OBLIGATIONS

Law. Determinate Thing.

any rule of action or system of uniformity particularly designated or physically segregated
Classifications Obligations of the debtor:
a) Divine law – law of religion and faith ー Take good care of the thing with the diligence of
b) Natural law – divine inspiration in man of the a good father of a family unless the law or
sense of justice, fairness, and righteousness by stipulation requires another standard of care
internal dictates of reason alone ー Deliver the thing
c) Moral law – totality of the norms of good ー Deliver the fruits of the thing (NIC)
conduct from every community ○ natural fruits: spontaneous products of the
d) State law – law promulgated by the state for the land, the young and other products of animals
common benefit and observance ○ industrial fruits: produced by lands of any kind
e) Physical law – uniformities of action and orders through cultivation or labor
of sequence ○ civil fruits: through a juridical relation
*creditor has rights to fruits from the obligation to
Obligation. deliver arises; no real right until it has been delivered
a juridical necessity to give, to do, OR not to do ー Deliver its accessions (additional) and
*juridical necessity: right of action to compel accessories (included)
performance if not, may result in judicial/legal action
Requisites: Generic Thing.
a) Active subject (creditor/obligee) cannot be specifically segregated from same class
b) Passive subject (debtor/obligor) Debtor’s failure to comply:
c) Prestation (subject matter) 一 Creditor may ask that the obligation be complied
d) Efficient cause (juridical tie) with at the expense of the debtor
Sources: *no demand because “genus nunquam perit” = a
a) Law (ex lege) *never presumed; must be express generic thing never perishes
b) Contracts (ex contractu)
c) Quasi-contracts (ex quasi-contractu) Remedies of Creditor.
○ negotiorum gestio: voluntary management of ● Debtor fails to deliver the determinate thing
the property or affairs of another without 一 compel debtor to make delivery; demand
knowledge/consent of the latter; damages
*not negotorium gestio if: ● Debtor fails to deliver a generic thing
(a) property is not neglected or abandoned 一 ask that the obligation be complied with by third
(b) management is tacitly authorized person at debtor’s expense; demand damages
○ solutio indebiti: juridical relation which is ● Debtor fails to do his obligations (to do)
created when something is received when 一 fails to perform/not within terms: creditor may
there is no right to receive it and it was unduly have the obligation executed at the expense of
delivered through mistake the debtor; demand damages *you cannot compel
d) Quasi-delicts/Torts (ex quasi-delicto/maleficio) debtor to perform because it will violate the rights
Requisites: fault/negligence, damages, connection against involuntary servitude
一 performs obligation to do but poorly: creditor
Vicarious Liability may have it undone at debtor’s expense; demand
Acts done by: Responsibility: damages
Minor children who live in their Mother, if dead or ● Debtor does what has been forbidden (not to do)
company incapacitated, father 一 creditor may demand that what was done be
Minors and incapacitated persons Guardians undone; demand damages
Employees in the services of the
branches in w/c they are employed
Owners/Managers of Damages.
establishment or
or on the occasion of their
enterprise
harm done or monetary value to be recovered
functions Kinds: Actual (Financial), Moral, Nominal, Temperate,
Employees and household helpers Liquidated, Exemplary/Corrective *proof is required for
acting within the scope of their
actual damages unless provided by law or stipulation
assigned tasks, even if the Employers
employer is not engaged in any Grounds for damages: fraud, negligence, delay,
business or industry contravention
Special agent, except when damage
was caused by official to whom the The State Fraud.
task was done properly pertains intentional evasion by the debtor of the normal
Pupils/students or apprentices in
Teachers/Heads of compliance of his obligation
establishments of arts and
their custody Kinds:
trade
a) Fraud in obtaining consent
*the responsibility shall cease when the persons above prove they
observed all the diligence of a good father of a family to prevent
○ causal fraud/dolo causante: fraud without which
damage *for employers, if he is able to prove due diligence in the consent would not have been given;
selection and supervision of the employee (not available against contract = voidable (essential element)
employer’s subsidiary liability arising from a crime
○ incidental fraud/dolo incidente: consent would
e) Delicts/crime (ex maleficio or ex delicto) have still been given but in different terms;
Effect: restitution, reparation, indemnification contract = valid but party employing fraud would
*every person criminally liable for a felony is be liable for damages (accidental element)
also civilly liable b) Fraud in the performance of the obligation -
employed after perfection of contract;
Proof necessary:
contract = valid and guilty party liable for damages
○ criminal - proof beyond reasonable doubt
○ civil - preponderance of evidence c) Fraud according to time of commission
● Acquittal because accused did not do the act ○ future fraud = waiver not allowed
complained of = no civil liability ○ past fraud = fraud allowed (act of liberality)
● Acquittal due to reasonable doubt = civil liability may
stand

