snupgd.files.wordpress.com · iii TABLE OF CONTENTS BOOK IV OBLIGATIONS AND CONTRACTS TITLE I — OBLIGATIONS Chapter 1 — GENERAL PROVISIONS Article 1156

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TABLE OF CONTENTS

BOOK IVOBLIGATIONS AND CONTRACTS

TITLE I — OBLIGATIONS

Chapter 1 — GENERAL PROVISIONS

Article 1156 ........................................................................... 1Article 1157 ........................................................................... 1Article 1158 ........................................................................... 1Article 1159 ........................................................................... 1Article 1160 ........................................................................... 1Article 1161 ........................................................................... 1Article 1162 ........................................................................... 2

Chapter 2 — NATURE AND EFFECTOF OBLIGATIONS

Article 1163 ........................................................................... 4Article 1164 ........................................................................... 4Article 1165 ........................................................................... 4Article 1166 ........................................................................... 4Article 1167 ........................................................................... 4Article 1168 ........................................................................... 4Article 1169 ........................................................................... 4Article 1170 ........................................................................... 5Article 1171 ........................................................................... 5Article 1172 ........................................................................... 5Article 1173 ........................................................................... 5Article 1174 ........................................................................... 6Article 1175 ........................................................................... 6Article 1176 ........................................................................... 6Article 1177 ........................................................................... 6Article 1178 ........................................................................... 6

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Chapter 3 — DIFFERENT KINDSOF OBLIGATIONS

Section 1 — Pure and Conditional Obligations

Article 1179 ........................................................................... 27Article 1180 ........................................................................... 28Article 1181 ........................................................................... 28Article 1182 ........................................................................... 28Article 1183 ........................................................................... 28Article 1184 ........................................................................... 28Article 1185 ........................................................................... 28Article 1186 ........................................................................... 29Article 1187 ........................................................................... 29Article 1188 ........................................................................... 29Article 1189 ........................................................................... 29Article 1190 ........................................................................... 30Article 1191 ........................................................................... 30Article 1192 ........................................................................... 31

Section 2 — Obligations with a Period

Article 1193 ........................................................................... 38Article 1194 ........................................................................... 39Article 1195 ........................................................................... 39Article 1196 ........................................................................... 39Article 1197 ........................................................................... 39Article 1198 ........................................................................... 39

Section 3 — Alternative Obligations

Article 1199 ........................................................................... 43Article 1200 ........................................................................... 43Article 1201 ........................................................................... 44Article 1202 ........................................................................... 44Article 1203 ........................................................................... 44Article 1204 ........................................................................... 44Article 1205 ........................................................................... 44Article 1206 ........................................................................... 45

Section 4 — Joint and Solidary Obligations


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Article 1213 ........................................................................... 49Article 1214 ........................................................................... 49Article 1215 ........................................................................... 49Article 1216 ........................................................................... 49Article 1217 ........................................................................... 50Article 1218 ........................................................................... 50Article 1219 ........................................................................... 50Article 1220 ........................................................................... 50Article 1221 ........................................................................... 50Article 1222 ........................................................................... 51

Section 5 — Divisible and IndivisibleObligations

Article 1223 ........................................................................... 55Article 1224 ........................................................................... 56Article 1225 ........................................................................... 56

Section 6 — Obligations with aPenal Clause

Article 1226 ........................................................................... 57Article 1227 ........................................................................... 57Article 1228 ........................................................................... 58Article 1229 ........................................................................... 58Article 1230 ........................................................................... 58

Chapter 4 — EXTINGUISHMENT OFOBLIGATIONS

GENERAL PROVISIONS

Article 1231 ........................................................................... 61

Section 1 — Payment or Performance


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Article 1242 ........................................................................... 63Article 1243 ........................................................................... 63Article 1244 ........................................................................... 63Article 1245 ........................................................................... 64Article 1246 ........................................................................... 64Article 1247 ........................................................................... 64Article 1248 ........................................................................... 64Article 1249 ........................................................................... 64Article 1250 ........................................................................... 65Article 1251 ........................................................................... 65Article 1252 ........................................................................... 78Article 1253 ........................................................................... 78Article 1254 ........................................................................... 78Article 1255 ........................................................................... 80Article 1256 ........................................................................... 81Article 1257 ........................................................................... 82Article 1258 ........................................................................... 82Article 1259 ........................................................................... 82Article 1260 ........................................................................... 82Article 1261 ........................................................................... 82

Section 2 — Loss of the Thing Due


Section 3 — Condonation or Remissionof the Debt


Section 4 — Confusion or Mergerof Rights


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Section 5 — Compensation

Article 1278 ........................................................................... 92Article 1279 ........................................................................... 92Article 1280 ........................................................................... 92Article 1281 ........................................................................... 93Article 1282 ........................................................................... 93Article 1283 ........................................................................... 93Article 1284 ........................................................................... 93Article 1285 ........................................................................... 93Article 1286 ........................................................................... 93Article 1287 ........................................................................... 93Article 1288 ........................................................................... 94Article 1289 ........................................................................... 94Article 1290 ........................................................................... 94

Section 6 — Novation


TITLE II — CONTRACTS



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Chapter 2 — ESSENTIAL REQUISITESOF CONTRACTS

GENERAL PROVISIONS

Article 1318 ........................................................................... 119Article 1319 ........................................................................... 123Article 1320 ........................................................................... 123Article 1321 ........................................................................... 123Article 1322 ........................................................................... 123Article 1323 ........................................................................... 123Article 1324 ........................................................................... 123Article 1325 ........................................................................... 123Article 1326 ........................................................................... 124Article 1327 ........................................................................... 124Article 1328 ........................................................................... 124Article 1329 ........................................................................... 124Article 1330 ........................................................................... 124Article 1331 ........................................................................... 124Article 1332 ........................................................................... 124Article 1333 ........................................................................... 124Article 1334 ........................................................................... 125Article 1335 ........................................................................... 125Article 1336 ........................................................................... 125Article 1337 ........................................................................... 125Article 1338 ........................................................................... 125Article 1339 ........................................................................... 125Article 1340 ........................................................................... 125Article 1341 ........................................................................... 126Article 1342 ........................................................................... 126Article 1343 ........................................................................... 126Article 1344 ........................................................................... 126Article 1345 ........................................................................... 126Article 1346 ........................................................................... 126Article 1347 ........................................................................... 133Article 1348 ........................................................................... 133Article 1349 ........................................................................... 133Article 1350 ........................................................................... 134Article 1351 ........................................................................... 134Article 1352 ........................................................................... 134Article 1353 ........................................................................... 134Article 1354 ........................................................................... 135Article 1355 ........................................................................... 135

