Obligation and Contracts (De Leon Summary) PDF

Obligation and Contracts (De Leon Summary) INTRODUCTION TO LAW THE GENERAL RULE OF LAW Law – any rule of action or any system of uniformity; determines not only the activities if men as rational beings but also the movements or motions of all objects of creation-- animate or inanimate. GENERAL DI...

Obligation and Contracts (De Leon Summary) INTRODUCTION TO LAW THE GENERAL RULE OF LAW Law – any rule of action or any system of uniformity; determines not only the activities if men as rational beings but also the movements or motions of all objects of creation-- animate or inanimate. GENERAL DIVISIONS OF LAW 1. State Law – promulgated and enforced by the state 2. Divine, Natural, Moral & Physical Law – not promulgated and enforced by the state Sate, Divine, Natural and Moral Law – comprised as a rule of action, apply to men as rational beings Physical Law – operates on all things including men w/o regard on rational thinking; figuratively speaking LAWS WHICH THE STATE IS NOT CONCERNED WITH 1. Divine Law – law on religion and faith; concept of sin. Sanction is rewards or punishments 2. Natural Law – caused by internal dictates of reason alone; moral nature, basis of state law 3. Moral Law – totality of norms of right and wrong; perception of the community; varies w/ time 4. Physical Law – laws of physical science, law only by analogy; objects have no power to disobey STATE LAW - Also called positive law, municipal law, civil law, or imperative law - Does not concern itself w/ the latter rules of action unless it also constitutes violation of its commands - General sense: refers to all laws taken together; mass of obligatory laws established for the purpose of governing the relations of persons in society - Specific sense: a rule of conduct promulgated by the legitimate authority of common observance or benefit CHARACTERISTICS OF LAW (SPECIFIC SENSE) 1. It is a rule of conduct – what shall and shall not be done; external acts only 2. It is obligatory – positive command, w/ duty to obey; impose sanctions for disobedience 3. It is promulgated by legitimate authority – enacted by the legislature (Congress) 4. It is of common observance and benefit – intended to serve man, maintain order and harmony in society SOURCES OF LAW 1. Constitution – fundamental law, supreme law or highest law; the law by which all other laws are enacted by legislature must conform, laws inconsistent w/ constitution shall be void; the latter shall govern 2. Legislation – declaration of legal rules by competent authority, preponderant source of law in the PH, includes ordinances enacted by LGU’s; also called enacted laws or statute laws 3. Administrative/executive orders, regulations and rulings – carried by admin officials under legislative authority; explain the law and carry out its general provisions; Admin. acts are valid only when not contrary to constitution 4. Judicial decisions/ Jurisprudence – decisions of the supreme court implementing the constitution; the decision of the Supreme Court is binding among all subordinate courts; doctrine of precedence (stare decisis). However, the SC may modify or reverse any of its previous rulings 5. Custom – habits/practices which due to its long uninterrupted usage have become acknowledged and approved by society as binding rules of conduct, custom must be proved as fact according to the rules of evidence 6. Other sources – principles of justice and equity, decisions of foreign tribunals, opinions of text writers and religion. They are only supplementary, only applied in the absence of all other sources; not binding on courts RULE IN CASE OF DOUBT IN INTERPRETATION OR APPLICATION OF LAWS - No judge/court shall decline to render judgment by reason of silence, obscurity or insufficiency of the laws - In case of doubt, in the interpretation/ application of laws, it is presumed that the lawmaking body intended right and justice to prevail - In case of a decision to serve justice and another that will deny it bec of strict interpretation of the law, courts must resolve in favor of the former for the ultimate end of law is justice LAW COMPARED TO OTHER MEANS OF SOCIAL CONTROL 1. Laws are made & administered by the only institutions authorized to act in behalf of the entire citizenry 2. Only legal institutions w/n society can make rules, regulations and orders which entire citizenry must comply 3. Citizens cannot terminate relationship with the state unless they choose to leave the geographical area 4. Sanctions of control through law are more varied and complex then the techniques available to organizations Remedial – sanction is indemnification for damages or injury for violation of law Penal – sanction is punishment of the violator 5. Before the law operates, various procedural steps are required, individual must be given a gearing or fair opportunity to show innocence; a.k.a. due process of law ORGANIZATIONS OF COURT The judicial power and the application of laws are vested in