Week 1 – Welcome / Introduction to Law I. Introduction to Law 1. Not Divine Law, law of religion and faith 2. Not Natural Law, justice, fairness and righteousness 3. Not Moral Law, norms of good and right conduct 4. Not Physical Law, order or regularity in nature a. a. Sources of Law i) i) Constitution – Fundamental Law of the land ii) ii) Legislations – Passed by Senate and House of Representatives iii) iii) Administrative issuances – Quasi Legislative Functions iv) iv) Jurisprudence – Decisions of the Supreme Court (SCRA) Stare decisis v) v) Treaties and Generally accepted principles of International Law - Art II Sec 2, Pacta sund servanda vi) vi) Customs – habits and practices through long and accepted usage have become binding rules of conduct vii) vii) Principles of Justice and Equity – common law jurisdiction a. b. Characteristics of Law - - Rule of Conduct - - Obligatory
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Week 1 – Welcome / Introduction to Law
I. Introduction to Law
1. Not Divine Law, law of religion and faith2. Not Natural Law, justice, fairness and righteousness3. Not Moral Law, norms of good and right conduct4. Not Physical Law, order or regularity in nature
a. a. Sources of Law
i) i) Constitution – Fundamental Law of the land ii) ii) Legislations – Passed by Senate and House
of Representatives
iii) iii) Administrative issuances – Quasi Legislative Functions
iv) iv) Jurisprudence – Decisions of the Supreme
Court (SCRA) Stare decisis
v) v) Treaties and Generally accepted principles of International Law - Art II Sec 2, Pacta sund servanda
vi) vi) Customs – habits and practices through long
and accepted usage have become binding rules of conduct
vii) vii) Principles of Justice and Equity – common
law jurisdiction
a. b. Characteristics of Law
- - Rule of Conduct- - Obligatory- - Promulgated by legitimate authority- - Of common observance and benefit
c. d. Quantum of Evidence- - Criminal cases: Proof Beyond Reasonable
Doubt - - Civil cases: Preponderance of Evidence-
greater weight of all the evidence which as a whole shows that the act sought to be proved is more probable than not.
- - Administrative cases: Substantial
Evidence – Such evidence that a reasonable mind might accept as adequate to support a conclusion
d. e. Effects and Applications of law
- - Requirement for publication1. 1. 15 days after publication in OG or
newspaper 2. 2. Ignorance of the law excuses no one
from compliance3. 3. Due Process
- - Law is prospective except:
1. 1. If the law provides for retroactivity2. 2. Penal law insofar as it favors the
accused3. 3. Remedial or curative law
- - Computing time1. 1. Year is 12 calendar months2. 2. Month is 30 days, except when it
refers to a calendar month3. 3. First day excluded, last day included
- - Conflict of Laws Provisionsi. i. Penal laws apply to all who sojourn to
Phils
ii. ii. Family Law and inheritance based on national law of the party regardless of where he lives
iii. iii. Forms and solemnities of contracts and other instrument based on the place where it is executed
e. f. Obligations and Contracts Defined
The body of rules which deals with the nature and sources of obligations and the rights and duties arising from agreements and the particular contracts. Obligation – A Juridical relation whereby a person may demand from another the observance of a determinative conduct (giving, doing, not doing), and in case of breach, may demand satisfaction from the assets of the latter. Contract – Meeting of the mind between two persons whereby one binds himself, with respect to the other, to give something or to render some service. A contract necessarily gives rise to an obligation but an obligation does not always need to have a contract.
f. g. Corporation and Partnership Defined
Partnership – Two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves. Corporation – Artificial being created by operation of law, having right of succession and the powers, attributes, properties expressly authorized by law or incident to its existence.
Weeks 2 to 4 – Obligations
I. General Provisions, Nature and Effects of Obligations
- - To give, to do, and not to do – Examples - - Four essential requisites of an obligation
(i) (i) A passive subject (Debtor – to give; Obligor – to do)
(ii) (ii) An active subject (Creditor/Obligee)(iii) (iii) Object (Prestation) – subject matter(iv) (iv) Juridical tie (Vinculum) – Source of
Obligation
- - Form as a manifestation of intent; but no specific form unless required by law
(b)(b) Kinds of Obligations
1. 1. According to subject mattera. a. Real Obligation – to giveb. b. Personal Obligation – to do
i. i. Positive – to give or doii. ii. Negative - not to do or not to give
A borrower agreed to pay his debt in 60 days, and in case of non-payment to render free service as driver/servant. When due date came, borrower refused to render free service. Decide.
2. 2. According to person obliged
a. a. Unilateralb. b. Bilateral (Reciprocal or non-reciprocal)
(c) (c) Sources of Obligation
1. 1. LAW – Imposed by law - - A wife was about to deliver a child. Her
neighbor brought her to hospital. Who should pay the hospital bill – Husband or Neighbor?
- - P.D. 1517 grants the right of first refusal
to person who has leased for more than 10 years an urban land and who construct his house thereon. Lessee of a Condo in Manila now claims his right of first refusal because he has been living in the unit for almost 15 years. Decide.
Obligations derived from law are not presumed.
