quiz 3.docx

REMEDIES FOR BREACH OF OBLIGATIONS *Obligations to give:* 1\. Determinate thing -- specific performance only if it is legally and physically possible. Substitute performance is not possible. 2\. Generic thing -- specific or substitute performance. The creditor can have another person to have suc...

REMEDIES FOR BREACH OF OBLIGATIONS *Obligations to give:* 1\. Determinate thing -- specific performance only if it is legally and physically possible. Substitute performance is not possible. 2\. Generic thing -- specific or substitute performance. The creditor can have another person to have such kind of thing be delivered at the cost of the debtor plus damages. *Obligations to do:* substitute performance only, since forcing the obligor to comply would violate the constitutional prohibition against involuntary servitude. *Obligations not to do:* and the obligor does it, the creditor may have it undone at the expense of the debtor. RESCISSION AS A REMEDY: TWO KINDS: 1\. Rescission in reciprocal obligations, which should've been properly termed as "resolution", is a primary remedy where the cause of action is substantial or fundamental breach or non-compliance. 2\. Rescission under Art. 1301/1303 in rescissible contracts is a remedy of last resort where the cause would normally be lesion or economic injury to a party. *Damages; KINDS (MENTAL):* 1\. Moral -- for mental and physical anguish 2\. Exemplary -- corrective or to set an example 3\. Nominal -- to vindicate a right when no other kind of damages may be recovered 4\. Temperate -- when the exact amount of damages cannot be determined 5\. Actual -- actual losses incurred. This is the only type of damage that would require proof. 6\. Liquidated -- predetermined beforehand. SPECIFIC CIRCUMSTANCES AFFECTING OBLIGATIONS IN GENERAL Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages. a\. FRAUD There is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void. *Kinds of Fraud:* 1\. Dolo causante -- or fraud in obtaining consent, is applicable only to contracts where consent is necessary and thus affects the validity of the contract, making it voidable. 2\. Dolo incidente -- or fraud in the performance of the obligation and applicable to obligations arising from any source. This kind, however, does not affect the validity of the contract and makes the party guilty of fraud liable for damages. b\. NEGLIGENCE *Negligence:* consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place. *Degree of care required:* 1\. As a rule a\. That required by law: e.g., a common carrier is required to exercise extraordinary care; or b\. That agreed upon by the parties. 2\. In the absence of the two above, diligence of a good father of a family. *Kinds of Negligence as to SOURCE:* 1\. Culpa Contractual -- contractual negligence -- or that which results in a breach of contract. 2\. Culpa Aquiliana -- civil negligence or quasi-delict 3\. Culpa Criminal -- criminal negligence -- or that which results in the commission of a crime or a delict. *Negligence on the part of the injured party:* 1\. If his negligence was the immediate and proximate cause of the injury, there is no recovery for damages. 2\. If his negligence was only contributory -- he may still recover damages, BUT the courts can mitigate or reduce the same. c\. DELAY *Kinds of Delay:* 1\. Mora Solvendi -- delay on the part of the debtor, which may either be: a\. Mora solvendi ex re: in real obligations b\. Mora solvendi ex persona: in personal obligations 2\. Mora Accipiendi -- delay on the part of the creditor; 3\. Compensatio Morae -- delay on the part of both parties. WHEN CONSIDERED IN DEFAULT: *General Rule:* upon demand, which may be judicial or extra judicial. *Exceptions*: 1\. When stipulated -- a due date in itself is not enough, what should be stipulated is that there is no need for demand to consider the debtor in default 2\. When the law so declares -- e.g., delivery of a partner's share in the partnership 3\. When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract -- e.g., a florist for a wedding 4\. When demand would be useless -- e.g., when the debtor already transferred the thing to another; or had it destroyed or hidden. 5\. In reciprocal obligations, where the respective obligations must be performed simultaneously, and one party was not ready d\. ANY OTHER MANNER OF CONTRAVENTION (VIOLATIO) In general, every debtor who fails in performance of his obligations is bound to indemnify for the losses and damages caused thereby. The phrase \"any manner contravene the tenor\" of the obligation includes any illicit act which impairs the strict and faithful fulfillment of the obligation or every kind or defective performance. FORTUITOUS EVENT: is an excuse for non-performance. *Fortuitous events* by definition are extraordinary events not foreseeable or avoidable. It is therefore, not enough that the event should not have been foreseen or anticipated, as is commonly believed but it must be one impossible to foresee or to avoid. *General Rule:* is that no personal shall be responsible for those events which could not be foresee, or which, though foreseen, were inevitable. *Exceptions:* 1\. Declared by stipulation; 2\. When the nature of the obligation requires the assumption of risk: e.g., insurance contracts. 3\. Expressly specified by law: examples: a\. A possessor in bad faith. b\. If the obligor is already in delay or has promised the same thing to two or more persons who do not have the same interests. c\. The officious manager may be liable for any fortuitous event under Art. 2147. 4\. When negligence, delay or fraud concurred with the fortuitous event. MODES OF EXTINGUISHMENT OF OBLIGATIONS Art. 1231. Obligations are extinguished: (1) By payment or performance: (2) By the loss of the thing due: (3) By the condonation or remission of the debt; (4) By the confusion or merger of the rights of creditor and debtor; (5) By compensation; (6) By novation. Other causes of extinguishment of obligations: a\. Annulment b\. Rescission c\. Fulfillment of a resolutory condition d\. Prescription These other causes are governed elsewhere in the Civil Code. PAYMENT OR PERFORMANCE Payment means not only the delivery of money but also the performance, in any other manner, of an obligation. a\. Provisions as to the PAYOR *Payment made by a third person:* With consent of the debtor/With interest in the fulfillment of the obligation Without knowledge/consent of the debtor Compel the creditor to accept payment Yes No Subrogation to the rights of the creditor Yes No Amount of reimbursement Full Reimbursement Beneficial