Laws on Obligation and Contracts

Art. 1163. Every person obliged to give something is also obliged to take care of it with the proper diligence of a good father of a family, unless the law or the stipulation of the parties requires another standard of care. (1094a) 3 kinds of prestations in obligations: •To give ? real (there is some physical thing which may be the subject of possession, the delivery of which completely discharges the obligation) •To do •Not to dopersonal (non-fulfillment is resolved in the end by the payment of an indemnification of damages).

Obligation to do or not to do •Perfection of the obligation devolves upon the person himself who is bound Obligation to give •Intimately connected with the thing that is the subject matter of relation •Definition: That which has for its object the delivery of a thing which the obligor must deliver to the obligee because of whatever right the latter may have acquired over the same (Caguioa) •Classification:(distinction lies purely and exclusively on the will of parties or under the norms of law) 1. Specific obligation – an obligation to give a specific or determinate thing *specific/determinate thing.

– a thing determined individually in such a manner that it cannot be substituted with another – object is particularly designated or physically segregated from all others of the same class; object is a concrete, particularized thing, indicated by its own individuality (Jurado) – one that is individualized and can be identified or distinguished from others of its kind (Tolentino) – examples: white horse which won the Senior Grand Derby in 1979, Samsung G600 G-660#1-1G-6608>PC< – the very same thing promised must be delivered by the debtor and he cannot substitute said thing with another although the substitute is more valuable than that agreed upon unless the creditor agrees to the substitution (Art. 1206 par.

1) – 3 accessory obligations (Note: only in specific obligations): (1) obligation to take care of it with the proper diligence of a good father of a family (Art. 1163); (2) to deliver the accessions and accessories although the same may not have been mentioned (Art. 1166); (3) to deliver the fruits from the moment the obligation to deliver arises (Art. 1164) 2. Generic obligation – has for its object a genus an object that is determined only by the class to which it pertains (incertum corpus) – delivery of a thing belonging to a specie stipulated, usually those which are fungible and those which are determined by amount, number or measure – an obligation to give a generic thing *generic/indeterminate thing.

– the object is one whose determination is confined to that of its nature – to the genus to which it pertains (Jurado) – one that is indicated only by its kinds, without being designated and distinguished from others of the same kind (Tolentino) – examples: ten white horses, Samsung G600, Acer laptop ?2 Purposes of obligations to give: (Caguioa) 1. To transfer title (e. g. contract of sale or barter) 2. To transfer merely possessions (commodatum—Art. 1933, by the contract of loan, one of the parties delivers to another, either something not consumable so that the latter may use the same for a certain time and return it, in which case the contract is called a commodatum ) Other form of classifying obligations in general: (Caguioa) a. Positive- obligations which have for their object to give or to do b.

Negative – restrains the obligor from delivering or doing something which he could do where it not for the obligation Good father of a family (bonus pater familias) •general legal standard of care or degree of diligence the law requires in obligation to deliver a thing Circumstances that should be taken into consideration in determining the degree of diligence: (Caguioa) •nature of the obligation depending on the circumstances of the debtor •nature of the obligation depending on the time of the performance of obligation •nature of the obligation depending on the place of the performance of the obligation Reason behind Art. 1163: the obligation to deliver a thing would be illusory if the debtor were not also obliged to preserve it.

(Tolentino) Effect of breach: Debtor who fails to exercise the diligence of a good father of a family in preserving the thing can be held liable for damages. (Tolentino) * Note: Art. 1163 can be read in conjunction with Art. 1173. Art. 1164. The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. However, he shall acquire no real right over it until the same has been delivered to him. (1095) •General rule: The creditor or obligee, in an obligation to deliver a determinate thing, is entitled to the fruits from the time the obligation to deliver arises. *When does the obligation to deliver the thing and the fruits arise?