axd 1
Negligence. A. Pure obligation.
any voluntary act or omission, there being no malice, without terms/conditions and demandable at once
which prevents the normal fulfillment of an obligation
Diligence observed: *silent: good father of a family B. Conditional obligation.
Kinds: demandability or extinguishment depends upon the
a) Contractual Negligence/Culpa Contractual happening of a condition
negligence in performance Condition: future and uncertain event the happening
*obligation/contract already existing of which will either give rise to a right or an obligation,
b) Civil Negligence/Tort/Culpa Aquiliana or extinguish such right or obligation
no contractual relation
Suspensive condition Resolutory condition
*master-servant rule does not apply
c) Criminal Negligence/ Culpa Criminal if fulfilled, obligation if fulfilled, obligation is
negligence resulting in the commission of a crime arises extinguished
*defense of a good father of a family is not proper
if not fulfilled, no juridical if not fulfilled, juridical
relation created relation is consolidated
Delay/Default/Mora.
non-fulfillment of obligation with respect to time rights not yet acquired, rights already acquired,
Kinds: but there is expectancy but subject to the threat or
a) Mora solvendi - delay by debtor that they will be acquired danger of extinction
*ex re (real obligations); ex persona (personal) Other classifications:
b) Mora accipiendi - delay by creditor 一 Potestative: depends upon will of one of the parties
c) Compensatio morae - both parties in default *debtor’s will: suspensive = void & resolutory = valid
*effect = as if there is no delay 一 Casual: depends upon change or will of a third
General rule: No demand, no delay person
Requisites: obligation demandable, liquidated; debtor 一 Mixed: depends partly upon will of one of the
does not perform, creditor demands performance parties and partly upon the change/will of a third
judicially/extra-judicially; debtor fails to comply person
Exceptions (delay even without demand): 一 Impossible: not capable of fulfillment; obligation
一 when the law provides (taxes) and condition are void *if not to do an impossible
一 obligation expressly so declares thing obligation = immediately demandable
一 when time is of essence (birthday) 一 Positive: some event will happen at a determinate
一 demand would be useless (dead animal) time; obligation is extinguished as soon as time
一 reciprocal obligations expires or indubitable that event won’t take place
Effects of delay 一 Negative: some event will not happen at a
Debtor: damages *determinate, liable fortuitous events determinate time; obligation becomes effective as
Creditor: bear risk of loss; debtor can consign the thing soon as the time indicated has elapsed or it
becomes evident that the event will not occur
Fortuitous events. 一 Divisible: capable of partial performance
couldn’t be foreseen or unavoidable (calamities/war)
一 Indivisible: not capable of partial performance by
General rule: No one should be liable; extinguish nature, agreement or law
Exceptions: law expressly states (delay, promise
determinate thing to two persons who do not have the Fulfillment of suspensive condition.
same interest), stipulation, assumption of risk Reciprocal: retroacts to the day of constitution, the
*burden of proving loss due to fortuitous events = one fruits and interest shall be deemed to have been
who invokes it mutually compensated
Unilateral: each party will keep the fruits, debtor
Rules as to payment without reservation. keeps the fruits and interests received before the
● Receipt of the principal without reservation as to fulfillment of the obligation
interest = presumption interest has been paid
● Receipt of a latter installment without Rights of the parties before fulfillment.
reservation as to prior installments = Creditor - preserve his right (registering his claim w/
presumption prior installments have been paid the Register of Deeds)
*above presumptions are disputable Debtor - may recover what he has paid by mistake
*when debtor, with intent, voluntarily prevents
Remedies of creditor to enforce payment of fulfillment of condition, the condition is deemed fulfilled
his claims against debtor. and obligation becomes demandable
a) Pursue debtor’s property except exempted by law
b) Exercise all rights and bring all the actions of the Rules with determinate things before fulfillment of
debtor except those personal to him (accion suspensive condition.
subrogatoria) ● Loss of the thing (when it perishes, goes out of
c) Impugn the acts which the debtor may have done commerce, disappears in a way that it’s existence is
to defraud his creditors (accion pauliana) - ex: unknown and cannot be recovered)
rescind a sale done to defraud 一 Without debtor’s fault: obligation extinguished
一 With debtor’s fault: debtor obliged to pay damages
Transmissibility of rights. ● Deterioration of the thing (impairment)
General rule: All rights acquired in virtue of an 一 Without debtor’s fault: borne by creditor, debtor
obligation is transmissible not liable for damages
Exceptions: Law prohibits (ex: general partner when 一 With debtor’s fault: creditor may choose between
they die); Stipulation by parties; By nature it is not rescission or fulfillment w/ damages
transmissible (agency, partnership, purely personal) ● Improvement of the thing
一 Without debtor’s fault: enjoyed by creditor
KINDS OF OBLIGATIONS. 一 At debtor’s expense: debtor will have rights to
一 Pure obligation — Conditional obligation usufruct (if improvement cannot be removed w/o
一 Obligation w/ a period — Alternative obligation damaging the principal, the thing + improvement
一 Facultative obligation — Joint obligation shall be delivered to the creditor w/o any right to
一 Solidary obligation — Divisible obligation the debtor to indemnify; debtor may set-off the
一 Indivisible obligation — Obligation w/ penalty improvements against any damage to the thing)

axd 2
 Fulfillment of resolutory condition.
obligation is extinguished, parties shall return to each D. Alternative Obligation.
other what they have received, in case of loss, various prestations are due but the performance of one
deterioration, or improvement (same w/ suspensive) is sufficient compliance of the obligation
shall be applied to the party bound to return Right to choose prestation.
*silent: debtor unless expressly stated otherwise
*Reciprocal obligation. Limitations:
one that arises from the same cause and in which each a) Debtor must completely perform prestation given
party is a debtor and creditor of each other, the (not partial)
obligation is dependent of the other obligation, to be b) Cannot choose illegal/impossible prestations
performed simultaneously c) Choice cannot be part of one and part of another
Remedies of injured party in reciprocal obligation:
一 recission with damages When an alternative obligation becomes simple:
一 fulfillment with damages 一 debtor has communicated his choice
*injured party may only choose one; however, he may 一 only one is practicable
also ask for rescission if he chose fulfillment and it is 一 if creditor has communicated his choice (if he
impossible expressly allowed to)

