Mgt 161 Law on Business Transactions PDF

ART. 1156. An obligation is a juridical necessity to give, to do, or not to do. Mgt 161...

ART. 1156. An obligation is a juridical necessity to give, to do, or not to do. Mgt 161 BOOK IV OBLIGATIONS AND CONTRACTS Juridical necessity – in the case of non-compliance, Law on Business Title. I. – OBLIGATIONS the courts of justice may be called upon to enforce its fulfillment. Transactions CHAPTER 1 The debtor/obligor may also be made liable for GENERAL PROVISIONS damages, which represent the sum of money given as compensation for the injury or harm suffered by the creditor/obligee. Atty. Emi Rose S. Remoroza-Parcon 2 3 Kinds of obligation according to Essential requisites of an obligation: ART. 1157. Obligations arise from: subject matter: 1. A passive subject (debtor/obligor) - the person who is bound to the fulfillment of the obligation he who has a duty; 1. real obligation (obligation to give) - that in (1) Law; 2. An active subject (creditor/obligee) – the person who is which the subject matter is a thing which the entitled to the fulfillment of the obligation; he who has a obligor must deliver to the oblige; or (2) Contracts; right; (3) Quasi-contracts; 3. Object/prestation (subject matter of the obligation) – 2. personal obligation (obligation to do or not to (4) Acts or omissions punished by law; conduct required by the debtor. do) – that in which the subject matter is an act: 4. A juridical or legal tie (efficient cause) - that which binds and or connects the parties to the obligation. a. to be done (positive), or (5) Quasi-delicts. b. not to be done (negative). 4 5 6 Sources of obligations: Sources of obligations: Classification of sources of obligations: 1. law – those imposed by a law (e.g. obligation to pay taxes, 4. crimes or acts/omissions punished by law – when they arise support one’s family) from civil liability which is the consequence of a criminal 1. Those emanating from LAW offense (e.g. the obligation by a thief to return the items 2. contracts – those arising from stipulation of the parties stolen) 2. Those emanating from private ACTS: (e.g. obligation to pay a loan) a. those arising from licit acts, in the case of contracts 5. quasi-delicts or torts – when they arise from damage and quasi-contracts; 3. quasi-contracts – when they arise from lawful, voluntary, caused to another through an act or omission, there being b. those arising from illicit acts, and unilateral acts and which are enforceable to the end that fault or negligence, but no contractual relation exists - punishable by law in the case of delicts; no one shall be unjustly enriched or benefitted at the between the parties (e.g. obligation of a possessor of an - not punishable by law in the case of quasi-delicts. expense of another (e.g. the obligation to return money paid animal to pay for damages which it may have caused) by mistake) 7 8 9  ART. 1159. Obligations arising from ART. 1158. Obligations derived from contracts have the force of law ART. 1160. Obligations derived from law are not presumed. ONLY those between the contracting parties and quasi-contracts shall be subject to the expressly determined in this Code or should be complied with in good provisions of Chapter 1, Title XVII of in special laws are demandable, and faith. this Book shall be regulated by the precepts of * must be complied fully, not selectively the law which establishes them; and * one party may not renege without the consent of the other * In quasi-contract, there is no consent but the same is supplied by fiction of law. In Other words, the law considers to what has not been foreseen, by the the parties as having entered into a contract, irrespective of - absent any allegation that is contrary to law, morals, good their intention, to prevent injustice or the unjust enrichment provisions of this Book. customs, public order, or public policy. of a person at the expense of another. - valid and enforceable 10 11 12 Civil liability includes: Kinds of quasi-contracts: ART. 1161. Civil obligations arising 1. Restitution 1. Negotiorum gestio – voluntary management of the property from criminal offenses shall be 2. Reparation for the damages caused; of affairs of another without the knowledge or consent of the governed by the penal laws, subject 3. Indemnification for consequential damages latter. to the provisions of Article 2177, and Example: 2. Solutio indebiti – the juridical relation which is created when something is received by a person when there is no of the pertinent provisions of Chapter Juan stole the car of Juanita. If Juan is convicted, the court will right to demand it and it was unduly delivered through 2, Preliminary Title, on Human order Juan: mistake. a. to return the car or pay for its value if lost or destroyed Relations, and of Title XVIII of this b. pay for any damage caused to the car c. pay such other damages suffered by Juanita as a consequence of Book, regulating damages. the crime 13 14 15 Requisites of a quasi-delict ART. 1162. Obligations derived BOOK IV 1. There must be an act or omission by the defendant; from quasi-delicts shall be OBLIGATIONS AND CONTRACTS Title. I. – OBLIGATIONS 2. There must be fault or negligence of the defendant; governed by the provisions of 3. There must be a direct relation or connection of cause and Chapter 2, Title XVII of this Book, effect between the act or omission of the damage; and CHAPTER 2 4. There is no pre-existing contractual relation between and by special laws (TORTS). the parties. NATURE AND EFFECT OF OBLIGATIONS 16 17 18  Meaning