Obligations and Contracts PDF

OBLIGATIONS AND CONTRACTS  Obligations and Contracts ARV Law – is rule of conduct, just, and obligatory promulgated by legitimate authority and of common observance and benefit.  Obligations and Contracts Obligation – is a juridical necessity to give (REAL), to do or not...

OBLIGATIONS AND CONTRACTS  Obligations and Contracts ARV Law – is rule of conduct, just, and obligatory promulgated by legitimate authority and of common observance and benefit.  Obligations and Contracts Obligation – is a juridical necessity to give (REAL), to do or not to do (PERSONAL). Contract – meeting of minds between two persons whereby one binds himself with respect to another, to give something or render some service.  Obligations and Contracts Essential elements/requisites of Obligation (1) Passive subject / debtor / obligor (2) Active subject / creditor / obligee (3) Object / prestation / subject matter (4) Juridical tie / legal tie Essential elements / requisites of Contract C – CONSENT – meeting of the minds O – OBJECT – subject matter C – CAUSE / causa / consideration / price  Obligations and Contracts Sources of Obligations (1) Law (2) Contracts (Art. 1305) (3) Quasi-contracts (Art. 2142) (4) Delicts / Crime / Felony (Art. 3 RPC) (5) Quasi-delicts / Tort / Culpa Aquiliana  Obligations and Contracts 2 Kinds of Quasi Contracts (1) Negotiorum Gestio – voluntary management (2) Solutio Indebiti – improper payment  Obligations and Contracts (a) Legal Obligations / Ex Lege (Art. 1158) Are obligations presumed? (b) Contractual Obligations (Art. 1159) Voluntary / Contractual / Conventional (c) Quasi - Contractual Obligations (Art. 1160) (d) Penal Obligations / Ex delicto (e) Quasi-Delicts  Obligations and Contracts If a crime / delict is committed, there are two liabilities – (a) Criminal liability - imprisonment (b) Civil Liability – payment of damages Scope of civil liability (1) Restitution (2) Reparation (3) Indemnification for consequential damages Obligations and Contracts Law v. Contract Contract v. Quasi-Contract Delict v. Quasi-delict Contract v. Quasi-delict Obligations and Contracts Nature and Effects of Obligations  Obligations and Contracts Art. 1163 (a) Specific/ Determinate v. Generic Indeterminate (b) Genus nunquam peruit – genus never perishes (c) Diligence of Good Father of a Family (Bonum paterfamilia)  Obligations and Contracts Art. 1163 What are the obligations in the delivery of a determinate thing? (1) Take good care of the thing with the DGFF (2) Deliver the thing including all its fruits (3) Deliver all its accessions and accessories  Obligations and Contracts Art. 1164 Personal right v. Real Right Kinds of fruits (a) Natural (b) Industrial (c) Civil The creditor has the right to the fruits of the thing from the time the obligation to deliver it arises In contracts, from the time of the perfection of the contract  Obligations and Contracts What transfers ownership? DELIVERY or TRADITION What creates the real right over the thing? REGISTRATION  Obligations and Contracts Remedies of the Creditor in a REAL obligation In case the obligation is generic - three (3) remedies Can the creditor compel the delivery of the thing? NO Can the creditor ask a third person? YES In case the obligation is specific Can the creditor compel the delivery of the thing? YES Can the creditor ask a third person? NO  Obligations and Contracts Art. 1166 – Accessions - fruits of a thing or additions to or improvements upon a thing Accessories – things joined to or included with the principal thing for the latter’s embellishment, better use or completion. Accessio cedit principali – accessory follows the principal Can the principal exist without the accessory? Can the accessory exist without the principal?  Obligations and Contracts Art. 1167 – Remedies of the Creditor in Personal Obligations (a) Ask the debtor, in case of refusal, ask a third person Exception – personal consideration is involved (b) Damages Can he compel? NO, bec. of involuntary servitude. But you can ASK Art. 1168 Remedies of the Creditor in Personal Obligations (a) Undoing of the forbidden thing plus damages (b) If not possible to undo, damages  Obligations and Contracts Art. 1169 – DELAY G.R. - NO DEMAND, NO DELAY Exceptions – (1) Law (2) stipulation (3) time is of the essence (4) useless Kinds of Delay (1) Mora solvendi ( debtor’s delay) (2) Mora accipiendi ( creditor’s delay) (3) Compensatio Morae (both)  Obligations and Contracts Art. 1170 – Instances when debtor is liable for damages (1) FRAUD / DECEIT / DOLO (2) NEGLIGENCE / FAULT / CULPA (3) DELAY / MORA /DEFAULT (4) VIOLATION OF THE TERMS OF THE OBLIGATION / CONTRAVENTION / BREACH  Obligations and Contracts