Obligations arising from law, quasi-contracts, criminal offenses, quasi-delictsObligations arising from contracts •From the time designated by the provisions of the Civil Code or of special laws creating or regulating them- General rule: from the moment of the perfection of contract (basis: Art. 1537 ) •Exceptions to the general rule: 1. In case there is a contrary stipulation of the parties with respect to the time when the thing or fruits shall be delivered. 2. If the obligation is subject to a suspensive condition ? obligation to deliver the thing as well as the fruits shall arise only from the moment of the fulfillment of the obligation; otherwise stated, from the moment the condition happens (Art.1187) suspensive condition – the happening or fulfillment of the condition results in the birth of the obligation 3.

If the obligation is subject to a suspensive term or period ? obligation to deliver arises only upon the expiration of the designated term or period •Reason/justification of the article: found in the corresponding liability of the creditor for any loss that is occasioned to the property, since he bears the same from the moment of the perfection of the contract. •Distinctions between personal and real rights Personal RightReal Right •power belonging to one person to demand of another, as a definite passive subject, the fulfillment of a prestation to give, to do, or not to do (Tolentino).

•jus ad rem ?right enforceable only against a definite person or group of persons- power belonging to a person over a specific thing, without a passive subject individually determined, against whom such right may be personally exercised – jus in re ? right enforceable against the whole world (e. g. right of ownership, possession, usufruct, or easement) Note: •Before delivery, the creditor, in obligations to give, has merely a personal right against the debtor – a right to ask for delivery of the thing and the fruits thereof; ownership does not pass to the creditor •Once the things and fruits delivered, the creditor acquires real right over such which is enforceable against the whole world ? the creditor only acquires the right of ownership over the thing and the fruits once they are delivered to him. Art. 1165.

When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by Article 1170, may compel the debtor to make the delivery. If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor. If the obligor delays, or has promised to deliver the same thing to two or more persons who do not have the same interest, he shall be responsible for any fortuitous event until he has effected the delivery. •Rights of the creditor in determinate obligations: 1. To compel specific performance •Such action when the debtor does not comply with what he has promised and the creditor demands that he fulfill the same •The debtor may be compelled to make the delivery of the very thing agreed upon •Complemented by Art. 1244 par.

1 which states that the debtor of a thing cannot compel the creditor to receive a different one, although the latter may be of the same value as, or more valuable than that which is due. •Implies that its basis is a contractual relation between plaintiff and defendant (Tolentino) 2. To recover damages for breach of the obligation •Rights of the creditor in generic obligations: 1. To ask for performance of the obligation •the delivery of a thing belonging to the species stipulated will be sufficient and hence, it is not absolutely necessary for the debtor to make the delivery himself, since the delivery of anything of the same species will fulfill the obligation. It may be performed by another, but at the expense of the debtor.

(substitute performance) •Creditor can only ask for the delivery of a thing or object belonging to the class or genus stipulated which must be neither of superior nor inferior quality (Art. 1246) 2. To ask that the obligation to be complied with at the expense of the debtor •The creditor may ask a third person to perform the obligation and all expenses incurred shall be charged against him 3. To recover damages for breach of the obligation Remedies available to creditor in specific obligation Remedies available to creditor in determinate obligation 1. to compel specific performance 2. to recover damages for breach of the obligation1. to ask for the performance of the obligation 2. to ask that the obligation to be complied with at the expense of the debtor 3.

To recover damages for breach of the obligation Note: *Before the thing to be delivered is separated from others of the same kind (and therefore the obligation becomes specific), no accessory obligations arise since the thing has not yet been made determinate; but once the determination occurs the rules applicable to specific obligations will immediately follow. (Caguioa) •Liability for fortuitous event a. The classification of obligations into specific and generic is of importance in the determination of the liability of the debtor for fortuitous event. i. Specific—the creditors bear the loss and deterioration of the thing through fortuitous event so long as the debtor is not in mora ii.

Generic—the creditor does not bear the loss until the object of the prestation has been individualized or made specific in accordance with the principle genus perire non censetur and consequently, impossibility of performance by fortuitous event is not a possible defense for the debtor. iii. Even if the thing is determinate, and the loss occurs by fortuitous event and as a general rule the creditor should bear the loss, still, in those cases where the debtor is in mora, or whose he has promised to deliver the same thing to two or more persons who do not have the same interest, which is equivalent to fraud since there is present the deliberate intent not to deliver to one of the two, the law, by way of punishment, shifts the burden of loss to the debtor. (Caguioa) Art. 1166.