of a specific or determinate thing ART. 1163. Every person obliged to A thing is said to be specific or determinate when it is Duties of a debtor in obligation to give a give something is also obliged to take particularly designated or physically segregated from all determinate thing: others of the same class. care of it with the proper diligence of * identified by its individuality; cannot be substituted with another 1. preserve or take care of the thing due * a good father of a family, unless the (even of same kind and quality) without the consent of the creditor 2. deliver the fruits of the thing 3. deliver its accession and accessories law or the stipulation of the parties Meaning of a generic or indeterminate thing 4. deliver the thing itself requires another standard of care. A thing is generic or indeterminate when it refers only to a 5. answer for damages in case of non-fulfillment or breach. class or genus to which it pertains and cannot be pointed out * diligence of a good father of a family * The above provision refers to an obligation to give with particularity. a specific or determinate thing * identified only by its specie; can be substituted of the same class as long as it is of the same kind. 19 20 21 Duties of a debtor in obligation to give a generic Different kinds of fruits: thing: ART. 1164. The creditor has a right to the fruits of the thing from the 1. Natural fruits – spontaneous products of the soil, and 1. to deliver a thing which is of the same quality intended by the parties taking into consideration the purpose of the obligation and time the obligation to deliver it the young and other products of animals; other circumstances; and arises. However, he shall acquire 2. Industrial fruits – those produced by lands of any kinds through cultivation or labor 2. to be liable for damages in case of fraud, negligence, or delay in the performance of his/her/their obligation, or contravention of no real right over it until the same 3. Civil fruits – those derived by virtue of a juridical the tenor thereof has been delivered to him. relation 22 23 24 Meaning of personal right and real right Personal and real right distinguished When the obligation to deliver arises: While in personal right there is a definite active subject and a 1. Personal right is the right or power of a person (obligee) to definite passive subject, in real right, there is only a definite 1. Generally, at the time of the perfection * demand from another (obligor), as a definite passive subject, active subject without any definite passive subject 2. If the obligation is subject to a suspensive condition or the fulfillment of the latter’s obligation to give, to do, or not to period, it arises upon fulfillment of the condition or arrival do. A personal right is, therefore, binding or enforceable only against a of a period. ** particular person while a real right is directed against the whole 2. Real right is the right or interest of a person over a specific world. 3. In obligations arising from law, quasi-contracts, delicts, thing (like ownership, possession, mortgage, lease) without a and quasi-delicts, the time of performance is determined definite passive subject against whom the right may be Debtor Creditor by the specific provisions of the law applicable. personally enforced. Personal Definite Definite * birth of the contract, or the meeting of the minds between the parties Real w/o any definite Definite ** the parties may make a stipulation to the contrary as regards to the rights of the creditor to the fruits of the thing. 25 26 27  Personal and real right distinguished Ownership acquired by delivery. ART. 1165. When what is to be delivered is a determinate While in personal right there is a definite active subject and a Ownership and other real rights over property are acquired and thing, the creditor, in addition to the right granted him definite passive subject, in real right, there is only a definite transmitted by: (a) law, (b) donation, (c) testate or intestate by Article 1170, may compel the debtor to make the active subject without any definite passive subject succession, and (d) in consequence of certain contracts by delivery. tradition, or delivery A personal right is, therefore, binding or enforceable only against a If the thing is indeterminate or generic, he may ask that 1. Delivery in sale – when there is an agreement that the thing sold the obligation be complied with at the expense of the particular person while a real right is directed against the whole is transferred from the vendor to the vendee. world. debtor. 2. Acquisition of real rights If the obligor delays, or has promised to deliver the same Debtor Creditor “he shall acquire no real right over it until the same has been Personal Definite Definite delivered to him” – the creditor does not become the owner until thing to two or more persons who do not have the same Real w/o any definite Definite the thing has been delivered to him interest, he shall be responsible for any fortuitous event until he has effected the delivery. 