Rules in case of loss/ impossibility before choice is

C. Obligation with a period. is communicated.
one whose demandability/extinguishment is subject to ● Debtor’s choice
the expiration of the term w/c must necessarily come 一 if only one/some are lost, with or w/o debtor’s
(day certain even if it may not be known when ex: death) fault, the debtor may deliver the remainder
Condition Period 一 all are lost through fortuitous events, obligation is
extinguished
May be past/future Always future
一 all are lost through debtor’s fault, debtor shall pay
Cause an obligation to Fixes time for when the value of the last thing lost plus damages
arise/cease obligation will take effect 一 all except one lost through debtor’s fault, last one
Upon debtor’s will Upon debtor’s will = courts is lost through fortuitous event, obligation is
suspensive = annul will authorize its duration extinguished
一 all except one lost through fortuitous event, last
Kinds of Period:
one is lost through debtor’s fault, debtor shall pay
Ex die In diem damages
suspensive, demandable resolutory, extinguished ● Creditor’s choice
when period lapses when period lapses 一 only some/one lost, deliver what the creditor
chooses among the remainder ( fortuitous event)
Legal Voluntary Judicial 一 all lost through fortuitous event, obligation is
fixed by law stipulation by parties fixed by the court extinguished
一 only some/one lost through debtor’s fault, creditor
“Means permit me to do so” is an obligation with a may claim the remainder, or the price of the ones
period; creditor may ask the court to fix a period lost + damages
When the court may fix a period: 一 all lost through debtor’s fault, creditor may claim
一 obligation has no period but from its nature and price of any plus damages
circumstances it can be inferred that a period was
intended E. Facultative Obligation.
一 when duration is upon debtor’s will only one prestation has been agreed upon but the
*the period is presumed to be for the benefit of the obligor may render another in substitution *right of
debtor and creditor thus they cannot compel the other to choice belongs to debtor only
perform/accept before the period
Rules in case of loss of principal thing/substitute.
Period for the benefit of one of the parties. ● Before substitution
一 Debtor: he cannot be compelled to perform ○ principal thing
before expiration but he may pay or perform a) fortuitous = extinguished
before expiration b) debtor’s fault = damages
一 Creditor: he cannot be compelled to accept but he ○ substitute = not due, no obligation
may demand performance before expiration ● After substitution
When debtor loses his right to make use of the ○ principal thing = not due, no obligation
period if it his for his benefit = demandable (IGIVA) ○ substitute
○ when he becomes insolvent, unless he gives a a) fortuitous = extinguished
guaranty/security b) debtor’s fault = damages
○ when he fails to furnish the guaranties/securities
promised F. Joint Obligation. “to each his own”
○ when he impairs the guaranties/securities by his each debtor is liable only for their proportionate part
own acts, or when through fortuitous events they and each creditor is entitled only to their proportionate
disappear, unless he gives new ones equally part (proportionately, pro rata, mancomunada,
satisfactory mancomunada simple)
○ when he violates any undertaking in consideration
of which the creditor agreed to the period G. Solidary Obligation. “one for all, all for one”
○ when he attempts to abscond each debtor is liable for the whole obligation and each
creditor is entitled to demand performance of the
Obligations according to number of prestations: whole obligation (joint and severally, individually and
a) Simple - one collectively, in solidum, mancomunada solidaria, juntos
b) Compound - several o separadamente)
○ conjunctive: several prestation are due but all must
be performed (and)
○ distributive/disjunctive: alternative; facultative (or)

