BUSINESS LAW: OBLIGATIONS AND CONTRACTS
Module 2: Nature and Effect of Obligations
MODULE 2
NATURE AND EFFECT OF OBLIGATIONS
Module Author: KHERVY B. REYES
College of Business Administration and Accountancy
De La Salle University – Dasmarinas
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BUSINESS LAW: OBLIGATIONS AND CONTRACTS
Module 2: Nature and Effect of Obligations
TABLE OF CONTENTS
Title
Gospel Reflection
CHAPTER 2. – Introduction and Chapter Outcomes
CHAPTER 2. - Nature and Effect of Obligations Articles 1163- 1169
ENABLING ASSESSMENT 4: Nature and Effect of Obligations
CHAPTER 2. - Nature and Effect of Obligations Articles 1170- 1173
Page
3
4- 6
7- 15
15- 22
23- 27
ENABLING ASSESSMENT 5: Nature and Effect of Obligations
27- 35
CHAPTER 2. - Nature and Effect of Obligations Articles 1174- 1178
36- 40
ENABLING ASSESSMENT 5: Nature and Effect of Obligations
40- 49
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BUSINESS LAW: OBLIGATIONS AND CONTRACTS
Module 2: Nature and Effect of Obligations
GOSPEL REFLECTION
Psalm 37:24
“Though he may stumble, he will not fail, for the Lord upholds him with his hand.”
Instruction: Using the space below, write a reflection essay.
Share your personal reflection based on the images and the bible verse above. How do you relate the images and
bible verse into your personal life? How do you think this bible verse connect to this module?
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BUSINESS LAW: OBLIGATIONS AND CONTRACTS
Module 2: Nature and Effect of Obligations
CHAPTER 2 - NATURE AND EFFECT OF OBLIGATIONS
See Arts. 1163 – 1178
In this chapter we need to explore or discuss in a wide-ranging manner the nature and effect of obligations.
KNOW THE CONCEPTS
DO YOU KNOW THE BASICS?
Art. 1163
(1) Discuss the nature of obligations: personal obligations and real obligations.
(2) What is the meaning of specific or determinate thing? Define generic or indeterminate thing.
(3) Distinguish between specific and generic thing.
(4) Explain the effects of obligations. What are the duties of debtor in obligation to give a determinate thing?
(5) Cite the duties of a debtor in obligation to deliver a generic thing?
Art. 1164
(6) What are the different kinds of fruits?
(7) Discuss the right of creditor to the fruits.
(8) When does the obligation to deliver the fruits arise?
(9) Distinguish personal right from real right.
(10) Explain how ownership and other real rights are acquired and transmitted.
Art. 1165.
(11) What are the remedies available to creditor in real obligation?
(12) Cite the rule where debtor delays or has promised delivery to separate creditors.
Art. 1166.
(13) Give the meaning of accessions and accessories.
(14) Explain the right of creditor to accessions and accessories.
Art. 1167.
(15) What are the situations contemplated in Art. 1167?
(16) What are the remedies of creditor in positive personal obligation?
(17) Give the rule when there is performance of an obligation by a third person.
Art. 1168.
(18) Discuss the remedies o creditor in negative personal obligation.
Art. 1169.
(19) What is the legal meaning of delay?
(20) Give the different kinds of delay or default.
(21) Explain the rule, “No delay in negative personal obligation.”
(22) What are the requisites of delay or default on the part of the debtor?
(23) What are the effects of delay?
(24) When is demand not necessary to put debtor in delay?
Art. 1170.
(25) What are the four (4) grounds for liability which may entitle the injured party to damages for all kinds of
obligations mentioned in Article 1157?
(26) Explain the differences between fraud and negligence.
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BUSINESS LAW: OBLIGATIONS AND CONTRACTS
Module 2: Nature and Effect of Obligations
Art. 1171.
(27) When can responsibility arising from fraud be demanded?
(28) Explain why a waiver of an action for future fraud is void.
(29) Discuss why a past fraud can be the subject of a valid waiver?
Art. 1172.
(28) Is the debtor liable for damages resulting from his negligence?
(29) Can an action for future negligence be renounced? Is this rule absolute?
(30) When can negligence be considered equivalent to fraud? What is its implications?
(31) Discuss the kinds of negligence according to source.
(32) Suppose the creditor is also guilty of negligence, can he recover for damages?
Explain the effect of negligence on the part of the injured party.
Art. 1173.
(33) What is the meaning of fault or negligence?
(34) Cite the factors to be considered in determining the issue of negligence.
(35) What is “damages?” What is the purpose of awarding damages? In case of fraud, bad faith, malice, or wanton
attitude, what shall be the responsibility of the obligor as a consequence of his non-performance of the obligation?
(36) Discuss the kinds of diligence required under Article 1173.
Art. 1174.
(37) What is fortuitous event?
(38) Distinguish fortuitous event from force majeure?
(39) Discuss the different kinds of fortuitous events and cite examples.
(40) What are the four (4) requisites of a fortuitous event? What would be the effect of absence of any of the said
requisites?
(41) Cite the rules as to the liability of a person for loss or damage in case of fortuitous event and give an example.
Art. 1175.
(42) What is the meaning of simple loan or “mutuum?”
(43) What is usury?
(44) What are the requisites for recovery of interest?
Art. 1176.
(45) What is the meaning of presumption?
(46) What are the two (2) kinds of presumption?
(47) When is presumption under Art. 1176 not applicable?
Art. 1177.
(48) In case the debtor fails to comply with his obligation, what are the remedies available to the creditor for the
satisfaction of his claim?
Art. 1178.
(49) What is the general rule under Art. 1178 regarding transmissibility of rights?
(50 What are the exceptions to this rule?
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BUSINESS LAW: OBLIGATIONS AND CONTRACTS
Module 2: Nature and Effect of Obligations
CHAPTER OUTCOMES
Course Learning Outcomes
Module Learning Outcomes
CLO1. Explain what the Explore or discuss in a widePhilippine law on obligations ranging manner the nature and
and contracts is and the effect of obligations.
prevailing
jurisprudence
relating thereto, specifically
on the nature and effect of
obligations, different kinds of
obligations, extinguishment of
obligations,
nature
of
contracts and its essential
requisites, form of contracts,
interpretation of contracts and
the various kinds of defective
contracts under the Philippine
law.
Chapter Learning Outcomes
1. Discuss the nature of
obligations:
a) personal obligations and
b) real obligations.
2. Explain the effect of
obligationsa) Duties of debtor in
obligation
to
give
a
determinate thing
b) Duties of a debtor in
obligation to deliver a generic
thing
c) Remedies of the creditor in
case of non-performance
3.
Discuss
breach
of
obligations: voluntary or
involuntary; its effects.
4. Explain the concepts and
rules on fraud, negligence,
delay, and contravention of
tenor.
4. Explain the general rule and
exception
on
fortuitous
events; effects
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BUSINESS LAW: OBLIGATIONS AND CONTRACTS
Module 2: Nature and Effect of Obligations
Art. 1163. Every person obliged to give something is also obliged to take care
of it with the proper diligence of a good father of a family, unless the law or the
stipulation of the parties requires another standard of care.
NATURE OF OBLIGATIONS
Personal Obligations
✓ obligations to do or not to do;
✓ where the subject matter is an act
to be done or not to be done
✓ Positive – obligation to do
✓ Negative – obligation not to do
Specific or Determinate Thing
Real Obligations
✓ obligations to give;
✓ where the subject matter is a thing
which the obligor must deliver to the
obligee
Generic or an Indeterminate Thing
- when it is particularly designated or physically - It refers only to a class or genus wherein
segregated from all others of the same class.
it cannot be pointed out with particularity.
- cannot be substituted with another although it is - A generic thing is defined by its specie.
of the same kind or quality unless the creditor The debtor can give anything of the same
consents (See Art 1244: Payment: debtor cannot compel class if it is of the same kind.
creditor to receive a different one, although it is more
valuable/as valuable as the thing due)
Example: laptop sold by A; the money your Example: a Patek Philippe watch;
parents gave you; your fish named Nemo)
sum of Php1,000
Duties of the debtor in an obligation to give a specific thing
(TAFDA- take care, accessories, fruits, deliver, answer for damages)
✓ Preserve or take care of the thing due (according to standard of care stipulated).