The obligation to give a determinate thing includes that of delivering all its accessions and accessories, even though they may not have been mentioned. (1097a) •Accessions—those things incorporated or attached to the principal either naturally or artificially (e. g. , alluvion, buildings, constructions, etc. ) •Accessories—those things which although not incorporated to the principal are added to the same for its completeness, use, perfection or embellishment (e. g. , keys to a house, tools of a car, etc) •Everything that is attached, naturally or artificially, to the principal thing, as well as that which serves to complete it, even if not attached to it, must be delivered together with it. •Exception: When the parties agree to exclude any accession or accessory of the thing.

Right by accession – right corollary to ownership of property which gives the owner the right to everything produced by the property or which is incorporated or attached thereto, either naturally or artificially. (Art. 440) Natural fruits – spontaneous products of the soil and the young and other products of animals (Art. 442) Industrial fruits – produced by lands of any kind through cultivation or labor (Art. 442) Civil fruits – rents of buildings, price of leases of lands and other property and the amount of perpetual or life annuities or other similar income (Art. 442) Summary: Obligations of debtor in determinate obligations: 1. To perform the obligation specifically. 2. To take care of the thing with the proper diligence of a good father of a family. 3.

To deliver all accessions and accessories of the thing even though they may not have been mentioned. 4. To be liable for damages in case of breach of the obligation by reason of delay, fraud, negligence or contravention of the tenor thereof. Obligations of debtor in generic obligations: 1. To deliver a thing which is neither of superior nor inferior quality. (Art. 1246) 2. To be liable for damages in case of breach of the obligation by reason of delay, fraud, negligence or contravention of the tenor thereof.

•Deducible from Art. 1263 which states that in an obligation to deliver a generic thing, the loss or destruction of anything of the same class or genus as that which constitutes the object thereof shall not extinguish the obligation (the genus of a thing can never perish) Dation in payment – property is alienated to the creditor in satisfaction of a debt in money •can be considered as that exception where an obligor gives something in exchange of the “specific” thing to be given, with the consent of the obligee Art. 1167. If a person obliged to do something fails to do it, the same shall be executed at his cost. This same rule shall be observed if he does it in contravention of the tenor of the obligation. Furthermore, it may be decreed that what has been poorly done be undone. (1098) •Obligations to do

– those obligations which have for their object a prestation consisting of performing a certain activity, physical or intellectual, distinct from that of the delivery of a thing (Caguioa) -difference from an obligation to give: obligee or creditor does not possess the power to compel the obligor to comply with his obligations oreason: the law recognizes the individual’s freedom or liberty to choose between doing that which he has promised to do and not doing it. General rule in obligations to do (or not to do): The debtor must perform the act as promised and cannot substitute the same with another act of forbearance, unless of course with the consent of the creditor or in case the obligation is facultative. (Art. 1244, par. 2) Note: (from Caguioa) The act to be performed is either very personal or not.

*if very personal – when the qualifications of the debtor are involved; the debtor is the only one that must perform it *if not personal – performance by an agent is permitted (substitute performance) •Effects of breach 1. In positive personal obligations to do, if the obligor fails to do that which he has obligated himself to do, the obligee can have the obligation performed or executed at the expense of the former. (Art. 1167, par. 2) 2. In case the debtor should have performed the act agreed upon in contravention of the agreement, or in a manner that is improper or inappropriate, the same thing shall be ordered undone and performed by another at the expense of the debtor should he refuse to do it all over again. 3. Obligee can also demand for damages by reason of the breach. (Art. 1170)?

In case of non-performance by the debtor, the right of the creditor to exact fulfillment encounters two difficulties: (Caguioa) i. That violence cannot be exercised against the person of the debtor for the purpose of compelling him to perform the prestation. ii. If the prestation is purely personal to the debtor and consequently, cannot be performed by any person other than him, execution by another is not possible and will not lie. ***Hence, the only remedy is one of damage. Art. 1168. When the obligation consists in not doing, and the obligor does what has been forbidden him, it shall also be undone at his expense. (1099a) •Obligation not to do.

