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OBLIGATIONS OBLIGATIONS, IN GENERAL ART 1156. An obligation is a juridical necessity to give, to do, or not to do. Kinds Natural: Ø grant a right of action Civil: give right of action Kinds as to Enforceability ▪ Prescribed but voluntarily reimburses ▪ Voluntarily performs the obligation ▪ In/testate heir voluntarily pays a debt exceeding the value of the property. Essential Active Subject / Creditor / Obligee Elements Passive Subject /Debtor / Obligor Object / Prestation Vinculum Juris / Efficient Cause / Juridical Tie (Absence of 1 element: Ø obligation) Transmissibility GR: All rights acquired in virtue of obli. are transmissible XPN: 1purely / strictly personal; 2stipulation; 3provision of law SOURCES OF OBLIGATIONS Sources Law Contracts Quasi-Contracts Delict Quasi-Delict LAW (EX LEGE) DEFN: Ø presumed; regulated by the precepts of law w/c establishes them EX: 1Duty of support; 2Duty to pay taxes CONTRACTS (EX-CONTRACTU) DEFN: have force of law between contracting parties QUASI-CONTRACTS (EX-QUASI CONTRACTU) DEFN: lawful, voluntary, and unilateral acts; give rise to juridical relation; Ø shall be unjustly enriched @ exp of another Negotiorum Gestio: GR: Voluntarily takes charge; w/o any power; obliged to cont. XPN: 1Ø neglected or abandoned; 2 tacitly authorized Solutio Indebiti: GR: received when there is Ø right to demand; unduly delivered through mistake REQ: 1who paid is Ø obliged; 2essential mistake of fact Other Examples: Funeral expenses, borne by 3rd person → reimburse the 3rd person. DELICT OR CRIME (EX-DELICTO) DEFN: Act or omission punishable by law; Governed by the Revised Penal Code Criminally liable = Civilly Liable ▪ Restitution ▪ Reparation of the damage caused ▪ Indemnification for consequential damages Proof Necessary: Criminal Liability → proof beyond reasonable doubt (sure) Civil Liability → preponderance of evidence (paramihan) Acquittal of Accused: Ø Civil Liabilty → did not do the act Civil Liability → acquittal due to reasonable doubt QUASI-DELICT DEFN: Act or omission causes damages to another; Fault or negligence → pay for damages REQ: 1act or omission; 2 fault or negligence; 3damage, 4direct relation of cause & effect Vicarious Liability: Acts done by: Responsible Minors (Live in their Company) GR: 1Father; XPN; death / incapacity of Father → 2Mother Minors & Incapacitated Person Guardian Employees (in the service) Owners & Managers Pupils & Students (in school) Teachers or Heads Employees & Household Helpers Employers Special Agent The State Defense: Persons above → observed all the diligence of a good father of a family to prevent damages. Employer → prove due diligence in selection & supervision; XPN: subsidiary liab in delict or crime Double recovery Ø allowed: ▪ Can file a case for criminal and civil liability but plaintiff Ø recover damages twice for same act or omission KINDS OF OBLIGATIONS Kinds of Civil Obligations PERFECTION AND EXTINGUISHMENT Pure Demandable at once Conditional Depend on event & condition w/ a term Period of effectivity / extinguishment is certain PLURALITY OF PRESENTATION Conjunctive All must be performed Alternative Only one must be performed Facultative Only one is demandable Debtor has the right to substitute RIGHTS & OBLI. OF MULTIPLE PARTIES Solidary (all for entire; any) Expressly so stated When the law requires When the nature of obligation requires Joint Only for respective share Disjunctive Use of “or” Not covered by the new civil code Solidarity Applies PERFORMANCE OF PRESTATION Divisible Certain # of days worked Metrical units of work Object is susceptible to partial perf. Payment in installments Indivisible Joint: Proceed against all, or act as all Solidary: Proceed against all OBLIGATIONS W/ A PENAL CLAUSE GR: Penalty shall substitute indemnity & Interest payments (Noncompliance) Debtor Ø escape fulfillment of perf by payment of penalty; XPN: Clearly granted Creditor Ø demand both at the same time; XPN: Clearly granted Performance → demanded; impossible w/o fault of debtor → penalty XPN Stipulation to the contrary Debtor refuses to pay penalty Debtor is guilty of fraud in fulfillment of obligation SUBJECT MATTER Real To Give Personal To do Not to do AFFIRMATIVENESS Positive To give To do Not to do PERSONS OBLIGED Unilateral 1 party is bound Bilateral Both parties are bound Reminders Potestative = Void Suspensive Upon the will of the debtor Constructive fulfillment When obligor voluntarily prevents fulfillment Effect of Impossible Obligation Positive Void Negative Always fulfilled Obli w/ a period Debtor pays when means permit him Condi w/ deadline GR: Extinguish the obli. REQ: Time expires; Induitable (event Ø take place) Negotiorum Gestio Solutio Indebiti
Kinds of Conditions WHEN PERFORMED Suspensive Give rise to obligation Resolutory Extinguishes obligation Return to each other what was received WHOM/WHERE IT DEPENDS Potestative Depends upon the will of the parties Causal Depends upon chance Mixed Partly upon will and partly upon chance CAPACITY TO BE PERF. IN PARTS Divisible Can be performed in parts Indivisible Ø be performed in parts # TO BE PERF. WHEN THERE ARE SEVERAL Conjunctive All must be performed Alternative Only one must be performed AS TO NATURE Positive Act / to do Negative Omission / not to do HOW IT IS MADE KNOWN TO THE OTHER PARTY Express State Implied Merely inferred WHETHER IT CAN BE FULFILLED* Possible Can be fulfilled Impossible Physically impossible Legally impossible Effect of Fulfillment* GR Retroact to the day of constitution of the obligation Fruits / Interests Reciprocal Obligation Deemed mutually compensated Unilateral Obligation Debtor entitled to fruits Period / Prescription Counted fr. the time the condition was fulfilled; unless the contrary Delivery of Specific or Determinate Thing (w/ Suspensive Condi) LOSS w/o fault of debtor Obli. is extinguished w/ fault of debtor Debtor is liable for damages DETERIORATION w/o fault of debtor Creditor bears impairment w/ fault of debtor Exact fulfillment, ask for damages Rescission & damages IMPROVEMENT By nature / time Improvement inured to creditor @ exp. of the debtor Debtor has no right except usufruct Kinds of Periods AS TO EFFECT Ex Die Period w/ suspensive effect In Diem Period w/ resolutory effect DEFINITE Specific date; Eg. Jan 31, 2025 INDEFINITE Certain but unknown; Eg. Death LEGAL Imposed by Law; Eg. Deadline for filing of tax returns VOLUNTARY Agreed by parties aka “conventional period’ JUDICIAL Fixed by courts Courts Fix the Period Art. 1191 Seller is ready to deliver but buyer is not ready to pay the price Art. 1197 When the period is intended but obligation did not fix a period When period depends upon will of the debtor Benefit of the Period GR: BOTH Debtor Ø be made to pay before the period Creditor Ø be made to accept payment before the period XPN: FAVORS ONE Depends upon tenor of obligation E.g. payable is to debtor, and collectible is to creditor DEBTOR LOSES RIGHT TO MAKE USE OF THE PERIOD (INFILVA) Insolvent; Unless there is guaranty / security of debt Guaranty / security is Ø furnished Guaranty / Security is impaired by his own acts Guaranty / Security is lost due to fortuitous event, unless he delivers new ones equally satisfactory When undertaking is violated If debtor attempts to abscond Alternative Obligations RIGHT OF CHOICE GR Debtor XPN Expressly granted to the creditor Given to a 3rd party NATURE Debtor’s right of choice is limited (Ø choose impossible / unlawful prestation) Choice is communicated; “concentration” Choice Ø be part of one and part of another If only one choice remains, debtor loses the right of choice Right of choice Debtor Creditor Lost ALL Lost SOME Lost ALL Lost SOME Fortuitous event Extinguished Deliver remaining Extinguished Demand from remaining Fault of debtor Value of last thing + Damages Deliver remaining Value of any thing + Damages Price of lost thing + damages; demand from remaining + Damages