- - In a newspaper ad, there was an offer to
replace 30 sachets of Tide for one Venetian cut Glass until the end of the year. At the end of the year, you present your tide sachets, but Tide refused to honor it anymore since the ad was posted more than half a year ago. Decide. 657
a. a. Quasi-contracts – Juridical relations based
on the principle that no one shall be unjustly enriched or benefited at the expense of another.
i. i. Negotiorum Gestio – When a person
voluntarily takes charge of the management of a business or property of another that has been neglected or abandoned, without any power from the latter, as a consequence of which, he is obliged to continue the same until the termination of the affair or to require the owner to substitute him. Ex. NPA infested area Fishpond
ii. ii. Solutio indebiti – When a person
unduly delivers a thing through mistake to another who has no right to demand it. (melon bank v. Javier)
b. b. Crimes (acts or omission punished by law) If you commit a crime, you are liable both criminally and civilly for the consequence of your acts or omissions such as restitution, reparation for damages caused and indemnification for consequential damages. Ex. Support for impregnated rape victim; loss of earning capacity of murder victim
c. c. Quasi delict or Torts – The fault or
negligence of a person who, by his act or
omission, independent from any contractual relation, causes damage to another person
A 3-year-old child was bitten by a dog
of her neighbor. As a result, she got infected by rabies and died. Can the neighbor be held liable for the acts of the dog?
A signboard of hanging out of a
building dropped on a car resulting in total wreck of the car. The car owner sues the building owner and demand to replace the car. Building owner cites the strong wind as force majeure condition indicating no fault on his part. Decide.
2. 2. Contracts
Have the force of law between the contracting parties and should be complied with in good faith.
Sincerity and Honesty
II. Nature and Effect of Obligations
(a)(a) Specific v. Generic Thing1. 1. Specific is designated or physically
segregated from others of the same class.2. 2. Generic refers to a class or genus and
cannot be determined with particularity.
(b)(b) Duties of debtor in delivery of generic thing1. 1. To delivery a thing which must neither be of
superior nor inferior quality (1246)2. 2. To pay damages in case of breach (1170)
(c) (c) Duties of debtor in delivery of specific thing1. 1. To deliver the thing which he has obligated
himself to give2. 2. To take care of the thing with the proper
diligence of a good father of a family The ordinary care that an average or
reasonably prudent person exercises over his property
Another standard of c are may be required by law or by stipulation of the parties
3. 3. To deliver all the accessions and accessories4. 4. To pay damages in case of breach
(d)(d) Remedies of Creditors in breach of obligation 1. 1. To Give Determinate Thing
a. a. To compel specific performanceb. b. To recover damages
2. 2. To Give Indeterminate Thinga. a. To ask for performance of the obligationb. b. To ask that obligation be complied with
by another at expense of debtorc. c. To recover damages
3. 3. To Do a. a. To have the obligation performed at
debtor’s expenseb. b. To recover damages
4. 4. Not to Do a. a. Undone at his expense b. b. To recover damages
(e)(e) Rules on Fruits1. 1. Kinds of fruits
a. a. Natural – product of the soil, young and other products of animals
b. b. Industrial – produced thru cultivation or labor
c. c. Civil – derived by juridical relations
2. 2. Creditor has rights to the fruits from the time the obligation to deliver arises
3. 3. Real rights acquired only when delivered to
hima. a. Real rights - right over a specific thing
without any passive subject, directed against the whole word.
b. b. Personal rights – right to demand from another debtor the fulfillment of the latter’s obligation
(f) (f) Accessions and accessories
Accessions – fruits of a thing or additions to or improvement upon a thing
Accessories – joined to or included with the principal thing for better use or completion.
1. 1. Even if not mentioned, accessories follow
the principal 2. 2. But obligation to deliver accessions or
accessories does not include the principal
(g)(g) Legal Delay1. 1. From the time obligee judicially or extra-
judicially demand fulfillment; not mere notice 2. 2. No demand from creditor necessary in
following cases:a. a. When obligation or law expressly so
declaresb. b. Time is of the essence (controlling
motive)c. c. When demand would be useless
3. 3. In reciprocal obligation, from the moment one party fulfills his obligation, delay by the other begins.
4. 4. Kinds of Delay
a. a. Mora solvendi – delay on the part of debtor
b. b. Mora acccipiendi – delay of creditorc. c. Compensatio more – delay in reciprocal
obligation
5. 5. Effects of Delaya. a. Liable for interest and damagesb. b. Liable even for fortuitous event when the
obligation is to delivery a determinate thing
(h)(h) Fortuitous Events1. 1. Any event which cannot be foreseen or
which though foreseen is inevitable, independent of the will or from aggravation of the debtor, render impossible the fulfillment of obligation
2. 2. No person shall be responsible for fortuitous events, except:
a. a. Where expressly specified by law or stipulated in contract
b. b. When nature of the obligation requires assumption of risk
c. c. When debtor incurs delayd. d. When debtor promises to deliver same
thing to two or more personse. e. When obligation to deliver arises from
criminal offensef. f. When obligation is generic
(i) (i) Fraud (deceit or dolo) Deliberate or intentional
evasion of the normal fulfillment of an obligation;1. 1. Dolo incidente (Incidental Fraud) -
committed in the performance of pre-existing obligation, remedy is damages
2. 2. Dolo causante (Causal Fraud) – Fraud employed at the time of the execution of a contract in order to secure consent, remedy is annulment bec of vitiation of consent
3. 3. Demandable in all obligations4. 4. Waiver of future fraud is void
(j) (j) Negligence (culpa) Omission of that diligence which is required by the nature of the obligation, but no malice
1. 1. Culpa contractual – Negligence in the performance of contractual obligation, a. a. Pre-existing contractb. b. Liable for damages based on breach of
contract c. c. Proof of contract and breach is enough
for recovery of damaged. d. Negligence of employee conclusive
presumption of employer’s negligence e. e. Proof of due diligence in the selection of
employee not a defense
2. 2. Culpa aquiliana – Negligence between parties not so related by any pre-existing contract, a. a. Obligation for damages based on quasi
delictb. b. No pre existing contractc. c. Negligence must be proved for recovery
of damage
d. d. Negligence of employee prima facie presumption of employer’s negligence
e. e. Due diligence in the selection and supervision of employee is a valid defense
3. 3. Can be regulated by the Court depending on
circumstance4. 4. Waiver of future negligence allowed
(k) (k) Presumptions 1. 1. Receipt of principal without reservation as to
interest = presumption of interest paid2. 2. Receipt of later installment of debt without
reservation of prior ones = presumption that prior ones paid
(l) (l) Remedies to satisfy claim
1. 1. Exhaust property of debtor2. 2. Subrogated to rights and actions of debtors,
except those inherent to person3. 3. Impugn all of acts by debtor done to defraud
creditor
II. Different Kinds of Obligations
(a)(a) Pure and Conditional Obligations
1. 1. Pure Obligation – One whose effectivity or extinguishments does not depend upon the fulfillment or nonfulfillment of a condition or upon the expiration of a term or period. Characterized by Immediate Demandability.