Fraud – is the deliberate or intentional evasion of the normal fulfillment of an obligation. Kinds of Fraud (1) DOLO INCIDENTE / Incidental Fraud (2) DOLO CAUSANTE/ Causal Fraud Causal Fraud v. Incidental Fraud - before creation - after creation - annulment - pay damages  Obligations and Contracts How is causal fraud committed? (1) Insidious words or machinations (2) Concealment Waiver of future fraud – not valid Waiver of past fraud – valid Waiver of past or future negligence –valid  Obligations and Contracts Negligence - is any voluntary act or omission, there being no malice, which prevents the normal fulfillment of an obligation. Kinds of Negligence (1) Contractual (Culpa contractual) (2) Civil (Culpa Aquiliana) (3) Criminal (Culpa Criminal)  Obligations and Contracts Art.1174 Fortuitous event – any event which cannot be foreseen, or which though foreseen, is inevitable “debtor must be free from any participation” (1) Acts of man - (2) Acts of God (force majeure) -  Obligations and Contracts Art.1174 (Fortuitous event) G.R. – Debtor not liable Exceptions – debtor is liable (1) Law (1170, 1165 , 1268, 1263) (2) Stipulation (3) Nature of the obligation requires the assumption of risk  Obligations and Contracts Art.1175 – Usury law is legally inexistent (CB 905) Requisites to recover interest (1) agreement (2) writing (3) lawful Mutuum - money Commodatum – other than money  Obligations and Contracts Art.1176 – Disputable presumptions Rule – Interest is paid ahead of the principal Presumption – interest is already paid Rule – Prior installments are first liquidated Presumption – prior installments are already paid  Obligations and Contracts Art.1177 – Remedies available to the creditors for the satisfaction of their claims Primary remedy – SPECIFIC PERFORMANCE Secondary remedies (1) Exhaust the properties - find (2) Accion Subrogatoria - subrogation (3) Accion Pauliana - rescind  Obligations and Contracts Art.1178 – Obligations are NOT transmissible Rights are transmissible (G.R.) Exceptions – (1) prohibited by law (2) stipulation Obligations and Contracts ARV Kinds of obligations Unilateral v. Bilateral Real v. Personal Determinate v. Generic Civil v. Natural Legal v. Conventional v. Penal Obligations and Contracts Kinds of obligations Pure v. Conditional Obligations with a Period Alternative v. Facultative Joint v. Solidary Divisible v. Indivisible Obligations with a Penal Clause  Obligations and Contracts 1179 Pure obligation – no condition, no period Condition – future and uncertain Period – future and certain Instances when obligation is immediately demandable (3)  Obligations and Contracts 1179 Suspensive cond. v. Resolutory cond. - Condition precedent - condition subsequent - Suspended - demandable at once - Arises - extinguished - Acquisition of rts - termination of rts 1180 Debtor promises to pay when his means permit him to do so - PERIOD  Obligations and Contracts If period depends on debtor – VALID If condition depends on debtor – VOID If condition depends on creditor, will of third person or chance – VALID If condition potestative – “one” If condition casual – “or” If condition mixed – “and”  Obligations and Contracts Impossible obligs. v. Impossibility in the Performance of the oblig - Beginning - after the creation - Annulled/void - debtor is released Kinds of impossibility (1) Physically (2) Legal Effect – (G.R.) Both obligation and condition are void  Obligations and Contracts 1184 – Positive condition 1185 – Negative Condition 1186 – Constructive fulfillment of condition 1187 – Retroactive effects of fulfillment of Suspensive condition 1188 – Rights pending the fulfillment of suspensive condition  Obligations and Contracts 1189 Kinds of Loss (PLC) (a) without debtor’s fault (b) through debtor’s fault (c) deterioration through debtor’s fault (d) deterioration without debtor’s fault (e) Improvement at expense of debtor (f) Improvement of thing by nature or by time  Obligations and Contracts 1190 – Effects of fulfillment of resolutory condition 1191 – Remedies in reciprocal obligation (1) Specific Performance OR (2) Rescission (with damages in both cases) 1192 – Where both parties are guilty of breach  Obligations and Contracts ARV Obligations with a Period Suspensive period (Ex Die) Resolutory period (In Diem) Day Certain (defined) Is death a period or condition?  Obligations and Contracts 1195 – Debtor presumed aware of the period 1196 – G.R. - Both parties are benefited by the period (Exceptions) 1197 – Judicial Period 1198 – (G.R.) Respect the period Exceptions – debtor loses the benefit of the period  Obligations and Contracts ARV Simple obligation - one Compound obligation – 2 or more a. Conjunctive – all are due b. Distributive – one, 2 or more are due 1. Alternative – what’s due 2. Facultative – can substitute  Obligations and Contracts ARV Alternative Obligation G.R. – Debtor’s choice 1201 – Communication of choice 1204 – Effect of loss of obligation (Debtor) 1205 – Effect of loss of obligation (Creditor) 1206 – Facultative obligation What was lost principal or substitute?  