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Chapter 3 — FORM OF CONTRACTS


Chapter 4 — REFORMATION OF INSTRUMENTS (n)

Article 1359 ........................................................................... 143Article 1360 ........................................................................... 143Article 1361 ........................................................................... 143Article 1362 ........................................................................... 143Article 1363 ........................................................................... 144Article 1364 ........................................................................... 144Article 1365 ........................................................................... 144Article 1366 ........................................................................... 144Article 1367 ........................................................................... 144Article 1368 ........................................................................... 144Article 1369 ........................................................................... 144

Chapter 5 — INTERPRETATIONOF CONTRACTS


Chapter 6 — RESCISSIBLE CONTRACTS


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Chapter 7 — VOIDABLE CONTRACTS


Chapter 8 — UNENFORCEABLECONTRACTS (n)


Chapter 9 — VOID OR INEXISTENTCONTRACTS


TITLE III — NATURAL OBLIGATIONS

Article 1423 ........................................................................... 176Article 1424 ........................................................................... 176

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TITLE IV — ESTOPPEL (n)

Article 1431 ........................................................................... 180Article 1432 ........................................................................... 180Article 1433 ........................................................................... 180Article 1434 ........................................................................... 180Article 1435 ........................................................................... 180Article 1436 ........................................................................... 180Article 1437 ........................................................................... 180Article 1438 ........................................................................... 181Article 1439 ........................................................................... 181

TITLE V — TRUSTS



Chapter 2 — EXPRESS TRUSTS

Article 1443 ........................................................................... 192Article 1444 ........................................................................... 192Article 1445 ........................................................................... 192Article 1446 ........................................................................... 192

Chapter 3 — IMPLIED TRUSTS

Article 1447 ........................................................................... 193Article 1448 ........................................................................... 193Article 1449 ........................................................................... 194Article 1450 ........................................................................... 194Article 1451 ........................................................................... 194Article 1452 ........................................................................... 194Article 1453 ........................................................................... 194Article 1454 ........................................................................... 194Article 1455 ........................................................................... 194Article 1456 ........................................................................... 195Article 1457 ........................................................................... 195

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SPECIAL CONTRACTS

TITLE VI — SALES

Chapter 1 — NATURE AND FORMOF THE CONTRACT

Article 1458 ........................................................................... 199Article 1459 ........................................................................... 199Article 1460 ........................................................................... 199Article 1461 ........................................................................... 199Article 1462 ........................................................................... 200Article 1463 ........................................................................... 200Article 1464 ........................................................................... 200Article 1465 ........................................................................... 200Article 1466 ........................................................................... 200Article 1467 ........................................................................... 200Article 1468 ........................................................................... 201Article 1469 ........................................................................... 201Article 1470 ........................................................................... 201Article 1471 ........................................................................... 201Article 1472 ........................................................................... 201Article 1473 ........................................................................... 201Article 1474 ........................................................................... 202Article 1475 ........................................................................... 202Article 1476 ........................................................................... 202Article 1477 ........................................................................... 203Article 1478 ........................................................................... 203Article 1479 ........................................................................... 203Article 1480 ........................................................................... 203Article 1481 ........................................................................... 203Article 1482 ........................................................................... 203Article 1483 ........................................................................... 204Article 1484 ........................................................................... 204Article 1485 ........................................................................... 204Article 1486 ........................................................................... 204Article 1487 ........................................................................... 204Article 1488 ........................................................................... 204

Chapter 2 — CAPACITY TO BUY OR SELL


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Chapter 3 — EFFECTS OF THE CONTRACTWHEN THE THING SOLD HAS BEEN LOST

Article 1493 ........................................................................... 224Article 1494 ........................................................................... 224

Chapter 4 — OBLIGATIONS OF THE VENDOR

Section 1 — General Provisions

Article 1495 ........................................................................... 224Article 1496 ........................................................................... 224

Section 2 — Delivery of the Thing Sold

Article 1497 ........................................................................... 225Article 1498 ........................................................................... 225Article 1499 ........................................................................... 225Article 1500 ........................................................................... 225Article 1501 ........................................................................... 225Article 1502 ........................................................................... 225Article 1503 ........................................................................... 226Article 1504 ........................................................................... 227Article 1505 ........................................................................... 227Article 1506 ........................................................................... 228Article 1507 ........................................................................... 230Article 1508 ........................................................................... 230Article 1509 ........................................................................... 231Article 1510 ........................................................................... 231Article 1511 ........................................................................... 231Article 1512 ........................................................................... 232Article 1513 ........................................................................... 232Article 1514 ........................................................................... 232Article 1515 ........................................................................... 233Article 1516 ........................................................................... 233Article 1517 ........................................................................... 233Article 1518 ........................................................................... 233Article 1519 ........................................................................... 234Article 1520 ........................................................................... 234Article 1521 ........................................................................... 244Article 1522 ........................................................................... 245Article 1523 ........................................................................... 245Article 1524 ........................................................................... 246Article 1525 ........................................................................... 246Article 1526 ........................................................................... 246Article 1527 ........................................................................... 247Article 1528 ........................................................................... 247Article 1529 ........................................................................... 247

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Article 1530 ........................................................................... 248Article 1531 ........................................................................... 248Article 1532 ........................................................................... 249Article 1533 ........................................................................... 249Article 1534 ........................................................................... 250Article 1535 ........................................................................... 251Article 1536 ........................................................................... 251Article 1537 ........................................................................... 251Article 1538 ........................................................................... 251Article 1539 ........................................................................... 251Article 1540 ........................................................................... 252Article 1541 ........................................................................... 252Article 1542 ........................................................................... 252Article 1543 ........................................................................... 252Article 1544 ........................................................................... 253Article 1545 ........................................................................... 264Article 1546 ........................................................................... 264Article 1547 ........................................................................... 265