28 29 30 Remedies of a creditor in real obligation Remedies of a creditor in real 1. In a specific real obligation (obligation to deliver a determinate obligation ART. 1166. The obligation to give a thing): 2. A generic real obligation (obligation to deliver a generic determinate thing includes that of a. demand specific performance * thing), on the other hand, can be performed by a third person delivering all its accessions and b. demand rescission or cancellation of the obligation * since the object is expressed only according to its family or c. demand payment of damages only (where it is the only genus. * accessories, even though they may feasible remedy) * If there is breach, the creditor has a right to recover not have been mentioned. * with right to indemnity to damages damages 31 32 33 Meaning of accessions and accessories ART. 1167. If a person obliged to do 1. Accessions are the fruits of, or additions to, or improvements something fails to do it, the same upon, a thing shall be executed at his cost. ART. 1168. When the obligation 2. Accessories are things joined to, or included with, the principal consists in not doing, and the obligor thing for the latter’s embellishment, better use, or completion. This same rule shall be observed if he does what has been forbidden him, it does it in contravention of the tenor * while accessions are not necessary to the principal thing, the shall also be undone at his expense. accessory and the principal thing must go together. But, both the of the obligation. Furthermore, it may accessions and the accessories can exist only in relation to the principal. be decreed that what has been poorly done be undone. 34 35 36 ART. 1169. Those obliged to deliver or to (1) When the obligation or the law expressly so In reciprocal obligations, neither party do something incur in delay from the declare; or incurs in delay if the other does not time the obligee judicially or (2) When from the nature and the circumstances of comply or is not ready to comply in a extrajudicially demands from them the the obligation it appears that the designation of the time when the thing is to be delivered or the proper manner with what is fulfillment of their obligation. service is to be rendered was a controlling motive incumbent upon him. From the However, the demand by the creditor for the establishment of the contract; or moment one of the parties fulfills his shall not be necessary in order that (3) When demand would be useless, as when the obligation, delay by the other begins. delay may exist: obligor has rendered it beyond his power to perform. 37 38 39 Kinds of delay Requisites of delay or default by the Ordinary delay versus Legal delay 1. Mora solvendi – delay of the debtor to fulfill his/her/their debtor obligation 1. Ordinary delay is merely the failure to perform an 1. failure of the debtor to perform his/her/they (positive) obligation on time. 2. Mora accipiendi – delay on the part of the creditor without obligation on the date agreed upon. justifiable reason to accept the performance of the 2. Legal delay or default is the failure to perform an obligation; and 2. demand (not mere reminder or notice) made by the obligation on time which failure constitutes a breach of the creditor upon the debtor to fulfill, perform, or comply with obligation 3. Compensatio morae – the delay of the obligors in the legal obligation (judicial or extrajudicially) reciprocal obligations (the delay of the obligor cancels the delay of the obligee) 3. failure of the to comply with such demand. 40 41 42 Effects of delay (mora accipiendi) Effects of delay (compensation morae) Effects of delay (mora solvendi) 1. creditor is guilty of breach 1. no actionable default – the delay of the obligor cancels out 1. debtor is guilty of breach the delay of the obligee and vice versa 2. creditor is liable for damages suffered, if any, by the 2. debtor is liable for interest (for money claims/obligations) debtor 2. equitably tempered or balance by the courts – if the delay or damages of one party is followed by a significant amount of time by 3. creditor bears the risk of loss of the thing due the other. 3. he is liable for fortuitous events when the obligation is to deliver a determinate thing. 4. where the obligation is to pay money, the debtor is not If it cannot be determined which of the parties is guilty of liable for interest from the time of the creditor’s delay delay, the contract shall be deemed extinguished and each shall bear his/her/their own damages 5. the debtor may release himself from the obligation by the consignation of the thing or sum due. 43 44 45 When demand is not necessary to put on delay 1. when the obligation so provides Mgt 161 Law on Business REVIEW 2. when the law so provides 3. when time is of the essence 4. when demand would be useless Transactions 5. when there is performance by a party in reciprocal obligations Atty. Emi Rose S. Remoroza-Parcon 46 2 NATURE & EFFECTS ART. 1169. Those obliged to deliver or to GENERAL PROVISIONS Art. 1163 – Specific & generic things do something incur in delay from the Art. 1156 – Meaning & essential requisites of Art. 1164 – Fruits time the obligee judicially or an obligation Art. 1165 – Creditor remedies in real extrajudicially demands from them the Art. 1157 – Sources of obligation obligations Art. 1166 – Accessions & accesories fulfillment of their obligation. Art. 1158 – Legal obligation Art. 1159 – Contractual obligation Art. 1167 – Creditor remedies in personal However, the demand by the creditor Art. 1160 – Quasi-contractual obligations positive obligations shall not be necessary in order that Art. 1161 – Delicts, civil liability Art. 1168 – Creditor remedies in negative delay may exist: Art. 1162 – Quasi - delicts obligations 3 Art. 1169 – DELAY 4 5 (1) When the obligation or the law expressly so In reciprocal obligations, neither party declare; or incurs in delay if the other does not Ordinary delay versus Legal delay (2) When from the nature and the circumstances of comply or is not ready to comply in a 1. Ordinary delay is merely the failure to perform an the obligation it appears that the designation of obligation on time. the time when the thing is to be delivered or the proper manner with what is 2. Legal delay or default is the failure to perform an service is to be rendered was a controlling motive incumbent upon him. From the obligation on time which failure constitutes a breach of the for the establishment of the contract; or moment one of the parties fulfills his obligation (3) When demand would be useless, as when the obligation, delay by the other begins. obligor has rendered it beyond his power to perform. 