Obligations and Contracts ARV Joint and Solidary Joint – proportionate compliance - to each his own Solidary – entire/whole compliance - one for all, all for one What’s the presumption? JOINT  Obligations and Contracts Kinds of solidarity (1) Active solidarity – creditors (2) Passive solidarity – debtors (3) Mixed solidarity – both 1209 – Joint Indivisible obligation 1210 – Solidarity v. Indivisibility  Obligations and Contracts 1211 – Solidarity with different periods, condition or manner 1212 – Act of solidary creditor prejudicial to others 1213 – Assignment by solidary creditor of his rights 1214 – Payment to any of solidary creditors 1216 – Right of creditor to proceed against any solidary debtor 1217 – Payment by a solidary debtor 1218 – Payment after obligation has prescribed  Obligations and Contracts 1219 – Effect of Remission of share after payment 1220 – No right of reimbursement in case of remission 1221 – Effect of loss of thing 1222 – Defenses available to solidary creditor  Obligations and Contracts ARV Divisible obligations v. Indivisible obligations Kinds of division 1225 – when obligation indivisible when obligation divisible (2nd par.)  Obligations and Contracts ARV Obligations with a penal clause (purposes) 1226 v. 1170 Stipulation required not required Proof of damages proof required not required  Obligations and Contracts ARV EXTINGUISHMENT OF OBLIGATIONS PAyment ANnulment LOss REScission REmission RESolutory Period/Cond Merger PREScription (Extinctive) COndonation Oral – 6 years NOvation Writing – 10 yrs Quasi-delict – 4 yrs  Obligations and Contracts EXTINGUISHMENT OF OBLIGATIONS - Death of a party in case the obligation is personal - Mutual Desistance or withdrawal - Compromise - Impossibility of the Fulfillment - Happening of a fortuitous event  Obligations and Contracts ARV PAYMENT 1233 – Complete performance (Exceptions) 1236 - Beneficial reimbursement 1237 – Reimbursement plus subrogation 1239 / 1241 – Payment by and to the incapacitated person / Payment to person not authorized  Obligations and Contracts PAYMENT 1244 – Rule of IDENTITY (Specific thing) 1246 – Rule of MEDIUM QUALITY (Generic) 1247 – Extrajudicial expenses v. judicial 1248 – Instance when partial payment is valid 1249 – Legal Tender 1250 – Extraordinary inflation/deflation  Obligations and Contracts Special Forms of Payment (1) Dacion en pago / Dation in Payment (2) Application of payment - Legal Application of Payments (3) Payment by cession (4) Tender of Payment and Consignation  Obligations and Contracts ARV LOSS OF THE THING DUE G.R. – oblig is extinguished Exceptions – (1) law (2) stipulation (3) nature of the obligation (4) obligation to deliver a specific thing arises from a crime (4) GENERIC  Obligations and Contracts ARV CONDONATION / REMISSION 1271 – Delivery of a private document 1273 – Renunciation of the principal or accessory 1274 – Presumption in case thing pledged found in possession of debtor  Obligations and Contracts ARV CONFUSION or MERGER 1276 – Merger in in the person of debtor or creditor 1277 – Merger in joint obligation Merger in solidary obligation  Obligations and Contracts ARV COMPENSATION 1279 – Legal Compensation (5 Requisites) 1280 – Benefits guarantors 1282 – Voluntary Compensation 1283 – Judicial Compensation 1287/1288 – Instances when legal compensation not allowed 1290 – Consent not required in legal comp.  Obligations and Contracts ARV NOVATION Express v. Implied Real Novation / Personal / Mixed Personal (1) substitution (2) Subrogation Substitution (1) Expromision (2) Delegacion Subrogation (1) legal (2) conventional  Obligations and Contracts NOVATION 1294 – Effect of new debtor’s insolvency in expromision 1295 - Effect of new debtor’s insolvency in delegacion 1296 – Effect of novation on accessory obligations 1297 / 1298 – Effect where old and new obligations are void Obligations and Contracts ARV CONTRACTS Obligations and Contracts Contract v. Law Contract v. Obligation Contract v. Agreement Contract v. Pact Contract v. Stipulation  Obligations and Contracts ARV Basic Principles / Characteristics of contracts Mutuality (1308) Autonomy / Liberty / Freedom (1306) Relativity (1311) Consensual (1315) Obligatory force of contract (1159)  Obligations and Contracts Innominate Contracts (1307) Do ut des – I give that you give Do ut facias – I give that you