Subsection 1 — Warranty in Caseof Eviction


Subsection 2 — Warranty Against HiddenDefects of or Encumbrances Upon

the Thing Sold


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Chapter 5 — OBLIGATIONS OF THEVENDEE

Article 1582 ........................................................................... 281Article 1583 ........................................................................... 281Article 1584 ........................................................................... 281Article 1585 ........................................................................... 282Article 1586 ........................................................................... 282Article 1587 ........................................................................... 282Article 1588 ........................................................................... 282Article 1589 ........................................................................... 282Article 1590 ........................................................................... 286Article 1591 ........................................................................... 287Article 1592 ........................................................................... 287Article 1593 ........................................................................... 287

Chapter 6 — ACTIONS FOR BREACH OFCONTRACT OF SALE OF GOODS


Chapter 7 — EXTINGUISHMENTOF SALE

Article 1600 ........................................................................... 313

Section 1 — Conventional Redemption

Article 1601 ........................................................................... 313Article 1602 ........................................................................... 313

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Article 1603 ........................................................................... 314Article 1604 ........................................................................... 314Article 1605 ........................................................................... 314Article 1606 ........................................................................... 314Article 1607 ........................................................................... 315Article 1608 ........................................................................... 315Article 1609 ........................................................................... 315Article 1610 ........................................................................... 315Article 1611 ........................................................................... 315Article 1612 ........................................................................... 315Article 1613 ........................................................................... 315Article 1614 ........................................................................... 316Article 1615 ........................................................................... 316Article 1616 ........................................................................... 316Article 1617 ........................................................................... 316Article 1618 ........................................................................... 316

Section 2 — Legal Redemption


Chapter 8 — ASSIGNMENT OF CREDITSAND OTHER INCORPOREAL RIGHTS

Article 1624 ........................................................................... 330Article 1625 ........................................................................... 330Article 1626 ........................................................................... 330Article 1627 ........................................................................... 330Article 1628 ........................................................................... 330Article 1629 ........................................................................... 331Article 1630 ........................................................................... 331Article 1631 ........................................................................... 331Article 1632 ........................................................................... 331Article 1633 ........................................................................... 331Article 1634 ........................................................................... 331Article 1635 ........................................................................... 332


Article 1636 ........................................................................... 335Article 1637 ........................................................................... 336

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TITLE VII — BARTER OR EXCHANGE


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CIVIL LAW

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Volume III

(Articles 1156-1641)

Second Edition

2006

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BOOK IV

OBLIGATIONS AND CONTRACTS

TITLE I. OBLIGATIONS

Chapter 1

General Provisions

Article 1156. An obligation is a juridical necessityto give, to do or not to do. (n)

Art. 1157. Obligations arise from:

(1) Law;

(2) Contracts;

(3) Quasi-contracts;

(4) Acts or omissions punished by law; and

(5) Quasi-delicts. (1089a)

Art. 1158. Obligations derived from law are notpresumed. Only those expressly determined in thisCode or in special laws are demandable, and shall beregulated by the precepts of the law which establishesthem; and as to what has not been foreseen, by theprovisions of this Book. (1090)

Art. 1159. Obligations arising from contracts havethe force of law between the contracting parties andshould be complied with in good faith. (1091a)

Art. 1160. Obligations derived from quasi-contractsshall be subject to the provisions of Chapter 1, TitleXVII, of this Book. (n)

Art. 1161. Civil obligations arising from criminaloffenses shall be governed by the penal laws, subject

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to the provisions of Article 2177, and of the pertinentprovisions of Chapter 2, Preliminary Title, on HumanRelations, and of Title XVIII of this Book, regulatingdamages. (1092a)

Art. 1162. Obligations derived from quasi-delictsshall be governed by the provisions of Chapter 2, TitleXVII of this Book, and by special laws. (1093a)

Concept and Birth of Obligations

An obligation, a “juridical necessity to give, to do ornot to do,” is constituted upon the concurrence of theessential elements thereof, viz.: (a) the vinculum juris orjuridical tie which is the efficient cause established bythe various sources of obligations (law, contracts, quasi-contracts, delicts, and quasi-delicts); (b) the object whichis the prestation or conduct required to be observed (togive, to do, or not to do); and (c) the subject-persons who,viewed from the demandability of the obligations, are theactive (obligee) and the passive (obligor) subjects.

The juridical tie binding the active and the passivesubjects together is created by any of the sources ofobligations expressed in Article 1157 of the Code (Leungvs. O’Brien, 38 Phil. 182), to wit:

(1) Law — Obligations ex lege or those derived fromlaw are not presumed. Only those expresslystated by the Code or by special laws aredemandable. They shall be regulated by theprecepts of the law which establishes them, andas to what has been foreseen, by the provisionsof the Code on Obligations and Contracts (seeArt. 1158, Civil Code; Bautista vs. F.O. Borromeo,Inc., 30 SCRA 119).

(2) Contracts — A contract is a meeting of the mindsbetween two persons whereby one binds himselfto the other to give something or to render someservice (Art. 1305, Civil Code). Obligationsarising from contracts have the force of law

Arts. 1156-1162

3

between the contracting parties and should becomplied with in good faith (Art. 1159; see Art.1308, Civil Code; see also Maritime Company ofthe Philippines vs. Reparations Commission, 40SCRA 170).

(3) Quasi-contracts — Quasi-contracts are certainlawful, voluntary and unilateral acts which giverise to a juridical relation to the end that noperson may unjustly enrich himself at theexpense of another (Art. 2142, Civil Code).Obligations derived from quasi-contracts basedon the presumed will of the parties aredemandable (see Title XVII, infra.; Cf. Art. 1160,Civil Code).

(4) Acts or omissions punished by law — Civil obli-gations arising from criminal offenses aregoverned by the penal laws, subject to theprovisions of Article 2177 and other pertinentprovisions of the Civil Code (see PreliminaryTitle on Human Relations, supra., and Title XVII,infra.; Tejuco vs. Squibb & Sons, 103 Phil. 594;Art. 1161, Civil Code).