✓ Deliver its accessions or accessories.
✓ Deliver the fruits of the thing.
➢ Right to the fruits of the thing from the time the obligation to deliver it arises
✓ The deliver the thing itself.
✓ To answer for damages in case of breach of the obligation by reason of delay, fraud,
negligence, or contravention of the tenor of the obligation.
Duties of the debtor in an obligation to deliver an indeterminate or generic thing
✓ To deliver a thing which is of the quality intended by the parties* (See Art 1246: if
quality/circumstances not stated, creditor cannot demand a thing of superior quality
and debtor cannot give a thing of inferior quality); which is neither of superior nor of inferior
quality*
✓ To be liable for damages in case of fraud, negligence, delay in the performance of the
obligation or in contravention of the tenor of the obligation
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BUSINESS LAW: OBLIGATIONS AND CONTRACTS
Module 2: Nature and Effect of Obligations
DILIGENCE OF A GOOD FATHER OF A FAMILY
✓ ordinary care or that diligence which an average or reasonably prudent person would
exercise over his own property
✓ This is in connection with real obligations (to give). The obligor has the duty to take
care of the thing due with ordinary diligence (average/reasonably prudent person)
PENDING delivery
Rule on Standard of Care
•
That which the law requires; or
•
That stipulated by the parties; or
•
In the absence of the two, diligence of a good father of a family
Art. 1164. The creditor has a right to the fruits of the thing from the time the obligation to deliver
it arises. However, he shall acquire no real right over it until the same has been delivered it.
Different kinds of fruits
Natural fruits
Industrial fruits
Civil fruits
- are the spontaneous
products of the soil, and the
young and other products of
animals.
- are those produced by lands
of any kind through
cultivation or labor, brought
about by reason of human
labor.
- are those derived by virtue
of juridical relation.
Example: grass; all trees and
plants on lands produced
without the intervention of
human labor
Example: rice; and all
products of land
Example: rents of buildings,
price of leases of lands and
other property, and the
amount of perpetual or life
annuities or other similar
income. (Art. 442)
Right of creditor to the fruits.
✓ By law, the creditor is entitled to the fruits of the thing to be delivered from the time
the obligation to make delivery of the thing arises.
✓ The intention of the law is to protect the interest of the obligee should the obligor
commit delay, purposely or otherwise, in the fulfillment of his obligation.
When does the obligation to deliver arise?
1. Generally, the obligation to deliver the thing due and its fruits arises from the time the
contract is perfected (meeting of the minds).
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BUSINESS LAW: OBLIGATIONS AND CONTRACTS
Module 2: Nature and Effect of Obligations
2. If the obligation is subject to a suspensive period/condition, the obligation to deliver arises
upon the fulfillment of the condition or the arrival of the period. However, this
notwithstanding, the parties may make a stipulation to the contrary as regards the right of the
creditor to the fruits of the thing.
3. In a contract of sale, the obligation arises from the perfection of the contract even if the
obligation is subject to a suspensive condition or period where the price has been paid (when
paid, it has to be delivered).
Distinguish personal right from real right.
Personal right
Real right
Jus ad rem, a right enforceable only
Jus in re, a right enforceable against
against a definite person or group of persons
Right pertaining to a person to demand from
another, as a definite passive subject, the
fulfillment of the prestation to give, to do or
not to do.
the whole world
Right pertaining to a person over a specific
thing, without a definite passive subject
against whom the right may be personally
enforced.
Explain how ownership and other real rights are acquired and transmitted.
Ownership and other real rights are acquired by delivery. Delivery may be actual or real,
constructive, or legal, or in any manner signifying an agreement that the possession of the
thing sold is transferred from the vendor to the vendee.
✓ The meaning then of “he shall acquire no real right over it until the same has been delivered to him,” is
that the creditor does not become the owner until the specific thing has been delivered to him.
So, what happens when there is no delivery yet?
When there is no delivery yet, the action to be filed by the creditor is one of specific
performance of the obligation (See Art 1165)
What is the importance of delivery?
The delivery of a thing constitutes a necessary and indispensable requisite for the purpose of
acquiring ownership of the same by virtue of a contract.
Art 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the
right granted to him by 1170, may compel the debtor to make delivery.
If the thing is generic, he may ask that the obligation be complied with at the expense of the
debtor.
If the debtor delays or has promised to deliver the same thing to two or more persons who do not
have the same interest, he shall be responsible for any fortuitous event until he has effected
delivery.
Remedies available to creditor in real obligation
Obligation to Deliver a Specific Thing
Obligation to Deliver a Generic Thing
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BUSINESS LAW: OBLIGATIONS AND CONTRACTS
Module 2: Nature and Effect of Obligations
1.
Demand SPECIFIC PERFORMANCE
(if it is still possible) of the obligation with a
right to indemnity for damages; or
NOTE: The obligation can be performed by a
third person since the object is expressed
only according to its family or genus.
2.
Demand RESCISSION or
CANCELLATION (in certain cases) of the
obligation also with a right to recover
damages (Art. 1170.); or
It is thus not necessary for the creditor to
compel the debtor to make the delivery
although he may ask for performance of the
obligation.
3.
Demand PAYMENT of DAMAGES
only (see Art. 1170.) where it is the only
feasible remedy.
In case of breach of the obligation, the
remedy of the creditor is to recover damages
(Article 1170).
THINK LIKE THE BOARD EXAMINER!
Question: Who can comply with the obligation to deliver a specific thing?
Answer: In an obligation to deliver a determinate thing, the very thing itself must be delivered.
(Art. 1244.) Consequently, only the debtor can comply with the obligation.
•
This is the reason why the creditor is granted the right to compel the debtor to make the delivery. (Art. 1165, par. 1.)
!!!VERY IMPORTANT PROVISION (VIP) under par. 3 of Art. 1165
“If the obligor delays or has promised to deliver the same thing to two or more persons
who do not have the same interest, he shall be responsible for any fortuitous event until he
has effected the delivery.”
Two (2) instances when a fortuitous event does not exempt the debtor from responsibility
(Note: The general rule is that no person shall be responsible for those events which could not
be foreseen, or which, though foreseen, were inevitable. (Art. 1174)
1. Where debtor delays, or
2. Where debtor has promised delivery to separate creditors.
Take note that this provision refers particularly to obligation to deliver a determinate thing.
➢ A generic thing cannot be the object of destruction by a fortuitous event.
➢ WHY? “genus nunquam perit” (genus never perishes). (see Arts. 1174, 1263.)
✓ So, do not worry about losing your boyfriend who cheats on you!!!
You deserve someone better!!!
Art 1166. The obligation to give a determinate thing includes that of delivering all its
accessions or accessories even though they may not have been mentioned.
not have the same interest, he shall be responsible for any fortuitous event until he has effected
delivery.
What are accessions and accessories?
Accessions (A-F-I)
Accessories
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Module 2: Nature and Effect of Obligations
are the additions/fruits/improvements upon a
thing (the principal)
are thing joined to or included with the
principal thing for the latter’s embellishment,
better use, or completion
Example: house on land, rents of a building, etc.
Example: bow of a violin, key of a house
✓ This is not necessary to the principal
thing.
The accessory must go together with the principal
(accessory always follows principal)
Explain the right of creditor to accessions and accessories.
General Rule: All accessions and accessories are considered included in the obligation to
deliver a determinate thing although they may not have been mentioned.
COMMIT TO MEMORY!!! Principle of Law: “The accessory follows the principal.”
Exception:
In order that they will be excluded, there must be a stipulation to that effect.
Case in Point: Caleon vs. Agus Development Corp., 207 SCRA 748 [1992]
The lease of a building or house naturally includes the lease of the lot, and the rentals include
those of the lot for the occupancy of a building or house not only suggests but also implies the
tenancy or possession in fact of the land on which it is constructed.
➢ Unless otherwise stipulated, an obligation to deliver the accessions or accessories of a
thing does not include the latter.
Case in Point: Pornellosa vs. Land Tenure Administration, 1 SCRA 375 [1961].
Thus, a sale of the improvements (e.g., house) upon a thing (e.g., land) is not sufficient to
convey title or any right to the thing.
Accession as a right.