Fault of creditor - Rescission + Damages; Perform + Damages - - Facultative Obligation NATURE Debtor always has the right to substitute BEFORE SUBSTITUTION Lost Principal Extinguished Lost Substitute Ø extinguished AFTER SUBSTITUTION Lost Principal Ø Extinguished Lost Substitute Extinguished Rules on Enforcement of Solidary Obligations 1 Debtor may pay any creditor; XPN: If one creditor demands → payment is made to him for the entire amount 2 Novation, compensation, confusion, remission made by any creditor. Obligation is extinguished. ▪ Said creditor is liable to other creditors by way of reimbursement. ▪ If a debtor paid the liability before the same was extinguished by remission, heirs to receive reimbursement from co- debtor. ▪ Whole obligation is extinguished by way of novation, confusion, or compensation, debtor is reimbursed by co- debtors 3 Avail of total defenses such as: ▪ Payment by another co-debtor ▪ Contract is void ▪ Prescribed obligation ▪ Minority 4 If two or more debtors offer to pay → creditor may choose. 5 Debtor who paid → may claim share of co-debtors with interest 6 If one debtor is insolvent → all co-debtors including payor will share in the reimbursement in proportion to debt. 7 If demand is made to one debtor → creditor may still demand payment from other debtors. 8 If debtor pays after obligation has prescribed or become illegal → he is not entitled to claim reimbursement; Solidarity may exist even if liability of debtors are not in the same manner Rules on Enforcement of Joint Obligations 1 The debts/credits → independent of each other, 2 The vices of each obligation arising from the personal defect of a particular debtor or creditor → Ø affect the obligation or rights of the others; 3 The demand by one creditor upon one debtor → produces the effects of default only with respect to the creditor who demanded & the debtor on whom the demand was made, but Ø with respect to the others, 4 Interruption of prescription (judicial demand of one creditor) upon a debtor → Ø benefit the other creditors nor interrupt the prescription as to other debtors. Partial payment or acknowledgement made by one of several joint debtors → Ø stop the running of the statute of limitations as to the others: 5 Insolvency of a debtor → Ø increase the responsibility of co-debtors nor creditor entitled to demand fr. co-debtors Presumptions in In/Divisibility Divisible Indivisible Certain # of days worked Definite Things Metrical Units Ø susceptible of partial performance Susceptible of partial performance Law or the intention of parties treats it as indivisible Installments Indivisibility JOINT INDIVISIBLE Right of creditors should be collective Debt is enforced by proceeding against all debtors If 1 debtor is insolvent, others are not liable for his share → convert obli. into monetary 1 debtor did not comply Debtor Ø ready to comply: Share + Damages Debtor ready to comply: Share only Ø is ready to comply → claim share + damages from all debtors SOLIDARY INDIVISIBLE 1 is not ready to comply → ready debtor = liable for damages Innocent debtor → claim reimbursement from co-debtors Reduction of Penalty by the Court 1 Principal Obligation has been partly or irregularly complied with 2 Penalty is iniquitous or unconscionable NATURE & EFFECTS AND REMEDIES IN CASE OF BREACH Concurrent Obligations give generic thing No concurrent obligation give determinate / specific thing Take care of the thing w/ proper diligence of a good father of a family To deliver fruits (no real right) Natural: Products of the soil & animals Industrial: Fr. human intervention; labor Civil: Fr. judicial relation of parties; rentals To deliver all Accessories: Incl. w/ principals Accessions: Additions & improvements
