Introduction to Obligations PDF

Introduction to Obligation Meaning of Obligation The term obligation is derived from the Latin word obligatio which means tying or binding. It is a tie or bond recognized by law by virtue of which one is bound in favor of another to render something- and this may consist in giving a thin...

Introduction to Obligation Meaning of Obligation The term obligation is derived from the Latin word obligatio which means tying or binding. It is a tie or bond recognized by law by virtue of which one is bound in favor of another to render something- and this may consist in giving a thing, doing a certain act, or not doing a certain act. Civil Code definition of Obligation Under the New Civil Code, Article 1156. An obligation is a juridical necessity to give, to do or not to do. An obligation is a legal duty, however created, the violation of which may become the basis of an action of law Meaning of Juridical Necessity Obligation is a juridical necessity because in case of noncompliance, the courts may be called upon by the aggrieved party to enforce its fulfillment or, in default thereof, the economic value that it represents. In a proper case, the debtor 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 or obligee (he who has the right to the performance of the obligation) 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 be visited with some harmful or undesirable consequences. If obligations were not made enforceable, then people can disregard them with impunity. If an obligation cannot be enforced, it may be only a natural obligation. Definition of Obligation “An obligation is a juridical relation whereby a person (called the creditor) may demand from another (called the debtor) the observance of a determinative conduct (the giving, doing, or not doing), and in case of breach, may demand satisfaction from the assets of the latter.” Essential Requisites of an Obligation Every obligation has four definite elements, without which no obligation can exist, to wit: 1) A passive subject (called debtor or obligor) – the person who is bound to the fulfillment of the obligation; he who has a duty; 2) An active subject (called creditor or obligee) – the person who is entitled to demand the fulfillment of the obligation; he who has the right; 3) Object or prestation (subject matter of 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 to perform. In bilateral obligations, the parties are reciprocally debtors and creditors; and 4) A juridical or legal tie (also called efficient cause) – that which binds or connects the parties to the obligation. The tie in an obligation can easily be determined by knowing the sources of the obligation. It is important to identify the prestation in a certain obligation. Once the prestation is identified, you can determine who the passive subject is whom the active subject can demand fulfillment of the obligation Kinds of prestation 1. To give- consist in the delivery of a movable or immovable thing in order to create a real right or for the use of the recipient or for its simple possession or in order to return to its owner 2. To do- all kinds of work or services, whether mental or physical. 3. Not to do- consist in abstaining from some act, includes “not to give.” both being negative obligations A contract of sale and a contract of loan are examples of prestations to give; A contract of labor or a service contract is an example of a prestation to do. To illustrate In an obligation to pay taxes, the passive subject is the taxpayer, the active subject is the government through the Bureau of Internal Revenue, the prestation is ―to give,‖ specifically to pay taxes, the juridical tie is a source of obligation arising from law. In an obligation to give products, the passive subject is the seller, the active subject is the buyer, the prestation is ―to give,‖ specifically to deliver products, and the juridical tie is a source of obligation arising from contract. For Example Under a building contract, A bound himself to build a house for B, for ₱ 1,000,000.00 In the given example, it can be inferred that: A is the passive subject B is the active subject The building of the house is the object or prestation. The agreement or contract, which is the source of the obligation is the juridical tie. For Example Object or prestation Obligation to do Building of the house A B Passive subject Contract Active subject Juridical tie For Example Suppose A had already constructed the house and it was the agreement that B would pay after the construction is finished. Then, A becomes the active subject B becomes the passive subject.  Example: Pelayo v. Lauron 12 Phil. 453 (BAR) Facts: A wife was about to deliver a child. Her parents- in- law called the doctor. Issue: Who should pay the doctor: the husband or the parents? Held: The husband should pay, even if he was not the one who called the doctor. It is his duty to support the wife, and support, includes medical attendance. The duty to pay is an obligation to give, and is imposed by the law. Distinction of obligation, right, and wrong (1) Obligation is the act or performance which the law will enforce. (2) Right, on the other hand, is the power which a person has under the law, to demand from another any prestation. (3) A wrong (cause of action), according to its legal meaning, is an act or omission of one party in violation of the legal right or rights (i.e. recognized by law) of another. In law, the term injury is also used to refer to the wrongful violation of the legal right of another. The essential elements of a legal wrong or injury are: (a) a legal right in favor of a person (creditor/obligee/ plaintiff) (b) correlative legal obligation on the part of another (debtor/obligor/defendant) (c) an act of omission by the latter in violation of the said right with resulting damage to the former. Kinds of Obligations A. From the viewpoint of “sanction” – 1. Civil obligation (or perfect obligation) – Example: Binay promises to pay Pnoy his (Binay’s) debt of Php. 1 million. 