(5) Quasi-delicts — Quasi-delicts are extra-con-tractual relations resulting from certain acts oromissions causing damage to another, therebeing fault or negligence on the part of the per-son responsible therefor (see Art. 2176, CivilCode). Obligations may be derived from suchquasi-delicts (see Title XVII, infra.; Barredo vs.Garcia, 73 Phil. 607; Art. 1162, Civil Code).

These sources of patrimonial obligations, asdistinguished from those that are correlatively due orarising from purely personal and intransmissible rights,are said to be exclusive (see Sagrado Orden de Predi-cadores vs. NACOCO, 91 Phil. 503) and so of the essencethat those sources, independently, can justifiably be calledthe fourth element of obligations.

Arts. 1156-1162 OBLIGATIONS AND CONTRACTSTitle I. Obligations

4 CIVIL LAW

Chapter 2

Nature and Effect of Obligations

Art. 1163. Every person obliged to give somethingis also obliged to take care of it with the properdiligence of a good father of a family, unless the law orthe stipulation of the parties requires another standardof care. (1094a)

Art. 1164. The creditor has a right to the fruits ofthe thing from the time the obligation to deliver it arises.However, he shall acquire no real right over it until thesame has been delivered to him. (1095)

Art. 1165. When what is to be delivered is adeterminate thing, the creditor, in addition to the rightgranted him by Article 1170, may compel the debtor tomake the delivery.

If the thing is indeterminate or generic, he mayask that the obligation be complied with at the expenseof the debtor.

If the obligor delays, or has promised to deliverthe same thing to two or more persons who do nothave the same interest, he shall be responsible forfortuitous event until he has effected the delivery. (1096)

Art. 1166. The obligation to give a determinatething includes that of delivering all its accessions andaccessories, even though they may not have beenmentioned. (1097a)

Art. 1167. If a person obliged to do somethingfails to do it, the same shall be executed at his cost.

This same rule shall be observed if he does it incontravention of the tenor of the obligation.Furthermore, it may be decreed that what has beenpoorly done be undone. (1098)

Art. 1168. When the obligation consists in notdoing, and the obligor does what has been forbiddenhim, it shall also be undone at his expense. (1099a)

Art. 1169. Those obliged to deliver or to do some-thing incur in delay from the time the obligee judicially

Arts. 1163-1169

5

or extrajudicially demands from them the fulfillment oftheir obligation.

However, the demand by the creditor shall not benecessary in order that delay may exist:

(1) When the obligation or the law expressly sodeclares; or

(2) When from the nature and circumstances ofthe obligation it appears that the designation of thetime when the thing is to be delivered or the service isto be rendered was a controlling motive for theestablishment of the contract; or

(3) When demand would be useless, as whenthe obligor has rendered it beyond his power toperform.

In reciprocal obligations, neither party incurs indelay if the other does not comply or is not ready tocomply in a proper manner with what is incumbentupon him. From the moment one of the parties fulfillshis obligation, delay by the other begins. (1100a)

Art. 1170. Those who in the performance of theirobligations are guilty of fraud, negligence, or delay,and those who in any manner contravene the tenorthereof, are liable for damages. (1101)

Art. 1171. Responsibility arising from fraud isdemandable in all obligations. Any waiver of an actionfor future fraud is void. (1102a)

Art. 1172. Responsibility arising from negligencein the performance of every kind of obligation is alsodemandable, but such liability may be regulated by thecourts, according to the circumstances. (1103)

Art. 1173. The fault or negligence of the obligorconsists in the omission of that diligence which isrequired by the nature of the obligation andcorresponds with the circumstances of the persons, ofthe time and of the place. When negligence shows badfaith, the provisions of Articles 1171 and 2201, para-graph 2, shall apply.


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If the law or contract does not state the diligencewhich is to be observed in the performance, that whichis expected of a good father of a family shall berequired. (1104a)

Art. 1174. Except in cases expressly specified bythe law, or when it is otherwise declared by stipulation,or when the nature of the obligation requires theassumption of risk, no person shall be responsible forthose events which, could not be foreseen, or which,though foreseen, were inevitable. (1105a)

Art. 1175. Usurious transactions shall be governedby special laws. (n)

Art. 1176. The receipt of the principal by thecreditor, without reservation with respect to the interest,shall give rise to the presumption that said interesthas been paid.

The receipt of a later installment of a debt withoutreservation as to prior installments, shall likewise raisethe presumption that such installments have been paid.(1110a)

Art. 1177. The creditors, after having pursued theproperty in possession of the debtor to satisfy theirclaims, may exercise all the rights and bring all theactions of the latter for the same purpose, save thosewhich are inherent in his person; they may also impugnthe acts which the debtor may have done to defraudthem. (1111)

Art. 1178. Subject to the laws, all rights acquiredin virtue of an obligation are transmissible, if there hasbeen no stipulation to the contrary. (1112)

Compliance with Obligations

Basically, the standard norm in the observance of anobligation by both the active and passive subjects may besaid to be that which Article 19 of the Code prescribes,viz.: “Every person must, in the exercise of his rights andin the performance of his duties, act with justice, giveeveryone his due, and observe honesty and good faith.”

Arts. 1163-1178

7

(1) In Obligations to Give

Every person obliged to give a determinate thingmust deliver, and the obligee may compel the delivery of,that itself which was promised, and the obligor cannotsubstitute it unless the obligee agrees (Art. 1244, inrelation to Art. 1165, Civil Code) or the right is reservedsuch as in alternative obligations (see infra.). The obligoris also obliged to take care of the things with the properdiligence of a good father of a family, unless the law or thestipulation of the parties requires another standard ofcare (see Art. 1163, Civil Code; E. Razon, Inc. vs. Court ofAppeals, 161 SCRA 356). The obligation to give a deter-minate thing includes that of delivering all its accessionsand accessories, even though they may not have beenmentioned (Art. 1166, Civil Code).

The creditor has a right to the fruits of the thingfrom the time the obligation to deliver it arises. He shall,however, acquire no real right (including ownership ortitle) over it until the same has been delivered to him(Art. 1164, Civil Code; Cruzado vs. Bustos, 34 Phil. 17;see Art. 1187, infra., as regards conditional obligations).