6 7 8 Kinds of delay Requisites of delay or default by the 1. Mora solvendi – delay of the debtor to fulfill his/her/their Effects of delay (mora solvendi) debtor obligation 1. debtor is guilty of breach 1. failure of the debtor to perform his/her/they (positive) 2. Mora accipiendi – delay on the part of the creditor without obligation on the date agreed upon. 2. debtor is liable for interest (for money claims/obligations) justifiable reason to accept the performance of the or damages obligation; and 2. demand (not mere reminder or notice) made by the creditor upon the debtor to fulfill, perform, or comply with 3. he is liable for fortuitous events when the obligation is to 3. Compensatio morae – the delay of the obligors in the legal obligation (judicial or extrajudicially) deliver a determinate thing. reciprocal obligations (the delay of the obligor cancels the delay of the obligee) 3. failure of the to comply with such demand. 9 10 11 Effects of delay (mora accipiendi) Effects of delay (compensation morae) When demand is not necessary to put 1. creditor is guilty of breach 1. no actionable default – the delay of the obligor cancels out on delay the delay of the obligee and vice versa 1. when the obligation so provides 2. creditor is liable for damages suffered, if any, by the debtor 2. equitably tempered or balance by the courts – if the delay 2. when the law so provides of one party is followed by a significant amount of time by 3. creditor bears the risk of loss of the thing due the other. 3. when time is of the essence 4. where the obligation is to pay money, the debtor is not If it cannot be determined which of the parties is guilty of 4. when demand would be useless liable for interest from the time of the creditor’s delay delay, the contract shall be deemed extinguished and each shall bear his/her/their own damages 5. when there is performance by a party in reciprocal 5. the debtor may release himself from the obligation by the obligations consignation of the thing or sum due. 12 13 14 BOOK IV Art. 1170 – Grounds for liability Art. 1171 - Responsibility arising from fraud ART. 1170. Those who in the OBLIGATIONS AND CONTRACTS Art. 1172 - Responsibility arising from performance of their obligations Title. I. – OBLIGATIONS negligence are guilty of fraud, negligence, or CHAPTER 2 Art. 1173 – Definition of negligence Art. 1174 – Assumption of risk delay, and those who in any NATURE AND EFFECT OF Art. 1175 – Usurious transactions manner contravene the tenor OBLIGATIONS Art. 1176 – Payment of principal over interest thereof, are liable for damages. Articles 1163 - 1178 Art. 1177 – Payment for latter interests Art. 1178 – Transmissibility of rights 15 16 17  Fraud – deceit / dolo Grounds for liability - includes any act, omission, or concealment involving some kind of malice or dishonesty with Breach of contract 1. fraud (deceit / dolo) – incidental fraud the deliberate intention to cause damage or failure without justifiable excuse or reason to 2. negligence (fault / culpa) prejudice. comply with the terms of a contract 3. delay (mora) * incidental fraud – committed in the performance 4. contravention of the terms of the obligation of an obligation * employed for the purpose of evading the normal fulfillment of an obligation 18 19 20 Fraud vs. Negligence Fraud vs. Negligence Negligence – fault / culpa 1. In fraud, there is a deliberate intention to cause damage or injury, while in negligence, 3. Fraud must be clearly proved, mere preponderance of evidence not being sufficient - voluntary act or omission, there being no bad there is no such intention. while negligence is presumed from the breach faith or malice, which prevents the normal * volition & intent of a contractual obligation. fulfillment of an obligation 2. Waiver of the liability for future fraud is 4. Lastly, liability for fraud cannot be void, while such waiver may, in certain sense, mitigated by the courts, while liability for be allowed in negligence. negligence may be reduced according to the circumstances. 21 22 23 Gross negligence does not signify mere omission of duties nor Contravention of the terms of the Negligence = fraud? the exercise of less than the standard degree obligation of care. Where the negligence shows bad faith or is so - violation of the terms and conditions gross that it amounts to malice or wanton It refers to negligence characterized by the stipulated in the obligation. The contravention attitude on the part of the defendant failure to exercise even slight care or must not be due to a fortuitous event or force diligence, or the entire absence of care, acting majeure. * The rules of fraud applies. or omitting to act on a situation where is a * force majeure - unforeseeable circumstances duty to act, not inadvertently, but willfully and that prevent someone from fulfilling a intentionally, with complete disregard for the contract 24 harmful consequences of his conduct to others. 