CIVIL LAW REVIEWER
TABLE of CONTENTS
OBLIGATIONS
Table of Contents
Chapter II. Nature and Effect of Obligations93
I.
Kinds of Prestations ............................93
II.
Breach of Obligation............................94
III. Fortuitous Event (Force Majeure) .......96
IV. Remedies to Creditors ........................96
V. Usurious Transactions and Rules on
Interest .........................................................97
Chapter III. Different Kinds of Obligations ..98
I.
Pure and Conditional Obligations .......98
II.
Reciprocal Obligations ......................100
III. Obligations with a Period ..................100
IV. Alternative and Facultative Obligations
101
V. Joint and Solidary Obligations ..........103
Effects of Prejudicial and Beneficial Acts
(Art.1212) ...................................................105
VI. Divisible and Indivisible Obligations..106
VII.
Oblligations with a Penal Clause ..106
Chapter IV. Extinguishment of Obligations
.......................................................................107
I.
Payment or Performance ..................107
II.
Loss or Impossibility..........................109
III. Condonation or Remission of the Debt
109
IV. Confusion or Merger of Rights ..........110
V. Compensation ...................................110
VI. Novation ............................................111
Charts: Payment & Performance ................114
90
OBLIGATIONS
Chapter I. General Provisions.......................91
I.
Obligations ..........................................91
II.
Sources of Obligations ........................91
Prof. Solomon Lumba
Faculty Editor
Leo Ledesma
Lead Writer
Krizel Malabanan
Ivy Velasco
Tin Reyes
Frances Domingo
Hazel Abenoja
Writers
CIVIL LAW
Kristine Bongcaron
Patricia Tobias
Subject Editors
ACADEMICS COMMITTEE
Kristine Bongcaron
Michelle Dy
Patrich Leccio
Editors-in-Chief
PRINTING & DISTRIBUTION
Kae Guerrero
DESIGN & LAYOUT
Pat Hernandez
Viktor Fontanilla
Rusell Aragones
Romualdo Menzon Jr.
Rania Joya
LECTURES COMMITTEE
Michelle Arias
Camille Maranan
Angela Sandalo
Heads
Katz Manzano Mary Rose Beley
Sam Nuñez Krizel Malabanan
Arianne Cerezo Marcrese Banaag
Volunteers
MOCK BAR COMMITTEE
Lilibeth Perez
BAR CANDIDATES WELFARE
Dahlia Salamat
LOGISTICS
Charisse Mendoza
SECRETARIAT COMMITTEE
Jill Hernandez
Head
Loraine Mendoza Faye Celso
Mary Mendoza Joie Bajo
Members
Chapter I. General Provisions
I.
II.
OBLIGATIONS
SOURCES OF OBLIGATIONS
A. LAW
B. CONTRACTS
C. QUASI-CONTRACTS
D. DELICTS
E. QUASI-DELICTS
Article 1156, Civil Code. An obligation is a juridical
necessity to give, to do or not to do.
I.
Obligations
Elements of an Obligation (De Leon, 2003)—
1. ACTIVE SUBJECT (Obligee/Creditor): the
person who has the right or power to
demand the prestation.
2. PASSIVE SUBJECT (Obligor/Debtor): the
person bound to the perform the prestation.
3. PRESTATION
(Object):
the
conduct
required
to
be
observed
by
the
debtor/obligor (to give, to do or not to do).
4. VINCULUM JURIS (Juridical or Legal Tie;
Efficient Cause): that which binds or
connects the parties to the obligation.
II. Sources of Obligations
A. Law
Art. 1158, Civil Code. 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.
B. Contracts
Art. 1159. Has the Force of Law Between
Parties. Obligations arising from contracts have
the force of law between the contracting parties
and should be complied with in good faith
C. Quasi-Contracts
Art. 2142, Civil Code. Certain lawful, voluntary and
unilateral acts give rise to the juridical relation of
quasi-contract to the end that no one shall be unjustly
enriched or benefited at the expense of another.
Lawful
Voluntary
Unilateral
Distinguished from crimes
Distinguished
from
quasi-delict,
which are based on fault and
negligence
Distinguished from contract which is
based on agreement
91
OBLIGATIONS
OBLIGATIONS & CONTRACTS TEAM
Chapter I. GENERAL PROVISIONS
OBLIGATIONS & CONTRACTS
CIVIL LAW REVIEWER
Chapter I. GENERAL PROVISIONS
Kinds of Quasi-Contracts
 Negotiorum Gestio: officious or voluntary
management of the property or affairs of
another without the knowledge or consent of
the latter.
 Solutio Indebiti: undue payment. The
juridical relation arises when:
o a thing is received without any right; and
o the thing delivered by mistake.
 Others: See Arts. 2164-2175
(De Leon, 2003)
D. Delicts (Acts or omissions punished by law;
crimes)
Extent of Civil Liability
Governed by the Revised Penal Code and the
Civil Code, includes:
1. Restitution;
2. Reparation of damages caused; and
3. Indemnity for consequential damages (Art.
104, Revised Penal Code).
(Tolentino, 1987)
Enforcement of Civil Liability
1. Independent: Criminal and civil action
arising from the same offense may be
instituted separately.
2. Suspended: However, after criminal action
has been commenced prosecution for civil
action is suspended in whatever stage it
may be found, until final judgment in the
criminal proceeding is rendered;
3. Impliedly Instituted: Civil action is impliedly
instituted with the criminal action, when:
○ offended party expressly waives the civil
action or reserves the right to institute a
separate civil action; or
○ the law provides for an independent civil
action
Barredo v. Garcia, (1942): The same negligent act
may give rise to an action based on delict or quasidelict and the injured party is free to choose which
remedy to enforce.
Mendoza vs. Arrieta, (1979): If the civil action is
based on quasi-delict, there is no need to reserve the
right to file a civil action in the criminal case.
action (res judicata)
 if judgment of acquittal
contained a declaration
that no negligence can
be attributed to the
accused and that the
fact from which civil
action might arise did
not exist
Quasi-Delict
Private,
against
individual
Criminal intent is not
necessary
Crimes
Public, against the State
Present in any act or
omission where fault or
negligence intervenes
An act can is only
punishable when there is
a law penalizing it
Gives rise to liability for
damages to the injured
party
Reparation,
compensation
or
indemnification of the
injury suffered by the
injured party
There are crimes from
which no civil liability
arises
Fine or imprisonment or
both, to public treasury
Preponderance
of
evidence
Can be compromised
Proof of guilt beyond
reasonable doubt
Can
never
be
compromised
No Effect
 an independent civil
action is allowed by law
 acquittal is due to lack
of
proof
beyond
reasonable doubt
Criminal
necessary
liability
intent
is
for criminal
Requisites of Liability (DWD)
1. Wrongful act or omission by fault or
negligence
2. Damage or injury proven by the person
claiming recovery
3. Direct causal connection between the fault
or negligence and the damage or injury
Liability for QuasiDelict (Art. 2180, NCC)
Primary, can be directly
sued by the injured
party
Liability for Crimes
(Art. 103, RPC)
Subsidiary,
employee
must first be convicted
and sentenced to pay
civil indemnity
All employers, whether
engaged
in
some
enterprise or not, are
liable
for
acts
of
employees,
even
household helpers
Avoid civil liability by
proving
exercise
of
diligence of a good
father of a family
Employer is only liable
when he is engaged in
some kind of business
or industry
Effect of Acquittal on Civil Actions
Barred
 if based on the very
same facts on which
the criminal action
which
ended
in
acquittal was based
 if the facts alleged in
the civil case has been
found to be nonexistent in the criminal
92
E. Quasi-Delicts (Voluntary acts or omissions
with fault or negligence causing damage to
another; not a crime nor a contract)
Subsidiary liability is
absolute and cannot be
avoided by any proof of
diligence
OBLIGATIONS
CIVIL LAW REVIEWER
CIVIL LAW REVIEWER
Nature
and
I.
II.
III.
IV.
V.
KINDS OF PRESTATIONS
BREACH OF OBLIGATIONS
FORTUITOUS EVENTS
REMEDIES
USURIOUS TRANSACTIONS
I.
Kinds of Prestations
Effect
of
KINDS OF PRESTATION
1. TO GIVE: real obligation; to deliver either
(1) a specific or determinate thing, or (2) a
generic or indeterminate thing.
2. TO DO: positive personal obligation;
includes all kinds of work or services.
3. NOT
TO
DO:
negative
personal
obligation; to abstain from doing an act;
includes the obligation not to give.
Accessories: those joined to or included with
the principal for the latter’s completion, better
use, perfection or enjoyment
OBLIGATION TO GIVE
Specific Thing
Generic Thing
Particularly
designated or
physically
segregated
from all other of
the same class;
identified
by
individuality.
Object
is
designated only
by its class/
genus/ species.
Debtor can give
anything of the
same class as
long as it is of
the same kind.
Cannot
be
substituted.
Can
be
substituted by
any of the same
class and same
kind.
Personal Right
Vested before delivery
A right enforceable only
against the debtor
Right of the creditor to
demand from the debtor,
the fulfillment of a
prestation to give, to do
or not to do
Accessions: additions to or improvement upon
a thing, either naturally or artificially
To Give
Specific
Thing
(Asked
in ’83,
’84, ’85
and
’86)
To Give
Generic
Thing
Real Right
Vested after delivery
A
right
enforceable
against the world
Right pertaining to a
person over a specific
thing, without a passive
subject
individually
determined
against
whom such right may be
personally enforced
Duties of the Debtor
 To preserve or take care of the thing
due
 To deliver the thing itself
 To deliver the fruits of the thing
 To deliver the accessions and
accessories
 To pay for damages in case of breach
Rights of the creditor
 To compel specific performance
 To recover damages in case of breach of
the obligation, exclusive or in addition to
specific performance
 Entitlement to fruits and interests from the
time the obligation to deliver arises





To Do
Limited
Generic Thing
When
the
generic objects
are confined to
a
particular
class.




To deliver a thing of the quality intended
by the parties taking into consideration
the purpose of the obligation and other
circumstances
Creditor cannot demand a thing of
superior quality neither can the debtor
deliver a thing of inferior quality
To be liable for damages in case of
breach
To do it
To shoulder the cost of having someone
else do it
To undo what has been poorly done
To pay for damages in case of breach



To ask for performance of the obligation
To ask that the obligation be complied with
by a third person at the expense of the
debtor
To recover damages in case of breach of
obligation
To compel performance
To recover damages where personal
qualifications of the debtor are involved
93
OBLIGATIONS
Chapter II.
Obligations
Chapter II. NATURE and EFFECT of OBLIGATIONS
Not To
Do



Chapter II. NATURE and EFFECT of OBLIGATIONS
Not to do what should not be done
To shoulder the cost of undoing what
should not have been done
To pay for damages in case of breach
II. Breach of Obligation


To ask to undo what should not be done
To recover damages, where it would be
physically or legally impossible to undo
what has been undone, because of :
o the very nature of the act itself;
o rights acquired by third persons who
acted in good faith;
o when the effects of the acts prohibited
are definite in character and will not
cease even if the thing prohibited be
undone.

Effect of Contributory Negligence
Reduces or mitigates the recoverable
damages, UNLESS, the negligent act or
omission of the creditor is the
proximate cause of the event which led
to the damage or injury complained of.
In this case, he cannot recover.

Diligence Required (De Leon, 2003)
a. By stipulation: that agreed upon by
the parties.
b. By law: in the absence of
stipulation, that required by law in
the particular case.
c. Diligence of a good father of a
family: if both the contract and law
are silent.
Future Negligence: may be waived
except in cases where the nature of the
obligation or the public requires another
standard of care (i.e. extraordinary
diligence as for a common carrier)
A. Voluntary – fraud, negligence, delay or
contravention of tenor of the obligation
B. Involuntary – fortuitous event
TYPES OF BREACH
Substantial Breach
Total breach
Amounts
to
NonPerformance;
Basis
for
rescission
under Art. 1191 and
payment of damages
Slight or Casual Breach
Partial breach
Obligation is partially
performed;
Gives rise to liability for
damages only
1. FRAUD (DOLO): deliberate or intentional
evasion of the normal fulfillment of an
obligation (De Leon, 2003).



Future Fraud: Any waiver of action for
future fraud is void (Art. 1171).
Past Fraud: can be subject of a valid
waiver by the aggrieved party (De Leon,
2003).
Woodhouse vs. Halili, (1953): In order
that fraud may vitiate consent, it must be
the dolo causante and not merely the
dolo incidente, inducement to the
making of the contract. The false
representation was used by plaintiff to
get from defendant a bigger share of net
profits. This is just incidental to the
matter in agreement. Because despite
plaintiff’s deceit, respondent would have
still entered into the contract.
2. NEGLIGENCE
or
FAULT
(CULPA):
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 (Art.
1173).

Fraud
There
is
deliberate
intention
to
cause
damage
Liability
cannot
be
mitigated
Waiver for future fraud
is void
Negligence
There is no deliberate
intention to cause damage
Liability may be mitigated
Waiver
for
future
negligence
may
be
allowed in certain cases:
 gross – can NEVER
be excused in
advance; amounts to
wanton attitude; rules
on fraud shall apply
 simple – may be
excused in certain
cases
Mandarin Villa Inc. v. CA (1996): Test of Negligence:
Did the defendant in doing the alleged negligent act
use the reasonable care and caution which an
ordinary and prudent person would have used in the
same situation? If not, then he is guilty of negligence.
94
OBLIGATIONS
CIVIL LAW REVIEWER

Chapter II. NATURE and EFFECT of OBLIGATIONS
Extent of Damages to be Awarded
Bad Faith
Debtor is liable for all
damages which can be
reasonably attributed to
the non-performance of
the obligation. Any waiver
or renunciation made in
anticipation
of
such
liability is null and void
Good Faith
Debtor is liable only for
the
natural
and
probable
consequences of the
breach of obligation and
fortuitous events
Culpa Contractual
Culpa Aquiliana Asked
in ’83, ’84, and ’86)
Negligence is substantive
and independent
Negligence is merely
incidental
in
the
performance
of
an
obligation
There is always a preexisting
contractual
relation
The source of obligation
of defendant to pay
damages is the breach or
non-fulfillment of the
contract
Proof of the existence of
the contract and of its
breach or non-fulfillment
is sufficient prima facie to
warrant recovery
Proof of diligence in the
selection and supervision
of the employees is NOT
available as defense

There may or may not be
a pre-existing contractual
obligation
The source of obligation
is
the
defendant’s
negligence itself
The negligence of the
defendant
must
be
proved
Proof of diligence in the
selection and supervision
of the employee is a
defense
Culpa Criminal: wrong or negligence in
the commission of a crime
3. DELAY or DEFAULT (MORA): failure to
perform an obligation on time which
constitutes breach of the obligation (De
Leon, 2003).
 Mora Solvendi: delay on the part of the
debtor to fulfill his obligation either to
give (Ex re) or to do (Ex persona),
(Asked in ’83, ’84, ’85, and ’86);
No Mora Solvendi in:
 Negative Obligations because delay
is impossible (De Leon, 2003);
 Natural
Obligations
(Tolentino,
1987).