2. Natural obligation- the duty not to recover what has voluntarily been paid although payment was no longer required. 3. Moral obligation (or imperfect obligation)- the duty of a Catholic to hear mass on Sundays and holy days of obligation. The sanction here is conscience or morality, or the law of the church. B. According to the subject matter, obligations may either be: 1. Real obligation (the obligation to give) is that in which the subject matter is a thing which the obligor must deliver to the obligee. 2. Personal obligation (the obligation to do or not to do) is that ub which the subject matter is an act to be done or not to be done. (example: the duty to paint a house, or to refrain from committing a nuisance) C. From the affirmativeness and negativeness of the obligation 1) Postive personal obligation or obligation to do or render service. (Art. 1167, NCC) 2) Negative Personal obligation or obligation not to do. (which naturally includes obligations “not to give”) (Art. 1168, NCC) D. From the viewpoint of the persons obliged 1. Unilateral- where only one of the parties is bound (Example: Binay owes Pnoy P1million. Binay must pay Pnoy) 2. Bilateral- where both parties are bound (Example: In a contract of sale, the buyer is obliged to pay, while the seller is obliged to deliver) Bilateral obligations may be: a. reciprocal b. non reciprocal (where performance of one is non dependent upon the performance by the other. Sources of obligation Article. 1157. Obligations arise from: (1) Law; (2) Contracts; (3) Quasi-contracts; (4) Acts or omissions punishable by law; and (5) Quasi-delicts. (Art. 1157, NCC) Sources of obligation 1. Law- when they are imposed by law itself. Example: Obligation to pay taxes; obligation to support one’s family. (Art. 291 of NCC) 2. Contracts- when they arise from the stipulation of the parties. (Art. 1306 of the NCC) Example: The obligation to repay a loan or indebtedness by virtue of an agreement. 3. Quasi- contracts- when they arise 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. 2142, NCC) In a sense, these obligations may be considered as arising from law Example: The obligation to return money paid by mistake or which is not due. (Art. 2154, NCC) Sources of obligation 4. Crimes or acts or omissions punished by law- when they arise from civil liability which is the consequence of a criminal offense. (Art. 1161. NCC) Example: The obligation of a thief to return the car stolen by him; the duty of the killer to indemnify the heirs of his victim. 5. Quasi-delicts or torts- when they arise from damage caused to another through an act or omission, there being fault or negligence, but no contractual relation exists between parties. (Art. 2176, NCC) Example: The obligation of the head of a family that lives in a building or a part thereof to answer for damages caused by things thrown or falling from the same (Art. 2193, NCC); the obligation of the possessor of an animal to pay for the damage which it may have caused. (Art. 2183) Criticism of the Enumeration Listed Down by the Law The enumeration is not scientific because in reality there are only two sources: the law and contracts, because obligations arising from quasi-contracts, crimes, and quasi-delicts are really imposed by the law. 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. (Art. 1158, NCC) Article 1158 refers to legal obligations or obligations 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. Meaning of the Article The law says “obligations derived from law are not presumed”. This merely means that the obligation must be clearly (expressly or impliedly) set forth in the law (the Civil Code or Special Laws). Thus, an employer is ordinarily not required to furnished his employees with legal assistance, for no law requires this. (De la Cruz v. Northern Theatrical Enterprises, where a movie house guard, forced to defend himself in court for killing a gate crasher, was acquitted but was not allowed to recover attorney’s fees from the theater owner) In case of overpayment of taxes, the National Government cannot be required to pay interest on the amount refundable in the absence of a statutory provisions expressly directing or authorizing such payment.  Hilario Jaravata v. Sandiganbayan L-56170, Jan. 31, 1984 A high school principal has no legal obligation to facilitate the release of the salary differentials of the teachers under him. So of he receives reimbursement for his “expenses” or as a “gifts” he cannot be adjudged guilty under the Anti- Graft Law, for after all, he had no duty to do said facilitation  ART. 1159 of the New Civil Code provides, Obligations arising from contracts have the force of law between the contracting parties and should be compiled with in good faith. (1091a)  A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. (Art. 1305). Meaning of the Article The article means that neither party may unilaterally and upon his own exclusive volition, escape his obligations under the contract, unless for causes sufficient in law and pronounced adequate by a competent tribunal. (1) Binding force- Obligations arising from contracts have the force of law between the contracting parties, i.e., they have same binding effect of obligations imposed by laws. This does not mean, however, that contract is superior to the law. As a source of enforceable obligation, contract must be valid and it cannot be valid if it is against the law (2) Requirement of a valid contract – a contract is valid (assuming all the essential elements are present; Art. 1318) if it is not contrary to law, morals, good customs, public order, and public policy. It is invalid or void if it is contrary to laws, morals, good customs, public order, or public policy. (Art. 1306) Compliance in good faith Compliance in good faith means compliance or performance in accordance with the stipulations or terms of the contract or agreement. Sincerity and honesty must be observed to prevent one party from taking unfair advantage over the other. Non compliance by a party with his legitimate obligations after receiving the benefits of a contract