25 26  ART. 1172. Responsibility arising Fraud from negligence in the ART. 1171. Responsibility arising The court is not given to mitigate or reduce performance of every kind of from fraud is demandable in all the damages to be awarded. obligation is also demandable, but obligations. Any waiver of an Waiver such liability may be regulated by action for future fraud is void. - future – void the courts, according to the - past - valid circumstances. 27 28 29 Negligence Negligence contractual vs. aquilana Negligence The court has the discretion to fix the measure of Contractual negligence damages - has prior contract contractual vs. aquilana - not a source of obligation Contractual negligence * mutual negligence Civil negligence - employer is liable * waiver – valid – tort / quasi-delict except those which require extraordinary - has no prior contract Civil negligence diligence – employer is not liable Criminal negligence - negligence resulting in the commission of a crime 30 31 32 ART. 1173. The fault or negligence of ART. 1173. … the obligor consists in the omission of Contributory negligence that diligence which is required by the If the law or contract does not nature of the obligation and corresponds Conduct that falls below the standard of care state the diligence which is to be which one is required to perform that has with the circumstances of the persons, of the time and of the place. When observed in the performance, that contributed to the legal harm caused to him/her/them. negligence shows bad faith, the which is expected of a good father provisions of Articles 1171 and 2201, of a family shall be required. paragraph 2, shall apply… 33 34 35 Diligence Factors to be considered Exercise of reasonable care and caution expected Kinds of diligence of an ordinary prudent person 1. nature of the obligation 1. AGREED upon by the parties, orally or in writing 2. circumstances of the person 3. circumstances of time 2. in the absence of stipulation, that required by Negligence 4. circumstances of place LAW - reasonable foresight of harm 3. if both contract and law are silent, good father - ignoring the admonition * the greater the risk, the greater the degree of of a family (bonos paterfamilias) care required * never presumed / one who alleges is the one * extraordinary risk demands extraordinary care to prove 36 37 38 ART. 1174. Except in cases expressly Fortuitous event specified by the law, or when it is 1. acts of man – independent of the will of the Fortuitous event obligor otherwise declared by stipulation, or when the nature of the obligation - any extraordinary event which cannot be e.g. fire, war, robbery, murder, insurrection requires the assumption of risk, no foreseen (impossible to foresee) - if foreseen, is inevitable (impossible to 2. acts of God – independent of the will of person shall be responsible for those avoid) every human being events which could not be foreseen, or e.g. earthquake, flood, rain, shipwreck, which, though foreseen, were * independent of the will of the obligor lightning, eruption of volcano inevitable. 39 40 ??? NAGA LANDSLIDE 41 Fortuitous event - requisites Fortuitous event – obligor liable Fortuitous event 1. independent of human will / obligor’s will 1. expressly specified by law a. promise of delivery to two parties 2. unforeseeable or unavoidable 1. ordinary fortuitous – rain b. debt of a thing certain and determinate which 3. renders compliance of obligation impossible proceeds from a criminal offense c. generic 2. extraordinary – earthquake, fire, war, 4. obligor must be free from any participation 2. declared by stipulation pestilence, unusual flood. or aggravation of injury * 3. assumption of risk * concurrent or previous negligence 42 43 44  Usury Contracting for or receiving interest in excess of ART. 1176. The receipt of the the amount allowed by law for the loan or use of principal by the creditor without ART. 1175. Usurious transactions money, goods, chattels, or credits reservation with respect to the shall be governed by special laws. Usury Law interest, shall give rise to the - suspended by Central Bank Circular No. 905 presumption that said interest has * excessive, exorbitant, or unconscionable interest been paid. may be declared illegal by the court for being “contrary to morals and the law” … 45 46 47 ART. 1176. … Presumption The receipt of a later installment inference of the existence/non-existence of a fact Art. 1176 is inapplicable if not actually known of a debt without reservation as to 1. there is expressed reservation prior installments, shall likewise Two kinds of presumption 2. prior stipulation 1. conclusive – cannot be contradicted nor 3. part of the principal raise the presumption that such overturned 4. payment of taxes installments have been paid. 2. disputable – may be rebutted / overcome if presented with proof to the contrary 48 49 50 ART. 1177. The creditors, after having pursued the property in possession of Remedies available to creditors ART. 1178. Subject to the laws, all the debtor to satisfy their claims, may exercise all the rights and bring all the 1. specific performance rights acquired in virtue of an 2. levy actions of the latter for the same 3. right to redeem obligation are transmissible, if purpose, save those which are 4. collect from the debtor of his/her/their debtor there has been no stipulation to 5. rescind or impugn acts/contracts inherent in his person; they may also the contrary. impugn the acts which the debtor may have done to defraud them. 51 52 53 Exceptions: Mgt 161 1. prohibited by law a. partnership b. agency c. commodatum (gratuitous) 2. prohibited