It is also used in the sense of a right. It may be defined as the right pertaining to the owner of
a thing over its products and whatever is incorporated or attached thereto. It therefore
includes the right to the fruits and the right to the accessory. However, it is not a mode of
acquiring ownership.
Art 1167. If the person obliged to do something fails to do it, the same shall be executed at his
cost.
The same rule shall be observed if he does it in contravention of the tenor of the obligation.
Furthermore, it may be decreed that what has been poorly done be undone.
What are the situations contemplated in Art. 1167?
Remedies of creditor in positive personal obligation.
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1.
Debtor fails to
perform an obligation to do
✓ The creditor can
perform the obligation
himself (at debtor’s
cost)
✓ The creditor can have
another perform the
obligation unless
personal
considerations are
involved (at debtor’s
expense)
2.
Debtor performs an
obligation to do but contrary
to the terms thereof
3.
The debtor performs
an obligation but in a poor
manner
✓ In both situations #2 & #3, it may be ordered (by the
court) to be undone if it is still possible.
Can a personal obligation to do be performed by another person?
Yes. However, while the debtor can be compelled to make the delivery of a specific thing
under Art. 1165, specific performance cannot be ordered in a personal obligation to do because
this may amount to involuntary servitude.
In cases where personal qualifications of the debtor are the determining motives for the
obligation contracted, the only feasible remedy for the creditor is one for indemnification for
damages.
Art 1168. When the obligation consists in not doing, and the obligor does what has been
forbidden him, it shall also be undone at his expense.
What are the remedies of a creditor in a personal obligation not to do?
Here, the very obligation is fulfilled in not doing what is forbidden.
The debtor cannot be guilty of delay in this situation. Hence, the remedy of the obligee is the
undoing of the forbidden thing plus damages (or damages only when it is impossible to undo
what was done)
Remedy: Action for damages caused by the debtor’s violation of his obligation.
Illustrative Example: S sold a land to B. It was stipulated that S would not construct a fence on
a certain portion of his land adjoining that sold to B. Should S construct a fence in violation of
the agreement, B can have the fence removed at the expense of S.
Art 1169. Those obliged to deliver or to do something incur in delay from the time the
creditor/obligee judicially or extra-judicially demands from them their obligation.
However, the demand by the creditor shall not be necessary in order that delay may exist:
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Module 2: Nature and Effect of Obligations
1.
2.
3.
When the obligation or law expressly so declares
When from the nature and the circumstances of the obligation it appears that the designation
of the time when thing is to be delivered or the service to be rendered was a controlling
motive for the establishment of the contract
When demand would be useless as when the obligor has rendered it beyond his power to
perform
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not
ready to comply in a proper manner with what is incumbent upon him. From the moment one of
the parties fulfills his obligation, delay by the other party begins.
What is the ordinary & legal meaning of delay?
ordinary delay
legal delay - default or mora
- is merely the failure to perform an
obligation on time.
- is the failure to perform an obligation on
time which failure, constitutes a breach of the
obligation.
When is there delay by the debtor/obligor?
General Rule: There is delay or delay begins when the creditor makes a judicial/extra-judicial
demand for the fulfillment of the obligation. “No demand, no delay.”
Exception: In the following cases when demand is not necessary:
1. When the law/
2. When time is of
3. When demand
4. When there is
obligation expressly
the essence
would be useless
performance by a
states
party in a reciprocal
obligation
Example:
Example:
Example:
— In case of
a. When the
reciprocal obligations
The delivery of
S obliged himself to
obligation so
(see Art. 1191.), the
balloons or cake on a deliver a specific
provides.
performance of one is
particular date when
horse to B on
a children’s
December 5. Through conditioned upon the
Donnie promised to
simultaneous
party/debut will be
S’s negligence or
pay Conch the sum of held;
fulfillment on the part
deliberate act, or by
P20,000.00 on or
reason of a fortuitous of the other.
before November 30
event for which S has
without the need of
The making of a
expressly bound
(a) So, neither party
any demand.
wedding dress where himself responsible
incurs in delay if the
Therefore, if Donnie
the wedding is
(see Art. 1174.), the
other does not
fails to pay on
scheduled at a certain horse died on
comply or is not
November 30, he is
time;
December 2.
ready to comply in a
automatically in
proper manner with
default. In this case,
Payment
of
money
at
the parties stipulate to
a particular time so
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Module 2: Nature and Effect of Obligations
dispense with the
demand.
b. When the law so
provides.
Under the law, taxes
should be paid on or
before a specific date;
otherwise, penalties
and surcharges are
imposed without the
need of demand for
payment by the
government.
that the creditor could Under this situation,
pay off certain debts
any demand for the
due on the same date; delivery of the horse
on December 5
The delivery of a car would be useless as S
has made it
to be used in a trip;
delivery of the bridal impossible for him to
perform his
car at a particular
obligation.
time; etc.
what is incumbent
upon him.
(b) From the moment
a party in reciprocal
obligations fulfills or
is ready to fulfill his
obligation, delay by
the other begins.
In all the foregoing
cases, the debtor is
fully aware that the
performance of the
obligation after the
designated time
would no longer
benefit the creditor.
Give the different kinds of delay or default and their effects.
1. Mora Solvendi
– delay on the part of obligor
to fulfill obligation.
2. Mora Accipiendi
- delay on part of obligee to
accept performance of the
obligation
3. Compensatio Morae
– delay of the obligors in
reciprocal obligations
Effects
a. Debtor is guilty of
BREACH
a. Creditor guilty of breach
a. The delay of the debtor
cancels the delay of the
creditor and vice versa. There
is then no actionable default
on part of both the parties.
b. Debtor liable for
INTEREST/DAMAGES
b. Creditor liable for damages b. If it cannot be determined
which of the parties is guilty
of delay, obligation shall be
deemed extinguished and
both parties will bear their
own losses.
c. Debtor liable for fortuitous
event if it is for a specific
thing (Art. 1165, par. 3)
c. Creditor bears the risk of
loss
c. If the delay of one is
followed by another, then the
liability will be equitably
tempered.
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d. Debtor will not be liable
for interest if the obligation is
to pay money
e. Debtor may release himself
from the obligation (Art.
1256: Consignation)
Explain the rule, “No delay in negative personal obligation.”
In an obligation not to do, non-fulfillment may take place but delay is impossible for the
debtor fulfills by not doing what has been forbidden him. (see Art. 1168.)
What are the requisites of delay or default on the part of the debtor?
1.
Failure of debtor to perform obligation ON TIME,
2.
Demand made by the creditor (burden of proof of demand falls on creditor),
3.
Failure of debtor to comply with demand
Note: This presupposes that the obligation is already due and liquidated. The debtor also must
prove that delay was not caused by his fault. Naturally, there is no delay when the obligation is
not yet due.
ASSESSMENT TITLE
Module 2: Nature and Effects of Obligation
ASSESSMENT TYPE
ENABLING
OUTCOMES
ASSESSED
Discuss the nature and explain the effects of obligations.
NUMBER
4
ESTIMATED
DURATION
30 MINUTES
You can fill out this part yourself and see how well you did.
TOTAL POINTS
30 Points
POINTS RECEIVED
GRADE
Name :
Course :
Instructor: Atty. Khervy B. Reyes, CPA
Date :
I.
MULTIPLE CHOICE
Determine the best answer for each of the following questions. Encircle the letter of the correct
answer.
1.
A thing is determinate when it is particularly designated or physically segregated from
all other of the same class.
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Module 2: Nature and Effect of Obligations
a.
b.
c.
d.
Indeterminate thing
Generic thing
Specific thing
Immovable thing
2.
The object thereof is designated merely by its class or genus without any particular
designation or physical segregation from all others of the same class.
a. Generic thing
b. Determinate thing
c. Specific thing
d. Movable thing
3.
I. If the object of obligation is a generic thing, the loss or destruction of anything of the
same kind even without the debtor’s fault and before he has incurred in delay will not
have the effect of extinguishing the obligation.
II. An obligation to pay money is generic.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
4.
Which of the following is not an obligation of the debtor in specific real obligation?
a. To deliver the specific or determinate thing which he has obligation himself to
give.
b. To take care of the thing extraordinary diligence.
c. To deliver the accessions and accessories.
d. To pay damages in case of breach of the obligation.