2. 2. Conditional Obligation – Effectivity is subordinated to the fulfillment or non-fulfillment of a future or uncertain fact or event
Future and uncertain event or Past event and unknown to the
parties
a. a. Suspensive v. Resolutory
In suspensive condition, fulfillment give rise to an obligation – acquisition of rights
In resolutory condition, fulfillment extinguishes obligation – loss of rights acquired
b. b. Casual, Potestative, Mixed
Casual – Depends on chance or will of third party (Valid)
Potestative – Depends on the will of one of the contracting parties
(1)(1) If suspensive condition depends on will of debtor, the obligation is void
(2)(2) If resolutory condition depends on will of debtor, the obligation is valid
(3)(3) If depends on will of creditor, it is valid.
Mixed – Depends partly upon the will
of a party and partly upon chance or third party (Valid)
c. c. Impossible Conditions - - Physically Impossible or legally
impossible- - If “to do”, whole obligation is void - - If “not to do”, obligation is valid, as if
not written- - If divisible, part not affected by
impossible condition is valid.
d. d. Positive v. Negative
i. i. Positive Condition (event will happen) extinguished:
As soon as time expires without
the event taking place As soon as it becomes indubitable
that the event will not take place
ii. ii. Negative Condition (event will not happen) effective:
As soon as time expired without
event taking place As soon as it becomes evident the
event cannot occur
e. e. Reciprocal v. Unilateral
i. i. If reciprocal, the fruits are deemed mutually compensated
ii. ii. If unilateral, fruits and interest belongs
to debtor
3. 3. Condition deemed fulfilled when obligor prevents its fulfillment
4. 4. Creditor may before the fulfillment of the
condition bring appropriate actions for the preservation of the rights.
5. 5. Debtor may recover what he has paid by
mistake before the fulfillment of condition.
6. 6. Effects of the fulfillment of a condition
retroacts to the day of the constitution of the obligation.
7. 7. Rule on loss or deterioration, improvements
before the fulfillment of condition
Lost – when perished, go out of commerce, or disappear in such a way that its existence unknown or cannot be recovered
a. a. If without the fault of debtor, the
obligation is extinguishedb. b. If lost thru fault of debtor, obliged to pay
damagesc. c. When deteriorate without fault of debtor,
creditor bores the impairmentd. d. When deteriorate with fault of debtor,
creditor may rescind or fulfillment with damages
e. e. When improved by nature, or by time, inure to the benefit of creditor
f. f. When improved by debtor, no right to be indemnified, but may remove such improvement, or set off against damage
8. 8. Remedies in reciprocal obligation
a. a. Specific Performance or Rescission b. b. With damages in either case
c. c. Alternative remedy not cumulative – can
choose one but not both
d. d. After action for specific performance impossible, option for rescission
e. e. Injured party must resort to judicial
rescission, i. i. Except where automatic rescission
expressly stipulatedii. ii. Or where there is no performance yet
f. f. Power of the court to fix period g. g. Subject to right of good faith third party
h. h. Substantial breach not slight breach
i. i. Where both parties have breach, liability
of first infractor equitably tempered; where first infractor not know, both parties bear own damages
(b)(b) Obligations with a Period
1. 1. Demandability or extinguishments subject to
expiration of a term or period 2. 2. Term or period – future and certain event
3. 3. Rules on loss, deterioration, improvements
of conditional obligation applicable
4. 4. If paid or delivered before period arrives, debtor may recover the thing, with fruits and interests.
5. 5. Established for the benefit of both debtor
and creditor, unless otherwise stated
6. 6. Court may fix period
a. a. If obligation does not fix a periodb. b. Depends on will of debtor
“When means permit” not condition, but period
Period fixed by court cannot be changed
7. 7. Debtor loses right to make use of the period
a. a. Debtor becomes insolvent, unless he gives guaranty or security
b. b. When debtor does not furnish guaranties or securities promised
c. c. When guaranties or securities impaired or disappear
d. d. When debtor violates an undertakinge. e. When debtor attempts to abscond
(c) (c) Alternative Obligations
Alternative – several objects or prestations but performance of one sufficient
Facultative – One object or prestation but debtor may substitute.