If the thing to be delivered is generic, the obligormust deliver a thing of the quality specified; if none isfixed, he must deliver one of average quality, nor can theobligee demand one of superior quality. The creditor mayask that the obligation be complied with at the expense ofthe debtor (see Art. 1246 and 1165, Civil Code).

(2) In Obligations to Do

If a person is obliged to do something, it must bedone as so promised, and it cannot be substituted byanother act or forbearance against the obligee’s will (seeArt. 1244, Civil Code). If the obligor fails to do it, thesame shall be executed at his cost (see Chavez vs. Gonzales,32 SCRA 547) albeit he may not be compelled to do sopersonally or by himself. This same rule shall be observedif he does it in contravention of the tenor of the obligation.


8 CIVIL LAW

Furthermore, it may be decreed that what has been poorlydone be undone (see Art. 1167, Civil Code).

(3) In Obligations Not to Do

When the obligation consists in not doing, and theobligor does what has been forbidden him, it shall beundone at his expense (see Art. 1168, Civil Code; Cui vs.Chan, 41 Phil. 523).

Breach of Obligations

Subject to such exceptions or qualifications as thelaw or the parties themselves may provide, obligationsmust be complied with precisely (“identity of obligations”)and completely (“integrity of obligations”) as promised orrequired. The receipt, however, of the principal by thecreditor, without reservation with respect to the interest,shall give rise to the presumption that said interest hasbeen paid. The receipt of a later installment of a debt,without reservation as to prior installments, shall likewiseraise the presumption that such installments have beenpaid (Art. 1176, Civil Code; for further discussions onPayment or Performance, see infra.).

Those who in the performance of their obligationsare guilty of fraud, negligence, or delay, and those who inany manner contravene the tenor thereof, are liable fordamages without the need for a contractual stipulationor prior agreement thereon (see Art. 1170, Civil Code;Boysaw vs. Interphil Promotions, Inc., 148 SCRA 635;Arrieta vs. NARIC, 10 SCRA 79; CMS Investments andManagement Corp. vs. Intermediate Appellate Court, 139SCRA 75; Magat vs. Medialdea, 121 SCRA 418).

Fraud

Responsibility arising from fraud (malice) is demand-able in all obligations. Any waiver of an action for futurefraud is void (Art. 1171, Civil Code).

Arts. 1163-1178

9

Fraud, in the context of its use as a mode of breachingan obligation, is bad faith in the performance of anobligation, oftentimes referred to as malice (see Flores vs.Miranda, 105 Phil. 266), as distinguished from fraud inthe celebration of contracts, also commonly known asdeceit (dolo) which may constitute a ground for annulmentof the contract if substantial (dolo causante) or whichmay merely call for a reparation for damages if incidental(dolo incidente), such as when, although fraud is absentor not exercised, the other party would have nonethelessentered into the agreement on significantly the sameterms.

Negligence

Responsibility arising from negligence in the per-formance of every kind of obligation is also demandable,but such liability may be regulated by the courts, accordingto the circumstances of each case (Art. 1172, Civil Code;E. Razon, Inc. vs. Court of Appeals, supra.).

The fault or negligence (culpa) of the obligor consistsin the omission of that diligence which is required by thenature of the obligation and corresponds with thecircumstances of the persons, of the time, and of the place.If the law or contract does not state the diligence which isto be observed in the performance, that which is expectedof a good father of a family shall be required (Art. 1173,Civil Code). Gross or reckless imprudence could amountto or be indicative of bad faith that can call for theapplication of the provisions of Article 1171 on Fraud andArticle 2201, 2nd paragraph, on Damages.

Negligence in the performance of obligations, ingeneral, although akin in many respects to, is not exactlythe same as, culpa contractual. The source of liability inculpa contractual being contracts exclusively, the rule onthe privity or relativity of contracts applicable to liabilityin culpa contractual may not accurately be pertinent to


10 CIVIL LAW

culpa in the performance of obligations derived from othersources such as law. Neither is negligence in theperformance of an obligation and culpa contractual, onthe one hand, to be likened to culpa aquiliana, on theother, which is the negligence referred to as a quasi-delict(Art. 2176, Civil Code) as a source of an obligation (Art.1157, Civil Code). The distinctions between culpacontractual and culpa aquiliana (see Cangco vs. ManilaRailroad Co., 38 Phil. 769; Rakes vs. AG & P, 7 Phil. 359)may be exemplified in the following illustrative appli-cation:

Facts

Two taxicabs, one owned and operated by “X & Co.”and the other by “Y & Co.,” have figured in a collision.Both drivers of the taxicabs are negligent. As a result ofthe incident, “A,” a passenger of the taxicab owned andoperated by “X & Co.,” suffers injuries. He institutes anaction for damages against “X & Co.,” “Y & Co.,” and thetwo drivers.

Basic differences in the Liabilities of the SeveralDefendants

(1) The primary (principal) cause of action by “A”against “X & Co.” is culpa contractual and thesource of liability against all others is culpaaquiliana (also culpa criminal in the case of thedrivers).

(2) “X & Co.” may not raise the defense of duediligence in the selection (culpa in eligiendo)and supervision (culpa in vigilando) of itsemployees, although “Y & Co.” may do so (DeGuia vs. Manila Electric Co., 40 Phil. 706).

(3) In case direct evidence is bereft of the existenceor non-existence of negligence, “X & Co.” canstill be held liable, since fault or negligence ispresumed in culpa contractual; in culpa aqui-liana, fault or negligence must, as a rule, beestablished.

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(4) In culpa contractual, the privity of contractswould bar non-successors from claiming from“X & Co.” (in case “A” dies); in culpa aquiliana,relatives and dependents (although non-heirs)may claim damages.

Discussions

(1) Although the cause of action against “X & Co.”is basically one of breach of contract (culpacontractual), the factual circumstances, however,would also point to the existence of tort as amode of breach. Where, without a pre-existingcontract between two parties, an act or omissioncould have nevertheless constituted an action-able tort between them, the mere existence thenof a contract between such parties will notmilitate against the application of the rules ontort liability or even the predominance of tort inthe resolution of the case (see Singson vs. BPI,23 SCRA 1117; Air France vs. Carrascoso, 18SCRA 155). Accordingly, “X & Co.” could becomea joint tortfeasor with the other defendants,rendering themselves solidarily liable (Art. 2194,Civil Code). Likewise, the possibility of “Y &Co.” being liable for moral damages for the injuryof “A” because of quasi-delict under Article 2219of the Civil Code may not altogether be dis-counted in appropriate cases.