5.
Which of the following is not a right of the debtor in generic real obligation?
a. To ask for performance of the obligation.
b. To ask that the obligation be complied with at the expense of the debtor.
c. To recover damages in case of breach of the obligation.
d. To compel specific performances.
6.
Extreme care that a person of unusual prudence exercise to secure rights or property.
a. Extraordinary diligence
b. Ordinary diligence
c. Due diligence
d. Diligence of a good father of a family
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7.
I. The highest degree of diligence is expected, and high standards of integrity and
performance are required of the banking business.
II. The degree of diligence required of banks is more than that of a good father of a
family.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
8.
The following statements explain negligence, except:
a. Is the conduct that creates an undue risk of harm to others.
b. It is expected from, and ordinarily exercised by, a person who seeks to satisfy a
legal requirement or to discharge an obligation.
c. It is the failure to observe that degree of care, precaution and vigilance that the
circumstances justly demand.
d. It is the omission to do something which a reasonable man, guided by
considerations that ordinarily regulate the conduct of human affairs, would do, or
doing something that a prudent and reasonable man would not do.
9.
I. It is presumed that a person driving a motor vehicle has been negligent if at the time of
the mishap, he was violating any traffic regulations.
II. The Civil Code characterizes negligence as the omission of that diligence required by
the nature of the obligation and corresponds with the circumstances of the persons, of the
time and of the place.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
10. I. When the plaintiff’s own negligence was not the immediate and proximate cause of his
injury, he cannot recover damages.
II. If the plaintiff’s negligence was only contributory, the immediate and proximate cause
of the injury being the defendant’s lack of due care, the plaintiff may recover damages,
but the courts shall mitigate the damages to be awarded.
a. Only I is true
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b. Only II is true
c. Both are true
d. Both are false
11. I. When an employee causes damage due to his own negligence while performing his
own duties, there arises the presumption that his employer is negligent, rebuttable only by
proof of observance of the extraordinary diligence.
II. In the selection of prospective employees, employers are required to examine their
employees as t their qualifications, experience and service records.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
12. It is the power of one person to demand of another, as a definite passive subject, the
fulfillment of a prestation to give, to do, or not to do.
a. Personal right
b. Real right
c. Definite right
d. Indefinite right
13. It is the power belonging to a person over a specific thing, without a passive subject
individually determined, against whom such right may be personally exercised.
a. Personal right
b. Real right
c. Definite right
d. Indefinite right
14. These are the spontaneous products of the soil, and the young and other products of
animal.
a. Real fruits
b. Natural fruits
c. Industrial fruits
d. Civil fruits
15. These are produced by lands of any kind through cultivation or labor.
a. Real fruits
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b. Natural fruits
c. Industrial fruits
d. Civil fruits
16. These are the rents of buildings, the price of leases of lands and other property and the
amount of perpetual or life annuities or other similar income.
a. Real fruits
b. Natural fruits
c. Industrial fruits
d. Civil fruits
17. Are those which arise from the same cause, and which each party is a debtor and a
creditor of the other, such that the obligations of one is dependent upon the obligation of
the other?
a. Reciprocal obligation
b. Unilateral obligation
c. Natural obligation
d. Specific obligation
18. I. When what is to be delivered is a generic thing, the creditor may compel the debtor to
make the delivery.
II. If the thing to be delivered is a determinate thing, the creditor may ask that the
obligation be complied with at the expense of the debtor.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
19. It signifies all of those things which are produced by the thing which is the object of the
obligation as well as all of those which are naturally or artificially attached thereto.
a. Determinate thing
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b. Indeterminate thing
c. Accessions
d. Accessories
20. It signifies all of those things which have for their object the embellishment, use or
preservation of another thing which is more important and to which they are not
incorporated or attached.
a. Determinate thing
b. Indeterminate thing
c. Accessions
d. Accessories
21. I. If a person obliged to do something fails to do it, the same shall be executed at his
cost.
II. The same rule shall be observed if he does it in contravention of the tenor of the
obligation.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
22. When does delay begins?
a. Delay begins from the time the obligor actually defaulted from his obligation.
b. Delay begins from the time the obligor defaulted from his obligation within a
reasonable time from the maturity of his obligation.
c. Delay begins from the time the obligor defaulted from his obligation within 5
days from the maturity of his obligation.
d. Delay begins from the time the obligee judicially or extrajudicially demands from
the obligor the performance of the obligation.
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23. Which of the following is not a requisite of default?
a. That the obligation be demandable and already liquidated.
b. That the debtor defaulted on maturity date of the obligation.
c. That the debtor delays performance.
d. That the creditor requires the performance judicially and extrajudicially.
24. In the following instances, demand is not necessary, except:
a. When the obligation or the law expressly so declares.
b. When from the nature and the circumstances of the obligation it appears that the
designation of the time when the thing is to be delivered or the service is to be
rendered was a controlling motive for the establishment of the contract.
c. In unilateral obligation.
d. When the demand would be useless, as when the obligor has rendered it beyond
his power to perform.
25. I. Mere delinquency in payment does not necessarily mean delay in the legal concept.
II. Default generally begins from the moment the creditor demands the performance of
the obligation.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
26. Delay in the fulfillment of an obligation by reason of a cause imputable to the debtor.
a. Mora solvendi
b. Mora accipiendi
c. Compensatio morae
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d. Creditor’s default
27. Delay of the oblige or creditor to accept the delivery of the thing which is the object of
the obligation.
a. Mora solvendi
b. Mora accipiendi
c. Compensatio morae
d. Debtor’s default
28. Default on the part of both parties because neither has completed their part in their
reciprocal obligation.
a. Mora solvendi
b. Mora accipiendi
c. Compensatio morae
d. Debtor’s default
29. I. In compensatio morae, the parties cancel out the effects of default, such that it is as if
no one is guilty of delay.
II. In reciprocal obligations, as in a contract of sale, the general rule is that the fulfillment
of the parties’ respective obligations should be simultaneous.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
30. When the amount is known or is determinable by inspection of the terms and conditions
of the relevant promissory notes and related documents.
a. Debt is due
b. Debt is demandable
c. Debt is liquidated
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d. Debt is unliquidable
BREACH OF OBLIGATIONS (See Arts. 1170 – 1174)
Breach of contract is the failure without justifiable excuse to comply with the terms of a
contract.
The breach may be willful or done unintentionally.
1. Voluntary – debtor in the performance of
the obligation is guilty of:
✓ fraud (Dolo)
✓ negligence (culpa)
✓ delay (mora)
✓ contravention of the tenor of the
obligation.
NOTE: debtor is liable for damages
2. Involuntary – debtor is unable to comply
with his obligation due to fortuitous event/s.
NOTE: debtor is not liable for damages
Case in Point: Nakpil vs. Manila Towers Dev. Corp., 502 SCRA 470 [2006]
It has been defined as the failure, without legal excuse, to perform any promise which forms
the whole or part of the contract.
Art 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or
delay and those who in any manner contravene the tenor thereof, are liable for damages.
What are the four (4) grounds for liability which may entitle the injured party to damages
for all kinds of obligations mentioned in Article 1157?
1. Fraud (dolo)–
deliberate or
intentional evasion of
the normal
fulfillment of the
obligation.
2. Negligence (fault
or culpa) – voluntary
act or omission
without malice that
prevents the
fulfillment of the
obligation.
3. Delay (mora)–
delay in the
performance of the
obligation under this
article must be
malicious or
negligent.
4. Contravention of
the terms of the
obligation – this is
the violation of the
terms and conditions
stipulated in the
contract. Of course, it
must not be due to a
fortuitous event.
Explain the differences between fraud and negligence.
Fraud
✓ There is deliberate intention to cause
damage.
Negligence
✓ There is no deliberate intention to
cause
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✓ Liability cannot be mitigated by the
courts.
✓ Waiver for future fraud is void
(Art. 1171).
✓ Fraud must be clearly proved, mere
preponderance of evidence not being
sufficient.
damage.
✓ Liability may be reduced according to
the circumstances (Art. 1173).
✓ Waiver for future negligence may be
allowed in certain cases
✓ Negligence is presumed from the
breach of a contractual obligation.