1. 1. Must completely perform one of them 2. 2. Right of choice to debtor, unless expressly
granted to creditor Except those impossible, unlawful,
which could not have been the object of the obligation or only one prestation is practicable
3. 3. Choice no effect until communicated,
irrevocable once communicated 4. 4. Debtor may rescind the contract with
damages if thru creditor’s acts debtor cannot make a choice
5. 5. If lost due to fortuitous event,
a. a. If two or objects remain, the obligation subsists
b. b. If only one object remain, it becomes simple obligation
c. c. If none remains, obligation is extinguished
6. 6. If lost due to fault of debtor,
When right of choice belongs to debtor
a. a. If 2 or more objects remain, debtor can
choose from remaining, not liable for damagesb. b. If only one remain, simple obligation to
deliver remainingc. c. If none remains, debtor indemnify
damages based on value of last object
When right of choice belongs to creditor
a. a. If alternative object still remain, creditor can choose the one lost and ask value of object lost and damages; if creditor choose the remaining object, debtor cannot be liable for damages
b. b. If none remains, debtor to indemnify for damages based on the price of the object chosen by the creditor plus consequential damages
7. 7. Facultative Obligation
a. a. Right of choice only to debtorb. b. If lost before substitution, debtor not
liable. c. c. Debtor liable for loss due to his fault
once substitution has been maded. d. If after substitution, it is lost thru
fortuitous event, obligation extinguished, debtor not liable
(d)(d) Joint and Solitary Obligations
1. 1. Joint Obligation – Each of creditor has right to demand, and each debtor is bound to render compliance, with his proportionate part of the prestation
a. a. Default rule is obligation is JOINT b. b. Joint creditor cannot act in representation
of the other creditors
c. c. Joint debtor cannot be compelled to answer for liability of other debtors
d. d. “Jointly”, “We promise to pay”, “Pro
rata”, “proportionately”
2. 2. Solidary Obligation – Each creditor has a right to demand, and each debtor is bound to render compliance, with the entire prestation; but as to co-debtor he is liable only for his share
a. a. Instances when obligation is solidary:
i. i. When obligation expressly states so ii. ii. When law requires solidarity:
1. 1. If 2 or more heirs take possession of estate
2. 2. Partners in partnership3. 3. If principal allowed agent to act
as though he has full power4. 4. If 2 or more appointed an agent
for common undertaking or transaction
5. 5. 2 or more bailees to whom a thing is loaned
6. 6. 2 or more officious managers, unless management was assumed to save thing from imminent danger
7. 7. 2 or more persons liable for quasi delict
8. 8. 2 or more payees when there has been payment of what is not due
9. 9. Principal, accomplices, and accessories of a felony.
iii. iii. When nature of obligation requires
solidarity1. 1. Ex. Accident fr “Kabit” system
b. b. “Solidarily”, “Jointly and severally”, in
solidum, together and/or separately, “I promise to pay”
c. c. Creditors and debtors need not be bound
in the same manner and by the same periods and conditions
d. d. Not same as indivisible obligation
i. i. Solidary refers to vinculum;
Indivisibility refers to prestation ii. ii. Solidary requires plurality of subjects
iii. iii. In solidary, all debtors liable for breach of obligation; In indivisibility, only debtor guilty of breach of obligation is liable for damage
iv. iv. In indivisible obligation, other debtors
not liable for insolvency; if solidary debtor becomes insolvent, the co-debtors bore his debt in proportion
e. e. Solidary creditors may do whatever may
be useful to others, but not anything which may be prejudicial to the others
f. f. A solidary creditor cannot assign his
rights without the consent of the others, except if to co-creditors
g. g. Debtor must pay to the creditor who
made demand, if none demanded, then he may pay any one of the solidary creditor
h. h. Novation, compensation, confusion or
remission of a solidary creditor shall extinguish the obligation but the creditor who did these acts shall be liable to the other creditors
i. i. No re-imbursement if payment made
after obligation prescribed or illegal
j. j. Remission of the whole obligation obtained by a solidary debtor does not entitle him to reimbursement from his co-debtors
k. k. Defenses available to solidary debtors
i. i. Derived from nature of obligation
Payment, fraud, prescription, remission, illegality, non performance of condition
ii. ii. Personal to the debtor
Insanity, incapacity, mistake, violence, minority
iii. iii. Personal to the other solidary debtors
Partial defense
(e)(e) Obligations with a Penal Cause
1. 1. With accessory undertaking in case of breach of obligation
a. a. To insure performanceb. b. To liquidate the amount of damage to be
awardedc. c. To punish the obligor in case of breach
2. 2. No need to prove actual damage 3. 3. Shall substitute for damages and interest,
except
a. a. When there is stipulation to the contraryb. b. When obligor is sued for refusal to pay
agreed penaltyc. c. When obligor is guilty of fraud
4. 4. When court may reduce penalty
a. a. If principal obligation partly complied withb. b. If principal obligation irregularly complied
withc. c. If penalty is iniquitous or unconscionable
Weeks 5 to 7 - Extinguishments of Obligations Modes of Extinguishing Obligations
1. Payment or performance 2. Loss of the thing due 3. Condonation or remission 4. Confusion or merger of the rights of creditor and debtor 5. Compensation 6. Novation 7. Death of a party in personal obligation 8. Annulment or Rescission of contract 9. Arrival of Resolutory period or fulfillment of resolutory conditon 10. Impossibility of fulfillment 11. Prescription