Mora Solvendi
Requisites
1. Obligation must be
liquidated, due and
demandable
2. Non-performance by
the debtor on period
agreed upon
3. Demand, judicial or
extra-judicial, by the
creditor
Effects
1. The debtor is liable
for damages
2. The debtor is liable
even if the loss is due
to fortuitous events
3. For
determinate
objects, the debtor
shall bear the risk of
loss
Mora Accipiendi: delay on the part of
the creditor to accept the performance of
the obligation
Compensatio Morae: delay of the
parties in reciprocal obligations; effect:
as if there is no default.
Mora Accipiendi
Requisites
1. Debtor offers of
performance
2. Offer must be in
compliance with the
prestation
3. Creditor refuses the
performance
without just cause
Effects
1. The responsibility of
the
debtor
is
reduced to fraud
and
gross
negligence
2. The
debtor
is
exempted from risk
of loss of the thing
which is borne by
the creditor
3. The
expenses
incurred by the
debtor
for
the
preservation of the
thing after the mora
shall be chargeable
to the creditor
4. If the obligation
bears interest, the
debtor does not
have to pay from
the time of delay
5. The creditor is liable
for damages
6. The debtor may
relieve himself of
obligation
by
consigning the thing
Rules on Mora, Delay or Default
Unilateral Obligations
General Rule:
“No demand no delay”.
The mere expiration of
the period fixed by the
parties is not enough in
order that the debtor may
incur in delay.
Exceptions
1. the obligation or law
provides
2. time is of the
essence
3. demand useless
4. debtor
acknowledges that
he is in default
Reciprocal Obligations
General Rule:
Delay occurs from the
moment one party fulfills
his undertaking, while the
other does not comply or
is not ready to comply in
a proper manner with
what is incumbent upon
him.
No delay if neither party
performs his undertaking
(Art. 1169, par. 2).
Exception:
different dates for the
performance
of
respective obligations are
fixed by the parties
95
OBLIGATIONS
CIVIL LAW REVIEWER
4. CONTRAVENTION OF THE TENOR:
violation of the terms and conditions
stipulated in the obligation, which must not
be due to a fortuitous event or force majeure
(De Leon, 2003).
 “In any manner contravenes the
tenor” means any illicit act, which
impairs the strict and faithful fulfillment
of the obligation, or every kind of
defective performance (Tolentino, 1987).
Chapter II. NATURE and EFFECT of OBLIGATIONS
2. The event must be unforeseeable or
inevitable
3. The event renders it impossible for debtor to
fulfill his obligation in a normal manner
4. The debtor must be free from any
participation in the aggravation of the injury
to the creditor (Tolentino, 1987; De Leon,
2003)
5. It must be the only and sole cause, not
merely a proximate cause.
III. Fortuitous Event (Force Majeure)
IV. Remedies to Creditors
Any event which could not be foreseen, or which
though foreseen are inevitable (Art. 1174)
A happening independent of the will of the
debtor and which makes the normal fulfillment of
the obligation impossible (De Leon, 2003).
A. Act of God: an accident, due directly or
exclusively to natural causes without human
intervention, which by no amount of
foresight, pains or care, reasonably to have
been expected, cold have been prevented.
B. Act of Man: force majeure is a superior or
irresistible force, which is essentially an act
of man; Includes unavoidable accidents,
even if there has been an intervention of
human element, provided that no fault or
negligence can be imputed to the debtor
(Asked in ’81, ’87 and ’88)
Liability in case of Fortuitous Event
No person shall be responsible for fortuitous
events, UNLESS:
1. expressly specified by law (Arts. 552(2),
1942, 2147, 2148, 2159)
2. liability specified by stipulation
3. the nature of the obligations requires
assumption of risk (Art. 1174)
4. when debtor is guilty of concurrent or
contributory negligence
5. debtor has promised to deliver the same
thing to two or more persons who do not
have the same interests (Art. 1165 par. 3)
6. the thing is lost due to the obligor’s fraud,
negligence, delay or contravention of the
tenor of the obligation (Art. 1170)
7. the obligation to deliver a specific thing
arises from a crime (Art. 1268)
8. the object is a generic thing, i.e. the genus
never perishes
Requisites for Exemption
1. The event must be independent of the
debtor’s will (fraud or negligence)
Art. 1170, Civil Code. 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.
Transmissibility of Rights
Art. 1178: Rights acquired by virtue of an
obligation are transmissible in character,
UNLESS prohibited:
1. by their very nature (i.e. personal
obligations)
2. by stipulation of the parties
3. by operation of law
(De Leon, 2003)
Primary Remedies
Arts. 1165-1168: PRESS
1. Specific Performance – performance
by the debtor of the prestation itself
2. Substituted Performance – someone
else performs or something else is
performed at the debtor’s expense
3. Equivalent Performance – right to
claim damages (in either performance or
rescission)
4. Rescission – right to rescind or cancel
the contract
5. Pursue the Leviable – to attach the
properties of the debtor, except those
exempt by law from execution
Subsidiary Remedies of Creditor
General Rule: Contracts are binding only
between the parties thereto, and their heirs,
assignees, and the estate, UNLESS: Accion
Subrogatoria and Accion Pauliana
1. Accion Subrogatoria: right of creditor to
exercise all of the rights and bring all of the
actions which his debtor may have against
third persons; Novation by change of debtor
(Art. 1291, par.3).
96
OBLIGATIONS
CIVIL LAW REVIEWER
Chapter II. NATURE and EFFECT of OBLIGATIONS
Requisites
a. Debtor to whom the right of action
properly pertains must be indebted to
the creditor
b. The debt is due and demandable
c. The creditor must be prejudiced by the
failure of the debtor to collect his own
rd
debt from 3 persons either through
malice or negligence
d. The debtor’s assets are insufficient
(debtor is insolvent)
e. The right of action is not purely personal
to the debtor
2. Accion Pauliana: Rescission, which
involves the right of the creditor to attack or
impugn by means of a rescissory action any
act of the debtor which is in fraud and to the
prejudice of his rights as creditor.
Siguan v. Lim, (1999): Petitioner cannot invoke the
credit of a different creditor to justify the rescission of
the subject deed of donation, because the only
creditor who may benefit from the rescission is the
creditor who brought the action; those who are
strangers to the action cannot benefit from its effects.
V. Usurious Transactions and Rules on
Interest
USURY: stipulation of interest rates higher than
the ceiling provided by law.
Note: Usury Law (Act No. 2655, as amended)
was repealed by Central Bank Circular No. 905,
Dec. 10, 1982.
INTEREST
Requisites: CASAL
a. There is a credit in favor of plaintiff
prior to alienation
b. The
debtor
has
performed
a
subsequent contract conveying a
patrimonial benefit to third persons
c. The creditor has no other legal remedy
to satisfy his claim
d. The debtor’s acts are fraudulent to the
prejudice of the creditor
e. The third person who received the
property is an accomplice in the fraud
Accion Subrogatoria
Not
necessary
that
creditor’s claim is prior to
the acquisition of the right
by the debtor
No need for fraudulent
intent
No period for prescription
Accion Pauliana
Credit must exist before
the fraudulent act
Fraudulent
intent
is
required if the contract
rescinded is onerous
Prescribes in 4 years
from the discovery of the
fraud
3. Accion Directa (Art. 1729, 1652, 1608,
1893): the right of lessor to go directly to a
sublessee for unpaid rents of the lessee
4. The right of laborers or persons who furnish
materials for a piece of work undertaken by
a contractor to go directly to the owner for
any unpaid claim due to the contractor
5. The right of vendor against every possessor
whose right is derived from the vendee
6. The right of a principal against a substitution
appropriated by an agent
Art. 1176, Civil Code. Receipt of the principal without
reservation as to the interest shall give rise to a
disputable presumption that the interest has been
paid. Receipt of the latter installment without
reservation as to prior installments shall likewise give
rise to a disputable presumption that such prior
installments have been paid.
Determination of Interests
Eastern Shipping Lines v. CA (1961)
Stage 1
For loan or forbearance NOT for loan or
of money, goods or forbearance of money,
credit, the interest rate goods or credit, the
is 12%
interest rate is 6%
a) Interest = interest
rate
stipulated
in
writing + 12% legal
interest,
computed
from date of judicial
demand
(filing
of
complaint)
b) If there is no
stipulated interest rate,
the interest rate is 12%
computed from date of
default or demand
(judicial
or
extrajudicial)
a) If date of demand is
certain, compute from
the date when demand
is made (judicial or
extra-judicial)
b) If date of demand is
NOT certain, compute
from the date of trial
court decision (judicial
demand)
Stage 2
Add 12% interest from finality of SC decision until
fully paid (equivalent to a forbearance of credit)
97
OBLIGATIONS
CIVIL LAW REVIEWER
Chapter III. DIFFERENT KINDS of OBLIGATIONS

Chapter III. Different Kinds of Obligations
I.
II.
III.
IV.
PURE AND CONDITIONAL OBLIGATIONS
RECIPROCAL OBLIGATIONS
OBLIGATIONS WITH A PERIOD
ALTERNATIVE AND FACULTATIVE
OBLIGATIONS
V. JOINT AND SOLIDARY OBLIGATIONS
VI. DIVISIBLE AND INDIVISIBLE OBLIGATIONS
VII. OBLIGATIONS WITH A PENAL CLAUSE

I.
Pure and Conditional Obligations
(Asked in ’79, ’88, ’00, ’03)
Pure Obligation (Art.1179): Effectivity or
extinguishment does not depend upon the
fulfillment or non-fulfillment of a condition or
upon the expiration of a term or period and
characterized by the quality of its being
IMMEDIATELY DEMANDABLE.
Conditional Obligation (Art.1181): Effectivity is
subject to the fulfillment or non-fulfillment of a
condition, which is characterized to be a
FUTURE and UNCERTAIN event.
Effects of Conditions
1. Suspensive Condition: Obligation shall
only be effective upon the fulfillment of the
condition (Art.1181). What is acquired by the
obligee upon the constitution of the
obligation is mere hope or expectancy, but is
protected by law.
Before Fulfillment
The demandability and
acquisition or effectivity
of the rights arising from
the
obligation
is
suspended.
Anything
paid by mistake during
such time may be
recovered.

After Fulfillment
The obligation arises or
becomes effective.
The obligor can be
compelled to comply with
what is incumbent upon
him.
Doctrine of Constructive Fulfillment
of Suspensive Conditions
Art. 1186: the condition shall be deemed
fulfilled when the obligor actually
prevented the obligee from complying
with the condition, and that such
prevention must have been voluntary or
willful in character.
 Applicable to suspensive conditions
and not to resolutory conditions.
 The article can have no application
to an external contingency which is
lawfully within the control of the
obligor.
The mere intention of the debtor to
prevent, without actually preventing
fulfillment
is
not
sufficient.
Constructive fulfillment will not hold
when the debtor acts pursuant to a
right.
There
is
constructive
fulfilment:
a. Intent of the obligor to prevent
fulfilment; and
b. Actual prevention of compliance
Principle
of
Retroactivity
in
Suspensive Conditions
Art.1187, par.1: once the condition is
fulfilled its effects must logically retroact
to the moment when the essential
elements, which gave birth to the
obligation have taken place. The
condition which is imposed is only
accidental, not an essential element of
the obligation.
 Applied
only
to
consensual
contracts. No application to real
contracts which can only be
perfected by delivery.
To Give
If reciprocal, the fruits
and interests shall be
deemed to have been
mutually compensated
as a matter of justice and
convenience
(Art. 1187, par. 1)
If unilateral, the debtor
shall appropriate the
fruits
and
interests
received, unless from the
nature and circumstance
it should be inferred that
the intention of the
persons constituting the
same was different.