one Supreme Court and in such lower courts as may be established by law. 1. Regular courts – PH judicial system consist of a hierarchy of courts resembling a pyramid with the Supreme Court at the apex a. Supreme Court b. Court of Appeals Courts of general or superior c. Regional Trial Courts – sitting in different jurisdiction provinces and cities d. Metropolitan Trial Courts – in Metropolitan areas as established by law e. Municipal Trial Courts – in cities not forming part of metropolitan area, and in municipalities f. Municipal Circuit Trial Courts – areas defined as municipal circuits; Circuit Courts exercise jurisdiction over two or more cities and/or municipalities 2. Special courts a. Sandiganbayan – special anti-graft court b. Court of Tax Appeals – a special tax court created by law, on the same level as the Court of Appeals 3. Quasi-judicial agencies - administrative bodies under the executive branch performing quasi-judicial functions. Also involve the settlement or adjudication of controversies or disputes a. National Labor Relations Commission b. Securities and Exchange Commission c. Land Transportation Franchising and Regulatory Board d. Insurance Commissions e. Independent Constitutional Commissions – Civil Service Commission, Commission on Elections, Commission on Audit CLASSIFICATIONS OF LAW 1. As to its purpose a. Substantive law – creating, defining regulating rights and duties which may either be public/private i. Law on Obligations and Contracts b. Adjective law – manner or procedure by which rights may be enforced or their violations redressed i. Remedial law or Procedural law ii. It is governed by the Rules of Court promulgated by the Supreme Court and special laws 2. As to its subject matter a. Public law – rights and duties arising from the relationship of the state and its people i. Criminal law – defines crimes and provides punishment ii. International law – governs relations among nations or states iii. Constitutional law – governs relations between state and its citizens; establishes the fundamental powers of government iv. Administrative law – governs the methods by which the functions of administrative authorities are to be performed v. Criminal procedure – branch of private law w/c governs methods of trial and punishment in criminal cases  b. Private law – regulates relations of individuals with one another for purely private ends, the state enforces private law but only as an arbiter and not as a party i. Law on Obligations and Contracts ii. Civil Law iii. Commercial Law iv. Civil procedure – provides for the means by which private rights may be enforced LAW ON OBLIGATIONS AND CONTRACTS DEFINED It is the body of rules which deals with the nature and sources of obligations and the rights and duties arising from agreements and the particular contracts. CIVIL CODE OF THE PHILIPPINES Law on Obligations and Contracts is found in Republic Act No. 386, otherwise known as the Civil Code of the Philippines. It is based primarily on the Civil Code of Spain which took effect on Dec. 7, 1889. Approved as R.A. No. 386 on June 18, 1949 and took effect on Aug 30, 1950. It is divided into four (4) books. CONCLUSIVE PRESUMPTION OF KNOWLEDGE OF LAW Ignorance of law excuses no one from compliance therewith. Everyone is conclusively presumed to know the law. The reasons are: 1. Social life will be impossible because most laws cannot be enforced because of their being unknown to many 2. Almost impossible to prove the contrary when person claims ignorance of law 3. Absurd to absolve those who do not know the law and increase obligation to those who know it 4. Evasion of law would be facilitated, and administration of justice would be defeated if a person could successfully plead ignorance of law to escape consequences of their acts TITLE I: OBLIGATIONS GENERAL PROVISIONS ART 1156 OBLIGATION – from Latin word obligatio meaning tying or binding, tie or bond recognized by law to w/c one is bound in favor of another to render something (giving an thing, doing or not doing a certain act) Stresses the duty under the law of the debtor or obligor when it speaks of obligation as a juridical necessity. This talk about civil obligations which give the creditor or oblige the right under the law to enforce their performance in courts of justice. It is distinguished from natural obligations w/c do not grant right of action but for voluntary fulfillment of debtor. Juridical necessity – in case of noncompliance the courts of justice may be called upon by the aggrieved party to enforce its fulfillment or by default thereof, the economic value that it represents Essential requisites of an obligation 1. Passive subject (debtor/obligor) – person bound to fulfill obligation 2. Active subject (creditor/obligee) – persons demanding fulfillment of obligation 3. Object/ prestation (subject matter) – consists of giving, doing, or not doing 4. Juridical/ legal tie (efficient cause) – source of obligations, binds and connects parties Form of obligations – manner in w/c an obligation is manifested or incurred; may be oral, in writing, or partly oral or party in writing. As a general rule, law does not require any form in obligations arising from contracts for their validity or binding force. Obligations arising from other sources do not have any form at all. Obligation – act or performance w/c the law will enforce Right – power w/c a person has under the law to demand from another any prestation Wrong/ Injury – omission of one party in violation of the rights of another. For this to occur, there must be: 1. Legal right in favor of one person 2. Correlative legal obligation of obligor to respect or violate said rights 3. Act or omission by the latter in violation of said rights with resulting damage to former Kinds of obligations according to subject matter 1. Real obligations – obligation to give; subject is a thing that must be delivered  2. Personal obligations – obligation to do or not to do a. Positive personal – to do b. Negative personal – not to do or not to give ART 1157 Sources of Obligations 1. Law – imposed by law itself 2. Contracts – arise from stipulation of the parties 3. Quasi-contracts – arise from lawful voluntary unilateral acts which are enforceable to the end that no one shall be unjustly enriched at the expense of another 4. Crimes or acts of omissions punishable by law – arises from criminal liability as consequence of criminal offense 5. Quasi-delict or torts – arise from damage caused to another there being fault/negligence but no contractual relation between parties Sources Classified 1. Emanating from law 2. Emanating from private acts (contracts) a. Licit – contracts and quasi-contracts b. Illicit – punishable (delicts/crimes), not punishable (quasi-delicts/torts) ART 1158 Legal obligations are not presumed because they are considered burden on the obligor. To be demandable, they must be clearly set forth in the law or in special laws (other laws not contained in the Civil Code). ART 1159 Contractual obligations Contract – is a meeting of minds between two persons where one binds himself with respect to another to give something or render some service. Obligations arising from contracts have the force of law between contracting parties. It should have all the essential elements and not contrary to law, morals, good customs, public order and public policy to be valid and enforceable. A void contract does not exist. A contract may be valid but cannot be enforced (unenforceable contracts) Breach of contract – may be breached or violated by the party in whole or in part. Occurs when a party fails or refuses to comply with the contract without legal reason or justification Compliance in good faith – performance according to stipulations of the contract. Sincerity and honesty must be observed. Noncompliance by a party would constitute u just enrichment on his part. ART 1160 Quasi-contractual obligations Quasi-contract is not properly a contract at all. There is no consent. The law considers the party having entered into a contract although they have not actually done so. This is to prevent unjust enrichment of a person at the expense of another. Kinds of Quasi-contracts 1. Negotiorum gestio – voluntary management of the properties of another w/o knowledge/ consent 2. Solutio indebiti – created when something is received when: there is no right to receive it & delivered by mistake. 3. Other examples – implied contract; the thing consumed must be paid for ART 1161 Civil liability arising from crimes Every person criminally liable is also liable civilly. In crimes with no material damage, no civil liability is enforced. But a person not criminally liable may be liable civilly. The scope of civil liability arising from crime includes: 1. Restitution – returning the property or monetary value of the loss 2. Reparation for the damages 3. Indemnification for consequential damages ART 1162 Obligations arising from quasi delicts Requisites of Quasi-delict 1. There must be: act or omission 2. Fault or negligence 3. Damage caused 4. Direct relation of act and the damage 5. There is no pre-existing contractual obligation Crime distinguished from quasi-delict Crime has criminal/malicious intent or criminal negligence Quasi-delict has only negligence Purpose is punishment Indemnification Affects public interest Affects private interest There is criminal and civil liability Only has civil liability Cannot be compromised or settled by parties themselves Can be compromised or settled by parties themselves Accused must be proved beyond reasonable doubt Can be proved by preponderance (greater evidence) NATURE AND EFFECT OF OBLIGATIONS ART 1163 Obligation to specific or determinate thing Specific/ determinate thing – particularly designated or physically segregated from others of the same class, identified by its individuality. It cannot be substituted with another even for the same king and quality without consent of creditor. Generic/ indeterminate thing – refers to class or