Chapter II: Law on Obligations and Contracts PDF

CHAPTER II LAW ON OBLIGATIONS AND CONTRACTS Part I. Obligations Art. 1156. An obligation is a juridical necessity to give, to do or not to do. (n) Meaning of obligation. The term obligation is derived from the Latin word...

CHAPTER II LAW ON OBLIGATIONS AND CONTRACTS Part I. Obligations Art. 1156. An obligation is a juridical necessity to give, to do or not to do. (n) Meaning of obligation. The term obligation is derived from the Latin word “obligatio” which means tying or binding. Civil Code definition. Article 1156 of the Civil Code defines obligation in its passive aspect. It merely stresses the duty of the debtor or obligor when it speaks of obligation as a juridical necessity. Juridical Necessity. 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 or, in default thereof, the economic value that it represents. In proper cases, the debtor or obligor may also be made liable for damages, which represents the sum of money given as a compensation for the injury or harm suffered by the creditor for the violation of his rights. In other words, the debtor must comply with his obligation whether he likes it or not; otherwise, his failure will cause harmful or undesirable consequences. If obligations were not made enforceable, then people can disregard them with impunity. Nature of obligations under the Civil Code. (a) Civil obligations: Obligations which give to the creditor or obligee right under the law to enforce their performance in courts of justice. 1  Example: On July 20, 2022, Henry borrowed ₱ 20,000.00 from Archie. They agreed that payment will be on August 20, 2022. During the agreement, Henry executed a promissory note. If Henry cannot pay on the stated date, Archie may enforce payment by filing a court action within a period of 10 years from due date. Specifically on August 20, 2032. (b) Natural obligations: Not being based on positive law but on equity and natural law, do not grant a right of action to enforce their performance although in case of voluntary fulfillment by the debtor, the latter may not recover what has been delivered or rendered by reason thereof. Examples: Henry obtained a loan of ₱ 60,000.00 from Archie. The debt, which is evidenced by a promissory note, is due on August 20, 2022. No action for payment was filed in court by Archie within 10 years from such date, hence, the debt prescribed. However, Henry, knowing that his debt has already prescribed, voluntarily paid Archie. Henry cannot recover what he had voluntarily paid to Archie because although payment was no longer required, in equity and moral justice, he still owed Archie the amount of ₱ 60,000.00. (a) obligation to pay interest for use of money, even if not agreed upon in writing. (b) duty to support natural or spurious children (even if not recognized voluntarily or by judicial compulsion and even if there is a judgment denying recognition). (c) giving of material and financial assistance to children upon their marriage. Essential elements of an obligation. (a) Passive subject (debtor/obligor): The person who is bound to 2  the fulfillment of the obligation: he who has a duty. (b) Active subject (creditor/obligee): The person who is entitled to demand the fulfillment of the obligation: he who has a right. (c) Object or prestation (subject matter or the obligation): The conduct required to be observed by the debtor. It may consist in giving, doing, or not doing, Without the prestation, there is nothing it perform. (d) Juridical or legal tie (efficient cause/source of the obligation): That which binds or connects the parties to the obligation. Example: Under a building contract, Vice bound himself to construct the house of Pastor for P 1,000,000. Here Vice is the passive subject, Pastor is the active subject, the construction of the house is object or prestation, and the building contract which is the source of the obligation, is the juridical tie. Suppose Vice had already constructed the house and it was the agreement that Pastor would pay Vice after the construction is finished, Vice then becomes the active subject, and Pastor, the passive subject. Form of obligations. The form of an obligation refers to the manner in which an obligation is manifested or incurred. It may be oral, or in writing, or partly oral partly in writing. As a general rule, the law does not require an obligation to be in any form for its validity or binding force. (Art. 1356, Civil Code) Obligation, right, and wrong distinguished.  Obligation is the act or performance which the law will enforce.  Right is the power which a person has under the law, to demand from another any prestation. 3   A wrong (cause of action) is an act or omission of one party in violation of the legal right/s of another. The following are the essential elements of a legal wrong or injury: (a) A legal right in favor of a person (creditor/plaintiff). (b) A correlative legal obligation on the part of another (debtor/defendant) not to respect or not to violate said right. (c) An act or omission by the latter in violation of said right with resulting injury or damage to the former. Kinds of obligation according to the subject matter. (1) Real Obligation (obligation to give): That in which a subject matter is a thing which the obligor must deliver to the obligee. Example: Seller binds himself to deliver a box of face mask to Buyer. (2) Personal obligation (obligation to do or not to do): That in which the subject is an act to be done or not to be done. It has two (2) kinds: a) Positive personal obligation: Obligation to do or to render service. Example: As a student, your positive personal obligation is to study. b) Negative personal obligation: Obligation not to do Example: As a student, your negative personal obligation is not to violate school policies. 