To Do/Not To Do
In obligations to do or not
to do, the court shall
determine the retroactive
effect of the condition
that has been complied
with.
(Art. 1187, par. 2)
The power of the court
includes
the
determination whether or
not there will be any
retroactive effects. This
rule shall likewise apply
in obligations with a
resolutory condition (Art.
1190 par. 3)
Preservation of Creditor’s Rights
Art.1188, par.1: The creditor may,
before the fulfillment of the condition,
bring the appropriate action for the
preservation of his rights. However, this
does not grant any preference of credit
but only allows the bringing of the proper
action for the preservation of the
creditor’s rights.
2. Resolutory Condition: Obligation becomes
demandable
immediately
after
its
establishment or constitution. The rights are
immediately vested to the creditor, but
always subject to the threat or danger of
extinction by the happening of the resolutory
condition (Tolentino, 1987).
98
OBLIGATIONS
CIVIL LAW REVIEWER
Chapter III. DIFFERENT KINDS of OBLIGATIONS
Before Fulfillment
Preservation of creditor’s
rights (Art. 1188, par. 1)
also
applies
to
obligations
with
a
resolutory condition
After Fulfillment
Whatever
may
have
been paid or delivered by
one or both of the parties
upon the constitution of
the obligation shall have
to be returned upon the
fulfillment
of
the
condition. There is no
return to the status quo.
However, when condition
is not fulfilled, rights are
consolidated and they
become
absolute
in
character
3. Potestative Condition
Exclusively
upon the
Creditor’s Will
Condition
obligation
valid
and
is
Exclusively
upon the
Debtor’s Will
in case of a
Suspensive
Condition
(Art. 1182)
Condition and
obligation are
void because to
allow
such
condition would
be equivalent to
sanctioning
obligations
which
are
illusory. It also
constitutes
a
direct
contravention of
the principle of
mutuality
of
contracts.
Exclusively
upon the
Debtor’s Will
in case of a
Resolutory
Condition
(Art. 1179, par
2)
Condition and
obligation
is
valid because in
such situation,
the position of
the debtor is
exactly
the
same as the
position of the
creditor when
the condition is
suspensive. It
does not render
the
obligation
illusory.
4. Casual Condition: The fulfillment of the
condition depends upon chance and/or upon
the will of a third person (Art. 1182)
5. Mixed Condition: The fulfillment of the
condition depends partly upon the will of a
party to the obligation and partly upon
chance and/or will of a third person
Osmena v. Rama: Defendant executed an
endorsement saying that she’ll pay her debt if the
house in which she lives is sold. Such condition
depended upon her exclusive will thus it is void.
Hermosa v. Longara: The condition that payment
should be made by Hermosa as soon as he receives
funds from the sale of his property in Spain is a mixed
condition. The condition implies that the obligor
already decided to sell the house and all that was
needed to make the obligation demandable is that the
sale be consummated and the price thereof remitted
to the islands. There were still other conditions that
had to concur to effect the sale, mainly that of the
presence of a buyer, ready, able and willing to
purchase the property under the conditions set by the
intestate.
6. Impossible Condition: conditions which
are impossible, contrary to good customs, or
public policy and those prohibited by law
shall annul the obligations which depend
upon them (Art. 1183).
 If pre-existing obligation, only the
impossible condition is void, but not the
obligation.
 If divisible obligation, that part which is
not affected by the impossible or
unlawful condition shall be valid.
 If the condition is not to do an
impossible thing, it shall be considered
as not having been agreed upon (Art
1183, par. 2). Consequently, it becomes
pure and immediately demandable.
 If attached to a simple or remuneratory
donation (Art. 727), or testamentary
disposition (Art. 873), condition is
considered as not imposed while the
obligation is valid.
7. Positive Condition: Obligation shall be
extinguished as soon as the time expires or
if it becomes indubitable that the event will
not take place (Art.1184)
8. Negative Condition: Obligation shall be
rendered effective from the moment the time
indicated has lapsed, or if it has become
evident that the event will not occur
(Art.1185)
 When no period has been fixed, the
intention of the parties is controlling,
and the time shall be that which the
parties may have contemplated, taking
into account the nature of the obligation
(Art 1185, par. 2).
Effects
of
Loss,
Deterioration,
and
Improvement in Real Obligations Pending the
Condition (Art. 1189)
Loss
Without
Debtor’s
Fault/Act
Obligation
extinguished
With Debtor’s
Fault/Act
is
Obligation
is
converted into
one
of
indemnity
for
damages
99
OBLIGATIONS
CIVIL LAW REVIEWER
CIVIL LAW REVIEWER
Improvement
Impairment to be
borne by the
creditor
Improvement at
the
debtor’s
expense,
the
debtor
shall
ONLY
have
usufructuary
rights
Creditor
may
choose
between
bringing
an
action
for
rescission
of
the obligation
OR bringing an
action
for
specific
performance
with damages
in either case.
Improvement
by the thing’s
nature or by
time shall inure
to the benefit of
the creditor
Loss, defined: when the thing perishes; goes
out of commerce; disappears in such a way that
its existence is unknown or it cannot be
recovered
II. Reciprocal Obligations
Obligations which are established from same
cause, such that one obligation is correlative to
the other. It results in mutual relationship
between the creditor and the debtor. It is
performed
simultaneously,
so
that
the
performance of one is conditioned upon the
simultaneous fulfillment of the other.
Tacit Resolutory Condition: if one of the
parties fail to comply with what is incumbent
upon him, there is a right on the part of the other
to rescind the obligation. The power to rescind is
given to the injured party (Tolentino, 1987).
Rescission of Reciprocal Obligations (Art.
1191, CC)
 Right to rescind is implied in reciprocal
obligations thus where one party fails to
comply with this obligation under a contact,
the other party has the right to either
demand the performance or ask for the
resolution of the contract.
 Based on the breach of faith committed by
the person who is supposed to comply with
the obligation as compared to the rescission
referred to in Art. 1308 which involves the
damage or lesion, or injury to the economic
interest of a person.
 Where both parties have committed a
breach of obligation, the liability will be
shouldered by the first infractor. This shall
be determined by the courts. However, if it
cannot be determined who was the first
infractor, the contract shall be deemed
extinguished and each shall bear his own
damages (Art.1192).
UP v. Delos Angeles (1970): The injured party may
extra-judicially rescind the contract on account of the
breach of the other party. However, this is without
prejudice to the option of the other party to resort to
the courts in order to determine if the rescission made
is valid, if not, the party who rescinded the contract
will be sentenced to pay damages.


Where the other party does not oppose the
extra-judicial declaration of rescission, such
declaration shall produce legal effect.
Effect is retroactive therefore invalidating
and unmaking the juridical tie between the
contracting parties, leaving things in their
status before the celebration of the contract.
III. Obligations with a Period
Period or Term (Asked in ’84, ’86 and ’91):
Interval of time, which either suspends
demandability or produces extinguishment.
The period must be: future, certain, and possible
(Tolentino, 1987).


Fortuitous event does not interrupt the
running of the period. It only relieves the
contracting parties from the fulfillment of
their respective obligations during the
period.
Kinds of Period (Art. 1193):
1. Ex die - period with a suspensive effect.
Obligation becomes demandable after
the lapse of the period.
2. In diem - period with a resolutory effect.
Obligation is demandable at once but is
extinguished upon the lapse of the
period.
Art. 1180, Civil Code. When the debtor binds himself
to pay when his means permit him to do so, the
obligation shall be deemed to be one with a period,
subject to the provisions of Article 1197.
Term/Period and Condition Distinguished
Term/Period
Interval of time which is
future and certain
Condition
Fact or event which is
future and uncertain
Must necessarily come,
although it may not be
known when
May or may not happen
100
OBLIGATIONS
Deterioration
Chapter III. DIFFERENT KINDS of OBLIGATIONS
CIVIL LAW REVIEWER
Exerts an influence upon
the very existence of the
obligation itself
Has retroactive effect
When it is left exclusively
to the will of the debtor,
the very existence of the
obligation is affected
Benefit of the Period
Presumption: Period in an obligation is
presumed to be established for the benefit of
both the creditor and debtor, UNLESS: If from
the tenor of the obligation or other
circumstances, it shall appear that the period
has been established in favor of either the
creditor or debtor (Art. 1196).
Period for the Benefit of either Creditor or
Debtor
Creditor
Creditor may demand
the
fulfillment
or
performance of the
obligation at any time
but the obligor cannot
compel him to accept
payment before the
expiration of the period
Debtor
Debtor may oppose any
premature demand on
the part of the oblige for
the performance of the
obligation, of if he so
desires,
he
may
renounce the benefit of
the period by performing
his obligation in advance
When court may fix period
Art. 1197: as general rule, the court is not
authorized to fix a period for the parties (De
Leon, 2003).
Araneta v. Phil. Sugar Estates, provides:
First, the Court shall determine:
 If the obligation does not fix a period, but from
its nature and circumstances, it can be inferred
that a period was intended
 If the period is void, such as when it depends
upon the will of the debtor
 If the debtor binds himself when his means
permit him to do so.
Second, it must decide what period was “probably
contemplated by the parties”.

The only action that can be maintained
under Art. 1197 is the action to ask the
courts to fix the term within which the debtor
must comply with his obligation. The
fulfillment of the obligation itself cannot be
demanded until after the court has fixed the
period for compliance, therewith, and such
period has arrived.

Art. 1197 does not apply to contract of
services and to pure obligations.
 The
court,
however,
to
prevent
unreasonable
interpretations
of
the
immediate demandability of pure obligations,
may fix a reasonable time in which the
debtor may pay.
(Tolentino, 1987)
When Debtor Loses Right to Use Period
Art.1198: I GIV A LA
1. Debtor becomes Insolvent, unless he gives
a guaranty or security for his debt, after
obligation is contracted
2. Debtor fails to furnish the Guaranties or
securities promised
3. Debtor by his own acts Impaired said
guaranties
or
securities
after
their
establishment, and when through a
fortuitous event they disappear, unless he
immediately gives new one equally
satisfactory
4. Debtor Violates any undertaking, in
consideration of which the creditor agreed to
the period
5. Debtor attempts to Abscond
6. By Law or stipulation
7. Parties stipulate an Acceleration Clause
In the cases provided, the obligation becomes
immediately due and demandable even if the
period has not yet expired. The obligation is thus
converted into a pure obligation (Tolentino,
1987).
IV. Alternative
Obligations
and
Facultative
Alternative Obligations
Several objects are due
May be complied with by
delivery of one of the
objects or by performance
of one of the prestations
which are alternatively
due
Choice may pertain to
debtor, creditor, or third
person
Facultative Obligations
Only one object is due
May be complied with by
the delivery of another
object
or
by
the
performance of another
prestation in substitution
of that which is due
Choice pertains only to
the debtor
Loss/impossibility of all
objects/prestations due to
fortuitous
event
shall
extinguish the obligation.
The loss/impossibility of
one of the things does not
extinguish the obligation.
Culpable loss of any of
the objects alternatively
Loss/impossibility of the
object/prestation due to
fortuitous
event
is
sufficient to extinguish
the obligation
Culpable loss
of the
object which the debtor
101
OBLIGATIONS
Exerts an influence upon
the time of demandability
or extinguishment of an
obligation
No
retroactive
effect
unless
there
is
an
agreement to the contrary
When it is left exclusively
to the will of the debtor,
the existence of the
obligation is not affected
Chapter III. DIFFERENT KINDS of OBLIGATIONS
CIVIL LAW REVIEWER
may
deliver
in
substitution before the
substitution is effected
does not give rise to any
liability on the part of the
debtor
Effect of Loss of Objects
Art. 1204: Debtor’s Choice
All Lost
A. Alternative Obligations
Fortuitous
Event
Debtor
is
released from the
obligation
Several prestations are due but the performance
of one is sufficient (De Leon, 2003).
Right of Choice
Art. 1200: to the debtor, UNLESS:
1. when it is expressly granted to the
creditor
2. when it is expressly granted to a third
person
Limitations to the right of choice
1. impossible prestations
2. unlawful prestations
3. those which could not have been the
object of the obligation
4. only one prestation practicable (Art.
1202)
(De Leon, 2003)
When choice shall produce effect
Art. 1201: Choice shall produce no effect except
from the time it has been communicated. The
effect of the notice is to limit the obligation of the
object or prestation selected. Notice of selection
or choice may be in any form provided it is
sufficient to make the other party know that the
selection has been made. It can be:
o oral
o in writing
o tacit
o any other equivocal means
 Choice of the debtor when communicated to
the creditor does not require the latter’s
concurrence.
 When the choice is rendered impossible
through the creditor’s fault, the debtor may
bring an action to rescind the contract with
damages (Art.1203).
 Obligation is converted into a simple
obligation when:
o When the person who has the right of
choice has communicated his choice
(Art. 1201)
o When only one prestation is practicable
(Art. 1202)
Some
Debtor to deliver
that which he
shall
choose
from among the
remainder
One
Remains
Debtor to deliver
that
which
remains
Debtor’s Fault
Creditor shall have
a right to indemnity
for damages based
on the value of the
last thing which
disappeared
or
service
which
become impossible
Debtor to deliver
that
which
the
creditor
shall
choose from among
the
remainder
without damages
Debtor to deliver
that which remains
Art. 1205: Creditor’s Choice
All Lost
Fortuitous
Event
Debtor
is
released from the
obligation
Some
Debtor to deliver
that which he
shall
choose
from among the
remainder
One
Remains
Creditor
may
claim
any
of
those subsisting
without a right to
damages
OR
price/value of the
thing lost with
right to damages
Debtor’s Fault
Creditor may claim
the price/value of
any of them with
indemnity
for
damages
creditor may claim
any
of
those
subsisting without a
right to damages
OR price/value of
the thing lost with
right to damages
Creditor may claim
the remaining thing
without a right to
damages OR the
price/value of the
thing lost with right
to damages
B. Facultative Obligation
Only one prestation has been agreed upon but
the debtor may render another in substitution
(De Leon, 2003)
Effect of Loss of Substitute
Before Substitution is
Made
If due to bad faith or
fraud of obligor: obligor
is liable
After Substitution is
Made
The
loss
or
deterioration of the
substitute on account
of the obligor’s delay,
negligence or fraud
102
OBLIGATIONS
due before the choice is
made may give rise to
liability on the part of the
debtor
Chapter III. DIFFERENT KINDS of OBLIGATIONS
CIVIL LAW REVIEWER
obligor
is
liable
because
once
substitution is made,
the
obligation
is
converted into a simple
one with the substituted
thing as the object of
the obligation.
V. Joint and Solidary Obligations
A. Joint Obligations
One where a concurrence of several creditors,
or of several debtors, or of several creditors and
debtors, by virtue of which, each of the creditors
has a right to demand, and each of the debtors
is bound to render compliance with his
proportionate part of the prestation which
constitute the object of the obligation (Obligacion
Mancomunada).
Presumption: Obligation is presumed joint if
there is a concurrence of several creditors, of
several debtors, or of several creditors and
debtors in one and the same obligation (Art.
1207).
Exceptions:
1. When the obligation expressly stated that
there is solidarity
2. When the law requires the solidarity
3. When the nature of the obligation requires
solidarity
4. When the nature or condition is imposed
upon heirs or legatees, and the testament
expressly makes the charge or condition in
solidum
5. When the solidary responsibility is imputed
by a final judgment upon several defendants
Principal Effects of Joint Liability
1. Demand by one creditor upon the debtor,
produces the effects of default only with
respect to the creditor who demanded and
the debtor on whom the demand was made,
but not with respect to others
2. Interruption of prescription by the judicial
demand of one creditor upon a debtor, does
not benefit the other creditors nor interrupt
the prescription as to other debtors
3. Vices of each obligation arising from the
personal defect of a particular debtor or
creditor does not affect the obligation or right
of the others
4. Insolvency of a debtor does not increase the
responsibility of his co-debtors, nor does it
authorize a creditor to demand anything
from his co-debtors
5. Defense of res judicata is not extended from
one debtor to another
Joint Divisible Obligation
Art. 1208: Each creditor can demand only for the
payment of his proportionate share of the
credit, while each debtor can be liable only for
the payment of his proportionate share of the
debit
Presumption: Credit or debt shall be presumed
to be divided into as many equal shares as there
are creditors or debtors.
 Joint creditor cannot act in representation of
the others, neither can a joint debtor be
compelled to answer for the liability of
others.
Joint Indivisible Obligation
Art. 1209: no creditor can act in representation
of the other; no debtor can be compelled to
answer for the liability of the others.
 If there are two or more debtors, the
fulfillment of or compliance with the
obligation requires the concurrence of all the
debtors, although each for his own share
and for the enforcement of the obligation
 In case of breach where one of the joint
debtors fails to comply with his undertaking,
the obligation can no longer be fulfilled or
performed. Consequently, it is converted
into one of indemnity for damages.
 In case of insolvency of one of the
debtors, the others shall not be liable for his
shares. To hold otherwise would destroy the
joint character of the obligation.
Joint Divisible
Obligations
In case of breach of
obligation by one of the
debtors, damages due
must be borne by him
alone