-Negative personal obligations – the object of the obligation is realized or fulfilled so long as that which is forbidden is not done by the obligor (Jurado) -those obligations whose object is the abstention of the debtor from whatever act which otherwise he could perform (Caguioa) -This type of obligation carries with it no accessory obligation and by its nature is purely personal to the debtor and consequently, he himself must abstain or refrain from performing the conditions prohibited and cannot delegate the same to an agent, except when there is consent from the creditor. -Delay or mora is NOT possible unlike in positive obligations; obligation is either fulfilled or not (Jurado) General rule: The debtor must perform the act as promised and cannot substitute the same with another act of forbearance. (Art. 1244, par. 2) Effects of breach: 1. In case the debtor breaches the obligation, the same shall be ordered undone at his expense. (Art. 1168) 2.

In those cases where it is not possible to undo the act done either physically or legally, or because the rights of third persons are involved, or for some other reason, the only feasible remedy on the part of the creditor is an indemnification for the damage caused. (Art. 1170) Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extra-judicially demands from them the fulfillment of their obligation. However, the demand by the creditor shall not be necessary in order that delay may exist: (1)

When the obligation or the law expressly so declare; or (2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or (3) When demand would be useless, as when the obligor has rendered it beyond his power to perform. In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him.

From the moment one of the parties fulfills his obligation, delay by the other begins. (1100a) Fulfillment of the obligation ?Performance of the obligation or payment, juridically speaking, presupposes the exact and complete execution of the prestation on the part of the debtor. (Caguioa) ? Traditionally, performance or fulfillment of the obligation has been expressed in the term “payment” or “solutio,” which expression has also the concept of extinction of the juridical relation.

?The Civil Code regulates fulfillment or payment among the models of extinguishing obligations Non-fulfillment/Breach of obligation: ?Manner of non-fulfillment (Caguioa) 1. non-fulfillment properly speaking – causes of non-fulfillment affect the very essence of the obligation thereby rendering it impossible of performance 2. defects in non-fulfillment -those which, without fundamentally affecting the tie of law nor rendering the performance thereof impossible presupposes a defective or an inexact performance of what was agreed upon -example: mora or delay – non-fulfillment in point of time OR (other classification of non-fulfillment according to Caguioa)

1. total non-fulfillment – no performance whatsoever 2.partial non-fulfillment – when there is partial performance or irregular non-fulfillment when there is irregular non-performance. – non-fulfillment occurs either at the very moment of the demand (ordinary breach) or before the maturity of the obligation (anticipatory breach). ?2 kinds of Breach of Obligations: (Jurado) 1. Voluntary – if the debtor or obligor in the performance of his obligation is guilty of default, fraud, negligence, or in any manner contravenes the tenor thereof; debtor is liable for damages •Voluntary breach through default or mora (Art. 1169) •Voluntary breach through fraud or dolo (Art. 1171) •Voluntary breach through negligence or culpa (Art.1172).

Voluntary breach through contravention of tenor of the agreement (Art. 1170) 2. Involuntary – if the non-fulfillment is brought about by circumstances foreign to the will of the debtor (Caguioa); otherwise put, if the debtor is unable to comply with his obligation because of some fortuitous event; debtor is NOT liable for damages (Art. 1174) Default or Mora (1st kind of voluntarily breaching obligation, a defect and partial non-fulfillment of obligation) ? covers all non-fulfillment in point of time in its broadest sense; juridically, however, it pertains only to culpable delay where fulfillment or compliance with the obligation, although late, is still possible (Caguioa) ?signifies the idea of delay in the fulfillment of an obligation with respect to time (Jurado) ? delay in the fulfillment of obligations; it is non-fulfillment with respect to time (Tolentino) Note:

There can be delay ONLY in positive obligations (to do and to give); but there can be NO delay in negative obligations Classification of Mora: 1. Mora solvendi – delay on the part of the debtor a. mora solvendi ex re -when demand by the creditor is not necessary to make the debtor in mora (Caguioa) -refers to obligations to give b. mora solvendi ex persona -if demand by the creditor is necessary in order to make the debtor in mora (Caguioa) -refers to obligations to do 2.