axd 3
General rule: J. Obligations with a penal clause.
*silent, presumed to be a joint obligation greater liability incase of non-compliance; penal clause
Exceptions: ensures performance; to provide liquidated damages
一 obligation expressly states and strengthen coercive force of obligation
一 required by law (agents, instrument saying “i *proof not required for actual damages suffered if there
promise to pay” is signed by two or more persons, is a penalty
responsibility/liability in a quasi-delict) Kinds of penal clause:
一 nature of the obligation a) Legal (law); Conventional (stipulation)
Kinds of solidarity: b) Subsidiary (only penalty may be enforced); Joint
a) passive solidarity: solidarity on debtors (both obligation and penalty)
b) active solidarity: solidarity on creditors *nullity of principal obligation nullifies the penal clause
c) mixed solidarity: solidarity on the part of the but not vice versa because the principal obligation can
debtors and the creditors stand for itself; the accessory follows the principal !
Solidary obligation and thing is lost. General rule: penalty takes place of the damages
一 fortuitous: obligation extinguished Exception: stipulation, debtor doesn’t pay penalty, fraud
一 one of the debtor’s fault: all solidary debtors are *debtor cannot just pay the penalty and avoid the
liable for the payment of price plus damages and obligation unless stipulated
interest and then they can recover from the guilty When court may reduce the penalty:
debtor 一 partial completion by debtor
*a solidary creditor cannot assign his right to a third 一 irregularly complied with by debtor
person without the consent of other solidary creditors; if 一 penalty is iniquitous/unconscionable
w/o consent, assignment is not valid as to them; they can
collect from the assigning creditor if the assignee fails to EXTINGUISHMENT OF OBLIGATIONS.
give them their shares (PaLoReCoComNov + RARP)
When the law requires solidarity. 一 Payment/Performance — Loss of the thing
一 when two or more heirs take possession of the 一 Remission/Condonation — Confusion/Merger
estate, they are solidarily liable for the 一 Compensation — Novation
loss/destruction of a thing devised/bequeathed 一 Rescission/Cancellation — Annulment
一 even when the agent exceeded his authority, 一 Fulfill Resolutory condition — Prescription
principal is solidarily liable if he allowed to act as
though he had full powers A. Payment.
一 when there are two or more bailees to whom a compliance of an obligation
thing is loaned in the same contract How payment must be made.
一 responsibility of two or more payees, when there 一 cannot compel creditor to accept different thing
has been solutio indebiti even if same or of greater value
一 Responsibility of two or more person who are 一 in obligations to do/not to do, an act cannot be
liable for a quasi-delict substituted by another act against creditor’s will
一 in obligations to give a generic thing *if silent,
*Joint Indivisible Obligation. cannot ask/give superior/inferior object
debtors/creditors are jointly bound but the 一 in monetary obligations, must be in legal tender
presentation is indivisible unless stipulated
一 all creditors must collectively demand, only
P1 coins - P20 coins Not exceeding P2,000
one/some is not valid unless authorized
一 demand must be made to all debtors 25 cents and below Up to P200
一 renunciation of a creditor only extinguishes its
一 incase of extraordinary inflation/deflation, value
own share. the obligation is converted to pay the
of the currency at the time of establishment of the
value of the thing. if all the creditor makes the
obligation shall be the basis of the payment
renunciation, obligation extinguished
unless there is agreement to the contrary
一 if one debtor does not comply, the obligation is
Formula: A = (B/C) x B
converted to monetary obligation to pay damages.
A: amount to be paid at maturity
debtor w/o fault shall not contribute for damages
B: amount of the obligation
一 if one debtor is insolvent, others shall not be
C: value on the date of maturity
liable for his share
*mercantile documents, promissory notes, etc. = shall
Indivisibility Solidarity produce only the effect of payment when encashed or
subject matter not susceptible to through creditor’s fault, it is impaired
tie between the parties
partial performance Incomplete performance.
一 substantial performance in good faith = complete
H. Divisible Obligation. performance; creditor entitled to a value
capable of partial performance commensurate to the incomplete portion
The ff. are deemed divisible: 一 creditor accepts incomplete performance (w/o
一 object has certain number of days of work protest) = obligation considered in good faith
一 object has metrical units 一 creditor cannot be compelled to accept partially
一 analogous things; by nature susceptible to partial 一 no partial payments on the part of the debtor
performance exception: stipulation, debt is partly liquidated
一 pay certain amount of installments and unliquidated
I. Indivisible Obligation. Person who must make the payment.
not capable of partial performance 一 debtor who has free disposal (should not be
The ff. are deemed indivisible: subject to any claim/encumbrance) and capacity
一 objects are definite things to alienate the thing (capable of giving consent)
一 not suscepting of partial performance (to sing) 一 if debtor does not have free disposal/capacity:
一 by law provision ○ payment isn’t valid except in cases stated by law
一 by stipulation ○ if by guardian/incapacitated person, may annul
○ injured party may recover payment
*in determining whether an obligation is divisible or not, *payment by debtor after court has ordered to retain
the controlling circumstance is not the possibility or
debt is not valid
impossibility of partial performance but the purpose of the
obligation and the intention of the parties

axd 4
Payment by a third person. Tender of Payment and Consignation.
一 creditor not bound to accept if third person Tender of Payment: debtor’s act of offering to the creditor
unless there is stipulation or third person has the thing or amount that is due
interest (guarantor/co-debtor) Consignation: depositing thing/amount due with the
Rights of a third person who makes the payment: proper court when creditor refuses or cannot receive it
一 w/ knowledge and debtor’s consent = recover Kinds:
what he has paid; subrogation a) legal (law) b) voluntary (agreement by parties)
一 w/o knowledge and debtor’s consent = can Requisites:
recover only insofar as the payment has been a) existence of a due and valid debt
beneficial to the debtor; no right of subrogation b) tender of payment (legal tender; complete) by the
一 payment made by a third person who does not debtor and refusal without justifiable reason by the
intend to be reimbursed (donation) *requires creditor to accept
debtor’s consent; if w/o debtor’s consent (not a c) previous notice of consignation to persons
donation) = such payment otherwise considered interested in the fulfillment of the obligation
valid as to the creditor; no subrogation d) consignation of the thing or sum due to judicial
authorities
Person to whom payment shall be made. e) subsequent notice of consignation made to the
a) capacitated creditor interested parties
b) creditor’s successor in interest *without both of the notices, consignation is void
c) any person authorized to receive payment
If payment to an incapacitated person: *silent: not valid Effect of consignation duly made:
一 valid if incapacitated person has kept the thing; debtor may ask for the cancellation of the obligation; the
amount to the extent only of the value of the obligation shall be extinguished after the creditor accepts
benefit to the incapacitated person the consignation or when the judge has declared it has
If payment to unauthorized person: *silent: not valid been properly made
一 valid if payment has redounded to creditor’s
benefit; benefit need not be proven when: Debtor’s right to withdraw sum/thing consigned.
○ after payment, third person acquires creditor’s ● Before acceptance: may withdraw as a matter of right;
rights creditor consent not required; obligation remans;
○ creditor ratifies payment co-debtors, guarantors, and sureties are not released
○ by creditor’s conduct, debtor has been led to ● After acceptance: creditor consent required;
believe that third person has authority obligation revived; creditor shall lose preference over
一 valid if payment has been made in good faith to the thing; guarantors and sureties are released;
third person in possession of credit/instrument solidary co-debtors become joint debtors