(2) While “X & Co.” may not raise the defense ofdue diligence in the selection and supervision ofits employees as against its passenger “A” (thelatter’s cause of action still being basically oneof culpa contractual), the proof of such diligence,however, is not all that immaterial orinconsequential. Once established, such duediligence will work to operate an extenuation ofany possible tort liability, and “X & Co.” couldno longer be considered a joint tortfeasor. In


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this case, neither liability under Article 2194 ofthe Civil Code nor liability for moral damagesto “A” under Article 2219 of the same Code (inthe absence of gross negligence amounting tobad faith) would be applicable. “X & Co.,”however, would still be liable but purely on thebasis of culpa contractual.

(3) If the drivers of the colliding vehicles were con-victed in a criminal case for their negligence, “X& Co.” and “Y & Co.,” being both engaged in anindustry, can be held liable subsidiarily for theirrespective drivers’ civil liability (Arts. 100-103,Revised Penal Code).

In FGU Insurance Corporation vs. G.P. SarmientoTrucking Corp., G.R. No. 141910, 06 August 2002, theSupreme Court said:

“In culpa contractual, upon which the action ofpetitioner rests as being the subrogee of ConcepcionIndustries, Inc., the mere proof of the existence ofthe contract and the failure of its compliance justify,prima facie, a corresponding right of relief. The law,recognizing the obligatory force of contracts, will notpermit a party to be set free from liability for anykind of misperformance of the contractual undertak-ing or a contravention of the tenor thereof. A breachupon the contract confers upon the injured party avalid cause for recovering that which may have beenlost or suffered. The remedy serves to preserve theinterests of the promisee that may include his “ex-pectation interest,” which is his interest in havingthe benefit of his bargain by being put in as good aposition as he would have been in had the contractbeen performed, or his “reliance interest,” which ishis interest in being reimbursed for loss caused byreliance on the contract by being put in as good aposition as he would have been in had the contractnot been made; or his “restitution interest,” which is

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his interest in having restored to him any benefitthat he has conferred on the other party. Indeed,agreements can accomplish little, either for theirmakers or for society, unless they are made the basisfor action. The effect of every infraction is to create anew duty, that is, to make recompense to the onewho has been injured by the failure of another toobserve his contractual obligation unless he can showextenuating circumstances, like proof of his exerciseof due diligence (normally that of the diligence of agood father of a family or, exceptionally by stipula-tion or by law such as in the case of common carri-ers, that of extraordinary diligence) or of the attend-ance of fortuitous event, to excuse him from his en-suing liability.

“Respondent trucking corporation recognizes theexistence of a contract of carriage between it andpetitioner’s assured, and admits that the cargoes ithas assumed to deliver have been lost or damagedwhile in its custody. In such a situation, a default on,or failure of compliance with, the obligation – in thiscase, the delivery of the goods in its custody to theplace of destination — gives rise to a presumption oflack of care and corresponding liability on the part ofthe contractual obligor the burden being on him toestablish otherwise. GPS has failed to do so.

“Respondent driver, on the other hand, withoutconcrete proof of his negligence or fault, may nothimself be ordered to pay petitioner. The driver, notbeing a party to the contract of carriage betweenpetitioner’s principal and defendant, may not be heldliable under the agreement. A contract can only bindthe parties who have entered into it or their succes-sors who have assumed their personality or theirjuridical position. Consonantly with the axiom resinter alios acta aliis neque nocet prodest, such con-tract can neither favor nor prejudice a third person.Petitioner’s civil action against the driver can only


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be based on culpa aquiliana, which, unlike culpacontractual, would require the claimant for damagesto prove negligence or fault on the part of the de-fendant.

“A word in passing. Res ipsa loquitur, a doctrinebeing invoked by petitioner, holds a defendant liablewhere the thing which caused the injury complainedof is shown to be under the latter’s management andthe accident is such that, in the ordinary course ofthings, cannot be expected to happen if those whohave its management or control use proper care. Itaffords reasonable evidence, in the absence of expla-nation by the defendant, that the accident arose fromwant of care. It is not a rule of substantive law and,as such, it does not create an independent ground ofliability. Instead, it is regarded as a mode of proof, ora mere procedural convenience since it furnishes asubstitute for, and relieves the plaintiff of, the bur-den of producing specific proof of negligence. Themaxim simply places on the defendant the burden ofgoing forward with the proof. Resort to the doctrine,however, may be allowed only when (a) the event isof a kind which does not ordinarily occur in the ab-sence of negligence; (b) other responsible causes, in-cluding the conduct of the plaintiff and third per-sons, are sufficiently eliminated by the evidence; and(c) the indicated negligence is within the scope of thedefendant’s duty to the plaintiff. Thus, it is not ap-plicable when an unexplained accident may be at-tributable to one of several causes, for some of whichthe defendant could not be responsible.

“Res ipsa loquitur generally finds relevancewhether or not a contractual relationship exists be-tween the plaintiff and the defendant, for the infer-ence of negligence arises from the circumstances andnature of the occurrence and not from the nature ofthe relation of the parties. Nevertheless, the require-ment that responsible causes other than those due

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to defendant’s conduct must first be eliminated, forthe doctrine to apply, should be understood as beingconfined only to cases of pure (non-contractual) tortsince obviously the presumption of negligence inculpa contractual, as previously so pointed out, im-mediately attaches by a failure of the covenant or itstenor. In the case of the truck driver, whose liabilityin a civil action is predicated on culpa acquiliana,while he admittedly can be said to have been incontrol and management of the vehicle which fig-ured in the accident, it is not equally shown, how-ever, that the accident could have been exclusivelydue to his negligence, a matter that can allow, forth-with, res ipsa loquitur to work against him.’’

Fortuitous Event

No person shall be responsible for those events whichcould not be foreseen (accident) or which, though fore-seen, are inevitable (force majeure), collectively referredto simply as “fortuitous event” (see Art. 1174, Civil Code).