Remedies for Breach of Obligations OBLIGATION TO GIVE Determinate Thing Specific performance (physically & legally possible) Generic Thing Specific / substitute performance OBLIGATION TO DO Substitute performance only OBLIGATION NOT TO DO Have it undone at expense of debtor Rescission as a Remedy Rescission = Resolution ▪ → 1 party is not ready to perform his part Rescissible Contracts ▪ → lesion suffered by a ward or absentee Kinds of Damages (MENTAL) MORAL Mental and physical anguish EXEMPLARY Corrective or to set an example NOMINAL Vindicate a right TEMPERATE When exact amount cannot be determined ACTUAL Actual losses, requires proof LIQUIDATED Predetermined, in essence, the same as penalty Circumstances Affecting Obligations (FrieND-BF) FRAUD (Dolo) Dolo Causante Affects validity of contract; VOIDABLE May be annulled Dolo Incidente Does not affect contract Recover damages NEGLIGENCE (Culpa) Degree of care required Required by law Agreed upon by parties If NOTA, good father of a family Kinds as to Source of Liability Culpa Contractual (Contractual Negligence) Culpa Aquiliana (Civil Negligence; Quasi Delict) Culpa Criminal (Criminal Negligence) On part of supposed Creditor Immediate & proximate cause: Ø recovery for damages Contributory: May recover & courts can reduce DELAY Kinds Mora Solvendi Ex Re (Delay by debtor in real obligations) Mora Solvendi Ex Persona (Delay by debtor in Personal Obligations) Mora Accipendi (Delay by creditor) Compansatio Morae (Delay by both parties) When Considered Delay GR Upon judicial and extrajudicial demand XPN When stipulated When the law so declares Designation of time was a controlling motive When demand would be useless In reciprocal obligations, simultaneous performance but one party is Ø yet ready BREACH (Violatio) Debtors who fails in performance of obligations is bound to indemnify for losses and damages FORTUITOUS EVENT Elements Cause of unforeseen occurrence is independent of human will Impossible to foresee, or if foreseen, unavoidable Obligation becomes impossible to fulfill Debtor is free from participation in the aggravation Responsibility GR No one is responsible for unforeseen / inevitable events XPN When stipulated When nature of obligation requires assumption of risk Expressly specified by law When delay, negligence or fraud concurred w/ the event Reminders FRAUD DEFN: Insidious words or machinations → entered contract Demandable → responsibility arising from fraud Void → waiver of action for FUTURE fraud; past = valid NEGLIGENCE DEFN: omission of that diligence w/c is required by the nature of the obligation; consider circumstances, time, & place. DELAY DEFN: Incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation There is NO delay in obligations not to do. BREACH DEFN: any illicit act w/c impairs the strict & faithful fulfillment FORTUITOUS EVENT DEFN: Extraordinary events Ø foreseeable and Ø avoidable MODES OF EXTINGUISHMENT OF OBLIGATION ART 1231 (Pa Li Con Con CoN) Payment or Performance Loss of the thing due or Impossibility Condonation / Remission of Debt Confusion / Merger of Rights of Creditor and Debtor Compensation Novation CIVIL CODE (FRAP) Fulfillment of Resolutory Condition Rescission Annulment Prescription Payment or Performance PAYMENT BY 3 RD PERSON w/ consent of debtor w/ interest in fulfillment of obligation Compel creditor to accept payment Subrogation to rights of creditor Full reimbursement w/o consent/knowledge of the debtor Cannot compel creditor No subrogation to rights Beneficial reimbursement PERSON WHO HAS INTEREST IN THE FULFILLMENT OF OBLIGATION Guarantors Co-debtor including joint co-debtors 3 rd party mortgagors whose properties secure the obligation 3 RD PARTY DOES NOT INTEND TO BE REIMBURSED Debtor accepts Treat as donation; obli = extinguished Debtor doesn’t consent No valid donation; obli = extinguished 3 rd party seek reimbursement fr. debtor REQUIREMENT FOR PAYMENT TO BE EFFECTIVE Capacity Not minors, incapacitated Not suffering penalty or civil interdiction Rules as to the Payee PAYMENT MAY BE MADE TO Person in whose favor the obligation has been constituted His successor in interest Any person authorized to receive it 3 rd party, if redounds to benefit or creditor BENEFIT TO