When payment must be made. Consignation w/o tender of payment is valid when:
a) place stipulated 一 creditor is absent/unknown/does not appear at the
b) no stipulation place of payment
○ to give determinate thing: where thing might 一 creditor is incapacitated when obligation is due
be during the perfection of the obligation 一 w/o just cause, creditor refuses to give receipt
○ to give generic thing: domicile of debtor 一 two or more persons claim same right to collect
一 when title of the obligation has been lost
Special forms of payment.
一 Dacion en Pago — Application of Payments
B. Loss of the thing due.
一 Payment by Cession — Tender and Consignation
when object goes out of commerce, existence is
unknown, and unrecoverable; physical or legal
Dation in Payment (Dacion en Pago).
transfer of ownership of a thing/right to fulfill impossibility of service
obligation in lieu of money *governed by law of sales ● Determinate thing
General rule: loss = obligation extinguished
Application of Payments. Exception:
designation of the debt by a debtor who has various 一 debtor’s fault *loss of the thing while in debtor’s
debts of the same kind in favor of one creditor possession shall be presumed to be his fault except in
Requisites: case of earthquakes, flood, storm, calamities
一 two or more debts of the same kind 一 debtor incurred delay
一 same debtor and creditor 一 provided by law (ex. debtor promised same thing to
一 all debts are due two different persons)
How application is made: 一 stipulation
a) debtor designates debt to be paid 一 nature of obligation requires assumption of risk
b) if debtor does not designate, creditor will by 一 proceeds from a criminal offense
indicating it in the receipt ● Generic thing
c) inferred from circumstances General rule: “generic thing does not perish”
d) most onerous debt that is due; if same nature and Exception: delimited generic thing
burden apply proportionately ● Obligations to do
Without debtor’s fault: obligation extinguished; if
Payment by Cession. service becomes so difficult beyond the contemplation
abandonment/assignment of all the properties of the of parties, creditor may be released in whole/part
debtor for the benefit of the creditors in order that the ● Partial loss: courts will decide
latter may sell the same and apply the proceeds thereof ● Loss by a third person: creditor shall have all the
to the satisfaction of their credits *creditors do not rights of action in which the debtor may have against
become owners of the property third persons by reason of the loss
Requisites:
一 two or more creditors
一 debtor must be (partially) insolvent
一 cession must be accepted by the creditors
一 debtor’s obligation is extinguished only up to the
extent of the net proceeds of the sale of the property

axd 5
 Compensation Confusion
C. Remission/Condonation.
One person who has both
gratuitous abandonment by the creditor of his right Two persons who are their
qualities of debtor and
against the debtor, which must be accepted as such by own debtors and creditors
creditor
the debtor
Requisites: At least two obligations Only one obligation
一 must be gratuitous
一 must be accepted by the obligor F. Novation.
一 parties must have capacity modification/extinguishment of obligation to set-up
一 must be inofficious another by changing the object/creditor/debtor
一 if made expressly, must comply with the forms of Requisites:
donations 一 previous valid obligation
○ immovable property: remission and acceptance 一 capacity and intention of the parties to modify or
must be in public instrument (specify property extinguish the obligation
remitted and value of charges debtor must satisfy) 一 modification and extinguishment of the obligation
○ movable property exceeding Php 5,000: remission 一 creation of a new valid obligation
and acceptance must be in writing; requires
simultaneous delivery of the thing/document Kinds of Novation:
representing it Real/Objective: change object/principal condition
Personal/Subjective: change in parties involved
D. Confusion/Merger. a) Changing debtor: Expromision and Delegacion
meeting in one person of the qualities of creditor and Expromision Delegacion
debtor with respect to the same obligation *must be
between principal debtor and creditor; must be complete w/o debtor’s knowledge w/ debtor’s knowledge
● Joint Obligation: confusion does not extinguish a joint *requires consent of all parties;
obligation except as regards the share of the creditor or new debtor can only recover
the new debtor can recover all
debtor in whom the two characters concur what was beneficial to old
he has paid and entitled to
debtor
● Solidary Obligation: confusion in the person of one of subrogation
the solidary debtors shall extinguish the entire
new debtor’s insolvency shall
obligation *solidary debtor may demand reimbursement not revive the original debtor’s
from his co-debtors; solidary creditor shall be liable for new debtor’s insolvency liability, except when said
the share of co-creditors shall not give rise to any insolvency was already
● Merger w/ principal debtor: principal obligation and liability on the part of the existing and of public
guaranty extinguished original debtor knowledge or known to the
● Merger w/ guarantor: obligation stands and guaranty original debtor at the time of
the delegation of his debt;
extinguished
new debtor’s non-fulfilment non-fulfilment of the
E. Compensation. of the obligation shall not obligation of the new debtor,
give rise to any liability on except through insolvency,
extinguishment to the concurrent amount of the debts
the part of the original shall revive the liability of the
of two persons who, in their own rights, are debtors debtor old debtor
and creditors of each other
Requisites: b) Changing creditor: Subrogation
一 each of the obligors be bound principally, and at the Kinds:
same time be a principal creditor of the other 一 conventional: takes place by express
*exception: guarantor may set up compensation as to agreement of the original parties (the debtor
what the creditor may owe the principal debtor and the original creditor) and the third
一 both debts consist a sum of money, or if it is a person (the new creditor)
consumable thing, must be the same kind/ quality 一 legal – when it takes place by operation of law
一 both debts are due
一 both debts be liquidated and demandable Effect of novation to accessory obligation.
一 no retention/controversy by third persons General rule: principal follows accessory
*when one or both debts are voidable, they may be Exception:
compensated before they are judicially rescinded/voided 一 accessory obligation established for third person
who did not consent to novation
Facultative compensation. 一 stipulation
may be claimed/opposed by one party 一 when a third person is subrogated in creditor’s
一 when one debt arises from deposit rights
一 one debt arises from obligation of a bailee in a
commodatum Natural Obligations.
一 one debt arises from a claim for support by 一 when w/o debtor’s knowledge or against his will, a
gratuitous title third person pays a debt which the obligor is not
一 one debt consists in civil liability from penal offense legally bound to pay because the action has
prescribed, but debtor later voluntarily reimburses
Assignment on compensation of debts. the third person, debtor can’t recover what he paid
一 w/ debtor’s consent: he cannot set up against the 一 when, after an action to enforce a civil obligation
assignee the compensation that would pertain to has failed, the defendant voluntarily performs the
him against the assignor unless right to obligation, he cannot demand reimbursement
compensation was reserved 一 when a testate/intestate heir voluntarily pays a debt
一 debtor notified but w/o consent: debtor may set up of the decedent exceeding the value of the property
compensation of debts maturing before assignment which he received by will or by the law of intestacy
but not of subsequent ones from the estate of the deceased, payment is valid
一 w/o debtor’s knowledge: he can set up and cannot be rescinded
compensation of all debts maturing before the time
he obtains knowledge of the assignment Prescriptive Periods.
一 from law: 10 years — written contract: 10 years
一 oral contract: 6 years — quasi-contract: 6 years
一 quasi-delicts: 4 years — crime: dependent on crime