In order that a fortuitous event can be the basis ofexemption from liability, a number of circumstances mustbe shown. The Supreme Court, in Lasam vs. Smith (45Phil. 657; reiterated in Austria vs. Court of Appeals, 39SCRA 527; Servando vs. Phil. Steam Navigation, 117SCRA 832), has held:

“In discussing and analyzing the term “caso for-tuito the Encyclopedia Juridica Española says: ‘In alegal sense and, consequently, also in relation to con-tract, a caso fortuito presents the following essentialcharacteristics: (1) The cause of the unforeseen andunexpected occurrence, or of the failure of the debtorto comply with his obligation, must be independentof the human will; (2) It must be impossible to fore-see the event which constitutes the caso fortuito, orif it can be foreseen, it must be impossible to avoid;(3) The occurrence must be such as to render it im-


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possible for the debtor to fulfill his obligation in anormal manner; and (4) The obligor (debtor) must befree from any participation in the aggravation of theinjury resulting to the creditor (EncyclopediaJuridica Española, 309).”

There is no caso fortuito where a ship captain pro-ceeded en route despite a typhoon advice close to the areawhere the vessel will pass. In Pedro Vasquez vs. Court ofAppeals (138 SCRA 553), it appeared that when a ship,owned and operated by private respondent, had left Ma-nila for Cebu, its officers were aware that a typhoon wasbuilding up in Mindanao. Good weather prevailed untilthe vessel reached Romblon. Upon passing TanguinguiIsland, however, the weather suddenly changed. Althoughthe officers knew that the island was within the typhoonzone, they still decided to proceed on course. Visibilitydropped to zero. The ship struck a reef and sank. Thepetitioners herein, relatives of some of the passengers,sued the respondent for damages. The respondent pleadedforce majeure. The Supreme Court has ruled:

“To constitute a caso fortuito that would exempta person from responsibility, it is necessary that (1)the event must be independent of the human will;(2) the occurrence must render it impossible for thedebtor to fulfill the obligation in a normal manner;and that (3) the obligor must be free of participationin, or aggravation of, the injury to the creditor.” x x x

“Under the circumstances, while, indeed, thetyphoon was an inevitable occurrence, yet, havingbeen kept posted on the course of the typhoon byweather bulletin at intervals of six hours, the captainand crew were well aware of the risk they were takingas they hopped from island to island from Romblonup to Tanguingui. They held frequent conferences,and oblivious of the utmost diligence required of verycautious persons, they decided to take a calculatedrisk. In so doing, they failed to observe that extra-

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ordinary diligence required of them explicitly by lawfor the safety of the passengers transported by themwith due regard for all circumstances and unneces-sarily exposed the vessel and passengers to the tragicmishap. They failed to overcome that presumptionof fault or negligence that arises in cases of death orinjuries to passengers.” (see also Nakpil & Sons vs.Court of Appeals, 144 SCRA 596).

A decision that has received critical attention is thecase of Overseas Bank vs. Court of Appeals (105 SCRA 49,113 SCRA 778), the Supreme Court there holding that abank should not be made liable to pay interest on depositsduring the period that its operations are orderedsuspended by the Monetary Board of the Central Bank.The criticism lies mainly on the thesis that (a) the rulingappears to have misapplied fortuitous event which, inthis context, can merely be a causative factor to loss as amode of extinguishing an obligation to deliver a specificthing but never as the mode itself and (b) the fact that anobligation to pay money (a “genus”) is incapable of being“lost.” In any event, the Supreme Court has felt that itwould be “utterly unfair to require such a bank to pay thestipulated interest for what enables a bank to do so is itsability to generate funds from its authorized operations.”If the situation cannot, strictly speaking, be legally termedas force majeure, it should be held, as a matter of simpleequity, that it be treated as such, and that “conventionalwisdom dictates this inexorable and just conclusion.” (Butsee Central Bank of the Philippines vs. Court of Appeals,139 SCRA 46).

Mechanical defects of carriers have been held not toconstitute fortuitous event (Sweet Lines vs. Court ofAppeals, 121 SCRA 769; Sons vs. Cebu Autobus, 94 Phil,892; Landingin vs. Pangasinan Transp. Co., 22 SCRA284; Necessito vs. Paras, 104 SCRA Phil. 75). A tire blow-out, that causes a public utility jeep to jump into a ditch,has been ruled to be insufficient to overcome thepresumption of negligence. The fact alone that the tire


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may have still been good because its grooves are stillvisible does not make the explosion a fortuitous event. Ifthere is no evidence that the driver has taken due pre-cautions to compensate for any condition liable to causeaccidents, such as the road condition, a tire blow-out couldnot unlikely be caused, for instance, by too much airpressure, overloading or speeding at the time of theaccident (Juntilla vs. Fontanar, L-45637, 31 May 1985).

The existence of a fortuitous event negates theliability that might otherwise arise in the breach of obli-gations. In Victorias Planters Assn., Inc. vs. Victorias Mill-ing Co., Inc. (97 Phil. 318), the Supreme Court has elabo-rated, thusly:

“Fortuitous event relieves the obligor from ful-filling a contractual obligation (Art. 1105, old CivilCode; Art. 1174, new Civil Code). The stipulation inthe contract that in the event of force majeure thecontract shall be deemed suspended during saidperiod does not mean that the happening of any ofthose events stops the running of the period agreedupon. It only relieves the parties from the fulfillmentof their delivering sugar cane and the respondentcentral from milling it. In order that the respondentcentral may be entitled to demand from thepetitioners the fulfillment of their part in thecontracts, the latter must have been able to performit but failed or refused to do so and not when theywere prevented by force majeure such as war. Torequire the petitioners to deliver the sugar cane whichthey failed to deliver during the six years is to demandfrom them the fulfillment of an obligation which wasimpossible of performance at the time it became due.Nemo tenetur ad impossibilia. The respondent centralnot being entitled to demand from the petitionersthe performance of the latter’s part of the contractsunder those circumstances cannot later on demandits fulfillment. The performance of what the law haswritten of cannot be demanded and required. The

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prayer that the petitioners be compelled to deliversugar cane for six years to make up for what theyfailed to deliver, the fulfillment of which was im-possible, if granted, would in effect be an extensionof the terms of the contracts entered into by andbetween the parties.”