by stipulation of parties Law on Business Transactions REVIEW Atty. Emi Rose S. Remoroza-Parcon 54 2 BOOK IV NATURE & EFFECTS Art. 1170 – Grounds for liability Art. 1163 – Specific & generic things Art. 1171 - Responsibility arising from fraud OBLIGATIONS AND CONTRACTS Art. 1172 - Responsibility arising from Art. 1164 – Fruits Title. I. – OBLIGATIONS Art. 1165 – Creditor remedies in real negligence CHAPTER 2 obligations Art. 1173 – Definition of negligence Art. 1166 – Accessions & accesories Art. 1174 – Assumption of risk NATURE AND EFFECT OF Art. 1175 – Usurious transactions Art. 1167 – Creditor remedies in personal OBLIGATIONS positive obligations Art. 1176 – Payment of principal over interest Articles 1163 - 1178 Art. 1168 – Creditor remedies in negative Art. 1177 – Payment for latter interests obligations Art. 1178 – Transmissibility of rights 3 Art. 1169 – DELAY 4 5 Usury Contracting for or receiving interest in excess of ART. 1176. The receipt of the the amount allowed by law for the loan or use of principal by the creditor without ART. 1175. Usurious transactions money, goods, chattels, or credits reservation with respect to the shall be governed by special laws. Usury Law interest, shall give rise to the - suspended by Central Bank Circular No. 905 presumption that said interest has * excessive, exorbitant, or unconscionable interest been paid. may be declared illegal by the court for being “contrary to morals and the law” … 6 7 8  ART. 1176. … Presumption The receipt of a later installment inference of the existence/non-existence of a fact Art. 1176 is inapplicable if not actually known of a debt without reservation as to 1. there is expressed reservation prior installments, shall likewise Two kinds of presumption 2. prior stipulation 1. conclusive – cannot be contradicted nor 3. part of the principal raise the presumption that such overturned 4. payment of taxes installments have been paid. 2. disputable – may be rebutted / overcome if presented with proof to the contrary 9 10 11 ART. 1177. The creditors, after having pursued the property in possession of Remedies available to creditors ART. 1178. Subject to the laws, all the debtor to satisfy their claims, may exercise all the rights and bring all the 1. specific performance rights acquired in virtue of an 2. levy actions of the latter for the same 3. right to redeem obligation are transmissible, if purpose, save those which are 4. collect from the debtor of his/her/their debtor there has been no stipulation to 5. rescind or impugn acts/contracts inherent in his person; they may also the contrary. impugn the acts which the debtor may have done to defraud them. 12 13 14 Exceptions: 1. prohibited by law a. partnership b. agency Chapter Instructions: 1. Group yourselves into groups of 3 2. Create a Facebook Messenger among your group members 3. You are to give your answers per group 4. Choose a representative who will be in-charge in sending your answers Review c. commodatum (gratuitous) 5. For the group representative, rename your name to your Group 2. prohibited by stipulation of parties Number 6. After I show you the question, you are given 30 seconds for a group to come up with an answer 7. After 30 seconds, submit your group answer to the Zoom chat group. 15 16 17  Determine if any of these items are specific/determinate or What is an generic/indeterminate things As a general rule, when a. Mara’s money in her bank account does the obligation to obligation? b. Klent’s recently purchased iPhone 14 c. Piya’s life insurance proceeds deliver arise? d. Jersy’s mystery novel on her nightstand #1 18 #2 19 #3 20 As a general rule, when is an Cite an example or What is the failure without obligee’s ownership over the circumstance when justifiable excuse or reason to thing that is subject of an demand is not necessary comply with the terms of a obligation arise? to put on delay contract? #4 21 #5 22 #6 23 What are the 4 instances When does an employer when the obligor is in What is become liable when one of his/her/their employee breach of his/her/their negligence? becomes negligent? obligation? #7 24 #8 25 #9 26 In the absence of a stipulation or a legal provision mandating the type Mgt 161 of diligence required in an obligation, what is the standard of diligence required in an obligation? Law on Business Transactions REVIEW #10 27 Atty. Emi Rose S. Remoroza-Parcon 2 BOOK IV NATURE & EFFECTS Art. 1170 – Grounds for liability Art. 1163 – Specific & generic things Art. 1171 - Responsibility arising from fraud OBLIGATIONS AND CONTRACTS Art. 1172 - Responsibility arising from Art. 1164 – Fruits Title. I. – OBLIGATIONS Art. 1165 – Creditor remedies in real negligence CHAPTER 2 obligations Art. 1173 – Definition of negligence Art. 1166 – Accessions & accesories Art. 1174 – Assumption of risk NATURE AND EFFECT OF Art. 1175 – Usurious transactions Art. 1167 – Creditor remedies in personal OBLIGATIONS positive obligations Art. 1176 – Payment of principal over interest Articles 1163 - 1178 Art. 1168 – Creditor remedies in negative Art. 1177 – Payment for latter interests obligations Art. 1178 – Transmissibility of rights 3 Art. 1169 – DELAY 4 5 BOOK IV ART. 1179. Every obligation whose OBLIGATIONS AND CONTRACTS performance does not depend upon a future Pure Obligation Title. I. – OBLIGATIONS or uncertain event, or upon a past event -is not subject to any condition and specific date CHAPTER 3 unknown to the parties, is demandable at - immediately demandable once. - “upon demand” DIFFERENT KINDS OF Every obligation which contains a resolutory OBLIGATIONS condition shall also be demandable, without NOTE: In a loan, a period is always intended by the parties even without any period specified. SECTION 1. - Pure and prejudice to the effects of the happening of Conditional Obligations the event. (1113) Articles 1179 - 1192 6 7 8 Conditional Obligation Suspensive Condition Characteristics of a Condition -is one whose consequences are subject in one way - the fulfillment of which gives rise to an 1. future and uncertain or another to the fulfillment of a condition. 