genus, cannot be pointed out with particularity, identified only by its specie. Debtor can give anything of the same class as long as it is same kind Duties of debtor in obligation to give a determinate thing 1. Preserve the thing a. Diligence of a good father of the family – ordinary care b. Another standard of care – extraordinary diligence; it is contrary to public policy to stipulate for absolute exemption from liability of the obligor in case of his own fault or negligence c. Factors to be considered – diligence required depends on the nature of obligation and the circumstances of the person, time and place. As general rule, debtor is not liable for failure to preserve the thing if it is not due to his fault but due to fortuitous event (force majeure) d. Reason of obligation – without this duty, debtor would afford being negligent 2. Deliver the fruits of the thing 3. Deliver the accessions and accessories 4. Deliver the thing itself 5. Answer for damages in case of breach Duties of debtor in obligation to give a generic thing 1. Deliver the thing of the quality intended taking into consideration the purpose of the obligation 2. Liable for damages in case of fraud, negligence, or delay in the performance of his obligation or contravention to the tenor thereof ART 1164 Right of creditor to the fruits Creditor has right to the fruits from the time obligation to deliver it arises, this is to protect oblige from the delay or breach in obligation. But creditor shall have no real right over it until the actual delivery. Different kinds of fruits 1. Natural fruits – spontaneous products of the soil, and the young and other products of animals without intervention of human labor a. Grass, all trees, and plants on land 2. Industrial fruits – produced by and through cultivation or labor a. Sugar cane, vegetable, rice  3. Civil fruits – derived by virtue of juridical relation a. Rents on buildings, price of leases of lands and other property and the amount of perpetual oor life annuities or other similar income When obligation to deliver the fruit arises 1. Generally arise from the perfection of the contract or the meeting of the minds between parties 2. If subject to suspensive condition, when the arrival of the term unless stipulated otherwise 3. In sale, perfection of contracts even if subject to suspensive condition or period 4. In quasi-contracts, delicts or quasi-delict, determined by provisions of law governing them Personal right – power of creditor to demand from the debtor, a definite passive subject the fulfillment of the latter’s obligation; there is a definite active and passive subject; enforceable only against particular person Real right – interest of a person over a specific thing, w/o definite passive subject against who, the right may be personally enforced; only has active subject w/o passive subject; binding against the whole world The ownership of real right over property are acquired and transmitted by delivery, creditor does not become owner of the thing until specific thing has been delivered to him. When there has been no delivery, the court of action of creditor is not recovery of ownership but specific performance or rescission. ART 1165 Remedies of creditor in real obligation 1. In a specific real obligation (determinate thing) – the very thing itself must be delivered, only the debtor can comply with the obligation. If the debtor fails to comply the creditor can: a. Demand specific performance with a right to indemnity for damages b. Demand rescission or cancellation also with a right to Alternative, not recover damages cumulative c. Demand payment of damages only when it is the only feasible remedy 2. In a generic real obligation (generic thing) - can be performed by a third person a. Not necessary for creditor to compel debtor to make delivery although former may ask performance b. In any case, creditor has right to recover damages When debtor delays or has promised to deliver to separate creditors Debtor not exempted from fortuitous events if the object is a determinate thing. If it is generic, it cannot be object of a fortuitous event because genus nunquam perit (genus never perishes) ART 1166 Obligation to give a determinate thing includes delivering all its accessions and accessories even though they were not mentioned. Accessions – fruits of a thing or additions or improvements upon a thing (house/ trees on land, rents of building, air conditioner in car, profits if dividends accruing from shares of stocks); also used in the sense of rights (rights to fruits and/or accessories of the thing) Accessories – things enjoined to or included with the principal thing for its embellishment, better use or completion (key of house, frame of picture, bracelet of a watch, machinery in a factory, bow of a violin) Note: While accessions are not necessary to the principal thing, accessory and the principal thing must go together. Right od creditor to accessions and accessories General rule: All accessions and accessories