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CONTRACTS
一 In contracts creating real rights, third persons
Contract. who come into possession of the object is bound
meeting of minds between two persons whereby one to the provisions of Mortgage Law and Land
binds himself, with respect to the other, to give Registration Law
something or render some service 一 In contracts to defraud creditors, they are
Elements: protected by law; if third person acts in bad faith
a) Essential (without this, no contract): consent, 4: Consensuality of Contract
object certain, cause by mere consent except: Real & Formal/Solemn
b) Natural (in contracts unless set aside): warranty 5: Obligatory Force of Contract and Compliance in
against eviction, warranty against hidden defects good faith
c) Accidental (stipulation by parties): terms, interest,
place Essential Requisites of a Contract.
Classifications: 1: Consent
一 Perfection/Formation manifestation of the meeting and the offer and
○ Consensual (mere consent) acceptance upon thing and cause
○ Real (by delivery; depositum, commodatum, pledge) Rules on offer:
○ Formal/Solemn (must be in form provided by law) 一 must be certain; definite, complete, intentional,
一 Cause business ads are not offers: mere invitations
○ Onerous (exchange of valuable consideration; sale) unless complete; advertisement for bidders mere
○ Gratuitous/Lucrative (pure beneficence/liberality; invitations
donation, commodatum) 一 becomes ineffective upon death, civil interdiction,
○ Remuneratory (cause/service remunerated - pay) insanity, insolvency of either party before
一 Dependence acceptance is conveyed
○ Principal (sale, loan) 一 option - offeror gives offeree certain period
○ Accessory (pledge, mortgage) Right of the offeror to withdraw offer:
○ Preparatory (agency, partnership) ○ no consideration, any time before acceptance
一 Name ○ w/ consideration, cannot before lapse period &
○ Nominate option is extinguished upon lapse of period in
○ Innominate (ex; do ut facias - give that you may do) both unless there is acceptance *option money
*rules that govern innominate contracts: Rules on acceptance:
(a) stipulation; (b) provisions of oblicon; (c) rules 一 must be absolute; if acceptance varies the offer,
of most analogous contracts; (d) customs there is no acceptance and meeting of the minds;
一 Risk/Fulfillment if acceptance is qualified, it’s a counter offer; if
○ Commutative (equivalent values) terms of acceptance is stipulated, it must be
○ Aleatory (depends upon chance; insurance) followed
一 Others 一 acceptance by letter/telegram only perfected if
○ Auto-contract (one person representing two offeror has knowledge of acceptance; contract is
opposite parties) presumed to be made where the offer was made
○ Contract of adhesion (one party drafted contract) 一 may be expressed/implied
Stages: 一 offer made through agent is accepted from the
a) Perfection/Conception (no agreement; only interest) time it is consummated to him *acceptance by
b) Birth (meeting of minds) agent is acceptance by principal
c) Consummation/Death/Termination (extinguishment) Rules on Consent:
一 cannot give consent: minors, insane or demented
Basic Principles of a Contract. (lucid intervals = valid contracts), deaf-mutes who do
1: Liberty of contracts/Freedom to stipulate not know how to read or write *valid if necessities
Void Stipulations: if one cannot consent = voidable
一 Creditor automatically becomes owner of property if both cannot consent = unenforceable
pledged/mortgaged if the debtor defaults in his 一 drunkenness and hypnotic spell: voidable
payment (pactum commissorium) against law 一 contract entered into where consent is given
一 Mortgage contract, specified price below w/c through mistake, violence, intimidation, undue
mortgaged property is not to be sold at the influence, violence
foreclosure sale against law
一 Unconscionable interest against morals Vices of Consent. (MIFUV)
一 Debtor to work without pay until he finds money 1: Mistake
to pay debt (slavery) against morals When it invalidates consent:
一 Hide a crime, suppress evidence, stifle the 一 mistake is w/ regards the object of the contract
prosecution of the offender against public policy (can have the contract canceled)
2: Mutuality of Contracts 一 if mistake was known, one party would not
cannot be left to will of one contracting party, force have entered the contract (“)
of law between contracting parties, if heavily 一 mistake refers to the legal effect of an
weighted in favor of one = void; Determination of agreement & when the real purpose of the
performance can be left to third person - binding parties is frustrated & the same is mutual
only once communicated to both & equitable When it does not vitiate consent:
3: Relativity of Contracts 一 simple mistake of account; shall only be
only between parties, assigns, heirs except when corrected (like 100, 1000)
intransmissible *heir shall not be liable beyond the 一 if the party alleging it knew the doubt,
value of the property received from decedent contingency or risk affecting the object
When contract may be enforced by/against a third 一 when one party is unable to read/understand
person: the language of the contract (the person
一 Stipulated in favor of third person (pour autrui), enforcing must show that the contract has been
he may demand fulfillment provided his explained to)
acceptance has been communicated to debtor 2: Violence/Physical Coercion
before revocation serious, irresistible force is employed (even if by
一 Third person includes another to violate his third person)
contract *liable for damages

