove: applicable – Doctrine of Res Ipsa Loquitor (the thing speaks for itself. Ex. Driver entering a one-way road – Doctrine of Proximate Cause – is that cause which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury and without which the result would not have occurred. Ex. A left his car with the engine still running and failed to put on the handbrake. As a result thereof, the cars of B, C and D were bumped and suffered damage by A's car. The proximate cause of the damages was due to A's negligence. – Doctrine of Damnum Absque Injuria – although there is physical damage, there is no legal injury; damage is not compensable. Ex. Driver temporarily blinded by the lightning. Driver is not liable because this is a case of a fortuitous event/act of God. Ex. Obligation of the head of a family (tort-feasor) that lives in a building or a part thereof to answer for the damages caused by things thrown or falling from the same (Art. 2193, NCC).