➢ They are similar in that both are voluntary, that is, they are committed with volition but in
fraud, a party, by his voluntary execution of a wrongful act, or a willful omission, knows
and intends the effects which naturally and necessarily arise from such act or omission
which deliberate intent is lacking in negligence.
➢ It being a state of the mind, fraud may be inferred from the circumstances of the case.
When is negligence equivalent to fraud?
Where the negligence shows bad faith or is so gross that it amounts to malice or wanton
attitude on the part of the defendant, the rules on fraud shall apply. (see Art. 1173.)
Gross negligence is negligence characterized by want or absence of or failure to exercise even
slight care or diligence, or the entire absence of care, acting or omitting to act on a situation
where there is a duty to act, not inadvertently but willfully and intentionally.
Case in Point: Evangelista vs. People, 315 SCRA 525 [1999]
It evinces a thoughtless disregard of or conscious indifferences to consequences insofar as
other persons may be affected, without exerting any effort to avoid them.
Art 1171. Responsibility arising from fraud is demandable in all obligations. Any waiver of an
action for future fraud is void.
This article refers to incidental fraud which is employed in the fulfillment of an obligation. (Art.
1170.)
TYPES OF FRAUD
Causal Fraud (Dolo Causante)
Incidental Fraud (Dolo Incidente)
- fraud employed in the execution of the
contract
- fraud in performance of obligation already
existing because of a contract
When can responsibility arising from fraud be demanded?
Responsibility arising from fraud can be demanded with respect to all kinds of obligation and
unlike in the case of responsibility arising from negligence (Art. 1172).
The court is not given the power to mitigate or reduce the damages to be awarded.
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✓ This is so because fraud is deemed serious and evil that its employment to avoid the
fulfillment of one’s obligation should be discouraged.
Explain why a waiver of an action for future fraud is void.
According to the time of commission, fraud may be past or future.
A waiver of an action for future fraud is void (no effect, as if there is no waiver) as being
against the law and public policy. (Art. 1409[1].)
✓ A contrary rule would encourage the perpetration of fraud because the obligor knows that
even if he should commit fraud, he would not be liable for it thus making the obligation
illusory.
Discuss why a past fraud can be the subject of a valid waiver?
A past fraud can be the subject of a valid waiver because the waiver can be considered as an
act of generosity and magnanimity on the part of the party who is the victim of the fraud.
✓ Here, what is renounced is the effects of the fraud, that is, the right to indemnity of the
party entitled thereto.
Art 1172. Responsibility arising from negligence in the performance of every kind of
obligation is also demandable, but such liability may be regulated by the courts, according to
the circumstances.
Is the debtor liable for damages resulting from his negligence?
In the performance of every kind of obligation, the debtor is also liable for damages resulting
from his negligence or culpa.
Can an action for future negligence be renounced? Is this rule absolute?
General Rule: An action for future negligence (not fraud) may be renounced.
Exception: Where the nature of the obligation requires the exercise of extraordinary diligence
as in the case of common carriers.
When can negligence be considered equivalent to fraud? What is its implications?
Where negligence is gross or shows bad faith, it is considered equivalent to fraud.
Bad faith does not simply connote negligence or bad judgment causing damages to another.
Any waiver of an action for future negligence of this kind is, therefore, void.
Discuss the kinds of negligence according to source.
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(1)
Contractual
negligence (culpa
contractual)
(2)
Civil negligence
(culpa aquiliana)
(3)
Criminal negligence
(culpa criminal)
✓ negligence in
contracts resulting
into breach.
✓ It is by itself the
source of an
obligation.
✓ this results in the
commission of a
crime.
✓ This makes the debtor
liable for damages.
✓ It is a tort which
includes a pre-existing
contractual relation
between the parties.
✓ The same negligent
act causing damages
may produce civil
liability arising from a
crime under Article
100 of the Revised
Penal Code (supra.),
✓ It is not a source of
obligation but is an
existing obligation.
✓ or create an action for
quasi-delict under
Article 2176
Suppose the creditor is also guilty of negligence, can he recover for damages?
Explain the effect of negligence on the part of the injured party.
When the plaintiff’s own negligence was the immediate and proximate cause of his injury, he
cannot recover damages.
But if his negligence was only contributory, the immediate and proximate cause of the injury
being the defendant’s lack of due care, the plaintiff may recover damages, but the courts shall
mitigate the damages to be awarded (Article 2179).
✓ There is contributory negligence on the part of the injured party where his conduct has
contributed, as a legal cause to the harm he has suffered, which falls below the
standard to which he is required to conform for his own protection.
Art 1173. The fault or negligence of the obligor consists in the omission of that diligence which
is required by the nature of the obligation and corresponds with the circumstances of the
persons, of the time and of the place. When negligence shows bad faith, the provisions of 1171
and 2201 par 2, apply.
If the law or contract does not state the diligence which is to be observed in the performance,
that which is expected of a good father of a family shall be required.
What is the meaning of fault or negligence?
✓ Consists in the omission of that diligence which is required by the nature of the
obligation and corresponds with the circumstances of the persons, of the time and of
the place.
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✓ is conduct that creates undue risk or harm to another.
✓ It is the failure to observe for the protection of the interests of another person, that
degree of care, precaution, and vigilance which the circumstances justly demand,
whereby such other person suffers injury.
✓ It is “the want of care required by the circumstances.”
Cite the factors to be considered in determining the issue of negligence.
(1) Nature of the
obligation
(2) Circumstances of
the person
(3) Circumstances of
time.
(4) Circumstances of
the place.
What is “damages?” What is the purpose of awarding damages?
In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is
liable shall be those that are the natural and probable consequences of the breach of the
obligation, and which the parties have foreseen or could have reasonably foreseen at the time
the obligation was constituted (Art. 2201).
In case of fraud, bad faith, malice, or wanton attitude, what shall be the responsibility of the
obligor as a consequence of his non-performance of the obligation?
The obligor shall be responsible for all damages which may be reasonably attributed to the
non-performance of the obligation.
✓ Willful injury to property may be a legal ground for awarding moral damages if the
court should find that, under the circumstances, such damages are justly due. The same
rule applies to breaches of contract where the defendant acted fraudulently or in bad
faith (Art. 2220).
✓ In contracts and quasi-contracts, the court may award exemplary damages if the
defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner
(Art. 2232).
✓ Any person who wilfully causes loss or injury to another in a manner that is contrary to
morals, good customs or public policy shall compensate the latter for the damage
(Art. 21).
Discuss the kinds of diligence required under Article 1173.
✓ Diligence is “the attention and care required of a person in a given situation and is the
opposite of negligence.’
1.
Those agreed upon by
the parties, orally and in
writing
2.
In the absence of a
stipulation, the one required
by law (common carrier)
3.
If none is stipulated,
then the diligence expected of
a good father
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ASSESSMENT TITLE
Module 2: Nature and Effects of Obligation
ASSESSMENT TYPE
ENABLING
OUTCOMES
ASSESSED
Discuss the nature and explain the effects of obligations.
NUMBER
5
ESTIMATED
DURATION
30 MINUTES
You can fill out this part yourself and see how well you did.
TOTAL POINTS
30 Points
POINTS RECEIVED
GRADE
Name :
Course :
Instructor: Atty. Khervy B. Reyes, CPA
Date :
I.
MULTIPLE CHOICE
Determine the best answer for each of the following questions. Encircle the letter of the correct
answer.
1. Is the legal invasion of a legal right?
a. Injury
b. Grievance
c. Damage
d. Damages
2.
Is the hurt, loss or harm which results from the injury?
a. Loss
b. Grievance
c. Damage
d. Damages
3.
Are the recompense or compensation awarded for the damage suffered?
a. Loss
b. Grievance
c. Damage
d. Damages
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4.
Which is not a mode of voluntary breach of the obligation?
a. Fraud
b. Acts or omissions punished by law
c. Negligence
d. Delay
5.
Which is a mode of involuntary breach of the obligation?
a. Fraud
b. Fortuitous event
c. Negligence
d. Delay
6.
It refers to all kinds of deception, whether through insidious machination, manipulation,
concealment, or misrepresentation, that would lead an ordinarily prudent person into
error after taking the circumstances into account.
a. Contravention of the tenor of the obligation
b. Mora
c. Culpa
d. Fraud
7.