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3. Intimidation KINDS OF OBLIGATIONS.
reasonable well-grounded fear of an imminent and 一 Rescissible Contract — Voidable Contract
grave evil upon his person or property or of his 一 Unenforceable Contract — Void Contract
spouse, descendants, ascendants (even if by third
person); *factors to consider: age, sex, condition; Rescissible Contract.
when intimidation does not exist: threat to enforce has all essential requisites but which may be set aside
one’s claim through competent authority, if claim is by reason of equity on account of damage to one of the
just or legal parties or upon a third person
4. Undue Influence Rescissible Contracts:
when a person takes improper advantage of his 一 Guardian and ward ¼ lesion
power over the will of another, depriving the latter 一 Representative and absentee ¼ lesion *absentee: not
of a reasonable freedom of choice in his domicile; whereabouts unknown and w/o agent
*factors to be considered: Confidential, Spiritual, 一 Undertaken to defraud creditors *third person must
Family and others relations of the parties, Mental know
weakness, Ignorance, Financial distress 一 Things under litigation
5. Fraud 一 Others
When fraud exists (dolo causente): Rescissible Payment: debtor makes the payment,
一 when through insidious words or machinations debtor must be insolvent, obligation shall not be due
of one of the contracting parties, w/c without
them the other would not have entered the Rescission.
contract (active fraud); to make a contract ineffective
一 when there is failure to disclose facts when Requisites:
there is duty to reveal them, as when the 一 party suffering must have no other legal means to
parties are bound by confidential relations obtain reparation for the same
(passive fraud) 一 party demanding rescission must be able to return
Requisites for voidable contract: Fraud is serious (if whatever he is obliged to restore (w/ fruits; and price
incidental, damages); not employed by both; other w/ interest) *not applicable to prejudiced creditors
party relied on fraud; in case of misrepresentation 一 object must not be legally in possession of third
by third person, unless such misrepresentation person who acted in good faith (indemnity for
created substantial mistake & mutual, if third person damages from the person causing the loss)
connives w/ one of the parties; misrepresentation in 一 action for rescission must be brought within period
good faith (only mistake) allowed by law: 4 years from contract except:
Kinds of Fraud: ○ guardianship: 4 yrs from capacity
一 In obtaining consent ○ absentees: 4 yrs from when domicile is known
○ Causal fraud/Dolo causente (no consent would have *extent of rescission: only up to extent to cover damages
been given) Alienations in fraud of creditors:
○ Incidental fraud/Dolo incidente (consent would’ve 一 by gratuitous title: presumed to have been entered
still be given but on different terms; valid but w/ into in fraud of debtor (wa nagbilin to cover debts)
damages) 一 by onerous title: judgment, writ of attachment
一 In performance ○ bad faith: indemnify creditors even if fortuitous
○ Evading fulfillment (no effect on contract but w/ ○ good faith: debtor shall not be liable; rescission
damages) won’t be available; if there are subsequent transfers,
even if done in bad faith, not liable anymore
Simulated Contract: (does not intend to have any effect)
a) Absolutely Simulated Contract: do not intend to Voidable Contract.
be bound at all; Void; may recover what they defective because of incapacity or vitiated consent;
have given; must be both, if not fraud & voidable binding unless annulled by proper action in court;
b) Relatively Simulated Contract: parties conceal susceptible of ratification
their true agreement: bound by real agreement; Voidable Contracts:
only consent and term are simulated 一 Incapable of giving consent (minors, insane,
demented, deaf-mute wdnkhtrow)
Objects of Contracts. 一 Vices of consent (MIFUV)
一 all things that are not outside the commerce of man, 一 Consent given in state of drunkenness/hypnotic spell
including future things
*contract is generally void when object is future Annulment.
inheritance Rules:
Requisites: succession had not been opened; object a) Prescriptive period: within 4 yrs from:
forms part of the inheritance: promissor purely 一 intimidation, violence, undue influence (when
hereditary in nature defect in consent ceases)
一 all rights that are transmissible (credit right, lease 一 mistake, fraud (when discovered)
hold rights) 一 minors, etc. (when guardianship ceases)
一 all services not contrary to law, morals, good b) Who may bring action for annulment:
customs, public order & policy 一 principal/subsidiary parties only but also:
一 must not be impossible ○ guardian of incapacitated during incapacity
一 must be determinate as to its kind or if not, it must ○ incapacitated after attaining capacity
be possible to determine w/o new contract ○ party whose consent was vitiated *he who must
come to court must come with clean hands
Cause of Contracts. c) Effects of annulment
Requisites: it must exist, lawful, true 一 obligations to give: return things w/ fruits and
一 Cause: essential reason; illegal = contract void; price w/ interest
known to parties 一 obligations to do: value is basis for damages
一 Motive: secret intention; legal = does not affect 一 restitution when one of the parties is incapacitated
contract; may not be known to parties is only up to what was beneficial to him
Lesion: inadequacy of cause; shall not invalidate 一 if lost through fault of the party obliged; return
contracts except when: fruits, value of the thing at the time of loss, interest
一 there is fraud, mistake, undue influence at the time of loss
一 in cases provided by law (ex. when ward/absentee 一 if one cannot return, the other cannot be forced to
suffer lesion by more than ¼ of the object’s value) comply *mutual restitution