I. Payment(a)(a) General Provisions Payment
(i) (i) Complete Delivery of money, performance of obligation
(ii) (ii) If substantially performed in good
faith, obligor may recover as though there had been complete fulfillment less damages
(iii) (iii) Third party cannot compel
creditor to accept payment or performance, except
a. a. When there is stipulation to the contrary
b. b. When third person has an interest in the fulfillment of obligation
(iv) (iv) Rights available to third party
who pays:a. a. If payment made with the
consent of the debtori. i. Recover from debtor
the entire amountii. ii. Subrogated to all the
rights of creditor
b. b. If payment made without
the knowledge or against the will of debtor, he can recover only insofar as payment has been beneficial to the debtor
(v) (v) To whom payment must be
made (1240)a. a. To the person in whose
favor obligation has been constituted
b. b. His Successor in interestc. c. Any person authorized to
receive it
d. d. Third person provided it has redounded to benefit of creditor. (1241, 1242) Presumption of benefit in the following case:
If after payment, third person acquires creditor’s rights
If creditor ratifies payment to third party
If creditor’s conduct let debtor to believe that the third person had authority to receive payment
e. e. Possessor of the credit
(vi) (vi) Payment must be in Legal
Tendera. a. Foreign currency may be
used as currency of contractb. b. Promissory notes, bills of
exchange, checks not legal tender. They produce effect of legal tender only when encashed or impaired thru the fault of creditor (1249)
c. c. In case of extraordinary
inflation or deflation, the basis is the value of currency at the
time obligation is established. (1250)
(b)(b) Applications of Payments
1. 1. The right belongs to the debtor, but if he does not exercise it, creditor may do it
2. 2. If creditor issues a receipt designating the debt to be applied, debtor can accept or reject
3. 3. Where neither debtor nor creditor made a choice, it shall be applied on the debt which is most onerous a. a. Older debts more onerous
than newer onesb. b. One bearing interest more
onerous than one that is notc. c. Secured debt more
onerous than unsecuredd. d. Debt as principal more
onerous than debt as guarantore. e. Solidary obligation more
onerous than sole debtor4. 4. If similar nature and burden,
payment shall be applied proportionately
(c) (c) Payment by Cession
Assignment or abandonment of all the properties of the debtor for the benefit of his creditors in order that the latter may sell same and apply proceeds thereof to
1. 1. Cession does not make the creditors owners of the property
2. 2. Unless stipulation to contrary,
debtor still required to pay balance
3. 3. Requires two or more creditors, debtors insolvent, cession accepted by creditors
(d)(d) Dacion en pago
Dation in payment is the transmission of the ownership of a thing by the debtor to the creditor as
an accepted equivalent of the performance of an obligation.
Governed by law on sales
1. 1. Difference between Dacion and Cessiona. a. Dacion usually only one
creditorb. b. Dacion does not require
insolvencyc. c. Dacion does not involve
all the property of debtord. d. Dacion makes creditor
owner of the propertye. e. Dacion is a novation
(e)(e) Tender of Payment and
Consignation Tender of payment – The act of the debtor of
offering to the creditor the thing or amount due Consignation – Deposit of the object or the
amount due with the proper court after refusal or inability of the creditor to accept the tender of payment
1. 1. Requisites of Consignationa. a. Debt Dueb. b. Tender of payment by
debtor and refusal by creditor to accept it without justifiable reason
c. c. Previous notice of the consignation had been given to persons interested in fulfillment of obligation
d. d. Thing or amount due has been deposited with judicial authority
e. e. Subsequent notice of consignation to interested parties
2. 2. Exception to requirement for
tender of payment:a. a. When creditor is absent or
unknown or does not appear at place of payment
b. b. When he is incapacitated to receive payment
c. c. When he refuses to give receipt, without just cause
d. d. When two or more persons claim same right to collect
e. e. When title of the obligation has been lost
3. 3. Expenses of consignation for
Creditor’s account
a. a. If creditor allows debtor to withdraw the consignation, creditor lose preference over the thing. Co-debtor, guarantors, sureties shall be released.
II. Loss of the Thing Due
(a)(a) Lost – when perished, go out of commerce, or disappear in such a way that its existence unknown or cannot be recovered Or becomes legally or physically impossible to perform, or so difficult as to be manifestly beyond the contemplation of the parties
(b)(b) The obligation to deliver specific thing is
extinguished if 1. 1. Without the fault of debtor, and 2. 2. Debtor not in delay
(c) (c) No person shall be responsible for fortuitous events, except:
1. 1. Where expressly specified by law or stipulated in contract
2. 2. When nature of the obligation requires assumption of risk
3. 3. When debtor is at fault, partly4. 4. When debtor incurs delay5. 5. When debtor promises to deliver same thing
to two or more persons6. 6. When obligation to deliver arises from
criminal offense7. 7. When obligation is generic
(d)(d) In case of partial loss the court shall determine whether it is so important as to extinguish the obligation
(e)(e) In case lost when the thing is in the possession of
debtor, presumption is it is his fault Except earthquake, flood, storm or other
natural calamity
(f) (f) Creditor shall have right to go against any third person responsible for the loss.