Fortuitous events will not extenuate liability (a) incases expressly specified by law, such as when the obligoris in default or has promised to deliver the same thing totwo or more persons who do not have the same interest(see Art. 1165, Civil Code); (b) when it is otherwise dec-lared by stipulation (see Insular Government vs. Punzalan,7 Phil. 546); or (c) when the nature of the obligationrequires the assumption of risk, such as in the aleatorycontract of insurance (see Art. 1174, Civil Code).

Delay

Those obliged to deliver or to do something but failincur delay (“mora”) from the time the obligee judiciallyor extrajudicially demands from them the fulfillment oftheir matured obligation (see Art. 1169, Civil Code).Without such demand, the mere non-performance of theobligation on the time fixed therefor does not necessarilyput the obligor in default (see Rose Packing Company,Inc. vs. Court of Appeals, 167 SCRA 309; Adiarte vs. Courtof Appeals, 92 Phil. 758). A demand before the maturityof the obligation is ineffective. Demand, however, by thecreditor shall not be necessary in order that delay mayexist when —

a. the obligation or the law expressly so declares(see Siulong & Co. vs. Ylagan, 43 Phil. 393); or

b. from the nature and the circumstances of theobligation it appears that the designation of thetime when the thing is to be delivered or theservice is to be rendered was a controlling motivefor the establishment of the contract (see Hanlonvs. Hausserman, 40 Phil. 796); or


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c. the demand would be useless, as when the obli-gor has rendered it beyond his power to perform(see Art. 1169, Civil Code; CETUS Dev., Inc. vs.Court of Appeals, 176 SCRA 72).

In reciprocal obligations, neither party incurs in de-lay if the other does not comply or is not ready to complyin a proper manner with what is incumbent upon him.From the moment one of the parties fulfills his obliga-tion, delay by the other begins (see Art. 1169, Civil Code;Cf. Alano vs. Cortes, 110 Phil. 74; Central Bank of thePhilippines vs. Court of Appeals, 139 SCRA 46; Limjucovs. Court of Appeals, 37 SCRA 663).

Delay or mora has generally been categorizedinto —

(1) Mora solvendi (delay of the debtor)

a. Mora solvendi ex persona (when demand isnecessary)

b. Mora solvendi ex re (when demand is unne-cessary)

(2) Mora accipiendi (delay of the creditor; seeVillaruel vs. Manila Motor Co., 104 Phil. 926).

(3) Compensatio morae (mutual delay of parties thatwould cancel the effects of delay by said parties).

Delay has the effect of rendering liable the guiltyparty for damages that the other might suffer (PNCC vs.NLRC, 172 SCRA 887), as well as of being responsibleeven for a fortuitous event, inclusive of the assumption ofany risk of loss (see Arts. 1165 and 1170, Civil Code).

Contravention of Tenor of Obligations

The faithful observance of an obligation according toits tenor is mandated by law; an unexcused failure thereofrenders the obligor liable for losses and damages that arecaused thereby (see Art. 1170, Civil Code; Arrieta vs.NARIC, 10 SCRA 79).

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Remedies for Breach of Obligations

Appropriate legal remedies are available in order toallow redress upon the breach of obligations. The leni-ency or laxity of the party entitled to enforce the obliga-tion does not diminish his rights thereunder (NationalPower Corporation vs. EIN Chem. Corporation, 145 SCRA529).

The judicial remedies, in general, would include: (a)The principal remedies (i) of specific performance in obli-gations to give specific things (Articles 1165 and 1167 ofthe Civil Code), substitute performance in an obligationto do or to deliver generic things (Article 1165 of the CivilCode) and equivalent performance for damages (Articles1168 and 1170 of the Civil Code); and (ii) of rescission orresolution of reciprocal obligations; and (b) the subsidi-ary remedies that may be availed of when the principalremedies are unavailable or ineffective such as (i) accionsubrogatoria or subrogatory action (Article 1177 of theCivil Code; see also Articles 1729 and 1893 of the CivilCode); and (ii) accion pauliana or rescissory action (Arti-cles 1177 and 1381 of the Civil Code). And, in order tosecure the integrity of final judgments, such ancillaryremedies as attachments, replevin, garnishments, receiv-ership, examination of the debtor, and similar remedies,are additionally provided for in procedural law.

The creditors, after having pursued the property inpossession of the debtor to satisfy their claims, may exer-cise all the rights and bring all the actions of the latterfor the same purpose save those which are inherent in hisperson; they may also impugn the acts which the debtormay have done to defraud them (Art. 1177, Civil Code;Gold Star Mining Co., Inc. vs. Lim-Jimena, 25 SCRA597; Pascual vs. Secretary of Public Works, 110 Phil. 331).Subject to applicable laws, all rights acquired by virtue ofan obligation, are transmissible if there has been no stipu-lation to the contrary (Art. 1178, Civil Code; see Bastidavs. Dy Buncio & Co., Inc., 93 Phil. 195).


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The principal remedies open to an obligee, upon thebreach of an obligation, are generally judicial in natureand must be independently sought in litigation, i.e., anaction for performance (specific, substitute or equivalent)or rescission (resolution) of a reciprocal obligation. Theright to rescind (resolve) is recognized in reciprocal obli-gations; it is implicit, however, in third paragraph of Ar-ticle 1191 of the Civil Code that the rescission there con-templated can only be invoked judicially. Hence, the merefailure of a party to comply with what is incumbent uponhim does not ipso jure produce the rescission (resolution)of the obligation.

Exceptionally, under the law and, to a limited de-gree, by agreement of the parties, extrajudicial remediesmay become available such as, in the latter case, an op-tion to rescind or terminate a contract upon the violationof a resolutory facultative condition. In the case oflease agreements, despite the absence of an explicit stipu-lation, that option has been reserved by law in favor of alessee under Article 1673 of the Civil Code by providingthat the lessor may judicially eject the lessee for, amongother grounds, a violation of any of the conditions agreedupon in the contract. The provision, read in conjunctionwith Section 2, Rule 70, of the 1997 Rules of Civil Proce-dure, would , absent a contrary stipulation, merely re-quire

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