Is basically a deception used by one party prior to or simultaneous with the contract, in
order to secure the consent of the other?
a. Incidental fraud
b.
Subsidiary fraud
c. Causal fraud
d. Contributory fraud
8.
That which is not serious in character and without which the other party would have
entered into the contract anyway.
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a. Incidental fraud
b. Subsidiary fraud
c. Causal fraud
d. Contributory fraud
9.
I. Dolo incidente is a fraud which induces a party to enter into a contract.
II. Dolo causante is not the reason that induced the party to enter into a contract.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
10. I. Dolo incidente is a fraud which renders the contract voidable.
II. Dolo causante is a fraud which renders a party to be liable for damages.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
11. I. Fraud must be established by clear and convincing evidence; mere preponderance of
evidence is not adequate.
II. Bad faith is not synonymous with fraud, in that it involves a design to mislead or
deceive another.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
12. I. Negligence signifies willfulness or deliberate intent to cause damage or injury to
another.
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II. Negligence signifies mere want of care or diligence and not the voluntaries of act or
omission.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
13. I. In fraud, liability cannot be mitigated by courts.
II. In negligence, liability may be mitigated by courts.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
14. I. In fraud, waiver future fraud is void.
II. In negligence, waiver for future negligence may be valid.
a. Only I is true
b. Onlly II is true
c. Both are true
d. Both are false
15. The omission to do something which a reasonable man, guided by those considerations
which ordinarily regulate the conduct of human affairs, would do; or the doing of
something which a prudent and reasonable man would not do.
a. Breach of contract
b. Fraud
c. Negligence
d. Delay
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16. It is want of care required by the circumstances.
a. Breach of contract
b. Negligence
c. Delay
d. Fraud
17. Is that conduct that naturally or reasonably creates undue risk or harm to others?
a. Negligence
b. Breach of contract
c. Fraud
d. Delay
18. Negligence is direct, substantive, and independent. This pertains to:
a. Culpa civil
b. Culpa contractual
c. Culpa aquiliana
d. Contractual negligence
19. This requires proof beyond reasonable doubt.
a. Culpa civil
b. Culpa contractual
c. Culpa aquiliana
d. Culpa criminal
20. Defense of a good father od a family in the selection and supervision of employees is a
proper or complete defense.
a. Culpa civil
b. Culpa contractual
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c. Culpa aquiliana
d. Culpa criminal
21. Which one of the following is not a requisite of mora solvendi?
a. The obligation is demandable and liquidated.
b. The obligation is no necessary demandable.
c. The debtor delays performance.
d. The creditor judicially or extrajudicially requires the debtor’s performance.
22. Which one of the following is not a requisite of mora accipiendi?
a. An offer of performance by the creditor who has the required capacity.
b. An offer of performance by the debtor who has the required capacity.
c. The offer must be to comply with the prestation as it should be performed.
d. The creditor refuses the performance without just cause.
23. One is entitled to an adequate compensation only for such pecuniary loss suffered by
him as has duly proved. Such compensation is referred to as:
a. Moral damages
b. Actual damages
c. Nominal damages
d. Temperate damages
24. It includes physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, similar injury.
a. Moral damages
b. Actual damages
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c. Nominal damages
d. Temperate damages
25. I. Moral damages are in the category of an award designed to compensate the claimant
for actual injury suffered and to impose a penalty on the wrongdoer.
II. The award of moral damages is not meant to enrich the complainant at the expense of
the defendant, but to enable the injured party to obtain means, diversion, or amusements
that will serve to obviate the moral suffering he has undergone.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
26. Are damages adjudicated in order that a right of the plaintiff, which has bee violated by
the defendant, may be vindicated or recognized, and not for the purpose of indemnifying
the plaintiff for any loss suffered by him?
a. Moral damages
b. Actual damages
c. Nominal damages
d. Temperate damages
27. Damages which may be recovered when the court finds that some pecuniary loss has
been suffered but its amount cannot, from the nature of the case, be provided with
certainty.
a. Moral damages
b. Actual damages
c. Nominal damages
d. Temperate damages
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28. Are those agreed upon by the parties to a contract to be paid in case of breach thereof?
a. Moral damages
b. Actual damages
c. Liquidated damages
d. Nominal damages
29. Damages are imposed, by way of example or correction for the public good, in addition
to the moral, temperate, liquidated or compensatory damages.
a. Actual damages
b. Exemplary damages
c. Liquidated damages
d. Nominal damages
30. The voluntary relinquishment or abandonment, express or implied
a. Waiver
b. Condonation
c. Compensation
d. Force majeure
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Art 1174. Except in the cases expressly specified by the law, or when it is otherwise declared
by stipulation, or when the nature of the obligation requires the assumption of risk, no person
shall be responsible
What is fortuitous event?
It is any event which cannot be foreseen, and although foreseen, is inevitable. (one that is
impossible to foresee/avoid) Its essence consists of being a happening independent of the will
of the obligor.
Distinguish fortuitous event from force majeure?
Fortuitous event
Force majeure
Acts of man. - Strictly speaking, fortuitous
event is an event independent of the will of
the obligor but not of other human wills, e.g.,
war, fire, robbery, murder, insurrection, etc.
Acts of God. - They are those events which
are totally independent of the will of every
human being, e.g., earthquake, flood, rain,
shipwreck, lightning, eruption of volcano, etc.
They are also called force majeure. The term
generally applies to a natural accident.
In our law, fortuitous events and force majeure are identical in so far as they exempt an
obligor from liability. Both are independent of the will of the obligor.
Discuss the different kinds of fortuitous events and cite examples.
(1)
Ordinary fortuitous events or those
events which are common and which the
contracting parties could reasonably foresee
(e.g., rain);
(2)
Extraordinary fortuitous events or
those events which are uncommon and which
the contracting parties could not have
reasonably foreseen (e.g., earthquake, fire,
war, pestilence, unusual flood).
What are the four (4) requisites of a fortuitous event?
What would be the effect of absence of any of the said requisites?
1.
Must be
2.
Impossible to 3.
Of such a
independent of the
foresee/avoid
character to render it
human will/obligor’s
impossible to fulfill
will
the obligation
4.
Obligor must
be free from
participation
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Note: An absence of any of these requisites would result into non-exemption of the obligor for
liability.
Cite the rules as to the liability of a person for loss or damage in case of fortuitous event and
give an example.
General Rule: No person shall be responsible for those events which could not be foreseen, or
which, though foreseen, were inevitable (Art. 1174).
✓ In other words, the obligation/ liability of a person for loss or damage in case of fortuitous
event is extinguished.
What are the exceptions to the exemption due to fortuitous event?
1. When expressly specified
by law:
2. When declared by
stipulation:
3. When the nature of the
obligation requires
assumption of risk:
a.
When debtor is guilty a.
This exception rests
of fraud, negligence, delay, or upon the freedom of contract
contravention
(car insurance: no force
majeure exception
a.
b.
When the debtor has
promised to deliver the same
thing to two or more persons
b.
Mere difficulty to
foresee the happening of an
event is different from an
impossibility
c.
The debt of a thing
certain and determinate
proceeds for a criminal
offense
Fire insurance
✓ Here, risk of loss or
damage is an essential
element in the
obligation.
d.
The thing to be
delivered is generic
Art 1175. Usurious transactions shall be governed by special laws.
What is the meaning of simple loan or “mutuum?”
It is a contract whereby one of the parties delivers to another money upon the condition that
the same amount of the same kind and quality shall be paid.
What is usury?
It is contracting for or receiving interest in excess of the amount allowed by law.
What are the kinds of interest?
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1. Simple
interest
-stipulated by
the parties
2. Compound
interest
-interest earned
is upon interest
due
3. Legal interest
– when rate of
interest intended
by parties is
presumed by law
4. Lawful
interest
– rate of interest
allowable by law
5. Unlawful
interest
– rate of interest
beyond the
maximum
What are the requisites for recovery of interest?
1. The payment of interest must be expressly stipulated.
2. The agreement must be in writing.
3. The interest must be lawful.
Art 1176. Receipt of the principal by the creditor, without reservation with respect to the
interest, shall give rise to the presumption that said interest had been paid.