may give Facio ut des – I do that you may give Facio ut facias – I do that you may give  Obligations and Contracts 1311 – RELATIVITY OF CONTRACTS G.R. – TPs are not bound by the agreement (1) 1311 – Stipulation Pour Autrui (2) 1312 – Registration (3) 1313 – Accion Paulina (4) 1314 – Interference in contractual relations  Obligations and Contracts 1315 – CONSENSUAL CONTRACT G.R. – mere consent creates contract Exceptions (1) REAL (deposit, pledge, commodatum) (2) FORMAL / SOLEMN  Obligations and Contracts 1317 – Unauthorized / Unenforceable Contract Requisites (1) authorized (2) act within the scope of his authority Remedy - RATIFICATION  Obligations and Contracts ARV 1318 – Essential Elements / Requisites Consent Object / subject matter Cause / causa / consideration Effect if one is missing – VOID  Obligations and Contracts 1319 – CONSENT (offer plus acceptance) COGNITION THEORY (Art. 1319, 2nd par.) POLICITACION 1323 – INEFFECTIVE OFFER - death, civil interdiction, insanity, insolvency 1324 – Option money v. Earnest Money  Obligations and Contracts Characteristics of consent (1) Intelligent (2) Free and voluntary (3) Conscious and spontaneous NOT definite offers (1) Business advertisements (2) Advertisement for bidders  Obligations and Contracts Incapacitated to enter into contract (1) minors (2) Insane (3) Deaf mutes (4) etc…  Obligations and Contracts Under lucid interval – valid Hypnotic spell – voidable State of drunkenness – voidable MIVUF – voidable Minor, insane, deaf-mute – voidable REMEDY - ANNULMENT  Obligations and Contracts VICES OF CONSENT Mistake - mistake of fact Intimidation - internal Violence - external / physical Undue Influence- improper advantage Fraud - causal fraud  Obligations and Contracts If the party knew the risk – no mistake Usual exaggerations in trade – not fraudulent Mere expression of an opinion – not fraud Misrepresentation made in good faith – not fraud Misrepresentation by a third person – not fraud, unless  Obligations and Contracts Simulation of contract – pretending by agreement 2 kinds (1) Absolutely simulation / Fictitious Effect - VOID (2) Relative simulation Effect – parties are bound by their true agreement  Obligations and Contracts ARV OBJECT – subject matter of the contract - within the commerce of man - future inheritance not allowed - only rights which are transmissible - determinate or capable of being made determinate  Obligations and Contracts ARV CAUSE / CAUSA Cause v. Motive Lesion (G.R. – valid) Kinds (1) onerous (2) gratuitous (3) remuneratory  Obligations and Contracts Absence of cause - void Illegal cause - void False cause - void Failure of cause - valid Insufficient cause - valid  Obligations and Contracts ARV FORM OF CONTRACT G.R. – NO FORM required, provided COC Exceptions - Form Effect (1) Validity varies VOID (2) Enforceability writing Unenforceable (3) Convenience PI + Reg. Valid only bet. to bind TPs the parties  Obligations and Contracts Remedy under Art. 1357 – compel Pub. Doc. (1) Validity - not available (2) Enforceability - not available (3) Convenience - available to bind TPs  Obligations and Contracts ARV REFORMATION OF v. INTERPRETATION of INSTRUMENT of CONTRACT (1) When available (1) Rule of clear, rule if if there is a doubt (2) When not allowed (2) Art. 1378 4 instances onerous – greatest xxx gratuitous – least xxx failure - void  Obligations and Contracts ARV 4 DEFECTIVE CONTRACTS (1) Rescissible (GACLOS) - Rescission (2) Voidable (2 grounds) - Annulment (3) Unenforceable (3 major grounds) (4) Void or Inexistent contract – Declaration of absolute Nullity See Handout No. 18  Obligations and Contracts Grounds for Rescission G uardian A bsentee C reditor L itigation O ther instances S tate of insolvency  Obligations and Contracts Action for Rescission - Subsidiary - Only to the extent necessary to cover the damage caused - Creates mutual restitution - Badges of fraud - Must be filed within 4 years  Obligations and Contracts ARV VOIDABLE Contracts 1. MIVUF 2. One party is incapacitated Period – 4 years Duty of mutual restitution Party capacitated cannot allege the incapacity  Obligations and Contracts ARV UNENFORCEABLE (1) Art. 1317 (2) Violation of the Statute of Frauds – must be in writing (3) Both parties are incapacitated Art. 1407 – both are incapacitated – effect of ratification  Obligations and Contracts ARV VOID CONTRACT - no effect whatsoever - cannot be ratified - imprescriptible - cannot be waived - can be assailed by TPs with interest - IN PARI DELICTO DOCTRINE  Obligations and Contracts ARV Civil Obligation v. Natural Obligation - Positive law - equity and natural law - Can be filed - cannot be filed Instances of natural obligation (Arts. 1423 – 1430)