would constitute unjust enrichment on his part. Examples: (1) If Francis agrees to sell his house to Paul and Paul agrees to buy the house of Francis, voluntarily and willingly, then they are bound by the terms of their contract and neither party may upon his own will, and without any unjustifiable reason, withdraw from the contract or escape from his obligations there under. That which is agreed upon in the contract is the law between Francis and Paul and must be complied with in good faith. (2) A contract whereby Francis will kill Paul in consideration of P1,000.00 to be paid by CJ, is void and non-existent because killing a person is contrary to law. Likewise, an agreement whereby Francis will render domestic service gratuitously until his loan to Paul is paid, is void as being contrary to law and morals. Differences between an Obligation and a Contract An obligation is the result of a contract (or some other source). Hence, while a contract, if valid, always results in obligations, not all obligations come from contracts. A contract always presupposes a meeting of the minds; this is not necessarily true for all kinds of obligations. Be it noted however, from another viewpoint that a contract may itself be the result of an obligation. Thus, if Paul engages Allen as the former’s agent, we have the contract of agency. As an agent, Allen has the obligation, say to look around for clients or buyers, as in the real estate business. As a result of such obligation, Allen may enter into a contract of sale with Carlo, a customer. The contract of sale itself results in the obligations to pay and to deliver. The obligation to deliver may result in a contract of carriage, and so on, ad infinitum.  Condrado v. Judge Tan 51 O.G. 2923, Jun. 1955 FACTS: In a validity made contract, some provisions were later on inserted by a falsifier. Issue: Is the whole contract void? HELD: Only the additional provision should be disregarded, and the original terms should be considered valid and subsisting.  ART. 1160. Obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII of this Book. (n) (Art. 1160, NCC)  A quasi-contract is that juridical relation resulting from lawful, voluntary, and unilateral acts by virtue of which the parties become bound to each other to the end that no one will be unjustly enriched or benefited at the expense of another. It is not properly a contract at all. In contract, there is a meeting of the minds or consent; the parties must have deliberately entered into a formal agreement. In a quasi-contract, there is no consent but the same is supplied by a fiction of law. In other words, the law considers the parties as having entered into a contract, although they have not actually did do, and irrespective of their intention, to prevent injustice. Kinds of quasi-contracts (1) Negotiorum gestio is the voluntary management of the property or affairs of another without the knowledge or consent of the latter. (Art. 2144, NCC.) (2) Solutio indebiti is 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, NCC) The requisites are: (a) There is no right to receive the thing delivered (b) The thing was delivered through mistake  UST Cooperative Store v. City of Manila, et al. L-17133, Dec. 31, 1965 FACTS: The UST Cooperative Store, which is tax-exempt under RA 2023 (The Philippine Non-Agricultural Cooperative Act) because its assets are not more than P500,000 paid taxes to the City of Manila, not knowing that it was tax exempt. ISSUE: May it successfully ask for refund? HELD: Yes, because the payment is not considered voluntary in character. Clearly, the payment was made under mistake. Query: Is a Quasi-Contract an Implied Contract? No, because in a quasi- contract (unlike in an implied contract) there is NO meeting of the minds. Other Examples of Quasi- Contracts When during fire, flood, or other calamity, property is saved from destruction by another person without the knowledge of the owner, the latter is bound to pay the former just compensation. Any person who is constrained to pay the taxes of another shall be entitled to reimbursement from the latter.  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 the Title XVII of this Book, regulating damages. (Art. 1161, NCC)  Oftentimes, the commission of a crime causes not only moral evil but also material damage. From this principle, the rule has been established that every person criminally liable for an act of omission is also civilly liable for damages. (Art. 100, Revised Penal Code) Scope of civil liability The extent of the civil liability arising from crimes is governed by the Revised Penal Code and the Civil Code. This civil liability includes: (1) Restitution (2) Reparation for damaged caused (3) Indemnification for consequential damages. (Art. 104, RPC)  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. (Art. 1162, NCC)  A quasi-delict is an act of or omission by a person (tort feasor) which causes damage to another giving rise to an obligation to pay for the damage done, there being fault or negligence but there is no pre-existing contractual relation between the parties. (Art. 2176, NCC) Examples While driving a car recklessly, I injured a pedestrian. While cleaning my window sill, my negligence caused a flower pot to fall on the street, breaking the arms of my neighbor.  Requisites of quasi-delict There must be an act or omission There must be fault or negligence There must be damage caused There must be a direct relation of cause and effect between the act or omission and the damage There is no pre-existing contractual relation between parties Example: While playing softball with his friends, Francis broke the window glass of Paul, his neighbor. The accident would not have happened had they played a little farther from the house of Paul.  