Laws on Obligations and Contracts PDF

CHAPTER III THE LAWS ON OBLIGATIONS AND CONTRACTS Obligations and Contracts are among the subjects of the Civil Code of the Philippines. Applicable Provisions of the Law on Obligations and Contracts Article 1156. Obligation is a juridical necessity, to give, to do, or not to do. The obligation re...

CHAPTER III THE LAWS ON OBLIGATIONS AND CONTRACTS Obligations and Contracts are among the subjects of the Civil Code of the Philippines. Applicable Provisions of the Law on Obligations and Contracts Article 1156. Obligation is a juridical necessity, to give, to do, or not to do. The obligation referred to in the above article is a civil obligation, meaning, only those obligations which if not performed by one party, the other party may go to court to enforce the obligation or simply to hold such person to pay for damages. What then are considered civil obligations ceil obligations 1. Law 2. Contracts 3. Quasi-Contracts 4. Acts or omissions punishable by law (delicts) 5. Quasi-Delicts' Elements of Obligation 1. Passive subject is the person or party who has the duty to fulfil the obligation or the prestation (see #3 for definition). Passive subject is sometimes called the obligor or debtor. 2. Active subject is the person who has the power to demand the fulfilment of the obligation; he is sometimes called the creditor or obligee. 3. Prestation is the object of the obligation either to give, to do, or not to do. 4. Juridical Tie is the vinculum (pl. vincula, a unifying bond) or that which binds the debtor and creditor. Sources of Obligation 1. Law-Obligations arising from law are not presumed only those obligation expressly determined by law are demandable. 2. Contracts - Under article 1305, contract is a meeting of the minds whereby one binds himself with respect to other to give something or render some services. 3. Quasi-Contract - This source of obligation is based on the principle of unjust enrichment, meaning no one shall benefit at the expense of the other. Unlike in contracts, there is no meeting of the minds between parties in this source of obligation; however, equity and law dictates that the person benefited from the act of the other has the obligation to reimburse or pay whatever expenses incurred by the latter. 4Acts or Omission Punishable by law (Delicts) - Under the Revised Penal Code of the Philippines, any person criminally liable is also civilly liable. The civil liability pertains to the damages that must be paid arising from the offense/crime committed. 5. Quasi-Delicts (Culpa Aquiliana) - Under Article 2176 the Civil Code, whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delicts. Article 2180 paragraph (4) states that, "The owners and managers of an establishment or enterprises are responsible for damages caused by their employees in the service of the branches in which the employee is employed or on the occasion of their functions." Article 2180 paragraph (5) stipulates that, "Employers shall be Liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industrys." Source of Damages (Liability) 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. 1. Fraud - There are two kinds of fraud, a. Incidental Fraud (Dolo Incidente). The fraud is committed during the performance of the obligation and the remedy for this kind of fraud is to demand for damages. b. Casual Fraud (Dolo Causante). The fraud is committed at the very beginning of the transaction in order to induce or convince the other person to enter into a contract. The remedy in this kind of fraud is to annul the contract plus damages. 2. Negligence. tis the omission e tonds to the required by the Nature of an obligation and corresponds circumstances of person, time and place. One of the formations of the Obligor o pe observe due diligence in the performance of his obligation. Hence, if the diligence required was not observed there may be liability. Two Kinds of Diligence a. Diligence of a good father of a family- or the ordinary diligence. This is the kind of diligence that must be observed by the obligor in general. b. Utmost diligence or extraordinary diligence- this is the highest degree of care. This must be observed only when the law so provides or when the parties so agree. Under the law, a common carrier must observe extraordinary diligence in vigilance over the goods and for the safety of the passenger transported by them. Delay - the delay referred herein is legal delay. This means that when the maturity date within ehich to perform the obligation was not performed, the creditor should demand its fulfilment in order for the debtor to be considered in delay. “NO DEMAND NI DELAY”. Ways to Demand the Fulfilment of the Obligation a. Judicial Demand - The creditor goes to court to fix the period within which the debtor performs the obligation. b. Extra Judicial Demand - The creditor writes a demand letter or demand orally. 4. Contravention of the Tenor of the Obligation- It is the failure to perform that which is incumbent upon him. The nonperformance or failure of the party to fulfil his duty is liable for damages. Different kinds of Damages If there are injuries committed either due to wrongful or negligent act or if a certain obligation or contract has been violated, the party so injured shall be entitled to any of the following damages. 1. Actual or Compensatory Damages 2. Moral Damages 3. Nominal Damages 4. Temperate or Moderate Damages 5. Liquidated Damages 6. Exemplary or corrective Damages Different Kinds of Obligation 1. Pure Obligation 2. Conditional Obligation 3. Obligation with a period 4. Joint and Solidary obligation 5. Alternative Obligation 6. Facultative Obligation 1. Pure Obligation. The obligation is not subject to a period or condition and is demandable at once. 2. Conditional Obligation. The obligation is subject to a condition.It is demandable upon the happening of the condition. 3. Obligation with a Period. A period is an event which will certainly happen. Thus, the happening or the arrival of the period gives rise to an obligation or extinguishment of it. 4. Joint Obligation. There are several debtors and one or more creditors, but each debtor is only liable for his share of the debt and each of the creditors to his share of credit. It is always presumed that the obligation is JOINT. 