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 d) Effect of loss while in possession of injured party Void by law:
一 if through his fault: annulment is extinguished 一 Donation between spouses (except moderate gifts)
一 w/o his fault or incapacitated: may bring action for 一 Sale between spouses (except when there is
annulment, return value of the thing and fruits up separation of property)
to the extent he was benefitted 一 Household service without compensation
一 Future inheritance
Annulment Rescission
To declare inefficacy inherent To avail inefficacy which did
Contract is a criminal offense
to contract not exist in the contract Both parties guilty Only one party is guilty
Vitiated consent; damage is There must be No action against each other;
immaterial lesion/damage Innocent party may demand
both criminally prosecuted;
what he has give and has no
Principal action Subsidiary action instruments of contracts shall
obligation to return
be confiscated by govt.
Law predominates Equity predominates
Contract is a not criminal offense
Available only to contracting Available to parties and
parties third persons Both parties guilty Only one party is guilty

Ratification to prevent Ratification not required to Innocent party may demand

Neither party may recover or
annulment prevent rescission what he has give and has no
demand
obligation to return
Ratification: adoption/affirmation of a voidable contract;
may be expressed/implied; one who can ratify the Pari delicto.
contract are the ones who may annul the contract; once no action or relief to both parties (equal guilt)
ratified, cannot annul because it cleanses contract from Exceptions:
all defects from inception 一 payor may recover interest paid in excess of allowed
by usury laws with interest from date of payment *not
Unenforceable Contract. excessive & unconscionable
cannot be enforced unless ratified *defense of 一 party may recover money/property delivered for
unenforceability only belong to contracting parties illegal purpose provided he repudiates the contract
Unenforceable Contracts: before a third person is affected
一 Entered into the name of another person w/ no 一 incapacitated person in an illegal contract if the
authority, or beyond his powers (may be ratified interest of justice so demands
expressed/impliedly by person whose name was used) 一 person may recover, if public policy is enhanced, if
一 Those that do not comply with the statute of frauds the agreement not illegal per se, only prohibited and
(wholly executory contracts only) *if statute of frauds prohibition is designed for his protection
is violated, contract cannot be sued upon for damages 一 excess of price fixed by law for any article/commodity
or performance 一 laborer additional compensation for extra hours and
一 Both parties are incapacitated to give consent for wages lower than minimum wage
*ratification by one parent/guardian = contract
becomes voidable Forms specific contracts must follow.
*ratification by both parents/guardian = valid from a) For validity
inception 一 donation of immovable and acceptance: must be
in public instrument
Statute of Frauds: *must be in writing 一 donation of movable with value above 500 and
一 Not to be performed within one year acceptance: must be in writing
一 Special promise to answer for debt, default, or 一 authority of agent to sell land: must be in writing
miscarriage of another; guaranty 一 contract of partnership where immovable is
一 Agreement in consideration of marriage, other than contributed: must be in public instrument
mutual promise to marry attached with signed inventory
一 Sale of goods, chattels, or things in action (credits, b) For enforceability
shares of stock, incorporeal rights) at a price not less 一 statute of frauds *parties may compel each other
than 500 to observe form required
*if auctioneer makes entry in his sales book; contract c) For convenience
becomes enforceable 一 modification, extinguishment, transmission,
一 Leasing of real property or of an interest therein for creation of real rights over immovable: public
more than a year 一 cession, repudiation, renunciation of hereditary
一 Sale of real property and interest rights or conjugal partnership gains: public
一 Representation as to credit of third person 一 power to administer property in connection with
Becomes enforceable when: public document contract: public
○ failure to object to the presentation of oral evidence to 一 cession of actions/rights from public documents:
prove them public
○ acceptance of benefits under them
Reformation.
Void/Inexistent Contract. correct error/mistake; to reveal real intention
no force and effect from the beginning, as if it had Requisites: meeting of minds, true intention not in
never been entered into; cannot be ratified, defense of contract, reason is due to mistake, fraud, inequitable
illegality cannot be waived; no prescription for conduct, accident
declaration of inexistence; defense of illegality not *who may avail: mutual mistake (any party, his successors,
available to third persons not directly affected; direct heirs assigns; if not (injured party, successors, heirs, assigns)
result of a previous illegal contract When an instrument may be reformed:
Void from the beginning: 一 mutual mistake
一 Contrary to law, morals, good customs, public order, 一 one mistake, other party fraudulent, knew/believed
public policy instrument did not state their real agreement,
一 Absolutely simulated inequitable
一 Objects/cause did not and will not exist at the time of 一 ignorance, lack of skill, negligence, bad faith maker of
contract instrument
一 Objects outside the commerce of man 一 different real intention
一 Impossible service
一 Intention cannot be ascertained

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When reformation is not available:
一 simple donation
一 will
一 real agreement void
一 if there is action to enforce, parties may not reform
anymore

Interpretation of Contracts.
Rules:
一 all correct information = literal stipulations
一 intention > words
一 most adequate
一 usage/custom of place
一 interpretation of obscurity shall not favor the party
that caused the obscurity
一 obscurity upon principal object = contract void
一 least transmission of rights shall prevail (ex.
commodatum > donation)
一 onerous contracts, greatest reciprocity of interest

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