Reimbursement *Person who has interest in the fulfillment of the obligation:* include those subsidiarily liable such as guarantors and codebtors (including joint co-debtors), even third party-mortgagors whose properties secure the obligation. *If third party payor does not intend to be reimbursed:* the payment may be treated as a donation. As such it is necessary that the debtor accept the same for validity. If the debtor did not consent, there would be no valid donation, and the third party-payor can seek reimbursement from the debtor. In any case, payment is still valid as to the creditor and the obligation is still extinguished. *Capacity and Free Disposal:* the payor should have capacity to alienate and the free disposal of the thing due for payment to be effective. Such that minors (who don't have capacity) and those suffering the penalty of civil interdiction (no free disposal) cannot make a valid payment. b\. Provisions as to the PAYEE *Payment may be made to:* 1\. Person in whose favor the obligation has been constituted -- not necessarily a party to the constitution of the obligation. 2\. His successor in interest -- who may not be creditors at the time of constitution, but may be creditors at the time of fulfilment. 3\. Any person authorized to receive it -- agents are creditors because they have the right to collect, but not in their own right. (This is relevant as to Compensation as a mode of extinguishing obligation) 4\. Third party -- if it redounds to the benefit of the creditor. *The benefit to the creditor need not be proven in the following cases:* a\. after the payment, the third person acquires the creditor\'s rights; b\. the creditor ratifies the payment to the third person; c\. by the creditor\'s conduct, the debtor has been led to believe that the third person had authority to receive the payment. d\. If the third party is in possession of the credit. *Payment to an incapacitated person:* is valid only if the incapacitated person kept the thing delivered or insofar as it was beneficial to him. c\. THING to be paid or delivered *Delivery of a specific thing:* The debtor of a thing cannot compel the creditor to receive a different one, although the latter may be of the same value as, or more valuable than that which is due. *Delivery of a generic thing:* whose quality and circumstances have not been stated, the creditor cannot demand a thing of superior quality. Neither can the debtor deliver a thing of inferior quality. The purpose of the obligation and other circumstances shall be taken into consideration. *Obligations to do or not to do:* an act or forbearance cannot be substituted by another act or forbearance against the obligee\'s will. *LEGAL TENDER:* refers to payment which the creditor can be compelled to accept. Under the New Central Bank Act, coins and currencies issued by the BSP have legal tender power. For currency notes, there is no limit as to the amount it can be used as legal tender. However, for coins, the following are the limits: 1\. P1 coins and above - shall be legal tender in amounts not exceeding P1,000 (now P2,000 beginning December of 2022); 2\. Coins below P1 -- legal tender not exceeding P100 (now P200 beginning December of 2022);. *Negotiable Instruments and Checks:* are not considered legal tender and their acceptance is dependent on the creditor. However, should the creditor accept the same, they do not produce the effect of payment, or extinguish the obligation, until: 1\. At the time the check or other mercantile documents have been encashed; 2\. Its value becomes impaired. *Extraordinary inflation or deflation:* of the currency stipulated should supervene, the value of the currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the contrary. d\. Place of payment 1\. Payment shall be made in the place designated in the obligation. 2\. If there was no stipulation and the obligation consists in the delivery of a determinate thing, the payment shall be made wherever the thing might be at the moment the obligation was constituted. 3\. In any other case the place of payment shall be the domicile of the debtor. 4\. If the debtor changes his domicile in bad faith or after he has incurred in delay, the additional expenses shall be borne by him. SPECIAL FORMS OF PAYMENT Dation in Payment *Dation in payment* is the delivery or transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation. It may consist not only of a thing but also of rights, i.e., usufruct or credit. *Extent of extinguishment:* General rule: to the extent of the value of the thing delivered as agreed upon or as may be proved. Exception: if the parties consider the thing as equivalent to the obligation through an express or implied agreement or by silence. Application of Payments Application of Payment: is the designation of the debt which is being paid by a debtor who has several obligations of the same kind in favor of the creditor to whom payment is made. *Requisites:* 1\. There is only one debtor; 2\. There are several debts; 3\. The debts are of the same kind; 4\. There is only one and the same creditor; 5\. The payment made by the debtor is not sufficient to pay-off all the obligations. *Right to apply payment:* generally, the debtor has the right to apply the payment at the time of making the payment, subject to the following LIMITATIONS: 1\. Creditor cannot be compelled to accept partial payment; 2\. Debtor cannot apply payment to principal if interest has not been paid; 3\. The debt must be liquidated, except when the parties agree otherwise; 4\. Cannot be made when the period has not arrived and such period was constituted in favor of the creditor, except with the consent of the creditor; 5\. When there is agreement as to which debt must be paid first. *If the debtor did not designate, to which debt shall payment apply?* That which was chosen by the creditor as reflected in the receipt which is accepted by the debtor without protest. *If debtor and creditor did not designate:* 1\. If the debts are of different nature and burden -- to that debt which is most onerous to the debtor; 2\. If the debts are of the same nature and burden -- applied proportionately. \\ Payment by Cession or Assignment Cession is when the debtor delivers to all his creditors all his properties for the purpose of selling and applying the proceeds to settle his obligations to them. Kinds: 1\. Voluntary -- the debtor may cede or assign his property to his creditors in payment of his debts; extent of extinguishment is only upto the amount of the proceeds. 2\. Judicial -- under the Financial Rehabilitation and Insolvency Act.