Test for determination of Negligence “The test in determining whether a person is negligent is this: Would a prudent man (in his position) foresee harm to the person injured as a reasonable consequence of the course about to be pursued? If so, the law imposes a duty on the actor to refrain from that course, or to take precaution against its mischievous results, and the failure to do so constitutes negligence. Reasonable foresight of harm, followed by the ignoring of the admonition born of this provision, is the constitute fact of negligence”  Crime distinguished from quasi- delict The following are the distinctions: 1. In crime, there is criminal or malicious intent or criminal negligence, while in quasi-delict, there is only negligence; 2. In crime, the purpose is punishment, while in quasi-delict, indemnification of the offended party; 3. Crime affects public interest, while quasi-delict concerns private interest; 4. In crime, there are generally two liabilities: criminal and civil, while in quasi-delict, there is only civil liability; 5. Criminal liability can not be compromised or settled by the parties themselves, while the liability for quasi-delict can be compromised as any other civil liability. 6. In crime, the guilt of the accused must be proved beyond reasonable doubt, while in quasi-delict, the fault or negligence of the defendant need only be proved by pre-ponderance (superior or greater weight) of evidence. Nature and Effects of Obligations ART. 1163. Every person obliged to give something is also obliged to take care of it with the proper diligence of a good father of a family, unless the law or the stipulation of the parties requires another standard of care. (Art. 1163, NCC) Duty to Exercise Diligence This article deals with the first effect of an obligation to deliver a determinate thing (as distinguished from a generic thing – or one of a class) – namely- the duty to exercise proper diligence. Unless diligence is exercised, there is a danger that the property would be lost or destroyed, thus rendering illusory the obligation. Diligence Needed That which is required by the nature of the obligation and corresponds with the circumstances of person, time, and place. This is really diligence of a good father of a family. However, if the law or contract provides for a different standard of care, said law or stipulation must prevail.  Ronquillo, et al. v. Singson CA, L-22612-R, Apr. 22, 1959 FACTS: A man ordered a ten-year-old boy, Jose Ronquillo, to climb a high and rather slippery santol tree, with a promise to give him part of the fruits. The boy was killed in the act of climbing. ISSUE: Is the person who ordered him liable? HELD: Yes, in view of his negligent act in making the order. He did not take due care to avoid a reasonably foreseeable injury to the 10y/o boy. The tree was a treacherous one, a veritable trap. His act was clearly a departure from the standard of conduct required of a prudent man. He should have desisted from making the order. Since he failed to appreciate the predictable danger and aggravated such negligence by offering part of the fruits as a reward, it is clear that he should be made to respond in damages for the actionable wrong committed by him. Preserve the thing – In obligations to give (real obligations), the obligor has the incidental duty to take care of the thing due with the diligence of a good father of a family pending delivery. Factors to be considered. – The diligence required necessarily depends upon the nature of the obligation and corresponds with the circumstances of the person, of the time, and of the place. (Art. 1173, NCC.) It is not necessarily the standard of care one always uses in the protection of his property. As a general rule, the debtor is not liable if his failure to preserve the thing is not due to his fault or negligence but to fortuitous events or force majeure.  A thing is said to be specific or determinate particularly designated or physically segregated others of the same class. Examples: 1. the watch I am wearing 2. The car sold by X 3. My dog named “Terror” 4. the house at the corner of Rizal and del Pilar 5. the Toyota car with Plate No. AAV 316 6. this cavan of rice 7. the money I gave you.  Specific thing and generic thing distinguished. A determinate thing is identified by its individuality. The debtor cannot substitute it with another although the latter is of the same kind and quality without the consent of the creditor. A generic thing is identified only by its specie. The debtor can give anything of the same class as long as it is of the same kind.  ART. 1164. The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. However, he shall acquire no real right over it until the same has been delivered to him. (Art. 1164, NCC.) Different Kind of fruits The fruits mentioned by the law refer to natural, industrial, and civil fruits. 1. Natural fruits are the spontaneous products of the soil, and the young and other products of animals. Example: Grass; all trees and plants on lands’ produced without the intervention of human labor. 2. Industrial fruits are those produced by lands of any kind through cultivation or labor. Example: Sugar cane, vegetables; rice; and all products of lands brought about by reason of human labor. 3. Civil fruits are those derived by virtue of a juridical relation. Example: Rents of buildings, price of leases of lands and other property and the amount of perpetual or life annuities or other similar income. (Art. 442, NCC) Right of creditor to the fruits The creditor is entitled to the fruits of the thing to be delivered from the time the obligation to make delivery arises. The intention of the law is to protect the interest of the obligee should the obligor commit delay, purposely or otherwise, in the fulfillment of his obligation.  When creditor is entitled to the fruits – Example: Francis is obliged to give Paul on Dec. 3, 2004, a particular parcel of land. (before Dec. 3, he has no right whatsoever over the fruits). After Dec. 3, 2004, Paul, the creditor is entitled (as of right) to the fruits. But if the fruits and the land are actually or constructively delivered only on Dec. 15, 2004, Paul becomes owner of the said fruits and land only from the said date. Between Dec.3 and Dec. 15, Paul had only a personal right (enforceable against Francis); after Dec. 15, he has a real right (over the properties), a right that is enforceable against the whole world.  