are considered included in obligation to deliver a determinate thing although not mentioned; based on the principle that accessory follows the principal. To not be included, there must be stipulation to that effect. Unless otherwise stipulated, obligation to deliver the accessions and accessories of the thing does not include the latter. Thus, obligation to deliver a house does not include the right over the land. ART 1167 Remedies of creditor in the ff situations of personal obligations: 1. Debtor fails to perform an obligation to do a. Perform the obligation by himself of by third person at the debtor’s expense, unless there sre personal considerations b. Recover damages 2. Debtor performs obligation but contrary to the terms thereof  a. May be ordered to be undone if possible and to do it according to specifications b. If debtor refuses, may ask third person to do it at the expense of debtor 3. Debtor performs obligation to do but in poor manner a. May be ordered to be undone if possible Performance by a third person Specific performance cannot be ordered in a personal obligation to do because it would constitute involuntary servitude w/c is prohibited under the constitution. In cases where personal qualifications of debtor are the determining motive of the obligation, and where performance of another would be impossible, the only remedy for creditor is indemnification for damages. But if the obligation can still be performed, the court cannot merely grant damages to creditor. ART 1168 Remedies in negative personal obligation When obligation consists of not doing and the debtor dies the thing forbidden, as a general rule, he must undo the act plus damages. If it is not possible to undo the act, remedy is action for damages. There is no specific performance in a negative personal obligation. In this, debtor cannot be guilty of delay. ART 1169 Meaning of delay 1. Ordinary delay – failure to perform obligation on time 2. Legal delay/default/ mora – failure to perform obligation on time and it constitutes breach of obligation Kinds of Legal delay 1. Mora solvendi – delay of debtor 2. Mora accipendi – delay of creditor 3. Compensatio morae – delay of obligors in reciprocal obligations, the delay of one cancels the delay of the other, there is no actionable default on part of both parties Requisites of mora solvendi 1. Failure of debtor to perform obligation on date agreed upon 2. Demand made by creditor which may either be judicial (filed in court) or extrajudicial (outside court, oral/written) 3. Failure of debtor to comply with such demand In this case, the obligation is already due and demandable. Creditor has the burden of proving that demand has been made. In the absence of demand, the debtor is only in ordinary delay. In the absence of evidence of such extrajudicial demand by the creditor, delay arises from the filing of the complaint. Debtor has the burden to prove that delay was not caused by his fault to relieve himself from liability. Effects of delay 1. Mora solvendi a. Debtor is guilty of breach/violation of obligation b. He is liable to creditor for interest/damages c. Liable even for fortuitous events when obligation is to deliver determinate thing i. However, if debtor can prove that loss would have resulted even if he had not been in default, court may mitigate/reduce damages ii. If obligation is to deliver generic thing, debtor is not relieved from liability for loss due to fortuitous event. He is still entitled to deliver the same kind or held liable for damages 2. Mora accipendi a. Creditor is guilty of breach of obligation b. He is liable for damages suffered, if any, by the debtor c. He bears the risk of loss of the thing due d. Where obligation is to pay money, debtor is not liable for interest from time of creditor’s delay e. Debtor may release himself from obligation by the consignation or deposit in court of the thing or sum due 3. Compensatio morae a. Delay of oblige cancels delay of obligor and vice versa b. No default or delay  c. If delay of the first infractor is followed by that of the other, the liability of the first infractor shall be equitably balanced by the courts When demand is not necessary 1. When the obligation so provides – if stipulated that demand is not necessary, it must be expressly so declared 2. When the law so provides – like delay in the payment of taxes, contributions on partnership 3. When time is of the essence – performance of obligation after designated time would no longer benefit the creditor, time element is important as performance itself. When time is not fixed, it is not of the essence, the contract must be made within a reasonable time 4. When demand would be useless – when the object is gone or it is impossible to perform the obligation, if there has already been prior absolute refusal by the debtor to comply with the obligation 5. When there is performance by a party in reciprocal obligations – from the moment one party fulfills the obligation, delay by the other begins ART 