Joint Indivisible
Obligations
In case of breach where
one of the joint debtors
fails to comply with his
undertaking,
the
obligation can no longer
be fulfilled or performed.
Thus action must be
converted into indemnity
for damages.
Plurality of Creditors: If one or some of
the creditors demands the prestation,
the debtor may legally refuse to deliver
to them, he can insist that all the
creditors together receive the thing, and
if any of them refuses to join the others,
the debtor may deposit the thing in court
by way of consignation (Tolentino,
1987).
103
OBLIGATIONS
If due to the negligence
of the obligor: obligor is
not liable
Chapter III. DIFFERENT KINDS of OBLIGATIONS
Chapter III. DIFFERENT KINDS of OBLIGATIONS
B. Solidary Obligation
An obligation where there is concurrence of
several creditors, or of several debtors, or of
several creditors and several debtors, by virtue
of which, each of the creditors has the right to
demand, and each of the debtors is bound to
render, entire compliance with the prestation
which constitutes the object of the obligation
(Obligacion Solidaria).
Indivisibility
Refers to the prestation
which
constitutes
the
object of the obligation
Plurality of subjects is not
required
In
case
of
breach,
obligation is converted into
indemnity for damages
because the indivisibility of
the obligation is terminated

Solidarity
Refers to the legal tie or
vinculum,
and
consequently to the
subjects or parties of
the obligation
Plurality of subjects is
indispensable
When there is liability
on the part of the
debtors because of the
breach, the solidarity
among the debtors
remains
The indivisibility of an obligation does not
necessarily give rise to solidarity. Nor does
solidarity itself imply indivisibility. (Art. 1211)
Kinds of Solidary Obligations
1. Active (solidarity among creditors): Each
creditor has the authority to claim and
enforce the rights of all, with the resulting
obligation of paying everyone of what
belongs to him.
 Creation of a relationship of mutual
agency among co-creditors.
A solidary creditor cannot assign his
rights without the consent of the others.
(Art. 1213)
 Each debtor may pay to any solidary
creditor, but if any demand, judicial or
extrajudicial, has been made by one of
them, payment must be made to him.
(Art. 1214)
2. Passive (solidarity among debtors): Each
debtor can be made to answer for the
others, with the right on the part of the
debtor-payor to recover from the others their
respective shares.
 Creation of a relationship of mutual
guaranty among co-debtors
 The total remission of the debt in favor
of a debtor releases all the debtors
 All the debtors are liable for the loss of
the thing due, even if such loss is
caused by the fault of only one of them
and for delay, even if it is caused by just
one of them
 The interruption of prescription as to
one debtor affects all the others; but the
renunciation
by
one
debtor
of
prescription already had does not
prejudice the others
3. Mixed: Solidarity among creditors and
debtors
 Solidarity is not destroyed by the fact
that the obligation of each debtor is
subject to different conditions or periods.
The creditor can commence an action
against anyone of the debtors for the
compliance with the entire obligation
minus the portion or share which
corresponds to the debtor affected by
the condition or period.
____________________________________________________________________________________
Effects of Modes of Extinguishment
Assignment of
Rights in Solidary
Obligations
 The
solidary
creditor
cannot
assign his right
because it is
predicated upon
mutual
confidence,
UNLESS, the (1)
the assignment is
to a co-creditor;
(2) assignment is
with consent of
co-creditor
Novation
Compensation &
Confusion
Remission
 If prejudicial, the
solidary creditor
who effected the
novation
shall
reimburse
the
others
for
damages incurred
by them;
 If beneficial and
secured by one,
he shall be liable
to the others for
the
share
(obligation
&
benefits)
which
 If it is partial, the
rules
regarding
application
of
payment
shall
apply
(w/o)
prejudice to the
right
of
other
creditors
who
have not caused
the confusion or
compensation to
be reimbursed to
the extent that
their rights are
diminished
or
 If
entire
obligation,
obligation is totally
extinguished.
 If for the benefit
of one of the
debtors covering
his entire share,
he is completely
released from the
creditor/s.
 If for the benefit
of one of the
debtors and it
covers only part
Loss or
Impossibility
 If not debtors’
fault,
the
obligation
is
extinguished
 If thru debtors’
OR
fortuitous
event after delay,
the obligation is
converted
into
indemnity
for
damages but the
solidary character
of the obligation
remains.
104
OBLIGATIONS
CIVIL LAW REVIEWER
CIVIL LAW REVIEWER
Chapter III. DIFFERENT KINDS of OBLIGATIONS
affected
 If
total,
the
obligation
is
extinguished,
what is left is the
ensuing
liability
for reimbursement
Effects of Prejudicial and Beneficial Acts
(Art.1212)
1. Each one of the solidary creditors may do
whatever may be useful or beneficial to the
others, but not anything which may be
prejudicial to the latter.
2. As far as the debtors are concerned, a
prejudicial act performed by a solidary
creditor is binding.
3. As between the solidary creditors, the
creditor who performed such act shall incur
the obligation of indemnifying the others for
damages.
Defenses Available to a Solidary Debtor (Art.
1222)
1. Those derived from the nature of the
obligation
2. Those personal to him
3. Those pertaining to his own share
4. Those personally belonging to other codebtors but only as regards that part of the
debt for which the latter are responsible.
Effects
Demand Upon a
Solidary Debtor
The
demand
made
against one of them shall
not be an obstacle to
those
which
may
subsequently be directed
against the others so
long as the debt has not
been fully collected. (Art.
1216)
Payment by a Debtor
Full payment made by
one of the solidary
debtors extinguishes the
obligation. (Art. 1217)
of his share, his
character as a
solidary debtor is
not affected.
105
OBLIGATIONS
corresponds
to
them
 If by substituting
the debtor, the
solidary creditor
who effected the
novation is liable
for the acts of the
new debtor in
deficiency
or
damages
 If by subrogating
a third person in
creditor’s rights,
the obligation is
not
in
reality
extinguished as
the
relation
between the other
creditors and the
debtor/s
is
maintained.
The creditor may proceed
against any one of the
solidary debtors or all
simultaneously
(Art.
1216)
A creditor’s right to
proceed
against
the
surety
exists
independently of his right
to proceed against the
principal



If two or more solidary
debtors offer to pay, the
creditor may choose
which offer to accept.
(Art. 1217)
The solidary debtor who
made the payment shall
have the right to claim
from his co-debtors the
share which corresponds
to them with interest,
UNLESS
barred
by
prescription or illegality.
(Art. 1218)
When a solidary debtor pays the entire
obligation, the resulting obligation of the codebtors to reimburse him becomes joint.
If payment was made before the debt
became due, no interest during the
intervening period may be demanded. (Art.
1217 par. 2)
When one of the solidary debtors cannot
reimburse his share to the debtor paying the
obligation due to insolvency, such share
shall be borne by all his co-debtors, in
proportion to the debt of each. (Art. 1217,
par. 2)
Inchausti v. Yulo, (1914): Debtors obligated
themselves solidarily, so creditor can bring its action
against any of them. Remission of any part o fthe
debt, made by the creditor in favor of one of the
solidary debtors, inures to the benefit of the rest of
them.
CIVIL LAW REVIEWER
Chapter III. DIFFERENT KINDS of OBLIGATIONS