2. past but unknown obligation or right - demandability is suspended Condition - is a future and uncertain event, upon the Two Principal Kinds of Condition happening of which, an obligation is acquired or Resolutory Condition 1. suspensive (condition precedent or antecedent) extinguished 2. resolutory (condition subsequent) - the fulfillment of which will extinguish an - must not be impossible obligation (or right) already existing 9 10 11 Condition for perfection v. condition imposed on the performance ART. 1180. When the debtor binds Condition for perfection v. e.g. removal of squatters himself to pay when his means condition imposed on the permit him to do so, the performance When obligation becomes obligation shall be deemed to be demandable at once one with a period, subject to the e.g. removal of squatters 1. pure obligations provisions of Article 1197. 2. when it is subject to a resolutory condition 3. when it is subject to a resolutory period 12 13 14 e.g. ART. 1181. In conditional Suspensive e.g. 1. “when my means permit me to do so” obligations, the acquisition of 1. sweepstakes ticket 2. “little by little” 2. contract TO sell 3. “as soon as possible” rights, as well as the 3. awarding of government contract 4. “from time to time” extinguishment or loss of those 4. surety agreement 5. “as soon as I have the money” 6. “at any time I have the money” already acquired, shall depend Resolutory e.g. 7. “in partial payment” upon the happening of the event 1. right of repurchase 8. “when I am in the position to pay” which constitutes the condition. 2. use of a property leased 15 16 17 ART. 1182. When the fulfillment of the Postestative Condition Classifications of conditions condition depends upon the sole will - suspensive 1. as to effect – suspensive vs. resolutory - depends upon the sole will of the contracting of the debtor, the conditional 2. as to form – express vs. implied parties obligation shall be void. If it depends 3. as to possibility – possible vs. impossible 4. as to cause or origin – potestative vs. casual vs. 1. upon the will of the debtor – condition is void upon chance or upon the will of a 2. upon the will of the creditor – condition is valid mixed third person, the obligation shall take 5. as to mode – positive vs. negative 3. mixed potestative - valid effect in conformity with the 6. as to number – conjunctive vs. disjunctive 7. as to divisibility – divisible vs. undivisible Casual Condition provisions of this Code. (1115) - depends upon the will of a third party 18 19 20 ART. 1183. Impossible conditions, those contrary to good customs or public policy Two kinds of impossible Effects of impossible conditions and those prohibited by law shall annul the 1. conditional obligation void obligation which depends upon them. If the conditions 2. conditional obligation valid – negative condition obligation is divisible, that part thereof 1. physically impossible conditions which is not affected by the impossible or 2. legally impossible conditions 3. only the affected obligation is valid unlawful condition shall be valid. “contrary to law, morals, good customs, public order, or public policy” 4. only the condition is void The condition not to do an impossible thing shall be considered as not having been agreed upon. 21 22 23 ART. 1184. The condition that Positive suspensive condition ART. 1185. The condition that some event happen at a - happening of an event at a determinate some event will not happen at a time. The obligation is extinguished: determinate time shall render the determinate time shall extinguish the obligation as soon as the time 1. as soon as the time expires without the event obligation effective from the taking place; or expires or if it has become 2. as soon it has become indubitable that the event moment the time indicated has indubitable that the event will not will not take place although the time specified has elapsed, or if it has become not yet expired. take place. evident that the event cannot e.g. marrying a certain person at a certain age occur… 24 25 26  Negative suspensive condition ART. 1185… - the event will not happen at a determinate ART. 1186. The condition shall If no time has been fixed, the time. The obligation is extinguished: be deemed fulfilled when the condition shall be deemed fulfilled 1. time has been fixed – when the time comes and at such time as may have probably the event does not happen. obligor voluntarily prevents its 2. no time has been fixed – determine the intention fulfillment. been contemplated, bearing in of the parties mind the nature of the obligation. 