The receipt of a later installment of a debt without reservation as to prior installments, shall
likewise raise the presumption that such installments have been paid.
What is the meaning of presumption?
By presumption is meant the inference of a fact not actually known arising from its usual
connection with another which is known or proved.
Example:
- D borrowed P1,000.00 from C.
- Later, D shows a receipt signed by C.
- The fact not actually known is the payment by D.
- The fact known is the possession by D of a receipt signed by C.
✓ The presumption is that the obligation has been paid unless proved otherwise by C as, for
example, that D forced C to sign the receipt.
What are the two (2) kinds of presumption?
(1)
Conclusive presumption
(2)
Disputable (or rebuttable)
presumption.
one which cannot be contradicted like the
presumption that everyone is conclusively
presumed to know the law (see Art. 3.);
one which can be contradicted or rebutted by
presenting proof to the contrary like the
presumption established in Article 1176. (see
Sec. 69[i], Rule 123, Rules of Court.)
When is presumption under Art. 1176 not applicable?
(1) With
reservation as to
(2) Receipt for a
part of principal.
(3) Receipt
without
indication of
(4) Payment of
taxes.
(5) Nonpayment proven.
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interest or prior
installments.
The reservation
may be made in
writing or
verbally.
particular
installment paid.
Only when the
principal is fully
receipted for,
may failure to
reserve the claim
for interest give
rise to the
presumption that
said interest has
been paid.
If the receipt
does not recite
that it was
issued for a
particular
installment due
as when the
receipt is only
dated.
Taxes payable
by the year are
not installments
of the same
obligation.
Between a
proven fact and
a presumption
pro tanto, the
former stands,
and the latter
falls.
Art 1177. The creditors, after having pursued the property in possession of the debtor to satisfy
their claims, may exercise all the rights and bring all the actions of the latter for the same
purpose, save those which are inherent in his person; they may also impugn the acts which the
debtor may have done to defraud them.
In case the debtor fails to comply with his obligation, what are the remedies available to the
creditor for the satisfaction of his claim?
1. Specific
performance
with right to
damages
2. Pursuit of the
leviable (not
exempt from
attachment
under the law)
property of the
debtor
3. After pursuing the property in
the possession of the debtor, he
may exercise all rights and bring
all the actions to the debtor
except those inherent in the
person of the debtor
4. Ask for
rescission/impugn
acts or contracts
which the debtor
may have done to
defraud the creditor
Example: On a certain due date, A could not pay B his obligation worth 500k. However, A
owns a car worth 200k and C is indebted to him for 50k. Before the due date, A sold his land
worth 100k to D. What are rights of B, the creditor?
1.
B may bring an action for the collection of the amount of 500k
2.
If judgment has been rendered and A still fails to pay the amount due, B may ask for
the attachment of A’s car so that the car may be sold and be applied to the payment
3.
B may ask the court to order C not to pay A in order that payment may be made to him
4.
B may ask the court to rescind the sale made by A to D on the ground that the
transaction is fraudulent.
Art 1178. Subject to the laws, all rights acquired n virtue of an obligation are transmissible, if
there has been no stipulation to the contrary.
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What is the rule under Art. 1178 regarding transmissibility of rights? Exception?
General Rule: All rights acquired in virtue of an obligation are generally transmissible. (see
Art. 1311.)
Exception:
1.
When transmission is prohibited by
law like rights in partnership, agency and
commodatum
2.
When prohibited by stipulation of
parties.
a.
By a contract of partnership, 2 or more
persons bind themselves to contribute money
with the intention of dividing the profits
among themselves.
Example: The stipulation that upon the death
of the creditor, the obligation shall be
extinguished or that the creditor cannot assign
his credit to another. The stipulation against
transmission must not be contrary to public
policy.
b.
By contract of agency, a person binds
himself to render some service on behalf
another, with his consent.
c.
By contract of commodatum, one of
the parties delivers to another something not
consumable so that the latter may use the
same and return it.
ASSESSMENT TITLE
Module 2: Nature and Effects of Obligation
ASSESSMENT TYPE
ENABLING
OUTCOMES
ASSESSED
Discuss the nature and explain the effects of obligations.
NUMBER
6
ESTIMATED
DURATION
30 MINUTES
You can fill out this part yourself and see how well you did.
TOTAL POINTS
25 Points
POINTS RECEIVED
GRADE
Name :
Course :
Instructor: Atty. Khervy B. Reyes, CPA
Date :
I.
MULTIPLE CHOICE
Determine the best answer for each of the following questions. Encircle the letter of the correct
answer.
1. It imports a dishonest purpose or some moral obliquity or conscious doing of a wrong.
a. Fraud
b. Bad faith
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c. Damage
d. Injury
2.
Is any event which cannot be foreseen, or which, though foreseen, is inevitable?
a. Accident
b. Injury
c. Fortuitous event
d. Calamity
3.
I. Fortuitous events by definition are extraordinary events not foreseeable or avoidable.
II. In fortuitous event, the mere difficulty to foresee the happening is not impossibility to
foresee the same.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
4.
Which is not an element of a fortuitous event?
a. The cause of the unforeseen and unexpected occurrence must have been
dependent of human will
b. The event that constituted the caso fortuito must have been impossible to foresee
or, if foreseeable, impossible to avoid.
c. The occurrence must have been such as to render it impossible for the debtors to
fulfill their obligation in a normal manner.
d. The obligor must have been free from any participation in the aggravation of the
resulting injury to the creditor64
5.
I. In order for a fortuitous event to exempt one from liability, it is necessary that one has
committed no negligence or misconduct that may have occasioned the loss.
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II. An act of God can be invoked to protect a person who has failed to take steps to
forestall the possible adverse consequences of such a loss.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
6.
Which is not an element of a fortuitous event?
a. The cause of the breach of the obligation must be independent of the will of the
debtor.
b. The event must be neither unforeseeable nor unavoidable.
c. The event must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner.
d. The debtor must be free from any participation in, or aggravation of the injury to
the creditor.
7.
I. In obligation to deliver a generic thing, the loss or destruction of anything of the same
kind does not extinguish the obligation.
II. An obligation to pay money is generic; therefore, it is not excused by fortuitous loss of
any specific property of the debtor.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false67
8.
I. Carnapping per se can be considered as a fortuitous event.
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II. The burden of proving that the loss was due to a fortuitous event rests on him who
invokes it.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
9.
I. A possessor in bad faith shall not be liable for deterioration or
even if caused by a fortuitous event.
loss in every case,
II. If the obligor delays, or has promised to deliver the same thing to two or more persons
who do not have the same interest, he shall not be responsible for any fortuitous event until
he has effected the delivery.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
10. In commodatum, the bailee is liable for the loss of the thing, even if it should be through
a fortuitous event, except:
a. If he devotes the thing to any purpose different from that for which it has been
loaned.
b. If he keeps it longer than the period stipulated, or after the accomplishment of the
use for which the commodatum has been constitude.
c. If he the thing loaned has been delivered with appraisal of itss value, unless there
is a stipulation exempting the bailee from responsibility in case of a fortuitous
event.
d. If, being able to save either the thing borrowed or his own thing, he chose to save
the former.
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11. The depositary is liable for the loss of the thing thorough a fortuitous event except:
a. If it is so stipulated.
b. If he uses the thing with the depositor’s permission.
c. If he delays its return.
d. If he allows others to use it, even though he himself may have been authorized to
use the same.
12. The officious manager shall be liable for any fortuitous event, except:
a. If he undertakes risky operation which the owner was not accustomed to embark
upon.
b. If he has 1preferred his own interest to that of the owner.
c. If he fails to return the property or business after demand by the owner.
d. If he assumed the management in good faith.
13. I. The receipt of the principal by the creditor without reservation with respect to the
interest, shall give rise to the presumption that said interest has been paid.