Mora accipiendi – delay on the part of the creditor to accept the delivery of the thing which is the object of the obligation (Jurado); generally, delay on the part of the creditor 3. Compensatio morae – delay of the parties or obligors in reciprocal obligations; where mora of the creditor neutralizes the mora of the debtor (Caguioa) ?3 requisites which should be present in order that the obligor or debtor may be considered in default (Jurado) oObligation is demandable and already liquidated oObligor or debtor delays performance oCreditor requires the performance judicially or extra-judicially •Mora solvendi ? the delay, contrary to law, in the fulfillment of the prestation by reason of a cause imputable to the former (Tolentino) ? presupposes a prestation that is due and demandable ? requisites: (Caguioa).

oObligation consists of a positive prestation (to do or to give) oObligation should be demandable , due , determined or liquidated oDebtor delays in the performance due to causes imputable to him oCreditor should demand performance of the debtor ?When does the obligor incur in delay? ? The obligor or debtor incurs in delay from the time the obligee or creditor demands from him the fulfillment of the obligation; the demand may be judicial or extrajudicial ojudicial: if the creditor files a complaint against the debtor for the fulfillment of the obligation oextrajudicial: if the creditor demands from the debtor the fulfillment of the obligation either orally or in writing (Jurado); sending of a bill or demand letter (Caguioa) Notes:

•A mere reminder or any act which cannot be qualified as a demand for payment will not be considered a demand since the code requires that the tolerance and benevolence of the creditor has terminated (Castan as cited in Caguioa) •The proof of the demand will be incumbent upon the creditor (Tolentino) •Demand is generally necessary even if a periof has been fixed in the obligation (Tolentino) •Where there has been an extrajudicial demand before action for performance was filed, the effects of default arise from the date of such extrajudicial demand. But where the evidence does not disclose any particular date on which the creditor made extrajudicial demand upon the debtor, the payment of interest or damages for the default must commence from the filing of the complaint.

(Tolentino) •The demand must refer to the prestation that is due and not to another (Tolentino) ?When demand is NOT necessary 1. when the obligation or the law expressly so declares ? the obligation or the law itself must expressly declare that the demand is not necessary in order that the debtor shall incur in delay ? example: in the obligation it is stipulated that, “D shall incur in delay if he does not pay the obligation upon the arrival of the designated date for payment”. *Notes: •In case of doubt, the doubt should be resolved in favor of the debtor, because dispensing with demand is an exception to a general rule; unless the exception is clearly proved, the general rule must apply. (Tolentino) •According to Art.

1788 of the Civil Code, where one of the partners who has undertaken to contribute a sum of money to the common fund at a specified date fails to do so, he becomes a debtor of the partnership not only for the amount which he has promised to contribute but also for the interest and damages from the time he should have complied with his obligation (Jurado) 2. when from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract ? basis: the time element for the fulfillment of the obligation is of the essence of the contract ? examples: (1) where a building was to be completed on a certain date because it was to be opened as a school on a fixed date; (2) where goods were to be delivered on a specified date because they were to be loaded on a boat leaving on such date.

Note: It is essential that the debtor has knowledge of the fixing of the date of performance as a controlling motive on the part of the creditor in order that it can be said that the debtor has tacitly consented to incur in delay without the necessity of a demand. (Tolentino) 3. when demand would be useless, as when the obligor has rendered it beyond his power to perform ? where performance has become impossible either through (1) some act or fault of the debtor or (2) as that caused by fortuitous event but the debtor has bound himself to be liable in cases of such events. *Note: 4th instance when demand is not necessary according to some authors (acknowledged by Tolentino) ? when the debtor expressly recognizes or acknowledges that he has incurred in delay.