4  Art. 1157. Obligations arise from: (1) Law (2) Contracts (3) Quasi-contracts; (4) Acts or omissions punished by law; and (5) Quasi delicts. (1089a) Sources of Obligations. 1. Law: When the obligation is imposed by the law itself. (Art. 1158) Art. 1158. Obligations derived from law are not presumed- Only those expressly determined in this Code or in special laws are demandable, and shall be regulated by the precepts of the law which establishes them; and as to what has not been foreseen, by the provisions of this Book. (1090) Legal Obligations. Article 1158 refers to legal obligations or obligation arising from law. They are not presumed because they are considered a burden upon the obligor. They are the exception, not the rule. To be demandable, they must be clearly set forth in the law, i. e., the Civil Code or special laws. Examples: a. Obligation to pay taxes; b. obligation of parents and children to support each other; c. obligation of the husband and wife to live together, observe mutual love, respect and fidelity, and to render mutual help and support as provided for in the Family Code. 2. Contracts: When the obligation arises from the stipulation of the parties. (Art. 1159) Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in 5 good faith. (1091a) Contractual obligations. The above article speaks of contractual obligations or obligations arising from contracts or voluntary agreements. It presupposes that the contracts entered into are valid and enforceable. A contract is a meeting of minds between two (2) persons whereby one binds himself, with respect to the other, to give something or to render some service. (Art. 1305, Civil Code) Examples: a. A lease contract on an apartment where the lessee is required to pay the rental within the first five days of the month in advance, and the lessor to undertake and shoulder the cost of major repairs during the term of the lease. b. A contract of carriage whereby the carrier is obliged to bring the cargo to a designated destination, and the shipper to pay the transport cost (1) Binding force: Obligations arising from contracts have the force of law between the contracting parties. They have the same binding effect of obligations imposed by law, however, this does not mean that contract is superior to the law. As source of enforceable obligation, a contract must be valid and cannot be valid if it is against the law. (2) Va1idity of contracts: A contract is valid if all its essential requisites are present, namely: consent, object and cause or consideration, and provided that it is not contrary to law, morals, good customs, public order and public policy. Otherwise, it shall be declared void and no obligation will arise. (3) Compliance in good faith: It means compliance or performance in accordance with the stipulations or terms of the contract or agreement. That which is agreed upon in the 6  contract is the law between the parties thereto and must be complied with in good faith, provided that the agreement shall not be contrary to law, morals, good customs, public order, and public policy. Sincerity and honesty must be observed to prevent one party from taking undue advantage over the other. Non-compliance by a party with his legitimate obligations after receiving the benefits of contract would constitute unjust enrichment on his part. (4) Breach of contract: It takes place when a party fails or refuses to comply, without legal reason or justification, with his obligation under the contract as agreed upon. In most cases, it will render the guilty party liable for damages. 3. Quasi-contracts: When the obligation arises from lawful, voluntary and unilateral acts which are enforceable to the end that no one shall be unjustly enriched or benefited at the expense of another. (Art. 2112, Civil Code) Example: Obligation to return money paid by mistake or that which is not due. Art. 1160. Obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII, of this Book. (n) Quasi—contractual obligations. A quasi-contract is that juridical relation resulting from lawful, voluntary and unilateral acts which are enforceable to the end that no one shall be unjustly enriched or benefited the expense of another. (Art. 2142, Civil Code) It is not properly a contract at all. Unlike in a contract, there is no consent in a quasi-contract because such consent is supplied by fiction of law. In other words, the law considers the parties as having entered into a contract, although they have not actually done so, to prevent injustice or the unjust enrichment of a person at the expense of another. 7 Kinds of quasi-contracts. a) Negotiorum gestio: The voluntary management of the property or affairs of another without the knowledge or consent of the latter. (Art. 2144, Civil code) Example: Coco went to Sulu without leaving somebody to look after his house in Quezon City. While in Sulu, a big fire broke out near his house. Through the efforts of Baron, a close neighbor, Coco’s house was saved from being burned. Baron, however, incurred medical expenses for injuries sustained. Under the principle of quasi-contract, Coco has the obligation to reimburse Baron for medical expenses, although the former did not actually give his consent to the act of the latter in saving his house. b) Solutio indebiti: The juridical relation which is created when something is received when there is no right to demand it, and it was unduly delivered through mistake. (Art. 2154, Civil Code) The requisites are: 1) There is no right to receive the thing