1170 Ground for liability which may entitle the injured party to damages in obligations 1. Fraud (deceit/dolo) – intentional evasion of the normal fulfillment of obligation, with malice or dishonesty and cannot cover cases of mistake and errors of judgement made in good faith; synonymous to bad faith; waiver of liability for fraud is void; fraud must be clearly proven; liability for fraud cannot be mitigated/reduced a. Incidental fraud – committed in performance of obligation already existing because of contract; remedy is action for damages b. Causal fraud – employed in the execution of contract which vitiates consent; remedy is annulment 2. Negligence (fault/culpa) – voluntary act or omission, there being no bad faith or malice, that prevents fulfillment of obligation; waiver for liability in negligence may be valid; presumed from violation of obligation so no need for proof; liability may be reduced 3. Delay (mora) 4. Contravention of the terms of obligation – violation of the terms and stipulation of obligation; must not be due to fortuitous event/ force majeure ART 1171 Responsibly arising from fraud demandable Refers to incidental fraud. It can be demanded with respect to all kinds of obligations. The court is not given the power to reduce or mitigate damaged to be awarded because fraud is deemed serious and evil. A waiver of action for future fraud is void but waiver of action for past fraud is valid because it can be considered an act of generosity on the part of the party who is the victim. ART 1172 Responsibility arising from negligence Debtor shall be liable for damages resulting from his negligence. The courts however are given discretions in fixing the measure of damages that is because negligence is a question tat depend upon the circumstances of the case. When both parties to a contract are negligent, the fault of one may cancel or neutralize the negligence of the other. Validity of waiver of action arising from future negligence 1. Action for future negligence may be renounced except where the obligation requires the exercise of extraordinary diligence, in this case the waiver is void 2. When negligence shows bad faith, it is equivalent to fraud, thus waiver is void Kinds of negligence according to source of obligation 1. Contractual negligence (culpa contractual) – negligence in contract resulting to breach; not a source of obligation, merely makes the debtor liable for damages to fulfill the existing obligation 2. Civil negligence (culpa aquiliana) – source of obligation between the parties not related before by any contracts 3. Criminal negligence (culpa criminal) – negligence resulting in a commission of a crime; may also cause civil liability or create action for quasi-delict NOTE: In negligence cases, the aggrieved party may choose between a criminal action or a civil action for damages. They cannot recover twice for the same negligent act. In other words, the responsibility for quasi-delict is not demandable together with the civil liability arising from a criminal offense. Effect of negligence on the part of the injured party If the plaintiff’s (person who files case) own negligence was the cause of the injury, he cannot recover damages. However, if his negligence is only contributory to the immediate and primary cause of the injury, the courts may mitigate damages to be awarded. To be entitled to damages, it is not required that the negligence of the defendant is the sole cause of the damage. ART 1173 Negligence is a question of fact dependent upon the circumstances of the case. In determining negligence, the following must be considered: 1. Nature of the obligation – smoking while carrying inflammable materials is negligence 2. Circumstances of the person – a healthy guard sleeping on duty is negligence 3. Circumstances of time – driving a car w/o headlight at night is negligence; but not during the day 4. Circumstances of the place – driving 100 kph in superspeed highway is ok but same speed in a traffic road is not Measure of liability for damages Damages – money compensation awarded to the injured party resulting from breach of contract/obligation by another In contracts and quasi-contracts, if obligor acted in good faith, shall only be liable for the natural and foreseeable consequences of the breach. In case of fraud/bad faith, obligor is responsible for all damages. Kids of diligence required 1. Agreed by the parties, oral or written 2. In absence of stipulation, required by law (i.e. extraordinary) 3. If contract and law silent, diligence of a good father of a family ART 1174 Fortuitous event – any event w/c cannot be foreseen or which though foreseen, is inevitable; the happening of which makes the fulfillment of the obligation impossible. May either be acts of man (war, fire, robbery, murder) or acts of God (majeure; earthquake, flood, rain, shipwreck). They can be ordinary (foreseeable: rain) or extraordinary (unforeseeable: earthquake) Requisites of a fortuitous event (absence of any would prevent