When obligation to deliver fruits arises 1. Generally, the obligation to deliver the thing due and, consequently, the fruits thereof, if any, arises from the time of the “perfection of the contract. Perfection, in this case, refers to the birth of the contract or to the meeting of the minds between the parties. (Art. 1305, 1315, 1319, NCC.) 2. If the obligation is subject to a suspensive condition or period (Art. 1179, 1189, 1193), it arises upon the fulfillment of the condition or arrival of the term. However, the parties may make a stipulation to the contrary as regards the right of the creditor to the fruits of the thing. 3. In a contract of sale, the obligation arises from the perfection of the contract even if the obligation is subject to a suspensive condition or a suspensive period where the price has been paid. 4. In obligations to give arising from law, quasi-contracts, delicts, and quasi-delicts, the time of performance is determined by the specific provisions of the law applicable.  Meaning of personal right and real right 1. Personal right is the right or power of a person (creditor) to demand from another (debtor), as a definite passive subject, the fulfillment of the latter’s obligiation to give, to do, or not to do. 2. Real right is the right or interest of a person over a specific thing (like ownership, possesion, mortgage), without a definite passive subject against whom the right may be personally enforced.  Personal right and real right distinguished In personal right there is a definite active subject and a definite passive subject, while in real right, there is only a definite subject without any definite passive subject. (See Art. 1156.) A personal right is, therefore, binding or enforceable only against a particular person, while a real right is directed against the whole world. Example: Francis is the owner of a parcel of land under a torrens title registered in his name in the Registry of Property. His ownership is a real right directed against everybody. There is no definite passive subject. If the land is claimed by Paul who takes possesion, Francis has a personal right to recover from Paul, as a definite passive subject, the property. If the same land is mortgaged by Francis to Mae, the mortgage; if duly registered, is binding against third persons. A purchaser buys the land subject to mortgage which is a real right. Ownership acquired by delivery Ownership and other real rights over property are acquired and transmitted in consequence of certain contracts by tradition or delivery. Mere agreement does not effect transfer of ownership. The meaning of the phrase “he shall acquire no real right over it until the same has been delivered to him”, is that the creditor does not become the owner until the specific thing has been delivered to him. Hence, when there has been no delivery yet, the proper court action of the creditor is not one for recovery of possession and ownership but once for specific performance or rescission of the obligation.  ART. 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by Article 1170, may compel the debtor to make the delivery. If the thing is indeterminate or generic, he may ask that the obligation be complied with the expense of the debtor. If the obligor delays, or has promised to deliver the same thing to two or more persons who do not have the same interest, he shall be responsible for fortuitous event until he has effected the delivery. (Art. 1165, NCC.) Remedies of creditor in real obligation In a specific real obligation (obligation to deliver a determinate thing), the creditor may exercise the following remedies or rights in case the debtor fails to comply with his obligation: a. Demand specific performance or fulfillment (if it is still possible) of the obligation with a right to indemnity for damages; or b. Demand rescission or cancellation (in a certain cases) of the obligation also with the right to recover damages(Art. 1170); or c. Demand payment of damages only where it is the only feasible remedy.  A generic real obligation (obligation to deliver a generic thing), on the other hand, can be performed by a third person since the object is expressed only according to its family or genus. It is, thus, not necessary for the creditor to compel the debtor to make the delivery, although he may ask for performance of the obligation. *the manner of compliance with an obligation to deliver a generic thing is governed by Article 1246. Responsibility of debtor who delays or has promised delivery to separate creditors. Paragraph 3 gives two instances when a fortuitous event does not exempt the debtor from responsibility. It likewise refers to a determinate thing. An indeterminate thing can not be the object of destruction by a fortuitous event because genus nunquam perit (genus never perishes).  Effects of Fortuitous Events Another important difference between a generic and a specific obligation is that, a specific obligation, that is, an obligation to deliver a specific thing, is, as a rule, extinguished by a fortuitous event or act of God. Upon the other hand, generic obligations are never extinguished by fortuitous events. Examples: a. Francis is obliged to give Paul this car. Before delivery, an earthquake destroys completely the car. The obligation to deliver is extinguished. b. Francis is obliged to give Paul a book. Since this is a generic thing, even if one particular book is lost, other book may7 take its place. Hence the obligation is not extinguished (genus nunquam perit) ‘Ordinary Delay’ Distinguished from ‘Default’ Ordinary delay is different from legal delay (default). The first is merely non-performance at the stipulated time; default is that delay which amounts to a virtual nonfulfillment of the obligation. (As a rule, to put a debtor in default, there must be a demand for fulfillment, the demand being either judicial or extrajudicial) Examples: a. Ron is obliged to give Harry his Jaguar car on Dec. 7, 2005. If on said day, Ron does not deliver, he is in ordinary delay (not default). If on Dec. 8, 2005, an earthquake destroys the Jaguar car, Ron is not liable because the obligation is extinguished. b. If, however, on Dec. 8, demand was made for delivery, Ron would be in legal delay (default) and if later, the car is destroyed by a fortuitous event, he would still be liable (in that the obligation to deliver the lot specific thing is converted into a monetary claim for damages). However, if the car would have been destroyed at any rate even if no demand had been made, the amount of damage would reduced.  