27 28 29 ART. 1187. The effects of a conditional ART. 1187… If the obligation is ART. 1187… obligation to give, once the condition has been fulfilled, shall retroact to the day of unilateral, the debtor shall In obligations to do and not to the constitution of the obligation. appropriate the fruits and interests Nevertheless, when the obligation imposes received, unless from the nature and do, the courts shall determine, reciprocal prestations upon the parties, the circumstances of the obligation it in each case, the retroactive fruits and interests during the pendency of should be inferred that the intention effect of the condition that has the condition shall be deemed to have been of the person constituting the same mutually compensated… been complied with. was different… 30 31 32 ART. 1188. The creditor may, before the fulfillment of the condition, bring the Right of a Creditor Retroactive effects of fulfillment appropriate actions for the preservation of - prevent the alieanation of concealment of suspensive condition - annotation his right. 1. obligations to give 2. obligations to give – bilateral Rights of a Debtor The debtor may recover what during the 3. obligations to give – unilateral - recover what has been paid before the 4. obligations to do same time he has paid by mistake in case of fulfillment of an obligation a suspensive condition. 33 34 35  (1) If the thing is lost without the fault of ART. 1189. When the conditions have the debtor, the obligation shall be (3) When the thing deteriorates without the been imposed with the intention of extinguished; fault of the debtor, the impairment is to be suspending the efficacy of an borne by the creditor; obligation to give, the following rules (2) If the thing is lost through the fault of shall be observed in case of the the debtor, he shall be obliged to pay (4) If it deteriorates through the fault of improvement, loss or deterioration of damages; it is understood that the thing is the debtor, the creditor may choose lost when it perishes, or goes out of between the rescission of the obligation the thing during the pendency of the commerce, or disappears in such a way that and its fulfillment, with indemnity for condition: its existence is unknown or it cannot be damages in either case; 36 recovered; 37 38 Requisites (5) If the thing is improved by its nature, or 1.obligation is a real obligation Kinds of Loss by time, the improvement shall inure to the 2.object is a specific / determinate thing 1. physical loss 3.subject to a suspensive condition benefit of the creditor; 2. legal loss – goes out of commerce (use of 4.the condition is fulfilled 5.there is USD during Japanese occupation (6) If it is improved at the expense of the a. loss 3. civil loss – existence is unknown or even if debtor, he shall have no other right than b. deterioration unknown, cannot be recovered that granted to the usufructuary. c. improvement before the condition happened 39 40 41 Loss 1. not the debtor’s fault – obligation extinguished ART. 1190… In case of the loss, 2. debtor’s fault – creditor entitled to damages ART. 1190. When the conditions deterioration or improvement of Deterioration have for their purpose the 1. not the debtor’s fault – creditor suffers the the thing, the provisions which, extinguishment of an obligation to impairment with respect to the debtor, are laid 2. debtor’s fault – creditor is entitled to give, the parties, upon the a. choice between rescission or fulfillment down in the preceding article shall fulfillment of said conditions, shall b. damages be applied to the party who is return to each other what they Improvement bound to return… 1. by nature – inure to the benefit of the creditor have received... 2. debtor’s expense – debtor is usufuctruary 42 43 44  ART. 1191…The injured party may ART. 1190… As for the obligations ART. 1191. The power to rescind choose between the fulfillment to do and not to do, the provisions obligations is implied in reciprocal and the rescission of the of the second paragraph of Article ones, in case one of the obligors obligation, with the payment of 1187 shall be observed as regards should not comply with what is damages in either case. He may the effect of the extinguishment incumbent upon him… also seek rescission, even after he of the obligation. has chosen fulfillment, if the latter should become impossible… 45 46 47 ART. 1191… ART. 1192. In case both parties have The court shall decree the rescission committed a breach of the obligation, claimed, unless there be just cause the liability of the first infractor shall Mgt 161 authorizing the fixing of a period. be equitably tempered by the courts. Law on Business This is understood to be without prejudice If it cannot be determined which of to the rights of third persons who have the parties first violated the contract, Transactions acquired the thing, in accordance with the same shall be deemed Articles 1385 and 1388 and the Mortgage extinguished, and each shall bear his Law. own damages. Atty. Emi Rose S. Remoroza-Parcon 48 49 BOOK IV ART. 1193… ART. 1193. Obligations for whose A day certain is understood to be that OBLIGATIONS AND CONTRACTS fulfillment a day certain has been Title. I. – OBLIGATIONS which must necessarily come, fixed, shall be demandable only although it may not be known when. CHAPTER 3 when that day comes. If the uncertainty consists in whether DIFFERENT KINDS OF Obligations with a resolutory the day will come or not, the OBLIGATIONS period take effect at once, but obligation is conditional, and it shall SECTION 2. - Obligations with a terminate upon arrival of the day be regulated by the rules of the Period certain… preceding Section. Articles 1193 - 1198 2 3 4  PERIOD vs. CONDITION Obligation w/ a PERIOD PERIOD vs. CONDITION 3. as to influence on the obligation – period only - is one whose consequences are subjected in 1. as to fulfillment – period is certain; a fixes the time for the efficaciousness of the one way or another to the expiration of said obligation period or term condition is un