VI. Divisible and Indivisible Obligations
A. Divisible Obligations
Purposes of Penalty
1.
2.
B. Indivisible Obligations
One which cannot be validly performed in parts
(Tolentino, 1987).
 Divisibility/indivisibility
refers
to
the
performance of the prestation and not to the
thing which is the object thereof. The thing
may be divisible, yet the obligation may be
indivisible.
 When the obligation has for its object the
execution of a certain number of days of
work, the accomplishment of work by
metrical units, or analogous things which by
their nature are susceptible of partial
performance, it shall be divisible (Art.1225,
par. 2).
 When there is plurality of debtors and
creditors, the effect of divisibility/indivisibility
of the obligation depend upon whether the
obligation is joint or solidary.
 A joint indivisible obligation give rise to
indemnity for damages from the time anyone
of the debtors does not comply with is
undertaking.
(Art. 1224)
Effect
Creditor cannot be compelled partially to receive
the prestation in which the obligation consists;
neither may the debtor be required to make the
partial payment (Art. 1248), UNLESS:
 The obligation expressly stipulates the
contrary
 The different prestations constituting the
objects of the obligation are subject to
different terms and conditions
The obligation is in part liquidated and in part
unliquidated
VII. Oblligations with a Penal Clause
Penal Clause: An accessory undertaking to
assume greater liability in case of breach (De
Leon, 2003). It is attached to an obligation in
order to ensure performance. The enforcement
of the penalty can be demanded by the creditor
only when the non-performance is due to the
fault or fraud of the debtor.
3.
Funcion coercitiva de garantia - to insure the
performance of the obligation.
Funcion liquidatoria - to liquidate the amount of
damages to be awarded to the injured party in
case of breach of the principal obligation
(compensatory).
Function estrictamente penal - to punish the
obligor in case of breach of the principal
obligation (punitive).
Effects of Penalty
1. The penalty shall substitute the indemnity for
damages and payment of interest in case of
non-compliance (Art. 1226), UNLESS:
a.
b.
c.
There is a stipulation to the contrary
The obligor refuses to pay the penalty
The obligor is guilty of fraud
2. Debtor cannot exempt himself from the
performance of the principal obligation by
paying the stipulated penalty unless this
right has been expressly reserved for him
(Art. 1227).
3. Creditor cannot demand the fulfillment of the
principal obligation and demanding the
satisfaction of the penalty at the same time
unless the right has been clearly granted to
him (Art. 1227). Tacit or implied grant is
admissible.
a.
b.
c.
If creditor has chosen fulfillment of the
principal obligation and performance thereof
become impossible without his fault, he may
still demand the satisfaction of the penalty.
If there was fault on the part of the debtor,
creditor may demand not only satisfaction of
penalty but also the payment of damages.
If creditor chooses to demand the
satisfaction of the penalty, he cannot
afterwards demand the fulfillment of the
obligation.
Proof of Actual Damage
Art. 1228: Proof of actual damages is not
necessary is applicable only to the general rule
stated in Art. 1226 and not to the exceptions.
The penalty is exactly identical with what is
known as “liquidated damages” in Art. 2226.
When Penalty may be Reduced
Art. 1229:
1.
2.
3.
If the principal obligation has been partly
complied with.
If the principal obligation has been irregularly
complied with.
If the penalty is iniquitous or unsconscionable
even if there has been no performance.
106
OBLIGATIONS
One which is susceptible of partial performance;
that is, the debtor can legally perform the
obligation by parts and the creditor cannot
demand a single performance of the entire
obligation (Tolentino, 1987).
If the principal obligation is void, penal
clause shall also be void. However, the
nullity of the penal clause does not carry
with it the nullity of the principal
obligation (Art.1230).
CIVIL LAW REVIEWER
Chapter
IV.
Obligations
Chapter IV. EXTINGUISHMENT of OBLIGATIONS
Extinguishment
of
singular. There must be full and faithful compliance
with the terms of the contract.
B. Payment by Cession (Art. 1255)
PAYMENT OR PERFORMANCE
LOSS OF THE THING DUE OR IMPOSSIBILITY
OF PERFORMANCE
III. CONDONATION OR REMISSION OF THE
DEBT
IV. CONFUSION OR MERGER OF RIGHTS
V. COMPENSATION
VI. NOVATION
I.
Payment or Performance
Art. 1232, Civil Code. Payment means not only
delivery of money but also performance, in any
manner, of the obligation.
See Diagrams of Prof. Labitag at the end
section of Obligations.
SPECIAL FORMS OF PAYMENT
A. Application of Payment (Art. 1252)
Designation of the debt to which should be
applied a payment made by a debtor who owes
several debts to the same creditor
Rules on Application—
1. Preferential right of debtor - debtor has the
right to select which of his debts he is
paying.
2. The debtor makes the designation at the
time he makes the payment
3. If not, the creditor makes the application, by
so stating in the receipt that he issues,
unless there is cause for invalidating the
contract.
4. If neither the creditor nor debtor exercises
the right to apply, or if the application is not
valid, the application is made by operation of
law.
5. If debt produces interest - payment not
deemed applied to the principal unless
interests are covered.
6. When no application can be inferred from
the circumstances of payment, it is applied
to: to the most onerous debt of the debtor; or
if debts due are of the same nature and
burden, to all the debts in proportion
7. Rules of application of payment may not be
invoked by a surety or solidary guarantor.
Reparations Commission vs. Universal Deep Sea
Fishing Corp. (1978): Rules on application of payment
cannot be made applicable to a person whose
obligation as a mere surety is both contingent and
Act whereby a debtor abandons all his property
to his creditors, so that the latter may apply the
proceeds (of its sale) to their credits.
C. Dation in payment (Art. 1245)
Delivery and transmission of ownership of a
thing by the debtor to the creditor as an
accepted equivalent of the performance of the
obligation (dacion en pago).
Dation in payment
Payment by cession
In favor of only one
creditor
Payment extinguishes the
obligation to the extent of
the value of the thing
delivered,
unless
the
parties agree that the
obligation
be
totally
extinguished
Transfer of ownership of
thing alienated to creditor
There
are
various
creditors
Extinguishes
credits
only up to the extent of
proceeds from sale of
assigned
property,
unless
otherwise
agreed upon
Not necessarily in state of
financial difficulty
Assignment of only some
specific thing
Only possession and
administration
with
authorization to convert
property to cash with
which the debts shall
be paid
Assignment
presupposes
insolvency of debtor.
Assignment involves all
the property of the
debtor.
D. Tender of payment and consignation
1. Tender of payment: Manifestation made by
debtor to creditor of his desire to comply
with his obligation, with offer of immediate
performance
 Preparatory act to consignation
 Extrajudicial in character
2. Consignation: Deposit of the object of
obligation in a competent court in
accordance to the rules prescribed by law,
whenever the creditor unjustly refuses
payment or because of some circumstances
which render direct payment to the creditor
impossible or inadvisable.
 Principal act which constitutes a form of
payment.
 Judicial in character.
107
OBLIGATIONS
I.
II.
Chapter IV. EXTINGUISHMENT of OBLIGATIONS
When Tender and Refusal Not Required (Art.
1259)—
1. Creditor is absent or unknown, or does not
appear at the place of payment
2. Creditor is incapacitated to receive the thing
due at time of payment
3. Without just cause, creditor refuses to give
receipt
4. Two or more persons claim the same right to
collect
5. Title of the obligation has been lost
Effects of Withdrawal by Debtor
Arts. 1260- 1261
1. Before approval of the court - Obligation
remains in force.
2. After approval of the court or acceptance by
the creditor, with the consent of the latter Obligation remains in force, but guarantors
and co-debtors are liberated. Preference of
the creditor over the thing is lost.
3. After approval of the court or acceptance by
the creditor, and without creditor’s consent Obligation subsists, without change in the
liability of guarantors and co-debtors, or the
creditor’s right of preference.
Art. 1259, Civil Code. Expenses of consignation,
when properly made, shall be charged against the
creditor.
Requisites and Effects
Application of
Payment
Requisites
1. Plurality of
debts
2. Debts are of
the same kind
3. Debts are owed
to the same
creditor and by
the same
debtor
4. All debts must
be due
5. Payment made
is not sufficient
to cover all
debts
Effects
Payment of debt
designated as to
corresponding
amount
Cession
Dation
Tender and Consignation
Requisites
1. Plurality of debts
2. Plurality of
creditors
3. Partial insolvency
of the debtor
4. Abandonment of
the totality of the
debtor’s
properties for the
benefit of the
creditors
5. Acceptance by
the creditors
Requisites
1. Should not be
prejudicial to
other creditors
2. Should not
constitute a
pactum
commissorium
Requisites
1. There is a debt due
2. consignation is made because
of some legal cause
3. previous notice of consignation
was given to those persons
interested in the performance
of the obligation
4. amount or thing due was
placed at the disposal of the
court
5. after the consignation has been
made, the persons interested
were notified thereof
Effects
Assignment liberates
debtor up to the
amount of the net
proceeds of the sale
of his assets
Assignment does not
vets title to the
property
in
the
creditors,
who
are
only
authorized to sell it.
Effects
Extinguishment
of
debt from as an
equivalent of the
performance of the
obligation
Effects
If accepted by the creditor or
declared properly made by the
Court:
1. Debtor is released in same
manner as if he had performed
the obligation at the time of
consignation
2. Accrual of interest is
suspended from the moment of
consignation.
3. Deterioration or loss of the
thing or amount consigned,
occurring without the fault of
debtor, must be borne by
creditor from the moment of
deposit
4. Any increment or increase in
the value of the thing after
consignation inures to the
benefit of the creditor
108
OBLIGATIONS
CIVIL LAW REVIEWER
Chapter IV. EXTINGUISHMENT of OBLIGATIONS
II. Loss or Impossibility
(Asked in ’83, ’84, ’85, and ’94)
A. Loss
A thing is lost when it perishes, goes out of
commerce or disappears in such a way that its
existence is unknown or it cannot be recovered
(Art. 1189, par. 2)
Loss of the thing when in possession of the
debtor: Loss was due to the debtor’s fault.
Burden of explaining the loss of the thing falls
upon him, UNLESS, due to a natural calamity:
earthquake, flood, storm, etc.
Subjective impossibility: Where there is no physical
or legal loss, but the thing belongs to another, the
performance by the debtor becomes impossible. The
debtor must indemnify the creditor for damages.
Effects of Loss
Obligation to Deliver a
Specific Thing
Extinguishment of the
obligation if the thing was
destroyed w/o fault of the
debtor and before he has
incurred delay.
Obligation to Deliver a
Generic Thing
Loss of a generic thing
does not extinguish an
obligation,
UNLESS,
Delimited
generic
things: kind or class is
limited itself, and the
whole class perishes
rd
Action against 3 persons - creditor shall have
all the rights of action the debtor may have
rd
against 3 persons by reason of the loss.
Presumption: The loss was due to the debtor’s
fault, UNLESS:
1. Law provides that the debtor shall be liable
even if the loss is due to fortuitous events
(Arts. 1942, 1979, 2147, 2159)
2. Obligor is made liable by express stipulation
3. Nature of the obligation requires an
assumption of risk
4. Fault or negligence concurs with the
fortuitous event
5. Loss occurs after delay
6. Debtor has promised to deliver the same
thing to two or more different parties
7. Obligation arises from a criminal act
8. Borrower in commodatum: saves his own
things and not the thing of the creditor
during a fortuitous event
In Reciprocal Obligations
Extinguishment of the obligation due to loss of
the thing or impossibility of performance affects
both the creditor and debtor; the entire juridical
relation is extinguished.
Partial loss
Art. 1264: Partial loss due to a fortuitous event
does not extinguish the obligation; thing due
shall be delivered in its present condition,
without any liability on the part of the debtor,
UNLESS, the obligation is extinguished when
the part lost was of such extent as to make the
thing useless.
B. Impossibility of Performance (Arts. 12661267, CC)
When prestation becomes legally or physically
impossible (by fortuitous event or force
majeure), the debtor is released.Impossibility
must have occurred without fault of debtor, and
after the obligation has been constituted.
PARTIAL IMPOSSIBILITY
1. Courts shall determine whether it is so
important as to extinguish the obligation.
2. If debtor has performed part of the obligation
when impossibility occurred, creditor must
pay the part done as long as he benefits
from it.
3. If debtor received full payment from creditor,
he
must
return
excess
amount
corresponding to part which was impossible
to perform.
Doctrine of Unforeseen Events
When the service has become so difficult as to
be manifestly beyond the contemplation of all
the parties, the obligor may be released in whole
or in part (De Leon, 2003).
Requisites:
1. Event could not have been foreseen at the
time of the constitution of the contract.
2. Event makes performance extremely difficult
but not impossible.
3. Event not due to any act of the parties.
4. Contract is for future prestation.
III. Condonation or Remission of the
Debt
CONDONATION: An act of liberality, by virtue of
which, without receiving any equivalent, creditor
renounces the enforcement of the obligation.
The obligation is extinguished either in whole or
in such part of the same which to remission
refers.
109
OBLIGATIONS
CIVIL LAW REVIEWER
Requisites
1. Debt must be existing and demandable
2. Renunciation must be gratuitous; without
any consideration
3. Debtor must accept the remission
Effect
Art. 1273: Renunciation of the principal debt
shall extinguish the accessory obligations, but
remission of the latter leaves the principal
obligation in force.
Presumptions
Arts. 1271, 1272, 1274:
 Whenever the private document in which the
debt is found in the possession of the
debtor, it shall be presumed that the creditor
delivered it voluntarily, unless contrary is
proved.
 Delivery of a private document evidencing
credit, made voluntarily by the creditor to the
debtor, implies the renunciation of the action
of creditor against the latter.
Kinds
1. As to form (Art. 1270)
 Express: made formally; in accordance
with forms of ordinary donations
 Implied: inferred from the act of the
parties
2. As to extent
 Total: entire obligation
 Partial: may refer only to amount of
indebtedness, or to an accessory
obligation, or to some other aspect of
the obligation
3. As to constitution
 Inter vivos: effective during the lifetime
of the creditor
 Mortis causa: effective upon death of the
creditor; must be contained in a will or
testament
IV. Confusion or Merger of Rights
CONFUSION: The meeting in one person of the
qualities of creditor and debtor of the same
obligation.
Requisites
1. It should take place between principal debtor
and creditor
2. It must be complete and definite- Parties
must meet all the qualities of creditor and
debtor in the obligation/ in the part affected.
Chapter IV. EXTINGUISHMENT of OBLIGATIONS
Effects
Arts. 1275- 1277:
1. The obligation is extinguished from the time
the characters of the debtor and creditor are
merged in the same person.
2. In joint obligations, confusion does not
extinguish the obligation except as regards
the corresponding share of the creditor or
debtor in whom the two characters concur.
3. In solidary obligations, confusion in one of
the solidary debtors extinguishes the entire
obligation.
4. Obligation is not extinguished when
confusion takes place in the person of
subsidiary debtor (e.g. guarantor), but
merger in the person of the principal debtor
shall benefit the former.
V. Compensation
COMPENSATION: Offsetting of two obligations
which are reciprocally extinguished if they are of
the same value, or extinguished to the
concurrent amount if of different values. (Asked
in ’80, ’81, ’98, and ’02)
Compensation
Confusion
There must always be 2
obligations
Involves only one
obligation
There are 2 persons who are
mutually
debtors
and
creditors of each other in 2
separate obligations, each
arising from the same cause.
There is only one
person whom the
characters of the
creditor and debtor
meet
Kinds
1. As to extent
 Total: Debts are of the same amount
 Partial: Amounts are not equal
2. As to origin
 Legal: takes place by operation of law
 Conventional:
parties
agree
to
compensate their mutual obligations
even when some requisite in Art. 1279 is
lacking (Art. 1282).
 Judicial: decreed by court when there is
counterclaim; effective upon final
judgment (Art. 1283).
 Facultative: when it can be claimed by
one of the parties who, however, has the
right to object to it.
110
OBLIGATIONS
CIVIL LAW REVIEWER
CIVIL LAW REVIEWER
2.
3.
4.
5.
6.
Requisites
Each obligor is
bound principally,
and at the same time
a principal creditor of
the other
Both debts must
consist in a sum of
money, or if the
things due are
FUNGIBLE, of the
same kind & quality
Both debts are due
Debts are liquidated
and demandable
There must be no
retention or
controversy over
either of the debts,
rd
commenced by 3
persons and
communicated in
due time to the
debtor
Compensation is not
prohibited by law
1.
2.
3.
4.
Effects
Effects rise from the
moment all the
requisites concur.
Debtor claiming its
benefits must prove
compensation; once
proven, effects
retroact from the
moment when the
requisites concurred.
Both debts are
extinguished to the
concurrent amount,
eventhough the
creditors and debtors
are not aware of the
compensation.
Accessory
obligations are also
extinguished.
Compensation is prohibited in:
1. Contracts of depositum
2. Contracts of commodatum
3. Future support due by gratuitous title
4. Civil liability arising from a penal offense
5. Obligations due to the government
6. Damage caused to the partnership by a
partner
ASSIGNMENT OF CREDIT (Art. 1285):
No effect and does not bind the debtor unless
and until the latter is notified of the assignment
or learns of it.
With Debtor’s
Consent
With Debtor’s
Knowledge
Debtor’s
consent
to
assignment of
credit
constitutes
a
waiver
of
compensation,
unless
he
reserved
his
right
to
compensation.
Debtor may set
up
compensation
of
debts
(maturing)
before
the
assignment of
credit but not of
subsequent
ones
Without
Debtor’s
Knowlege
Debtor
may
setup
compensation
of all credits
(maturing) prior
to
the
assignment and
also latter ones
until he had
knowledge of
the assignment.
Facultative compensation: Compensation which
can only be set up at the option of a creditor, when
legal compensation cannot take place because some
legal requisites in favor of the creditor are lacking.
Creditor may renounce his right to compensation, and
he himself may set it up.As opposed to conventional
compensation, facultative compensation is unilateral
and does not depend upon the agreement of the
parties.
VI. Novation
NOVATION: Extinguishment of an obligation by
the substitution or change of the obligation by a
subsequent one which extinguishes or modifies
the first either by changing the object or principal
conditions, or by substituting the person of the
debtor, or by subrogating a third person in the
rights of the creditor. A juridical act of dual
function—it extinguishes an obligation, and at
the same time, it creates a new one in lieu of the
old. (Asked in ’78, ’88, ’94 and ’01)
Requisites
1. A previous valid obligation
2. Agreement of all the parties to the new
obligation
3. Extinguishment of the old obligation
4. Validity of the new obligation
Novation is not presumed.
 Express novation: Parties must expressly
disclose their intent to extinguish the old
obligation by creating a new one.
 Implied novation: No specific form is
required. There must be incompatibility
between the old and new obligation or
contract.
(Asked in ’79, ’82, ’88, and ’94)
California Bus Line v. State Investment (2003): In the
absence of an unequivocal declaration of
extinguishment of the pre-existing obligation, only
proof of incompatibility between the old and new
obligation would warrant a novation by implication.
The restructuring agreement merely provided for a
new schedule of payments and authority giving Delta
to take over management and operations of CBLI in
case it fails to pay installments. There was no change
in the object of prior obligations.
Test of Incompatibility
Whether or not the old and new obligation can
stand together, each one having an independent
existence. No incompatibility exists when they
can stand together. Hence, there is no novation.
Incompatibility exists when they cannot stand
together. Hence, there is novation.
Effects
In General
1.
Old
obligation is
extinguished
and replaced
by the new
one
stipulated.
If
Original
Obligation
is
Void
Novation is void if
the
original
obligation
was
void,
except
when annulment
may be claimed
only
by
the
If
New
Obligation
is
Void
New obligation is
void,
the
old
obligation
subsists, unless
the
parties
intended that the
former realations
111
OBLIGATIONS
1.
Chapter IV. EXTINGUISHMENT of OBLIGATIONS
Chapter IV. EXTINGUISHMENT of OBLIGATIONS
debtor, or when
ratification
validates
acts
that are voidable.
(Art. 1298)
1.
Original
obligation is void:
No novation
2.
Original
obligation
voidable:
Effective
if
contract is ratified
before novation

shall
be
extinguished
in
any event. (Art.
1297)
1. New obligation
void: No novation
2. New obligation
voidable:
Novation
is
effective
Accessory obligations are also extinguished,
but may subsist only insofar as they may
rd
benefit 3 persons who did not give their
consent to the novation OR may not be
affected upon agreement between the
parties.
Original or new obligation with suspensive or
resolutory condition
Art. 1299: If original obligation was subject to a
suspensive or resolutory condition, the new
obligation shall be under the same condition,
unless it is otherwise stipulated.
Compatible Conditions