CREDITOR NEED NOT BE PROVEN IF After payment → 3 rd party acquires creditor’s rights Creditor ratifies the payment to the 3 rd person By creditor’s conduct → debtor led to believe 3rd party has authority 3 rd party is in possession of credit PAYMENT TO INCAPACITATED PERSONS Still valid if Incapacitated person kept the thing Insofar as it was beneficial to him Rules as to the Thing to be Paid / Delivered SPECIFIC THING Debtor Ø compel creditor to receive different one regardless of value GENERIC THING Debtor Ø deliver inferior quality, and creditor cannot demand superior quality TO DO / NOT TO DO Ø be substituted by another act or forbearance against debtor’s will Other Concepts LEGAL TENDER P1, P5, & P20 Max of P2,000 (XPN: P20 bills) Coins below P1 Max of P200 Bills No Limit NEGOTIABLE INSTRUMENTS Ø legal tender, acceptance is dependent on the creditor No effect of payment and does not extinguish obligation: ▪ Check/other mercantile docs have been encashed ▪ Its value becomes impaired EXTRAORDINARY (DE/IN)FLATION Stipulated currency will prevail PLACE OF PAYMENT OR PERFORMANCE Place designation in stipulation If no stipulation and consists determinate thing, wherever thing was located at the time of constitution Domicile of the debtor If domicile is changed in bad faith, debtor shall bear additional expense SPECIAL FORMS OF PAYMENT (DACCO) Dacion en pago Application of payments Payment by cession or assignment Tender of payment and consignation ADVANTAGES OF JUDICIAL CESSION Debts are discharged and obligations are extinguished PROPERTY EXEMPT FROM EXECUTION Generally not covered by cession except when waived Dation in Payment (Dacion en Pago) GOVERNED BY Law on Sales MAY CONSIST OF Thing; Eg. Property Rights; Eg. Credit or Usufruct NATURE There has to be delivery of thing. If promise only, constitutes Novation Prior acceptance and consequent transfer of ownership EXTENT OF EXTINGUISHMENT GR Extent of value of thing delivered as agreed upon XPN Thing is considered equivalent to entire obligation (express or implied)
Application of Payments REQUISITES Only one debtor Several Debts Debts are of the same kind Only one and same creditor LIMITATIONS Creditor Ø be compelled to accept partial payment Debtor Ø apply payment to principal if int. is unpaid Debt must be liquidated, unless otherwise agreed When period has Ø arrived, the period being in favor of the creditor When there is an agreement which debt is paid first NO DESIGNATION (DEBTOR) Creditor will choose reflected in the receipt NO DESIGNATION (DEBTOR & CREDITOR) Same nature & burden Add proportionately Different Nature & Burden Most onerous debt Cession of Assignment ▪ Debtor delivers → all creditors ALL his properties ▪ Purpose: selling & applying proceeds to obligations ▪ Properties exempt from execution: Ø covered by cession; XPN: debtor waives exemption Kinds of Cession VOLUNTARY Only up to proceeds 1 Stipulation 2. Preference of Credits JUDICIAL Under FRIA Advantage: discharges debtor of his debts; obli are extinguishes Dacion en Pago vs. Cession or Assignment DACION EN PAGO (ART 1245) CESSION OR ASSIGNMENT (ART 1255) Substitute of performance / obligation Substitute of performance / obligation Ownership transferred to creditor No such transfer Totally extinguished (if agreed upon or silence) Only up to proceeds (unless otherwise stipulated) No plurality of creditors Plurality of creditors Specific thing All properties (except: exempt from execution) May be made by solvent debtor Supposes financial difficulty of debtor Tender of Payment and Consignation TENDER OF PAYMENT Preparatory act Ø extinguish the obligation CONSIGNATION Thing is deposited in court instead of directly paying the creditor Extinguishes the obligation; Ø to exercise a right REQUISITES OF LEGAL TENDER There exist a valid debt that is due There is legal cause to consign (creditor refuses valid tender of payment) Even w/o tender of payment in case of the ff: ▪ Creditor is absent/unknown or Ø appear of