III. III. Condonation or Remission of Debt
g. h. Act of liberality by virtue of which creditor abandons his right
Gratuitous Accepted by debtor Obligation must be demandable Parties must be capacitated Donation not inofficious Forms in express condonation
h. i. Implied remission- - Delivery of private document evidencing
credit- - If thing pledge is found in the possession
of debtor or owner of thing - - Renunciation of principal extinguish
accessory obligation IV. Confusion or Merger of Rights
Creditor and Debtor merged in the same person1. 1. Between principal debtor and principal
creditor2. 2. Complete and definite merger
a. a. Merger of debtor and creditor benefits the guarantor
b. b. Extinguish only the portion of the joint obligation corresponding to the creditor and debtor merged
c. c. Merger of one solidary debtor with creditor extinguishes obligation
V. Compensation
a. a. Persons who in their own rights are debtors and creditors of each other extinguishes the debts to the concurrent amount
b. b. Guarantor can set up compensation of what principal debtor may owe creditor
c. c. Compensation may be total or partiald. d. Parties may agree to compensate debts not yet
due
e. e. When one or both debts are rescissible or voidable, they may be compensated before they are judicially rescinded or avoided
f. f. Requisites of legal compensation (by operation of law ):
1. 1. Parties are principal creditors and debtors of each other
2. 2. Both debts consist in sum of money or consumable of same kind and quality
3. 3. Both debts are due and demandable4. 4. Two debts are liquidated (amount is
certain)5. 5. No retention or controversy commenced
by 3rd partyb. g. Compensation after assignment
i. Assignment made with consent of debtor Debtor cannot set up compensation against
previous creditor
ii. Assignment with knowledge but without consent Debtor can set up compensation for debts
before the notification Debtor cannot set up compensation with
respect to debts which matured after notification
iii. Assignment without knowledge of debtor Debtor can set up compensation for debts
maturing before he learned of assignmentc. h. Compensation cannot take place in following case:
i. Debts from Contracts of Depositum (A person receives a thing belonging to another for safekeeping and of returning the same; not bank deposits)
ii. Debts from Commodatum (One person delivers to another something for him to use and return it)
iii. Claims for support due by gratuitous title
iv. Debts from Criminal offense
v. Taxes
VI. Novation – extinction of an obligation through the creation of a new one which substitutes it
a. a. Requisites:
i. Previous valid obligation
ii. Agreement to enter new obligation
iii. Extinguishments of old
iv. Creation of new valid obligationb. b. Must be declared in unequivocal termsc. c. Or incompatible on every point – Test: Whether
old and new contract can stand together each having its own independent existence
d. d. Substitution of Debtor
i. Expromision – Without the knowledge or consent of debtor, at the instance of the new debtor
1. 1. Payment by new debtor gives him right to beneficial reimbursment
2. 2. Insolvency or non fulfillment of obligation by new debtor will not give rise to liability of old debtor
ii. Delegacion – Substitution made at the instance of old debtor
3. 1. Payment by new debtor entitles him to reimbursement and subrogation
4. 2. Non fulfillment of obligation by new debtor will not give rise to liability of old debtor
5. 3. Insolvency of new debtor will revive action against old debtor if insolvency was already existing and of public knowledge, or known to the debtor when he delegated his debt
e. e. If new obligation is void, the original one shall subsists
f. f. If original obligation is void, novation is void; except when annulment may be claimed only by debtor or when voidable acts have been ratified
g. g. Subrogation – Substitution of Debtor
i. Conventional – By express agreement of the old creditor, debtor and the new creditor
ii. Legal –Without agreement, by operation of law
1. 1. When creditor pays another creditor who is preferred, even without the debtor’s knowledge
2. 2. When a third person, not interested in the obligation, pays with the express or tacit approval of debtor
3. 3. When a third person interested in the fulfillment of obligation pays, even without the knowledge of debtor
Definition of a ContractDefinition of a Contract
A meeting of the minds Between two persons Whereby one binds himself, with respect to the
other To give something or to render some service
Different phases or stages in the life of a contractDifferent phases or stages in the life of a contract
1. 1. Preparation – Preliminary to formation2. 2. Perfection – birth of the contract3. 3. Consummation - fulfillment
Essential characteristics of ContractsEssential characteristics of Contracts
1. 1. Obligatory force – must be complied with in good faith 2. 2. Autonomy – parties are free to enter such stipulations,
clauses, terms and conditions – – Clauses and condtions must not be contrary to:
LAW Morals Good Customs Public Order Public Policy
3. 3. Mutuality – contract must bind both parties
Determination can be left to third party, whose decision shall be binding only when communicated to both parties
Unless such determination be evidently inequitable 4. 4. Relativity – takes effect only bet parties, their assigns and
heirs Stipulation pour autrui accepted by third party Where third persons comes into possesion of the object
of contract creating real rights Where contract is to defraud a third person Where third person induces a contracting party to violate his
contracta. Different Classes of ContractsDifferent Classes of Contracts
According to perfection
– – Consensual – Perfected by mere agreement of the parties
– – Real – Requires not only consent, but also the delivery of the object
According to form
– – Common – Do not require particular form – – Formal – Those which require particular form, like
donation, mortgage
According to nature of vinculum– – Unilateral – Obligation of one party only – – Bilateral – Reciprocal obligations for both parties
According to cause
– – Onerous – Giving of an equivalent or compensation – – Gratuitous – Given without compensation, just pure
liberality
According to risks involved– – Commutative – Prestation is pecuniarily appreciable
and determined at the moment of celebration of contract
– – Aleatory – Pecuniarily appreciable but not yet determined at the moment of celebration, since it depends upon the happening of an uncertain event. Ex. Insurance
According to name
– – Nominate – with specific names or designation in law – – Innominate – no specific name