Fulfillment of both
conditions:
new
obligation becomes
demandable
Fulfillment
of
condition concerning
the
original
obligation:
old
obligation is revived;
new obligation loses
force
Fulfillment
of
condition concerning
the new obligation:
no
novation;
requisite
of
a
previous valid and
effective obligation
lacking


Incompatible
Conditions
Original obligation is
extinguished, while
new obligation exists
Demandability shall
be
subject
to
fulfillment/
nonfulfillment of the
condition affecting it
OBJECTIVE NOVATION
1. Change of the subject matter
2. Change of causa or consideration
3. Change of the principal conditions or terms
SUBJECTIVE NOVATION
1. Substitution of the Debtor: Consent of
creditor is an indispensable requirement
both in expromision and delegacion.
Expromision
Initiative for change does
not emanate from the
debtor, and may
Even be made without
his knowledge.
Requisites
1. Consent of the
creditor and the new
debtor
2. Knowledge or
consent of the old
debtor is not
required
Effects
1. Old debtor is
released
2. Insolvency of the
new debtor does not
revive the old
obligation in case the
old debtor did not
agree to expromision
3. If with knowledge
and consent of old
debtor, new debtor
can demand
reimbursement the
entire amount paid
and w/ subrogation
of creditor’s rights
4. If without knowledge
of the old debtor,
new debtor can
demand
reimbursement only
up to the extent that
the latter has been
benefited w/o
subrogation of
creditor’s rights
Delegacion
Debtor (delegante) offers
or initiates the change,
and
the
creditor
rd
(delegatorio) accepts 3
person (delegado) as
consenting
to
the
substitution
Requisites
1. Consent of old
debtor, new debtor,
and creditor
Effects
1. Insolvency of the
new debtor revives
the obligation of the
old debtor if it was
anterior and public,
and known to the old
debtor.
2. New debtor can
demand
reimbursement of
the entire amount he
has paid, from the
original debtor. He
may compel creditor
to subrogate him to
all of his rights.
rd
2. Subrogation of a 3 person in the rights
of the creditor
a. Conventional
subrogation:
by
agreement of the parties;
rd
Requisites: the consent of the 3
person, and of the original parties (Art.
1301).
Conventional
subrogation
Debtor’s consent is
necessary
Extinguishes
an
obligation and gives
rise to a new one
Assignment of credit
Debtor’s consent is not
required
Refers to the same right
which passes from one
person to another, without
modifying or extinguishing
the obligation
112
OBLIGATIONS
CIVIL LAW REVIEWER
CIVIL LAW REVIEWER
Defects/ vices in the
old obligation are
cured
Chapter IV. EXTINGUISHMENT of OBLIGATIONS
Defects/ vices in the old
obligation are not cured
b. Legal subrogation: by operation of law
Effects
Total
1. Transfers to the
person subrogated
the credit with all the
rights
thereto
appertaining, either
against the debtor or
rd
3 persons.
2. Obligation is not
extinguished, even if
the intention is to
pay it.
3. Defenses against the
old
creditor
are
retained,
unless
waived by the debtor
Partial
1. A creditor, to whom
partial payment has
been made, may
exercise his right for
the remainder, and
shall be preferred to
the
person
subrogated in his
place in virtue of the
partial payment.
113
OBLIGATIONS
Legal subrogation is not presumed,
except in the following circumstances:
1. When creditor pays another creditor
who is preferred, even without the
debtor’s knowledge
rd
2. When a 3 person not interested in
the obligation pays with the express
or tacit approval of the debtor
3. When, even without the knowledge
of the debtor, a person interested in
the fulfillment of the obligation
without prejudice to the effects of
confusion as to the latter’s share
effects of confusion as to the latter’s
share
CIVIL LAW REVIEWER
Charts: PAYMENT & PERFORMANCE
Charts: Payment & Performance
by Professor Eduardo A. Labitag
UP College of Law
(Asked in ’75, ’84, ’88, ’95, and ’98)
1.
2.
3.
4.
Legend:
G = General Rule
 = Exception
C = Creditor
D = Debtor
In GENERAL
Debtor or his:
Authorized Agent
Heir
Successor-in- interest
3rd PERSON
Interested in obligation
(creditor cannot refuse
to accept valid payment)
Payment w/ or
w/o debtor’s
knowledge
Effects:
1.
Valid
payment;
obligation extinguished
2. Debtor to reimburse
fully 3rd person interested
in obligation
3. 3rd person subrogated
to rights of creditor
In Obligation to Give, if
PAYOR has
Not interested in obligation
(creditor may refuse to accept
payment [1236])
Payment with
debtor’s consent
(express/tacit)
Effects:
1. 3rd person is entitled
to full reimbursement
2. Legal subrogation
(novation) – 3rd person
is subrogated/step into
the shoes of creditor
3rd person (whether or not
interested in obligation) does not
intend to be reimbursed (1238)
Payment without
debtor’s knowledge
or against the will of D
Effects:
3rd person can only be
reimbursed only insofar as
payment has been beneficial to
debtor(1236, 2nd. par.)
burden of proof on 3rd person
cannot compel C to subrogate
him (1237)
Debtor must give
consent
Effects:
1. Payment is deemed
as a donation/offer of
donation
2. Donation must be in
proper form (if above
P5Th must be in
writing
No free disposal & no
capacity to alienate
Effects: Payment is invalid  w/o prejudice to
natural obligations
Minor who entered
contract w/o consent of
parent or guardian
Effects: No right to recover fungible
thing delivered to creditor who spent
or consumed it in good faith
114
114
OBLIGATIONS
WHO CAN PAY?
CIVIL LAW REVIEWER
Charts: PAYMENT & PERFORMANCE
TO WHOM PAYMENT MAY BE MADE
In GENERAL
•
Creditor /person in whose favor obligation was
constituted, or
•
•
His successor in interest, or
115
G – NOT valid
Payment to Incapacitated
Creditor (1241)
Payment to 3rd
PERSON (1241,
2nd par.)
In Case of
ACTIVE
SOLIDARITY
 1) If C has kept the thing delivered
2) Insofar as payment benefited C
G VALID if 3rd
person proves
that
it
redounded
to
C’s benefit
 Exception to proof of benefit:
.3rd person acquires C’s rights after payment
.C ratifies payment
.C’s conduct leads D to believe that 3rd
person had authority to receive payment
.Assignment of credit without notice to D
If no demand is made, D may pay to ANY of
solidary creditors
If any judicial/extrajudicial demand is made by any
one of the creditors who made the demand (1214)
Effect:
No extinguishment
If payment is made
to
a
WRONG
PARTY
OBLIGATIONS
Any person authorized to received payment (1240)
 Extinguishment if fault or
negligence can be imputed
to creditor
 Payment in good faith to person in
possession of credit = debtor released
(1242)
If debtor pays creditor after being
judicially ordered to retain debt =
payment not valid (1243)
Payment made in good faith to any
person in possession of credit
Effect: D released (1242)
115
CIVIL LAW REVIEWER
Charts: PAYMENT & PERFORMANCE
WHAT IS TO BE PAID?  IDENTITY
In GENERAL
The very prestation (thing or service
Debtor cannot compel C
to receive a different
specific thing even latter
has same value or more
valuable than that due
(1244)
G:
C cannot demand a thing of superior quality;
can demand inferior
D cannot deliver a thing of inferior quality
Obligation to give a
GENERIC thing
 Unless quality & circumstances have been
stated (1246) purpose and other circumstances
of obligation considered
Obligation to pay sum of money, if D alienates
property to C = DACION EN PAGO governed by
law on SALES (1245)
Obligation to DO or
NOT to DO
Payment of
MONEY
Payment of
INTEREST
Identity: The very same act promised to be done
or not to be done
 Substitution cannot be done against C’s will
(1244, 2nd par.)
1. Payment of domestic obligations in Phil.
Currency
 Exceptions under R.A. 4100; R.A. 8183 –
Foreign currency if agreed to by parties
2.
In case of extraordinary inflation/deflation,
basis
of payment is value of currency at the time of
obligation was established (1250)
No interest (i.e., for the use of someone’s money)
shall be due unless expressly stipulated in writing
116
OBLIGATIONS
Obligation to give a
SPECIFIC thing
Give:
1. Specific thing itself
2. Accessions & accessories
3. If with loss, improvements,
deterioration  Apply Art.
1189
CIVIL LAW REVIEWER
Charts: PAYMENT & PERFORMANCE
HOW IS PAYMENT TO BE MADE  INTEGRITY
 Exceptions:
1. Contrary stipulation
2. When debt is in part liquidated & in part
unliquidated
3. When there are several subjects/parties
are bound under different terms/conditions
In Case of SUBSTANTIAL
PERFORMANCE IN
GOOD FAITH (1234)
PRESUMPTIONS
in payment of
INTERESTS &
INSTALLMENTS
 Effect if C accepts incomplete
performance (1235): WAIVER
-
May be express or implied
If C knows the incompleteness/
irregularity of the payment, and he
still accepts it w/o objection, then
obligation is deemed extinguished
(estoppel)
* There must be intent to waive
 Except if C has no knowledge of
the incompleteness
D may recover as if there had
been complete fulfillment
- Less damages suffered by C
INTEREST – If principal amount is
received w/o reservation as to
interest  interest is presumed to
have been paid (1176; 1253)
INSTALLMENTS  If a latter
installment of a debt is received
w/o
reservation
to
prior
installments

Prior
installments
are
presumed paid (1176, 2nd par.)
117
OBLIGATIONS
In GENERAL
1233 – Complete delivery or rendering
1248 – C cannot be compelled to
received partial prestations; D cannot
be compelled to give partial payments
CIVIL LAW REVIEWER
Charts: PAYMENT & PERFORMANCE
WHERE PAYMENT IS TO BE MADE (ART. 1251)
In GENERAL
In the place designated in the obligation
In any other case
 Domicile of debtor
If D changes his domicile
in bad faith or after he has
incurred in delay
 Additional expenses
shall be borne by D
Expenses
Payment
of
Making
In GENERAL
Extrajudicial
expenses
required by the payment
shall be borne by DEBTOR
 Unless otherwise
stipulated
As to JUDICIAL expenses
 Rules of Court shall
govern
118
OBLIGATIONS
If no place is designated
If obligation is to deliver a
SPECIFIC thing
 Place of performance is
wherever the thing was at
the moment obligation was
constituted
 Unless there is a
contrary
express
stipulation
CIVIL LAW REVIEWER
Charts: PAYMENT & PERFORMANCE
WHEN PAYMENT IS TO BE MADE?
When obligation is due and
demandable but D may pay before
due date if period is for benefit of D
 Exceptions wherein demand of creditor is not
necessary for delay to exist:
1. When obligation/law expressly declares
2. Nature & circumstances of the obligation
designation of time is controlling motive or
establishment of contract
3. When demand would be useless
WHY SHOULD PAYMENT BE MADE?
Because C may compel D to pay, and
failure to pay will allow C to satisfy credit
from properties of D that are not exempt
from execution
- end of Obligations -
119
OBLIGATIONS
In GENERAL
Payment to be made when the creditor
makes
a
demand
(judicially/extrajudicially)
CIVIL LAW REVIEWER
TABLE of CONTENTS
CONTRACTS
Table of Contents
Chapter I. General Provisions.....................122
I.
Classification of Contracts.................122
II.
Elements of Contracts.......................123
III. Stages of Contracts...........................123
IV. Charactertics of Contracts (MARCO) 123
Chapter III. Forms of Contracts ..................129
I.
Rules .................................................129
II.
Kinds of Formalities...........................129
Chapter IV. Reformation of Contracts........130
Chapter V. Interpretation of Contracts.......130
Chapter VI. Defective Contracts .................131
I.
Rescissible Contracts (Arts. 1380-1389)
131
II.
Voidable Contracts (Arts. 1390-1402)
132
III. Unenforceable Contracts (Arts. 14031408) ..........................................................133
IV. Void or Inexistent Contracts (Arts. 14091422) ..........................................................134
121
CONTRACTS
Chapter II. Essential Requisites .................125
I.
Consent .............................................125
II.
Object ................................................127
III. Cause ................................................127
Prof. Solomon Lumba
Faculty Editor
Leo Ledesma
Lead Writer
Krizel Malabanan
Ivy Velasco
Tin Reyes
Frances Domingo
Hazel Abenoja
Writers
CIVIL LAW
Kristine Bongcaron
Patricia Tobias
Subject Editors
ACADEMICS COMMITTEE
Kristine Bongcaron
Michelle Dy
Patrich Leccio
Editors-in-Chief
PRINTING & DISTRIBUTION
Kae Guerrero
DESIGN & LAYOUT
Pat Hernandez
Viktor Fontanilla
Rusell Aragones
Romualdo Menzon Jr.
Rania Joya
LECTURES COMMITTEE
Michelle Arias
Camille Maranan
Angela Sandalo
Heads
Katz Manzano Mary Rose Beley
Sam Nuñez Krizel Malabanan
Arianne Cerezo Marcrese Banaag
Volunteers
MOCK BAR COMMITTEE
Lilibeth Perez
BAR CANDIDATES WELFARE
Dahlia Salamat
LOGISTICS
Charisse Mendoza
SECRETARIAT COMMITTEE
Jill Hernandez
Head
Loraine Mendoza Faye Celso
Mary Mendoza Joie Bajo
Members
Chapter I. General Provisions
I.
II.
III.
IV.
CLASSIFICATION
ELEMENTS
STAGES
CHARACTERISTICS
Article 1305, Civil Code. 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.
I.
Classification of Contracts
A. To formation:
1. Consensual: consent is enough; e.g.
sale
2. Real: consent and delivery is required;
e.g. deposit, pledge
3. Solemn or formal: special formalities are
required for perfection e.g. donation of
realty
B. To relation to other contracts:
1. Principal: may exist alone; e.g. lease
2. Accessory: depends on another contract
for its existence; e.g. guaranty
3. Preparatory: a preliminary step towards
the celebration of a subsequent
contract; e.g. agency
C. To nature of vinculum
1. Unilateral: only one party is bound by
the prestation; e.g. commodatum
2. Bilateral (synallagmatic): where both
parties are bound by reciprocal
prestations; e.g. sale
D. To fulfillment of prestations
1. Commutative: fulfillment is determined in
advance
2. Aleatory: fulfillment is determined by
chance
E. By equivalence of prestations
1. Gratuitous: no correlative prestation is
received by a party
2. Onerous: there is an exchange of
correlative prestations
3. Remuneratory: the prestation is based
on services or benefits already received
F. By the time of fulfillment
1. Executed: obligation is fulfilled at the
time contract is entered into
2. Executory: fulfillment does not take
place at the time the contract is made
G. To their purpose
122
CONTRACTS
OBLIGATIONS & CONTRACTS TEAM
Chapter I. GENERAL PROVISIONS
OBLIGATIONS & CONTRACTS
CIVIL LAW REVIEWER
CIVIL LAW REVIEWER
Chapter I. GENERAL PROVISIONS
H. To their subject matter
1. Things, e.g. sale, deposit
2. Services, e.g. agency
I.
To their designation
1. Nominate: the law gives the contract a
special designation or particular name
e.g. deposit
2. Innominate: the contract has no special
name
Article
1305,
Civil
Code.
INNOMINATE
CONTRACTS shall be regulated by the stipulations
of the parties, by the general provisions of Titles I
and II of [the Civil Code], by the rules governing the
most analogous nominate contracts, and by the
customs of the place.
Classes of Innominate Contracts
1. Do ut des: I give so that you may give
2. Do ut facias: I give so that you may do
3. Facio ut facias: I do so that you may do
4. Facio ut des: I do so that you may give
III. Stages of Contracts
A. Preparation, conception or generation:
period of negotiation and bargaining, ending
at the moment of agreement
B. Perfection or birth: the moment when the
parties come to agree on the terms of the
contract
C. Consummation or death: the fulfillment or
performance of the terms agreed upon
IV. Charactertics of Contracts (MARCO)
A. MUTUALITY
The contract must bind both contracting parties;
its validity or compliance cannot be left to the will
of one of them (Art.1308).
Taylor v. Uy Teng Piao, 1922: [BUT] a contract may
expressly confer upon one party the right to cancel
the contract because the exercise of that right is a
fulfillment of the provisions of the contract itself