exemption from liability) 1. Must be independent of human will or at least debtor’s will 2. Could not be foreseen or if foreseen, inevitable 3. It should cause the performance of obligation impossible 4. There must be no concurrent negligence on the debtor’s part that caused the creditor’s injury Mare pecuniary or poverty is not an excuse for the non-fulfillment of the obligation. Neither is mere difficulty to foresee the happening of an event. Rules as to liability in case of fortuitous events General rule: one is not responsible for loss/damages due to his no-fulfilment of obligation resulting from fortuitous events. In this case, his obligation is extinguished Exceptions to the general rule 1. When expressly specified by law a. The debtor is guilty of fraud, negligence, delay or contravention to the tenor of obligation b. Debtor promised to deliver the same thing to two or more persons w/o same interest c. If obligation to deliver arises from a crime (obligation to return the thing stolen) d. The thing to be delivered is generic (genus never perishes) 2. When declared by stipulation – freedom of contract, it must be clearly expressed 3. When nature of obligation requires assumption of risks – risk of loss or damage is the essential element of obligation (insurance contracts) ART 1175 Usury is contracting or receiving interest in excess of the amount allowed by law for the loan or use of money, goods, chattels or credits Requisites for recovery on interest 1. Payment if interest must be expressly stipulated 2. Agreement must be in writing  3. Interest must be lawful ART 1176 Presumption is the inference of a fact not actually known arising from the connection with another which is known/proved. It can be conclusive (cannot be contradicted – everyone is presumed to know the law) or disputable/rebuttable (can be contradicted by presenting a proof to the contrary). When presumptions in this article do not apply 1. With reservation that the interest/prior installments have not been paid 2. Receipt without indication of the particular installment paid – date of issuance of receipt does not automatically indicate month paid for 3. Receipt for a part of the principal only – it is only when the principal has been fully receipted for and there is failure for creditor to reserve payment of interest that the presumption of payment of interest will arise 4. Payment of taxes – there is no presumption that previous taxes have been paid by the payment of latter ones 5. Non-payment proven – presumption cannot prevail over a proven fact ART 1177 Remedies available for creditors for the satisfaction of their claims 1. Exact fulfillment with right to damages 2. Pursue the leviable property of the debtor 3. After having pursued the properties of the debtor, bring all action (like right to collect from debtor’s debtor) except those inherent/ personal to him (right to vote) 4. Ask the courts to rescind or impugn acts/contracts w/c debtors have made to defraud him (this remedy can only be resorted if creditor could not collect in full his credit, he must first exhaust the properties of the debtor or subrogate himself of the debtor’s transmissible rights) The debtor is liable for all his properties, present and future, for the fulfillment of the obligation. Subject to exemptions provided by law ART 1178 Transmissibility of rights All rights acquired by virtue of an obligation are generally transmissible or assignable. Except for the following: 1. Prohibited by law – partnership, agency, commodatum 2. Prohibited by stipulation of parties – like creditor cannot assign his credit to another or that upon the death of the creditor, the obligation is extinguished. It must be clearly proven or at least implied from terms of contract DIFFERENT KINDS OF OBLIGATIONS SECTION 1. – PURE AND OCNDITIONAL OBLIGATIONS ART 1179 Pure obligation – is not subject to any condition and no specific date is mentioned in the fulfillment of obligation, therefore, immediately demandable. With the words “upon the demand of --”. Conditional obligation – consequences are subject in one way or another in the fulfillment of a condition Condition – a future and uncertain event upon the happening of which, the effectivity and extinguishment of an obligation subject to it depends. May also be past but unknown. Condition must not be impossible. Two principal kinds of condition 1. Suspensive condition (condition predecent/antecedent) – fulfillment of which gives rise to an obligation; until this takes place, the obligation is a mere hope 2. Resolutory condition (condition subsequent) – fulfillment of which extinguished an obligation already existing; until this takes place, hovers the possibility of termination When obligation is demandable at once 1. When it is pure 2. When subject to resolutory condition 3. When subject to resolutory period Past event unknown to the parties It refers to the knowledge to be acquired in the future of a past event which as the moment is unknown to the parties.