place of paym. ▪ When the creditor is incapacitated to receive payment ▪ 2 or more persons claim the right to collect (can file interpleader) ▪ Title of the obligation has been lost There is previous notice to consign to persons having interest in the fulfillment of obligation The amount / thing is deposited in court WITHDRAWAL OF THING DEPOSITED As a matter of right Before acceptance by creditor No revival, obligation is Ø extinguished After acceptance / declaration Only with creditor’s consent There is revival, obligation is already extinguished LOSS OR IMPOSSIBILITY Loss of Thing Due DUE TO FORTUITOUS EVENT GR Debtor not liable for damages XPN When the law so provides When the stipulation so provides Nature requires assumption of risk Obli arising from criminal offense unless creditor is mora accipiendi Obli to give generic thing (XPN: Limited generic) MALFUNCTION OF BREAK SYSTEM Not a fortuitous event, could be prevented by maintenance. ROBBERY & THEFT Liable if there was negligence in its part (pawnshop) PARTIAL LOSS May be determined by court as important to extinguish obligation PRESUMPTION OF FAULT (Debtor’s fault) Does not apply in case of Earthquake Flood Storm Other natural calamities Impossibility TYPES Nature Physical (by reason of its nature) Legal (through some subsequent law) Whom impo. refers Obective (Eg. paint a broken building) Subjective (Eg. C to paint a portrait) Extent Partial Total Period of impossibility Permanent Temporary DIFFICULTY OF PERFORMANCE If difficulty is manifestly beyond contemplation of parties, obligor may be released therefrom, in whole or in part COURT OF ACTION If above difficulty, debtor may go to court to release from obligation RIGHT OF CREDITOR Creditor may go against third persons of debtor by reason of loss EXTINGUISHMENT OF OBLIGATIONS Extinguishment Condonation/ Remission Dacion en Pago Novation Compromise GRATUITOUS Condonation/ Remission Extinguished entirely w/o equivalent NOT GRATUITOUS Dacion en Pago Cr’or receives thing diff. fr. stipulated Novation Subj. of principal condi. are changed Compromise In litigation / dispute Condonation NATURE Acceptance by donee is required Movable Property Oral donation requires simultaneous delivery If value exceeds P5000 acceptance be in writing Immovable property Must be in public document KINDS As to form Express Implied As to Extent Total Partial As to manner Inter vivos Mortis Causa Merger / Confusion DEFN Meeting in one person of the qualities of the creditor and debtor with respect to the same obligation REQS Must take place between the credit and the principal debtor Involves the very same obligation Must be total Compensation DEFN Mode of extinguishment to the concurrent amount; reciprocally creditors and debtors of each other KINDS As to effects / extent Total Partial As to origin / cause Legal: operation of law Facultative: can be claimed by one Conventional: compensate mutual obli. Judicial: decreed by the court REQUISITES (All) Parties must be mutual principal debtors & creditors in their own right Both debts must be due Both debts must be liquidated and demandable In sum of money, or same kind/quality if consumables Claim is clearly demandable (i.e. no controversy) GUARANTORS May set up in regards what creditor may owe principal debtor RESCISSIBLE / VOIDABLE DEBTS May be subject of compensation before rescinded or avoided / annulled ASSIGNMENT OF CREDITS Debtor may still invoke compensation against debts due to him if: ▪ He had no knowledge or did not consent to the assignment ▪ W/ knowledge/consent, but reserved his right to compensation COMPENSATION IS NOT PROPER Depositum: as to the depositary Bail: as to the bailee Support: as to the one giving support (XPN: support in arrears and those contractual in nature) Civil liability from penal offense SEVERAL DEBTS Rules on application of payments shall apply LEGAL COMPENSATION Takes effect by operation of law Extinguishes both debts to concurrent amount HOW IT WILL BE DISTRIBUTED