Essential Requisites of ContractsEssential Requisites of Contracts
Consent of the contracting parties Object certain subject matter of the contract Cause of the obligation which is established Elements of Elements of
ConsentConsent
Concurrence of the offer and the acceptance o Definite Offer that may be exactly fixed o Assent to the terms without qualifications or conditions o Conveyed before the death, civil interdiction, insanity, or
insolvency
o Qualified acceptance is a counter offer o Perfected when acceptance comes to knowledge of offeror o Offer can be withdrawn anytime before acceptance, unless
option is founded on consideration o If offer made thru agent, accepted when communicated to
the agent
By parties with legal capacity to contract o Not minors, insane or demented, deaf-mutes who do not
know how to write, incompetents under guardianship, civil interdiction
o Minor can be liable if he misrepresents his age o Prohibited by law from entering into contracts
Husband and Wife to each other o o Insolventso o Persons prohibited from giving donationso o Adultery, concubinageo o In consideration of criminal offenseo o Made to public officer, spouse, by reason
of officeo o Persons with fiduciary relationso o Guardian, for property under his
guardianshipo o Agents, for property entrusted to them o o Executor/administratoro Public officers, judges, for property under their
Mistake - False notion of a thing or a fact materrial to the contract
Simple mistake gives rise to correction Render voidable in following cases: Mistake as to object of the contract
o Identity of thing, Substance, Condition, Quantity only if principal reason o
Mistake of Law Will not make it voidable except: Mutual error as to the legal effect of an agreement when the real purpose of the parties is frustrated Mistake as to person If such identity or qualification is principal cause of contract
Violence – Employment of external physical force, irresistible and serious to wrest consent
Intimidation – Moral compulsion to influence another to give his consent thru fear of imminent or grave evil
o o Force employed must be serious or
irresistibleo o Determining cause for the party in
entering into the contract
Undue Influence – Improper advantage of his power over the will of another depriving the latter of reasonable freedom of choice
Confidential, Family, Spiritual and other
relations or Person influenced suffering from mental
weakness, ignorant, financial distress
Fraud – Insidious words or machinations of one of the contracting parties induced the other to enter into a contract, which without them he would not have agreed; Failure of one party to disclose facts to other party when there is a duty to reveal them
Dolo incidente (Incidental Fraud) - committed in the performance of pre-existing obligation, remedy is damages
Dolo causante (Causal Fraud) – Fraud employed at the time of the execution of a contract in order to secure consent, remedy is annulment bec of vitiation of consent
o o Must be employed by one of the contracting parties,
o o but not by both or by third partieso o Must be Seriouso Must have induced the other party to
enter into the contract - Vices of Declaration
Simulated Contracts 1. Absolute1. Absolute – Contracting parties do not intend to be bound by the contract at all–Void
2. Relative– Contracting parties conceal their true intentions– Real agreement binding on the parties if it does not prejudice third person
ObjectsObjects
Thing, right or service which is the subject matter of the obligation created or established Thing or service must be within the commerce of man
o o The law prohibits future inheritance as object of contract
o o Transmissible and can be appropriatedo o Not contrary to Law Moral Good Conduct Public
Order Public Policyo o Real or possibleo o Determinate or determinable
CauseCause
Essential reason why the parties enter into the contract Cause should be in existence
o Licit or lawful o True
Interchangeable with consideration, but not same as motive General rule: Particular motive of the party in entering into a contract are not material. Except: When it predetermines the purpose of the contract
FormForm
Whatever may be the form, Contract shall be obligatory on all provided all the essential requisites are present Two exceptions:
When Law requires a certain form for validity When Law requires form for enforcement Must appear
in Writing to be valid: o Donation exceeding P 5,000o o Sale of piece of land or interest therein by an agento o Antichresis - Creditor acquires rights to fruits of
immovable but applying to payment of interesto o Agreement regarding payment of interest
Must appear in Public Instrument to be valid: Donations of immovable property
Partnership where immovable or real rights are contributed Must appear in Public Instrument for Enforcement
Creation, transmission, modification, sales or extinguishments of real rights over immovable properties
Cession, repudiation, or renunciation of hereditary rights, or those of conjugal partnership of gains
Power to administer property Cession of actions or rights proceeding from an act
appearing in a public document
ReformationReformation
When the true intention of the parties are not expressed in the instrument, one of the party may ask for the instrument to be changed so that true intention may be expressed. Requisities Must be a meeting of the minds of the parties
True intention is not expressed in the instrument Failure due to mistake, fraud, inequitable conduct or
accident What may be reformed Mutual mistake of parties cause failure to disclose
real agreements One party mistaken and the other acted fraudulently
or inequitably One party was mistaken and the other knew that
instrument did not state real agreement, yet concealed it Ignorance, lack of skill,, negligence or bad faith on
the part of person drafting it Where parties agree on mortgage, but instrument states
property is sold absolutely or with right to repurchase
o What may not be reformedo o Simple Donations with no conditiono o Willso o Those where real agreement is void
Defective ContractsDefective Contracts
o o As to defecto o Rescissible - Injury or damageo o Voidable - Vitiation of consent or legal
capacityo o Unenforceable - In excess of authority or do
not complyy with S of Fraudo o Void - Lack of an element of a valid contract
o o As to effecto o Rescissible and Voidable - Valid until
annulledo o Unenforceable - Cannot be enforced by
action in courto o Void - No legal effects at all
o o As to parties who can file actiono o Rescissible and Void – May be attack directly
By contracting parties or by third partieso o Voidable and Unenforceable - Cannot be