ART. 1166. The obligation to give a determinate thing includes that of delivering all its accessions and accessories, even though they may not have been mentioned. (Art. 1166, NCC.)  Meaning of Accessions and Accessories a. Accessions are the fruits of a thing or additions to or improvements upon a thing (the principal). Examples: house or trees on a land; rents of a building; air-conditioner in a car; profits or dividends accruing from shares of stocks, etc/ b. Accessories are things joined to or included with the principal thing for the latter’s embellishment, better use, or completion. Examples: Key of a house; frame of a picture; bracelet of a watch; machinery in a factory; bow of a violin.  Right of creditor to accessions and accessories The general rule is that all accessions and accessories are considered included in the obligation to deliver a determinate thing although they may not have been mentioned. This rule is based on the principle of law that the accessory follows the principal. In order that they will be excluded, there must be a stipulation to that effect. But, unless otherwise stipulated, an obligation to deliver the accessions or accessories of a thing does not include the latter. Thus, a sale of the improvements (e.g., house) upon a land is not sufficient to convey title or any right to the land. But the lease of a building or house naturally includes the lease of the lot on which it is constructed for the possession of the lot is implied in the lease of the improvement.  ART. 1167. If a person obliged to do something fails to do it, the same shall be executed at his cost. This same rule shall be observed if he does it in contravention of the tenor of the obligation. Furthermore, it may be decreed that what has been poorly done be undone. (Art. 1167, NCC)  Remedies of Creditor if Debtor Fails to Do a. To have the obligation performed (by himself or by another) at debtor’s expense (only if another can do the performance). b. Also– to obtain damages. (Damages alone cannot substitute for performance if owners can do it; if purely personal or special – as a painting to be done by a reputed artist – only damages may be asked, unless substitution is permitted)  Performance by a third person A personal obligation to do, like a real obligation to deliver a generic thing, can be performed by a third person. While the debtor can be compelled to make the delivery of a specific thing, a specific performance cannot be ordered in a personal obligation to do because this may amount to involuntary servitude which, as rule, is prohibited under our Constitution. Where, however, the personal qualifications of the debtor are the determining motive for the obligation contracted (e.g., to sing in a night club), the performance of the same by another would be impossible or would result to be so different that the obligation could not be considered performed. Hence, the only feasible remedy of the creditor is indemnification for damages. But where the obligation can still be performed at the expense of the debtor notwithstanding his failure or refusal to do so, the court is not authorized to merely grant damages to the creditor.  ART. 1168 When the obligation consists in not doing, and the obligor does what has been forbidden him, it shall also be undone at his expense. (Art. 1168, NCC)  In an obligation not to do, the duty of the obligor is to abstain from an act. Here, there is no specific performance. The very obligation is fulfilled in not doing what is forbidden. Hence, in this kind of obligation the debtor cannot be guilty of delay. (Art. 1169, NCC) As a rule, the remedy of the obligee is the undoing of the forbidden thing plus damages. However, if it is not possible to undo what was done, either physically or legally, or because of the rights acquired by third persons who acted in good faith, or for some other reason, his remedy is an action for damages caused by the debtor’s violation of his obligation. Example: Ron bought a land from Harry. It was stipulated that Harry would not construct a fence on a certain portion of his land adjoining that sold to Ron. Should Harry construct a fence in violation of the agreement, Ron can bring an action to have the fence removed at the expense of Harry.  When Demand is Not Needed to Put Debtor in Default a. When the law so provides (Example: Taxes should be paid within a definite period, otherwise penalties are imposed without need of demand for payment) b. When the obligation expressly so provides c. When time is of the essence of the contract (or when the fixing of the time was the controlling motive for the establishment of the contract) d. When demand would be useless, as when the obligor has rendered it beyond his power to perform. (Example: When before the maturity, the seller has disposed of it in favor of another, or has destroyed the subject matter, or is hiding) e. When the obligor has expressly acknowledged that he really is in default (But it should be noted that his mere asking for extension of time is not an express acknowledgement of the existence of default on his part)  Different Kinds of Mora a. mora solvendi (default on part of the debtor) 1. mora solvendi ex re (debtor’s default in real obligations) 2. mora solvendi ex persona (debtor’s default in personal obligations) b. mora accipiendi (default on part if the creditor) c. compensatio morae (when in a reciprocal obligation both parties are in default; here it is as if neither is in dafault)  Requisites for mora solvendi 1. The obligation must be due, enforceable, and already liquidated or determinate in amount. 