5. Solidary Obligation. In this type of obligation, each of the debtors is liable for the entire obligation and each of the creditors is entitled to demand the satisfaction of the whole obligation from any or all of the debtors. Contract Article 1305 states that "Contract is a meeting of the minds between two persons, whereby one binds himself, with respect to the other, to give something or render some service." Essential Requisites of Contract Art. 1318. There is no contract unless the following requisites concur: (1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause of the obligation which is established. Consent is manifested by the meeting of the offer and the acceptance of the thing and the cause, which are to constitute the contract. Rules regarding object Cause or consideration is a an essential requisite of a contract; the cause or consideration is the reason why the parties entered into a contract. formalities of contract Contract may be made orally or in writing as long the three essential requisites are present. a. When the law itself requires that they be in some particular form (writing) in order to make them valid and enforceable (the so-called solemn contracts); b. When the law requires to be proved by some writing (memorandum) of its terms, as in those covered by the Statute of Frauds, in Article 1403 (2) of the Civil Code. Stages of Contract 1. Negotiation Stage or the Generation Stage. This is the first step. It begins from the time the prospective contracting parties manifest their interest in the contract and ends at the moment of agreement of the parties. In this stage, the parties will bargain or negotiate as to the terms and conditions. No meeting the minds yet. Hence, there is still no contract at this stage. 2. Perfection or Birth of the Contract takes place when the parties agree upon the essential elements of the contract. 3. After the bargaining or negotiation, the parties shall determine whether to accept, the terms and conditions. Once it is accepted then there is a contract (there is already meeting of the minds). This is the stage where the contract is perfected, and therefore, both parties must comply. 4. Consummation/ Termination. This is the stage where the contract is ended because the parties have fulfilled with their obligations. Characteristics of Contract 1. Mutuality of Contract. The validity or performance or compliance of which cannot be left to the will of only one of the parties. 2. Autonomy of Contract. The contracting parties may establish such stipulations, clauses, terms, and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. 3. Obligatory Force. Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfilment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. 4. Relativity of Contract. This means that the contract entered into by the parties are binding only between them, their heirs and assigns, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent. Defective Contracts and their Effects 1. Rescissible Contracts. Contracts which are rescissible are valid contracts having all the essential requisites of a contract, but by reason of injury or damage caused to either of the parties therein or to third persons are considered defective and, thus, may be rescinded. 2. Voidable Contracts. Voidable means those contracts which are valid until annulled. Art. 1390. "The following contracts are voidable or annullable, even though there may have been no damage to the contracting parties:" 3. Unenforceable Contract. A contract which cannot be enforced unless ratified, due to any of the following reasons: a. The contract was entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers. b. The Contract did not comply with the Statute of Frauds. 4. Void and Inexistent Contract. It is equivalent to nothing and is absolutely wanting in civil effects. It cannot be validated either by ratification or prescription. But, although a void contract has no legal effects even if no action is taken to set it aside, when any of its terms have been performed, an action to declare its inexistence is necessary to allow restitution of what has been given under it. CHAPTER IV Law on sales Sale is a contract; hence, as a general rule it is perfected from the time there is a meeting of the minds of the parties. The parties in this kind of contract are called the Vendor (seller) and the Vendee (buyer). Contract of Sale Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent. A contract of sale may be absolute or conditional. Essential Elements of a Contract of Sale Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of a contract of sale are the following: a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; b) Determinate subject matter (Object); and c) Price certain in money or its equivalent (Consideration). The term equivalent may refer to check or other negotiable instruments. Forms of Contract of Sale The Contract of Sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the forms of contract. Thus, Contract of Sale may be made in writing or by word of mouth (orally). Sale of Immovable Property through an Agent, Special Power of Attorney is Needed When the sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. A Contract of Sale of a Parcel of Land must be in Writing but not Necessarily Notarized Though a conveyance of land is not made in a public document (meaning not notarized), it does not affect the validity of such conveyance. Two kinds of Sale 1. Absolute Sale. A contract of sale is absolute when title to the property passes to the vendee upon delivery of the thing sold. A deed of sale is absolute when there is no stipulation in the contract that title to the property remains with the seller until full payment of the purchase price. The sale is also absolute if there is no stipulation giving the vendor the right to cancel unilaterally the contract the moment the vendee fails to pay within a fixed period. 2.Conditional Sale. Ownership remains with the vendor and does not pass to the vendee until full payment of the purchase price. The full payment of the purchase price partakes of a suspensive condition, and non-fulfillment of the condition prevents the obligation to sell from arising.' An example is contract to sell. Transfer of Ownership Article 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. Effect of the sale by a person who is not the owner of the thing sold Where the goods are sold by a person who is not the owner thereof, the buyer acquires no better title than the seller had. Sale of Personal Property on Installment: Article 1484, the Recto Law The Recto Law was passed in order to protect the buyers on instalment who, more often than not, have been victimized by sellers who, before the enactment of this law, succeeded in unjustly enriching themselves at the expense of the buyers, because aside from recovering the goods sold, upon default of the buyer in the payment of two instalments, still retained for themselves all amounts already paid, and in addition, were adjudged entitled to damages, such as attorney's fees, expenses of litigation and costs.