II. The receipt of a later installment of debt without reservation as to prior installment,
shall likewise raise the presumption that such installments have been paid.
a. Only I is true
b. Only II is true
c. Both are true
d. Both are false
14. A presumption which may be contradicted or overcome by other evidence.
a. Conclusive presumption
b. Definite presumption
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c. Disputable presumption
d. Questionable presumption
15. A presumption which is irrebuttable upon the presentation of the evidence and any
evidence tending to rebut the presumption is not admissible.
a. Conclusive presumption
b. Uncertain presumption
c. Disputable presumption
d. Questionable presumption
16. The following are instances of disputable presumptions, except:
a. That money paid by one to another was due to the latter.
b. The tenant is not permitted to deny the title of his landlord at the time of
commencement of the elation of landlord and tenant between them.
c. That a thing delivered by one to another belonged to the latter.
d. That prior rents or installments had been paid when a receipt for the late
one is produced.
17. The following are instances of disputable presumptions, except:
a. That there was a sufficient consideration for a contract.
b. That persons acting co-partners have entered into a contract of copartnership.
c. Whenever a party has, by his own declaration, act, or omission,
intentionally and deliberately led another to believe a particular thing true,
and to act upon such belief, he cannot, in any litigation arising out of such
declaration, act or omission, be permitted to falsify it.
d. That an obligation delivered up to the debtor has been paid.
18. Spouses H and W obtained from A and B a loan amounting to P6,000,000 at 3% interest
per month. The loan was secured by a mortgage on a parcel of land. Thereafter, the
parties executed a Contract of Sale a conveying the mortgaged property in favor of H
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and W. subsequently, A and B gave H and W an exclusive option to repurchase the land
for P10,000,000. This was embodied in a document denominated as an Option to Buy.
On thus same document, A and B acknowledge receipt of a total sum of P10,000,000 as
consideration for the purchase of the land. The Option to Buy provided that if the option
is exercised after December 5, 1998, the purchase price shall increase at the rate of
P300,000 or 3% of the rate of P381,000 or 3.81% of the purchase price every month,
with the fifth of every month as the cut- off date for said increase.
Are the 3% and 3.81% stipulated monthly interest valid?
a. Yes, because the Usury Law has been suspended by certain Central bank
Circular.
b. Yes, because the parties are free to stipulate on the interest to be imposed
on monetary obligations.
c. No, because the Court will temper interest rates if they are
unconscionable.
d. No, because what is only required is that the interest due should be that
stipulated in writing, and in the absence thereof, the rate shall be 12% per
annum.
19. One of the following is a determinate thing
a. A car with plate no. AB123
b. A red book
c. A black cellphone
d. A 10 inches laptop
20. B, Inc. contracted C, Inc., a stevedoring company, to load and stow a shipment of
146,288 cartons of fresh green bananas and 15,202 cartons of fresh pineapples into the
cargo hold of a vessel. The vessel was docked at the port of Davao City and the goods
were to be transported by it to the port of Inchon, Korea. B, Inc. insured the shipment
with J Cp.
C, Inc. loaded and stowed the cargoes aboard the vessel. The vessel set sail from the
port of Davao City and arrived at the port of Inchon, Korea. It was then discovered upon
discharge that some the cargo was in bad condition. In a survey report, it was stated that
16,069 cartons of the banana shipment and 2,185 cartons of the pineapple shipment were
so damaged that they no longer had commercial value.
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B, Inc. filed a claim for the damages. J Co. evaluated the claim and thereafter sent a
check in the amount of $ 210,266.43 to B Inc., the latter then issued as subrogation
receipt to J Co. Thereafter J Co. instituted an action for damages against C, Inc.
Is C, Inc., under obligation to observe the extraordinary degree of diligence in the
conduct of its business?
a. No, because if there is no law or contract stating the degree of diligence
which is to be observed in the performance of an obligation then that
which is expected of a god father of a family or ordinary diligence shall
be required.
b. Yes, because its participation was to load the cargoes on board the vessel
which requires utmost care.
c. No, because its participation was to load the cargoes on board vessel
which requires ordinary care.
d. None of the above.
21. X, an official of TESDA, boarded the LRT to be to arrive in Caloocan in time for her 3
p.m. meeting when her handbag was slashed and the contents were stolen by an
unidentified person. Among those stolen were her wallet and the government-issued
cellular phone. She then reported the incident to the police authorities; however, the thief
was not located, and the cellphone was not recovered. She also reported the loss to her
immediate superior, and she requested that she be freed from accountability for the
cellphone. The COA Auditor denied her request on government property and was
ordered to pay the purchase value. Is X liable?
a. Yes, X is liable because putting her cellphone in her bag is not sufficient
care of a cellphone while traveling on board the LRT.
b. Yes, X is liable as she should have rode a jeep or bus.
c. No, X is not liable because riding the LRT is not a negligent act more so
because X’s mode of transit was influenced by time considerations.
d. No, X is not liable as she boarded the LRT to be able to arrive in
Caloocan in time for her 3 p.m. meeting.
22. D borrowed P50,000 from C. C dies before he has collected the debt leaving S, his son
as heir. Which of the statements is correct?
a. S can collect from D although D and C did not agree that the right to the
debt will pas on the heirs of C.
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b. S cannot collect because the credit right is personal to C.
c. S can collect only if D and C agreed that the right to the debt will pass on
to the heirs of C.
d. S cannot collect because the law prohibits the transmission of the credit
right.
23. X was the disbursing officer of the Ternate Beach Project of the Philippine Tourism in
Cavite. In the morning of July 1, 2018, a Friday, he went to Manila to encash a check
covering the wages of the employees. However, the processing of the check was delayed
and was completed at about 3 p.m. Nevertheless, he decided to encash the check because
the employees would be waiting for their pay the following day; otherwise, the workers
would have to wait until July 5, the earliest time, when the main office would open. At
that time, he had two choices: (1) return to Ternate, Cavite that same afternoon and
arrive early evening; or (2) take the money with him to his house in Marilao, Bulacan,
spend the night there, and leave for Ternate the following day. He chose the second
option, thinking it was the safer one. Thus, at past 3 p.m., he took a passenger jeep
bound for Bulacan. While the jeep was on EDSA, the jeep was held up and the money
kept by X was taken. X chased the robbers and caught up with one robber who was
subsequently charged with robbery and pleaded guilty. The other robber who held the
stolen money escaped. The Commission on Audit found X negligent because he had not
brought the cash proceeds of the check to his office in Ternate, Cavite for safekeeping,
which is the normal procedure in the handling of funds. Is X liable?
a. No, because the robbers attacked X in broad daylight in the jeep while it
was on a busy highway and the presence of other passengers; hence, could
not be said to be a result of his negligence.
b. Yes, because he should not have allowed the delayed encashment of the
check.
c. No, because X chased the robbers and caught up with one robber who was
subsequently convicted of robbery.
d. Yes, because he decided to encash the check despite knowledge of the
fact that it was already late.
24. W received from X a pendant with diamonds to be sold on commission basis, but which
W failed to subsequently return because of a robbery committed upon her in the evening
of January 16, 2018 while walking alone in a dark alley carrying the said pendant. X
filed an action against W for recovery of the pendant or its value, but W set up the
defense that the robbery extinguished her obligation. Is W liable?
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a. No, because the robbery took place without any concurrent fault on W’s
part.
b. Yes, because the conduct of W in returning alone to her house in the
evening carrying jewelry of considerable value would have been
negligence per se.
c. No, because the incident was unforeseen.
d. Yes, because W committed delay.
25. J is a usufructuary of a fishpond. J entered into a contract leasing the fishpond to Y for a
period of 5 years. Paragraph 5 of the lease contract states that the lessee “cannot
sublease” the fishpond.
X is a businessman engaged in the operation of fishponds. Y persuade X to take over
the operation of said fishpond. X acceded to the proposal. X and Y executed a written
agreement whereby X would take possession of the fishpond in consideration of the
amount of P100,000.
X incurred expenses for the improvement of the of the fishpond. However, sometime
in June 2018, J, went to the fishpond and presented X with letter showing that Y had
surrendered possession of the fishpond to him. Is Y liable for subleasing the fishpond?
a. No, because as a lessee he can transfer his rights over the subject matter
of the contract of lease.
b. Yes, because as a lessee he cannot transfer rights over the subject matter
of the contract of lease.
c. No, because subleasing is not prohibited by law.
d. Yes, because when an obligation consists in not doing and the obligor
does what has been forbidden him, it shall also be undone at his expense.
In this case, Y led X to incur expenses to improve the operation of the
fishpond.
“Better the storm with Christ than smooth waters without HIM.”
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