II. Elements of Contracts
A. Essential: Those without which the contract
would not exist (consent, object, causa).
B. Natural: Those which are derived from the
nature of the contract and ordinarily
accompany the same-they are presumed to
exist unless the contrary is stipulated e.g.
warranty in sales
C. Accidental:
stipulated
Common
Elements
Special
Elements
Example
Those
which
exist
only
Solemn
Real
Consensual
Consent, subject matter, causa
Formality
Delivery
None
Donationo
f personal
property
more than
P5K
Loan,
pledge
Others
if
The release must be binding on both parties.
The determination of the performance may
rd
be left to a 3 person, whose decision shall
NOT be binding if:
 It is evidently inequitable (the courts will
decide)
 The decision had not been made known
to both parties (Art.1309)
B. AUTONOMY
The contracting parties may establish such
stipulations, clauses, terms and conditions as
they may deem convenient, provided they are
not contrary to law, morals, good customs,
public order, or public policy (Art. 1306).
C. RELATIVITY
Contracts take effect only between parties, their
assigns and heirs UNLESS, obligations arising
from the contract are not transmissible by their
(1) nature, (2) by stipulation or (3) by provision of
law. The heir is not liable beyond the value of
the property he received from the decedent. (Art.
1311)
Exception: Strangers may enforce the contract
in their favor in the ff. cases:
1. Stipulations Pour Autrui—
If a contract should contain some stipulation
in favor of a third person, he may demand its
fulfilment provided he communicated his
123
CONTRACTS
1. Transfer of ownership, e.g. sale
2. Conveyance of Use, e.g. Commodatum
3. Rendition of Service, e.g. agency
Chapter I. GENERAL PROVISIONS
acceptance to the obligor before its
revocation. A mere incidental benefit or
interest of a person is not sufficient. The
contracting parties must have clearly and
deliberately conferred a favour upon a third
person (Art.1311).
Requisites:
a. Existence of a valid contract
b. Knowledge of the third person of the
existence of the contract; and
c. Interference by third person without
legal justification or excuse
Requisites:
a. There must be a stipulation in favor of a
third person
b. The stipulation must be part, not the
whole of the contract
c. The contracting parties must have
clearly and deliberately conferred a
favor upon a third person, NOT a mere
incidental benefit or interest.
d. The
third
person
must
have
communicated his acceptance to the
obligor before its revocation
e. No relation of agency exists between
any of the parties and the third person
favored
D. CONSENSUALITY
Contracts are perfected by mere consent and
from that moment, the parties are bound not only
to the fulfillment of what has been expressly
stipulated but also to all consequences which,
according to their nature, may be in keeping with
good faith, usage and law, (Art.1315) EXCEPT
real contracts, such as deposit, pledge and
commodatum, are not perfected until the
delivery of the object of the obligation.
(Tolentino)
Florentino v. Encarnacion, 1977:
a. Contracts to perform personal acts
which cannot be as well performed by
others are discharged by the death of
the promissor. Conversely, where the
service or act is of such a character that
it may as well be performed by another,
or where the contract, by its terms,
shows that performance by others
was contemplated, death does not
terminate the contract or excuse
nonperformance.
b. In this case the stipulation is a
stipulation pour atrui because the true
intent of the parties is to confer a direct
and material benefit upon a third party.
Accion Directa: Where the statute
authorizes the creditor to sue on his
debtor’s contract, e.g. lessor v. sublessee (Art. 1651,1652) (J.B.L. Reyes)
2. Third Person In Possession—
When the third person comes into
possession of the object of a contract
creating real rights (Art 1312)
3. Fraud—
Where the contract is entered into in order to
defraud a person (Art. 1313)
4. Tortuous Interference—
Where the third person induces a
contracting party to violate his contract
(Art.1314).
E. OBLIGATORY FORCE
Art. 1159, Civil Code. Obligations arising from
contracts have the force of law between the
contracting parties and should be complied with in
good faith.
Art. 1308, Civil Code. The contract must bind both
contracting parties; its validity or compliance cannot
be left to the will of one of them.
Art. 1315, Civil Code. Contracts are perfected by
mere consent, and from that moment the parties are
bound not only to the fulfillment of what has been
expressly stipulated but also to all the consequences
which, according to their nature, may be in keeping
with good faith, usage and law.
Art. 1356, Civil Code. Contracts shall be obligatory,
in whatever form they may have been entered into,
provided all the essential requisites for their validity
are present. However, when the law requires that a
contract be in some form in order that it may be valid
or enforceable, or that a contract be proved in a
certain way, that requirement is absolute and
indispensable. In such cases, the right of the parties
stated in the following article cannot be exercised.
124
CONTRACTS
CIVIL LAW REVIEWER
Chapter II. Essential Requisites
I. CONSENT
II. OBJECT
III. CAUSE
I.
Consent
Conformity of the parties to the terms of the
contract; the acceptance by one of the offer
made by the other. (Manresa)
Requisites:
1. It must be manifested by the concurrence of
the offer and acceptance (Arts. 1319-1326)
2. The contracting parties must possess the
necessary legal capacity (Arts. 1327-1329)
3. It must be intelligent, free, spontaneous, and
real (not vitiated) (Arts. 1330-1346)
A. Concurrence
1. Offer: a unilateral proposition which one
party makes to the other for the celebration
of the contract. (Tolentino)
Requisites:
a. Definite
b. Intentional
c. Complete
Invitations
to
make
offers
(advertisements)
 Business advertisements of things for
sale, are NOT definite offers, just
invitations to make an offer, UNLESS
the contrary appears (Art. 1325)
 Advertisements
for
bidders
are
invitations to make proposals, advertiser
is NOT bound to accept lowest or
highest bid, UNLESS contrary appears;
the bidder is the offeror (Art. 1326).
 Statements of intention: no contract
results even if accepted
Rosenstock v. Burke, 1924:
FACTS: Elser, in a letter, informed Burke that he was
‘in a position and is willing to entertain’ the purchase
of the yacht under some terms.
HELD: The word “entertain” applied to an act does not
mean the resolution to perform said act, but simply a
position to deliberate for deciding to perform or not to
perform said act. It was merely a position to deliberate
whether or not he would purchase the yacht and
invitation to a proposal being made to him, which
might be accepted by him or not.
Chapter II. ESSENTIAL REQUISITES
OFFER TERMINATES upon:
a. Rejection by the offeree
b. Incapacity (death, civil interdiction,
insanity, or insolvency) of the offeror or
offeree before acceptance is conveyed
c. Counter-offer
d. Lapse of the time stated in the offer
without acceptance being conveyed
e. Revocation of the offer before learning
of acceptance
f. Supervening illegality before acceptance
(J.B.L. Reyes)
2. Acceptance
Requisites:
a. Unqualified and Unconditional, i.e. it
must conform with all the terms of the
offer, otherwise it is a counter-offer (Art.
1319)
b. Communicated to the offeror and
learned by him (Arts. 1319, 1322). If
made through an agent, the offer is
accepted from the time the acceptance
is communicated to such agent.
c. Express/Implied, but is not presumed
OPTION CONTRACT: A preparatory
contract in which one party grants to the
other, for a fixed period, the option to decide
whether or not to enter into a principal
contract. (Art. 1324)
With consideration
Offeror
cannot
unilaterally withdraw his
offer
Without consideration
Offeror may withdraw by
communicating withdrawal
to the offeree before
acceptance
B. Capacity
1. Incapacitated to Give Consent
a. Minors, UNLESS, the minor’s consent
is operative in contracts:
 For necessaries (Art.1427)
 Where
the
minor
actively
misrepresents his age (estoppel)

