Content text RFBT Self Study Part 1.pdf
VSA IRS CPA Review REGULARY FRAMEWORK FOR BUSINESS TRANSACTIONS SELF STUDY MATERIALS (A) RECALL OF KEY CONCEPTS Law on Obligations Important Civil Code Provisions • Art. 1156: Obligation is a juridical necessity to give, to do, or not to do. • Art. 1157: Sources: Law, Contracts, Quasi-contracts, Crimes, Quasi-delicts. • Art. 1163–1165: Diligence of a good father of a family unless law or stipulation requires otherwise. • Art. 1170: Breach through fraud, negligence, delay, contravention. • Art. 1191: Rescission for reciprocal obligations. Landmark Doctrines • Valencia v. Cabanting (G.R. 144665, 2004) – In obligations to give a determinate thing, creditor may compel delivery or claim damages. • Castro v. De Leon (G.R. 167698, 2009) – Mora solvendi requires demand, unless demand is unnecessary under law. • De Leon v. Court of Appeals (G.R. 80903, 1991) – Rescission requires mutual restitution. Other key Doctrinal Points • Mora Solvendi (Debtor’s Delay) – Requires demand, unless demand is useless or law dispenses. • Mora Accipiendi (Creditor’s Delay) – When creditor unjustly refuses tender. • Compensation (Art. 1278) – Extinguishes obligations when two persons are mutually debtor and creditor in their own right. • Novation (Art. 1291) – Extinguishes an obligation by changing object, principal conditions, debtor, or creditor. Drill Questions on Obligations Q1. X owes Y ₱500,000 due on May 1. On May 2, Y sues X without prior demand. Is X in default? A. Yes, default exists immediately upon maturity. B. Yes, since demand is unnecessary. C. No, because default requires demand unless law or stipulation states otherwise. D. No, because demand must always be judicial. Explanation: Under Art. 1169, demand is generally necessary for delay, unless demand is useless, time is controlling motive, or law expressly provides otherwise. Q2. X agreed to sell Y his car on installment. Y defaulted on 2 payments. Can X rescind? A. Yes, rescission is automatic. B. No, rescission is not allowed in installment sales. C. Yes, under Art. 1191, rescission is available in reciprocal obligations upon substantial breach. D. No, rescission requires court approval in all cases. Explanation: Rescission applies to reciprocal obligations under Art. 1191. A substantial breach (e.g., nonpayment of installments) justifies rescission. Q3. X and Y owe each other ₱100,000. Both debts are due and demandable. What is the legal effect? A. Both obligations are extinguished by compensation. B. Both obligations remain. C. X must pay Y, who must then return the same amount. D. Obligations are suspended until agreement. Explanation: Legal compensation occurs when requisites in Art. 1279 are present – debts due, liquidated, demandable, and between same parties in same capacity. Recall.. Definition of civil obligation: Obligation = juridical necessity to give, to do, or not to do. Requisites or essential elements: • Active subject (creditor) • Passive subject (debtor) • Prestation (object to give to do or not to do) • Juridical tie (vinculum juris/ why there is obligation/ sources of obligation) Sources of obligations : • Law • Contract
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