2. There must be non-performance 3. There must be a demand, unless the demand is not required (as already discussed). (When demand is needed, proof of it must be shown by the creditor) 4. The demand must be for the obligation that is due (and not for another obligation, nor one with a bigger amount, except in certain instances, considering all the circumstances)  Mora Accipiendi a. The creditor is guilty of default when he unjustifiably refuses to accept payment or performance at the time said payment or performance can be done. Some justifiable reasons for refusal to accept may be that the payor has no legal capacity or that there is an offer to pay an obligation other than what has been agreed upon. b. If an obligation arises ex delicto (as a result of a crime), the debtor-criminal is responsible for loss, even though this be through a fortuitous event, unless the creditor is in mora accipiendi.  Reciprocal Obligations a. Reciprocal obligations depend upon each other for performance (Example: In a sale, the buyer must PAY, and the seller must DELIVER) b. Here performance may be set on different dates. (Example: delivery date on Dec. 9, 2005; and payment on Dec. 13, 2005. To put the seller in default, demand as a rule must be made. Delivery upon the other hand, does not put the buyer in default, till after demand, unless demand is not required. This is because, in the example given, different periods for performance were given) c. If the performance is not set on different dates, either by the law, contract, or customs, it is understood that performance must be simultaneous. Hence, one party cannot demand performance by the other, if the former himself cannot perform. And when neither has performed , there is compensatio morae (default on part of both; so it is as if no one is in default). If one party performs and the other does not, the latter would be in default.  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. (Art. 1170, NCC) Grounds for Liability 1. Fraud (deceit or dolo) – as used in Article 1170, it is the deliberate or intentional evasion of the normal fulfillment of the obligation. As a ground for damages, it implies some kind of malice or dishonesty and it cannot cover cases of mistake and errors of judgment made in good faith. It is synonymous to bad faith.  Article 1170 refers to incidental fraud (dolo incidente) committed in the performance of an obligation already existing because of contract. It is to be differentiated from casual fraud (dolo causante) or fraud employed in the execution of a contract under Article 1338, which vitiates consent.  2. Negligence (fault or culpa) – it is any voluntary act or omission, there being no malice, which prevents the normal fulfillment of an obligation. (see Arts. 1173, 1174, NCC) 3. Delay (mora) – this has already been discussed under article 1169. 4. Contravention of the terms of the obligation – This is the violation of the terms and conditions stipulated in the obligation. The contravention must not be due to s fortuitous event or force majeure. (Art. 1174, NCC)  Fraud and Negligence distinguished 1. In fraud, there is deliberate intention to cause damage or injury, while in negligence, there is no such intention. 2. Waiver of the liability for future fraud is void (Art. 1171), while such waiver may, in a certain sense, be allowed in negligence. (Art1172) 3. Fraud must be clearly proved, while negligence is presumed from the violation of a contractual obligation. 4. Lastly, liability for fraud cannot be mitigated or reduced by the courts, while liability for negligence may be reduced according to the circumstances. (Art. 1173) They are similar in that both are voluntary, that is, they are committed with volition. Where, however, the negligence shows bad faith; or in so gross that it amounts to malice or wanton attitude on part of the defendant, the rules on fraud shall apply. In such case no more distinction exists between the two, at least as to effects.  ART. 1171. Responsibility arising from fraud id demandable in all obligations. Any waiver of action for future fraud is void. (Art. 1171, NCC)  Waiver of Action for future fraud void According to the time of commission, fraud may be past or future. A waiver of an action for future fraud is void (no effect, as if there is no waiver) as being against the law and public policy. A contrary rule would encourage the perpetration of fraud because the obligor knows that even if he should commit fraud, he would not be liable for it, thus making the obligation illusory.  Waiver of Action for Past Fraud Valid What the law prohibits is waiver anterior to the fraud and to the knowledge thereof by the aggrieved party. A past fraud can be the subject of a valid waiver because the waiver can be considered as an act of generosity and magnanimity on the part of the party who is the victim of the fraud. Here, what is renounced is the effect of the fraud, that is, the right to indemnity of the party entitled thereto.  Example: Sally promised to deliver 120 cavans of rice of a particular brand and quality to Bessie at the rate of 10 cavans a month. Sally cannot make an agreement with Bessie, whereby Bessie will not file an action in court against Sally, should Sally commit fraud in the performance of her obligation. This waiver of an action for future fraud is void. Hence, Bessie can still bring an action against Sally for damages arising from the fraud. But once fraud is committed, Bessie, with full knowledge thereof, can waive her right to indemnity as an act of forgiveness on her part.  ART. 1172. Responsibility arising from negligence in the performance of every kind of obligation is also demandable, but such liability may be regulated by the courts, according to the circumstances. (Art. 1172, NCC.)  