attacked by third persons
Resolution (Rescission of reciprocal obligation Party who may institute action
For resolution, only party to the contract o Causes
Failure of one party to comply w/ obligation o Kind of contract
Reciprocal obligation only o Power of the courts
Can grant extension for performance
Rescissible Contracts
Guardian who represent ward, lession of more than ¼
of the value of the thing In representation of absentee, lession of ¼ In fraud of creditor who is unable to collect Things under litigation, entered into by defendant
without approval of litigants and court Payment made in state of insolvency where debt not
yet due Those which may be declared by law
Partition (1098) Result of deterioration (1189) Unpaid seller (1526 and 1534) Badges of
Fraud
o o Cause or consideration is inadequateo o Transfer made after suit has begun or pendingo o Sale on credit by an insolvent debtoro o Evidence of large indebtedness or complete
insolvencyo o Transfer of all or nearly all of debtor propertieso o Between father and son, with any of above
circumstanceso o Failure of vendee to take exclusive possession
Voidable ContractsVoidable Contracts Where one party is incapable of giving consent to a
contract Where the consent is vitiated by mistake, violence,
From time incapacity ceases From discovery of such fraud or mistake
Ratification or confirmation Loss of the thing by thru the fault of the person who has
right to annul Effects of annulment of Voidable ContractEffects of annulment of Voidable Contract– – If not consummated, then parties are released from
obligation
– – If consummated, parties are to restore to each other what they have given, with fruits and interests, plus damages
– – If to do or not to do, there will be apportionment of damages
– –Incapacitated party not obliged to make restitution except for what he was benefited Unenforceable ContractsUnenforceable Contracts Those entered into in the name of another person by one
who has been given no authority or legal representation or who has acted beyond his powers
Those not complying with Statute of Frauds. Statute of FraudStatute of Fraud– –Purpose is to prevent fraud, not to aid the commission of fraud– – Basic and fundamental principles
Applies only to executory contracts Cannot apply if action is not for damage bec of violation
of agreement or for specific performance Exclusive May be waived Personal defense Contracts are not void Rule of exclusion Concerns admissibility of evidence, not credibility Does not apply if action is to claim reformation
– – Following must be in writing or in some notes or memorandum:
– – Agreement not to be performed within a year from the making thereof
– – A special promise to answer for debt, defaults or miscarriage of another
– – Agreement in consideration of marriage– – Sales of goods, chattels, things above P500– – Lease of more than one year––Representation as to credit of another
Void ContractsVoid Contracts– – No concurrence of offer/acceptance
– – Cause, object, purpose contrary to law, morals, good customs, public order, or public policy
– – Absolutely simulated or fictitious– – Cause or object did not exist at the time of the
transaction– – Object outside commerce of men– – Impossible service– – Intention of the parties relative to principal object cannot
be ascretained– – Prohibited or declared void by law EstoppelEstoppel Estoppel in pais - by one’s conduct or acts,
representatioons, admissions or silence, culpable negligience induces another to believe certain facts to exist and such other rightfully relies and acts on such belief.
Estoppel by Deed - A party to a deed, are precluded from
aasserting against the other party to the deed any right or title in derogation of the deed, or from denying any material fact asserted therein.
Estoppel by Record - A party precluded from denying the
truth of matters set forth in a record, whether judicial or legislative.
Estoppel by LachesEstoppel by Laches Estoppel by Laches
Failure or neglect to enforce a right for an Unreasonable and unexplained length of time Despite knowledge or notice
EXTINCTIVE PRESCRIPTION(Arts. 1139-1155)
40 days Redhibitory action based on defects
of animals.6 months (a)(a) Action for reduction of price for
rescission in case of breach of sale of real estate, either with a statement of its area at a certain price for a unit of measure or number.
(b)(b) Action for warranty against hidden defects of thing sold.
1 year (a)(a) Action by husband against wife to impugn child’s legitimacy if husband is in the same place as wife.
(b)(b) Action for revocation of donation for acts of ingratitude.
(c) (c) Action for forcible entry or unlawful detainer.
(d)(d) Action for defamation.(e)(e) Action for rescission or for
damages if immovable sold is encumbered with non-apparent burden or servitude.
2 years Action to impugn child’s legitimacy if husband is in the Philippines but not in same place as wife.
3 years Action to impugn child’s legitimacy if husband is abroad.
4 years (a)(a) Action for revocation or reduction of donation based on supervening birth, appearance or adoption of a child.
(b)(b) Action for revocation of donation based on fulfillment of condition.
(c) (c) Action for recovery of movable (replevin) if possessor is in good faith.
(d)(d) Action upon injury to rights of plaintiff.
(e)(e) Action upon a quasi-delict.(f) (f) Action for rescission of
rescissible contracts.(g)(g) Action for annulment of
voidable contracts.5 years (a)(a) Action for legal separation.
(b)(b) Action for annulment of marriage based on
1. Lack of parental consent.2. Fraud.3. Force, intimidation or undue influence.4. Physical incapacity and afflicted with a sexuality transmissibledisease.(c) (c) Action to claim legitimacy if
child should die during minority or in state of insanity.
(d)(d) Action for declaration of incapacity of heir.
(e)(e) Action for warranty of solvency of debtor if credit is assigned to co-heir during partition.
(f) (f) All other actions whose periods are not fixed by law.
6 years (a)(a) Action upon oral contract.(b)(b) Action upon a quasi-contract.
8 years Action for recovery of movables (replevin) if possessor is in bad faith.
10 years (a)(a) Action for recovery of possession of immovables (accion publiciana) if real right of possession is lost.
(b)(b) Action for recovery of ownership of immovables (accion reinvindicatoria) if possessor is in good faith.
(c) (c) Action upon a mortgage contract.
(d)(d) Action upon a written contract.(e)(e) Action upon an obligation
created by law.(f) (f) Action upon a judgment.
Lifetime (a)(a) Action to claim legitimacy.(b)(b) Action to obtain declaration of