There must, however, be an express recognition of the default and not merely requests for extension to time to perform. ?Effects of mora solvendi: 1. to indemnify the creditor for damages which his delay has occasioned in obligations to give and to do (Caguioa) 2. to answer for the loss or deterioration of the thing due even if caused by fortuitous event (Caguioa) 3. When it has for its object a determinate thing, the delay places the risks of the thing on the debtor (Tolentino) •Mora accipiendi ? constitutes non-acceptance without reason (Caguioa) ? delay in the performance based on the omission by the creditor of the necessary cooperation, especially acceptance on his part (Tolentino) ? requisites: (Caguioa).

oThat there exists an obligation which has already matured and for whose fulfillment an act of cooperation on the part of the creditor is required oThat the debtor has performed al that is incumbent upon him under the obligation and made tender of payment to the creditor oThat the creditor refused to accept payment or to cooperate in the fulfillment of the obligation without any justifiable reason ?When does the creditor incur in delay? ? The creditor incurs in delay when the debtor tenders payment or performance, but the creditor refuses to accept it without just cause. ?Effects of mora accipiendi: 1. it excludes the mora of the debtor and destroys the effects of the latter (Caguioa) 2. it transfers the risk to the creditor for fortuitous events which formerly belonged to the debtor (Caguioa & Tolentino)

3.debtor can obtain his freedom from the obligation by the consignation of the thing due, and consequently, after consignation, his obligation to pay interest is extinguished (Caguioa & Tolentino) 4. the responsibility of the debtor for the thing is reduced and limited to fraud and gross negligence (Tolentino) 5. all expenses incurred by the debtor for the preservation of the thing after the mora shall be chargeable to the creditor (Tolentino) 6. creditor becomes liable for damages (Tolentino) •Compensatio morae Reciprocal obligations – those which are created or established at the same time, out of the same cause, and which result in mutual relationships of the creditor and debtor between the parties.

– are conditional in the sense that fulfillment of an obligation by one party depends upon the fulfillment of the obligation by the other ? General rule in reciprocal obligations: the fulfillment by the parties should be simultaneous. Where both are in default, their respective liability for damages shall be offset equitably. ?When does delay or mora begin? ? Delay or mora begins from the moment the other party fulfills or tenders fulfillment of his obligation in a proper manner (Caguioa)); otherwise put, delinquency commences when one of the contracting parties fulfills his obligation and becomes invested with power to determine the contract because of failure on the part of the other to carry out the agreement. (Tolentino) ?How is demand made in reciprocal obligations?

? Demand is made in only one way and that is by actual performance or tender of performance of the obligation of the party claiming delay or default by the other. (Caguioa) Cessation of Effects of Mora ? occurs in the following cases: (Caguioa version) (1)through the will of the creditor as in the cases of waiver of the payment of the due indemnification, remission, extension of time, and novation; (2)by concession by the law of a time to fulfill to the debtor (moratorium) (3)when the creditor is also guilty of mora, in which case, there occurs the neutralization of the mora (compensation morae) ? benefits arising from default or delay may cease upon:

(Tolentino version) (1)renunciation by the creditor a. express b.implied – when after the delay has been incurred, the creditor grants an extension of time to the debtor or agrees to a novation of the obligation (2)prescription Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages. (1101) ? enumerated herein are those kinds of voluntary breaches of obligation: (1) through fraud; (2) negligence; (3) delay; (4) contravention of the tenor of the obligation. ? General rule: in cases where there is voluntary breach of obligation, one of the rights of the creditor is to ask for indemnification of damages under this article. Notes:

•“Damages” as used in the above provision include any and all damages that a human being may suffer in any and all manifestations of his life: physical or material, moral or psychological, mental or spiritual, financial, economic, social, political and religious. (Tolentino) •Breach of contractual obligation entitles the other party damages even if no penalty for such breach is provided in the contract. •The responsibility for damages arising from non-fulfillment of a contractual obligation cannot be divided nor can it be extended to persons who have nothing to do with the obligation (Tolentino) Contravention of the tenor of obligation (also another kind of voluntary br