Validity of waiver of action arising from negligence 1. An action for future negligence (not fraud) may be renounced except where the nature of the obligation requires the exercise of extraordinary diligence as in the case of common carriers. Thus, in the preceding example, the law allows an agreement between Sally and Bessie, whereby Sally will not be liable for damages arising from negligence in the performance of his obligation. But if Sally is a common carrier (e.g., bus, shipping or airline company) such waiver is void. 2. Where negligence shows bad faith (i.e., deliberately committed), it s considered equivalent to fraud. Any waiver of an action for future negligence of this kind is, therefore, void.  Kinds of negligence according to source of obligation 1. Contractual negligence (culpa contractual) or negligence in contracts resulting in their breach. Article 1172 refers to culpa contractual. This kind of negligence is not a source of obligation. (Art. 1157) It merely makes the debtor liable for damages in view of his negligence in the fulfillment of a pre- existing obligation. (Arts. 1170, 1172) 2. Civil negligence (culpa aquiliana) or negligence which itself is the source of an obligation between the parties not so related before by any pre-existing contract. It is also called tort or quasi-delict. (Art. 2176) 3. Criminal negligence (culpa criminal) or negligence resulting in the commission of a crime. The same negligent act causing damages may produce civil liability arising from a crime under Article 100 of the Revised Penal Code, or create an action for quasi-delict under Article 2176 of the Civil Code.  Examples: 1. If Sandy entered into a contract with Bandy to deliver a specific horse on a certain day and the horse died through the negligence of Sandy before delivery, Sandy is liable for damage to Bandy for having failed to fulfill a pre-existing obligation because of his negligence. This is culpa contractual. 2. Assume now, that the horse belongs to and is in the possession of Bandy. The negligence of Sandy which results in the death of the horse is culpa aquiliana. In this case, there is no pre-existing contractual relation between Sandy and Bandy. The negligence itself is the source of liability 3. A crime can be committed by negligence. If Bandy wants, she can bring an action for culpa criminal (damage to property through simple or reckless imprudence). Here, the crime is the source of the obligation of Sandy to pay damages.  ART. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the person, of the time and of the place. When negligence shows bad faith, the provisions of the articles 1171 and 2201, paragraph 2, shall apply. If the law or contract does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family shall be required. (Art. 1173)  Negligence is a question of fact, its existence being dependent upon the particular circumstances of each case. In determining the issue of negligence, the following factors must be considered: 1. Nature of Obligation Example: Smoking while carrying materials known to be inflammable constitutes negligence. 2. Circumstances of the person Example: A guard, a man in the prime of life, robust and healthy, sleeping while on duty is guilty of negligence. 3. Circumstances of time Example: Driving a car without headlights at night is gross negligence but it does not by itself constitute negligence when driving during the day. 4. Circumstances of the place Example: Driving at 80kph on the superhighway is permissible but driving at the same rate of speed in Rizal Avenue, Manila is gross recklessness.  ART. 1174. Except in cases expressly specified by law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which though foreseen, were inevitable. (Art. 1174, NCC)  A fortuitous event is any event which cannot be foreseen, or which, though foreseen, is inevitable. The essence of a fortuitous event consists of being a happening independent of the will of the debtor and which happening, makes the normal fulfillment of the obligation  Fortuitous event distinguished from force majeure 1. Acts of man – strictly speaking, fortuitous event is an event independent of the will of the obligor but not of other human wills. Examples: War, fire, robbery, insurrection 2. Acts of God – They refer to what is called majeure or those events which are totally independent will of every human being. Examples: Earthquake, flood, rain, shipwreck, lightning, eruption of volcano, etc.  Kinds of Fortuitous Events 1. Ordinary fortuitous events or those events which are common and which the contracting parties could reasonably foresee (e.g., rain) 2. Extra-ordinary fortuitous events or those events which are uncommon and which the contracting parties could not have reasonably foreseen. (e.g., earthquake, fire, war, pestilence, unusual flood). (see Art. 1680, par. 2.)  Rule as to liability in case of fortuitous event A person is not, as a rule, responsible for loss or damage caused to another resulting from fortuitous events. In other words, his obligation is extinguished. The exceptions are enumerated below. 1. When expressly specified by law – In exception (a), (b), and (c) below, the special strictness of the law is justified. (a) The debtor is guilty of fraud, negligence, or delay, or contravention of the tenor of the obligation. (Arts. 1170, 1165, par 3.) (b) The debtor has promised to deliver the same (specific) thing to two or more persons who do not have the same interest (c) The obligation to deliver s specific thing arises from a crime. (Art. 1268, NCC) (d) The thing to be delivered is generic. (Art. 1263)  Rule as to liability in case of fortuitous event 2. When declare by stipulation- the basis for the exception rests upon the freedom of contract, (see Art. 1306, NCC). Such stipulation is usually intended to better protect the interest of the creditor and procure greater diligence on the part of the debtor in the fulfillment of his obligation. But the intention to make the debtor liable even in the case of a fortuitous event should be clearly expressed. 3. When the nature of the obligation requires the assumption of risk- here, risk of loss or damage is an essential element in the obligation.