Mercado v. Espiritu, 1917:
Minors held in estoppel through
active misrepresentation
 Bambalan v. Maramba, 1928:
There is no estoppel if the minority
was known.
b. Insane
or
demented
persons,
UNLESS, they contract during a lucid
interval
c. Deaf-mutes who do not know how to
read and write.
125
CONTRACTS
CIVIL LAW REVIEWER
Chapter II. ESSENTIAL REQUISITES
2. Disqualified to Contract (Art. 1329):
a. Those under Civil interdiction for
transactions inter vivos (RPC Art. 34)
b. Undischarged insolvents (Insolvency
Law, Sec.24)
c. Husband and wife: cannot donate (Art.
123 FC) to each other, nor sell if the
marriage is under ACP (Art.1490)
d. The ff. cannot purchase (Art. 1491):
 The guardian: his ward’s property
 The agent: the principal’s property
 Executors
and
administrators:
property under administration
 Public officers-state property under
their administration
 Justices, judges, prosecutors, clerks
of court, lawyers-property attached
in litigation.
e. Members of Ethnic Minorities: their
contracts (excluding sale of personal
property or personal service contracts)
must be approved by the Governor or
his representative. (Public Land Act)
Incapacity
to
Give
Consent (Art. 1327)
Restrains the exercise of
the right to contract
Based
on
subjective
circumstances of certain
persons
Disqualification
to
Contract (Art.1329)
Restrains the very right
itself
Based on public policy
and morality
Voidable
Void
C. Vices of Consent (Art. 1330, CC) (MIVUF)
1. Mistake
Inadvertent and excusable disregard of a
circumstance material to the contract. (J.B.L.
Reyes)
 In order that mistake may invalidate
consent, it should refer to the
substance of the thing which is the
object of the contract, or to those
conditions which have principally moved
one or both parties to enter into the
contract (Art.1331)
Mistake of Fact
Mistake of Law
Mutual Mistake
When one or
both contracting
parties believe
that a fact exists
when in reality it
does not, or vice
versa
When one or
both
parties
arrive at an
erroneous
conclusion on
the
interpretation of
a question of
law or the legal
effects
 Must be as
to the legal
effect of an
agreement
 Must
be
mutual
 Real purpose
of the parties
must
have
been
frustrated
2. Intimidation
When one of the contracting parties is
compelled by a reasonable and wellgrounded fear of an imminent and grave evil
upon his person or property, or upon the
person or property of his spouse,
descendants or ascendants, to give his
consent (Art. 1335).
Martinez v. HSBC, 1910: The conveyance of several
properties by to her husband’s creditors, though
reluctant is still consent. She assented to the
requirements of the defendants, the civil and criminal
actions against them would be dropped. A contract is
valid even though one of the parties entered into it
against his wishes and desires, or even against his
better judgment. Contracts are also valid even though
they are entered into by one of the parties without
hope of advantage or profit.
3. Violence
Irresistible force used to extort consent
(J.B.L. Reyes)
4. Undue Influence
When a person takes improper advantage of
his power over the will of another, depriving
the latter of a reasonable freedom of choice
(Art. 1337).
Circumstances:
a. Relationship of the parties (family,
spiritual, confidential etc.)
b. That the person unduly influenced was
suffering
from
infirmity
(mental
weakness, ignorance etc.) (Art.1337)
5. Fraud
When
through
insidious
words
or
machinations of one of the contracting
parties, the other is induced to enter into a
contract which, without them, he would not
have agreed to (Art. 1338).
Art. 1339, Civil Code. Failure to disclose facts, when
there is a duty to reveal them, as when the parties are
bound by confidential relations, constitutes fraud.
Art. 1340, Civil Code. The usual exaggerations in
trade, when the other party had an opportunity to
know the facts, are not in themselves fraudulent.
Art. 1341, Civil Code. A mere expression of an
opinion does not signify fraud, unless made by an
expert and the other party has relied on the former's
special knowledge.
Art. 1342, Civil Code. Misrepresentation by a third
person does not vitiate consent, unless, such
misrepresentation has created substantial mistake
126
CONTRACTS
CIVIL LAW REVIEWER
CIVIL LAW REVIEWER
Chapter II. ESSENTIAL REQUISITES
Art. 1343, Civil Code. Misrepresentation made in
good faith is not fraudulent but may constitute error.
SIMULATION OF CONTRACTS (Art. 13451346): Declaration of a non-existent will made
deliberately for the purpose of producing the
appearance of a transaction that does not exist,
or which is different from the one which actually
arose. (J.B.L. Reyes)
Absolute
No real transaction is
intended
Fictitious contract
Void
Relative
Real transaction is hidden
Disguised contract
Bound
as
to
hidden
agreement, so long as it
does not prejudice a third
person and is not contrary
to law, morals, good
customs, public order or
public policy
II. Object
The thing right or service which is the subject
matter of the obligation arising from the contract.
Requisites:
a. Lawful: Not contrary to law, morals, good
customs, public order or public policy.
b. Actual or possible
c. Transmissible: Within the commerce of man
d. Determinate or determinable
All things or services may be the object of
contracts, EXCEPT:
 Things which are outside the commerce of
men
 Intransmissible rights
 Future inheritance except in cases
authorized by law
 Impossible things or services
 Objects which are indeterminable as to their
kind, the genus should be expressed
In order that a thing, right or service may be the
object of a contract, it should be in existence at
the moment of the celebration of the contract, or
at least, it can exist subsequently or in the
future.
A FUTURE THING may be the object of a
contract, such contract may be interpreted as a:
 Conditional contract: where its efficacy
should depend upon the future existence of
the thing
Aleatory contract: where one of the contracting
parties assumes the risk that the thing will never
come into existence, e.g. insurance
III. Cause
It is the impelling reason for which a party
assumes an obligation under a contract.
Requisites:
a. Existing
b. Licit or Lawful
c. True
127
Cause in:
Onerous
Contracts
As to each of
the contracting
parties
is
understood to
be
the
undertaking or
the promise of
the thing or
service by the
other party
Renumeratory
Contracts
The
service
benefit which
remunerated
or
is
Pure
Beneficence
Mere
liberality of
the
benefactor
In Villaroel v. Estrada (1940), where a moral
obligation is based upon a previous civil obligation,
which has already been barred by the statute of
limitations at the time the contract is entered into, it
constitutes a sufficient cause or consideration to
support a contract (Natural Obligation).
BUT,
In Fisher v. Robb (1939), if the moral obligation arises
wholly from ethical consideration, it cannot constitute
a sufficient cause to support an onerous contract, as
when the promise is made on the erroneous belief
that one was morally responsible for the failure of an
enterprise (Moral Obligation).
Cause
Lack
Cause
of
Illegality
Cause
of
Falsity
cause
of
Lesion
or
inadequacy
of cause
Defined
Absence or total
lack of cause
Contrary to law,
morals,
good
customs, public
policy
and
public order
Cause is stated
but is untrue
Cause is not
proportionate to
object
Effect
The
contract
confers no right
and has no legal
effect
Null and Void
Void if it should
not be proved that
it was founded
upon
another
cause which was
true and lawful
Shall not invalidate
the
contract
except when
CONTRACTS
and the same is mutual.
CIVIL LAW REVIEWER
Chapter II. ESSENTIAL REQUISITES
a)there is fraud,
mistake,
undue
influence
b)when
parties
intended
a
donation
128
CONTRACTS
Liguez v. CA (1957): In making the donation in
question, Lopez was not moved exclusively by the
desire to benefit Liguez, but also to secure her
cohabiting with him, so that he could gratify his sexual
impulses. The donation was an onerous transaction
and clearly predicated upon an illicit causa.
Chapter III. Forms of Contracts
I. RULES
II. KINDS OF FORMALITIES
I.
Rules
Contracts shall be obligatory, in whatever form
they may have been entered into, provided all
the essential requisites for their validity are
present. (Art. 1356)
Chapter III. FORMS OF CONTRACTS
d. The cession of actions or rights
proceeding from an act appearing in
a public document.
e. All other contracts where the
amount involved exceeds five
hundred pesos must appear in
writing, even a private one. But
sales of goods, chattels or things in
action are governed by Articles,
1403, No. 2 and 1405.
2. Donation of immovable properties (Art.
749)
Spiritual System of the Spanish Code: The law looks
more on the spirit rather than the form of contracts.
3. Partnership where immovable property
or real rights are contributed to the
common fund (Arts.1771 and 1773)
Exceptions:
 When the law requires that a contract be in
some form for validity (Arts. 1357-1358)
 When the law requires that contract be in
some form to be enforceable (Statute of
Frauds)
BF Corporation v. CA, 1998: A contract may be
encompassed in several instruments even though
every instrument is not signed by the parties since it is
sufficient if the unsigned instruments are clearly
identified or referred to and made part of the signed
instruments.
II. Kinds of Formalities
A. Contracts Which Must Appear in Writing:
1. Donation of personal property whose
value exceeds five hundred pesos (Art
748)
2. Sale of a piece of land or any interest
therein through an agent (Art 1874)
3. Antichresis (Art 2134)
4. Agreements regarding payment of
interests in contracts of loans (Art. 2314)
B. Contracts Which Must Appear in a Public
Document
1. Art. 1358:
a. Acts and contracts which have for
their
object
the
creation,
transmission,
modification
or
extinguishment of real rights over
immovable property; sales of real
property or of an interest therein a
governed by Articles 1403, No. 2,
and 1405;
b. The
cession,
repudiation
or
renunciation of hereditary rights or
of those of the conjugal partnership
of gains;
c. The power to administer property, or
any other power which has for its
object an act appearing or which
should appear in a public document,
or should prejudice a third person;
129
CONTRACTS
CIVIL LAW REVIEWER
Chapter IV. REFORMATION OF CONTRACTS
Chapter V. INTERPRETATION OF CONTRACTS
Chapter IV. Reformation of Contracts
Chapter V. Interpretation of Contracts
Reformation of Contracts (Art 1359-1369)
REFORMATION: is that remedy in equity by
means of which a written instrument is made or
construed so as to express or conform to the
real intention of the parties when some error or
mistake has been committed. (J.B.L. Reyes)
RULES ON DOUBTS (Art. 1378)
Requisites (Art 1359):
1. There must be a meeting of the minds of the
contracting parties;
2. Their true intention is not expressed in the
instrument;
3. Such failure to express their true intention is
due to mistake, fraud, inequitable conduct,
or accident; and
4. There is clear and convincing proof of
mistake, fraud, inequitable conduct, or
accident.
If the mistake, fraud, inequitable conduct, or accident
has prevented the meeting of the minds of the parties,
the proper remedy is not reformation but annulment of
the contract. (See also Art 1390)
Who May Ask for Reformation (Art. 1368):
1. Either party or his successors in interest, if
the mistake was mutual; otherwise,
2. Upon petition of the injured party, or his
heirs and assigns.
NO REFORMATION in (Art. 1366):
1. Simple donations inter vivos wherein no
condition is imposed;
2. Wills;
3. When the real agreement is void.
Implied Ratification (Art. 1367): The action to
enforce the instrument bars subsequent action
to reform.
Principal
Objects
Gratuitous
Contracts
Onerous
Contracts
Doubts where
it cannot be
known what
may
have
been
the
intention
or
will of the
parties,
the
contract shall
be null and
void.
Absolutely
impossible
to
settle doubts by
the rules and
only refer to
incidental
circumstances
the
least
transmission
of rights and
interests shall
prevail.
Absolutely
impossible
to
settle doubts by
the rules and
only
refer
to
incidental
circumstances
the doubt shall
be settled in
favor of the
greatest
reciprocity
of
interests.
130
CONTRACTS
CIVIL LAW REVIEWER
CIVIL LAW REVIEWER
Chapter VI. DEFECTIVE CONTRACTS
Chapter VI. Defective Contracts
RESCISSIBLE
VOIDABLE
UNENFORCEABLE
VOID OR INEXISTENT
I.
Rescissible Contracts (Arts. 1380-1389)
What are the
rescissible
contracts?
(Art
1381; see also Art
1382)
What makes it
defective?
Effect
on
the
Contract
How to rescind?
Who can rescind?
When to rescind
(Art 1389)
Contracts of
guardians
Contracts in
representation
of absentees
Contracts are
entered into to
defraud existing
creditors
131
Contracts refer
to things in
litigation
When the acts of
administration
cause LESION or
damage to the
WARD
they
represent by more
than 25% of the
value of the thing
When the acts
of administration
cause LESION
or damage to
the ABSENTEE
they represent
by more than
25% of the value
of the thin
Valid until rescinded (Art 1380)
When the creditors
cannot in any other
manner collect the
claims due them
Direct Action (different from action for
rescission under Art 1191)
Accion Pauliana for Contracts in Fraud of
Creditors
NO rescission if:
1. Injured party has other legal
means to obtain reparation (Art
1383).
2. Plaintiff cannot return his part of
the obligation (Art 1385 par 1)
3. Object of the contract is in the
hands of third person, onerously
acquired by him in good faith (Art
1385 par 2)
4. If the court approves the
contracts under Art 1381 par 1
and 2 (Art 1386)
In general, by By absentee
injured party
NO rescission if:
1. Injured party has other legal means to
obtain reparation (Art 1383)
2. Plaintiff cannot return his part of the
obligation (Art 1385 par 1)
3. Object of the contract is in the hands of
third person, onerously acquired by
him in good faith (Art 1385 par 2)
By ward, or by
guardian ad litem
of ward during
incapacity of ward
in
an
action
against
the
original guardian
Within four years
from [re-] gaining
capacity
Within 4 years
from knowledge
of domicile of
absentee
If entered into by
the
defendant
without
the
knowledge
&
approval of the
litigants
or
competent judicial
authority
By creditor(s)
By party litigant
Within 4 years from
knowledge
of
fraudulent contract
Within 4 years
from knowledge of
fraudulent contract
CONTRACTS
I.
II.
III.
IV.
CIVIL LAW REVIEWER
Chapter VI. DEFECTIVE CONTRACTS
II. Voidable Contracts (Arts. 1390-1402)
Who can/cannot
annul?
(Art 1397)
When? (Art 1391)
Effect
Annulment
of
How to
Cure
Defect?
(Arts
1392 - 1396)
Incapacity of one party to the
contract
Consent vitiated by mistake, violence,
intimidation, undue influence or fraud
Valid until annulled by competent court (Art 1390 last par)
1. Directly, by an action for annulment
2. Indirectly, by counterclaim asking for positive action of the court to set aside the
contract
Annulment cannot proceed when:
1. the object of the contract is lost through fraud or deceit of the person with right to
institute proceedings (art 1401 par 1);
2. the right of action is based upon the incapacity of any one of the contracting
parties and the thing is lost through the fault or fraud of the plaintiff (Art 1401 par
2)
1. Parties who are obliged principally or subsidiarily
2. Persons who are capable cannot allege the incapacity of those with whom they
contracted
3. Persons who exerted intimidation, violence, or undue intimidation, or employed
fraud, or caused mistake, cannot base their action upon these flaws of the
contract
Within four years after guardianship of Within four years
minors or incapacitated persons 1. After intimidation, violence or undue
ceases
influence ceases
2. From the time of discovery of mistake
or fraud
1. Mutual restitution of the things delivered, along with fruits and price paid with
interest (Art 1398)
2. Damages to be paid by party who caused defect of the contract, by virtue of
Article 20 and 21 of the Civil Code
1. Express (written or oral manifestation) or tacit ratification (acts or conduct) by
injured party, or guardian of incapacitated person.
Ratification does not require the conformity of the contracting party
who has no right to bring the action for annulment (Art 1395)
132
CONTRACTS
What makes it
defective?
(Art
1390)
Effect on the
Contract
How to annul?
CIVIL LAW REVIEWER
Chapter VI. DEFECTIVE CONTRACTS
III. Unenforceable Contracts (Arts. 1403-1408)
Contract entered into
without authority of, or
in excess of authority
given by owner
Contracts
covered
by
Statute of Frauds which
did not comply with the
written
memorandum
requirement
(See Art 1403 par 2)
Contract where both
parties are incapable
of giving consent to
contract
Effect on the
Contract
How to assail?
No effect unless ratified. Cannot be enforced by a proper action in court.
Who can assail?
*an
unenforceable
contract cannot
be assailed by
third persons (Art
1408)
When?
By person whose name
the contract was entered
into; By owner of property.
How to
Defect?
1403)
1. Ratification by person
whose
name
the
contract was entered
into
Cure
(Art
Not by direct action.
1. As a defense, by
motion to dismiss the
complaint
on
the
ground that the contract
is unenforceable
Not by direct action.
1. As a defense, by motion
to dismiss the complaint
on the ground that the
contract is unenforceable;
2. Objection
to
the
presentation
of
oral
evidence to prove an oral
contract (See Art 1405)
By party against whom the
contract is being enforced;
or his privies.
Not by direct action.
1. As a defense, by
motion to dismiss the
complaint on the
ground
that
the
contract
is
unenforceable
By party against whom
the contract is being
enforced; or his privies;
or parents or guardians
persons, as it is a
personal defense
When a party asks the court to enforce the contract
1. Ratification by party 1. By ratification of
party against whom
against whom the
the contract is being
contract is being
enforced;
or
his
enforced
privies; or parents or
2. By failure to object to the
presentation
of
oral
evidence to prove an oral
contract
or
by
the
acceptance of benefits
under the contract (Art
1405)
guardians
 The ratification by
one party converts
the contract into a
voidable contract (Art
1407)
133
CONTRACTS
What are the
unenforceable
contracts?
(Art
1403)
CIVIL LAW REVIEWER
Chapter VI. DEFECTIVE CONTRACTS
IV. Void or Inexistent Contracts (Arts. 1409-1422)
it
Contracts which
are inconsistent
and void from the
beginning
(Art
1409)
How to assail?
Who can assail?
When?
Contract’s Cause, Object
of Purpose is contrary to
morals, good customs,
public order or public
policy
(Art 1409 par 1)
Inexistent contracts, or
contracts whose essential
elements are absent
(Art Art 1409 par 2, 3, 4,5)
Contracts expressly
prohibited or declared
void by law (Art 1409
par
7);
contracts
which
are
direct
results of a previous
illegal contract (art
1422)
1.Those whose Cause, Object of Purpose is contrary to morals, good customs,
public order or public policy
2.Those which are absolutely simulated or fictitious
3.Those whose cause or object did not exist at the time of the transaction
4.Those whose object is outside the commerce of men
5.Those which contemplate an impossible service
6.Those where the intention of the parties relative to the principal object of the
contract cannot be ascertained
7.Those expressly prohibited or declared void by law
1. File for action for declaration of inexistence or nullity of contract
2.As a defense during trial (Art 1409 last par). Such defense not available to third
persons not directly affected by contract (Art 1421)
3.In pari delicto applies when cause or object of contract constitutes a criminal
offense (Art 1411)
1. Innocent party Art 1. Any of the parties
1. Any person whose
1411 par 2; Art 1412 2. Any
person
whose
interests
are
par2)
interests are directly
directly affected by
2. Less-guilty party, upon
affected by the contract
the contract Art
court discretion
(Art 1421)
(1421)
3. Incapacitated person
2. By party for whose
who is a party to an
protection
the
illegal contract, upon
prohibition of the
court discretion (Art
law is designed (Art
1415)
1416)
4. Any person whose
interests are directly
affected
by
the
contract (Art 1421)
The action or defense does not prescribe (Art 1410)
- end of Contracts -
134
CONTRACTS
What makes
defective?