delivered: and 2) The thing was delivered through mistake. Example: Bea owes Julia ₱ 1,000. If Bea paid Gerald believing that the latter was authorized to receive payment for Julia, the obligation to return on the part of Gerald arises. If Bea paid ₱ 2,000 to Julia by mistake, Julia must return the excess of ₱ 1,000. Note: The cases that have been classified as quasi-contracts are of infinite 8  variety, and when for some reason, recovery cannot be had a true contract, recovery may be allowed on the basis of a quasi-contract. Example: Seller of goat’s milk leaves milk at the house of Buyer each morning. Buyer uses the milk and one (1) week after, Seller asks payment for the milk delivered. Here, an implied contract is understood to have been entered into by the very acts of Seller and Buyer, creating an obligation on the part of Buyer to pay the reasonable value of the milk, otherwise Buyer would be unjustly benefited at the expense of Seller. Illustrative Case: UST vs. City of Manila L-17133, December 31, 1965 Facts: ABC Cooperative paid municipal taxes and license fees to the city government, unaware that under a new law, it was exempt “from all taxes and government fees.” Later, ABC Cooperative learned of its exemption and sought to recover from the city government the taxes it had paid to the latter. The city government refused to refund said taxes. Held: ABC Cooperative can recover such taxes from the city government which has a duty to return what has been paid by mistake under the principle of solution indebiti. 4. Acts or omissions punishable by law (crimes or delicts): When the obligation arises from civil liability as a consequence of a criminal offense. (Art. 1161, Civil Code) Art. 1161. Civil obligations arising from criminal offenses shall be governed by the penal laws, subject to the provisions of Article 2177, and of the pertinent provisions of Chapter 2, Preliminary Title, on Human Relations, and of Title XVIII of this Book, regulating damages. (1092a) 9  Example: The obligation of the thief to return the thing stolen by him; the duty of the offender to indemnify the heirs of the victim. Civil liability arising from crimes or delicts. Oftentimes, the commission of a crime causes not only moral evil but also material damage. General Rule: Every person criminally liable is also civilly liable for damages. (Art. 100, Revised Penal Code) Exception: In crimes which cause no material damage, there is no civil liability to be enforced such as contempt, violation of the Comprehensive Dangerous Drugs Act, violation of the Election Code, possession of firearms and ammunitions. However, a person not criminally responsible may still be civilly liable, such as causing damage to another’s property without malicious or criminal intent or negligence. Scope of civil liability. (1) Restitution (2) Reparation for the damage caused: and (3) Indemnification for consequential damages. (Art. 104, Revised Penal Code) Example: If Akusado convicted for the crime of carnapping, the court will order Akusado to: (1) Return the car or pay its value if it was lost or destroyed; (2) Pay for any damage caused to the car; and (3) Indemnify such other damages suffered by the offended party as a consequence of the crime, such as moral, nominal, or exemplary damages. 5. Quasi-de1icts or torts: When the obligation arises frum damage caused to another through an act or omission, there being fault or negligence, but no contractual relation exists between the parties. (Art. 2176, Civil 10 Code) Art. 1162. Obligations derived from quasi-delicts shall be governed by the provisions of Chapter 2, Title XVII of this Book, and by special laws. (1093a) Example: The obligation of the possessor of an animal to pay for the damage which it may have caused. (Art. 2183, Civil Code) Obligations arising from quasi-delicts. A quasi-delict is an act or omission by a person which causes damage to another, there being fault or negligence, but without any pre-existing contractual relation between the parties. (Art. 2176, Civil Code) Requisites of quasi-delict. Before a person may be held liable for quasi-delict, the following requisites must concur: (1) There must be an act or omission; (2) Such act or omission causes damage to another; (3) Through fault or negligence: (4) There must be a direct relation or connection between the act or omission and the resulting damage; and (5) There is no pre-existing contractual relation between the parties. Example: While having ball game with friends, Bata broke the window glass of Tanda, his neighbor. The accident would not have happened had they played a little farther from the house of Tanda. In this case, Bata is under obligation to pay the damage caused to Tanda by his act although there is no pre-existing contractual relation between them because Bata is guilty of negligence. Crime distinguished from quasi-delict. 11  Crime Quasi-delict There is criminal or malicious There is only negligence intent or criminal negligence. The purpose is indemnification of The purpose is punishment. the offended party, Affects public interest Concerns private interest There is generally both criminal Civil liability only and civil liability. Cannot be compromised or settled Can be compromised any other by the parties themselves civil liability The fault or negligence of the The guilt of the accused must be defendant need only be proved by proved beyond reasonable doubt. preponderance of evidence. Actually, there are only two (2) sources, that is, law and contracts, because obligations arising from quasi-contracts, delicts, and quasi-delicts are actually imposed by law. (Leung Ben vs. O' Brien, 38 Phil. 182) 12