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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
- - Promulgated by legitimate authority
- - Of common observance and benefit

b. c. Organization of courts

- - Supreme Court
- - Court of Appeals, Sandiganbayan, Court of
Tax Appeals
- - Regional Trial Court
- - Metropolitan Trial Court, Municipal Trial
Court
- - Quasi Judicial Bodies
1. 1. Comelec
2. 2. NLRC
3. 3. LTFRC
4. 4. ERB

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 publication


1. 1. 15 days after publication in OG or
newspaper
2. 2. Ignorance of the law excuses no one
from compliance
3. 3. Due Process

- - Law is prospective except:


1. 1. If the law provides for retroactivity
2. 2. Penal law insofar as it favors the
accused
3. 3. Remedial or curative law

- - Computing time
1. 1. Year is 12 calendar months
2. 2. Month is 30 days, except when it refers
to a calendar month
3. 3. First day excluded, last day included

- - Conflict of Laws Provisions


i. 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

a. General Provision

- - Juridical Necessity – enforce compliance; seek


damages
- - 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 matter
a. a. Real Obligation – to give
b. b. Personal Obligation – to do
i. i. Positive – to give or do
ii. 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. Unilateral
b. 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 Thing


1. 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 thing


1. 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 thing


1. 1. To deliver the thing which he has obligated
himself to give
2. 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 accessories
4. 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 performance
b. b. To recover damages

2. 2. To Give Indeterminate Thing


a. a. To ask for performance of the obligation
b. b. To ask that obligation be complied with by
another at expense of debtor
c. c. To recover damages

3. 3. To Do
a. a. To have the obligation performed at
debtor’s expense
b. b. To recover damages

4. 4. Not to Do
a. a. Undone at his expense
b. b. To recover damages

(e) (e) Rules on Fruits


1. 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


him
a. 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 Delay


1. 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
declares
b. 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 creditor
c. c. Compensatio more – delay in reciprocal
obligation

5. 5. Effects of Delay
a. a. Liable for interest and damages
b. b. Liable even for fortuitous event when the
obligation is to delivery a determinate thing

(h) (h) Fortuitous Events


1. 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 delay
d. d. When debtor promises to deliver same
thing to two or more persons
e. e. When obligation to deliver arises from
criminal offense
f. 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 obligations
4. 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 contract
b. b. Liable for damages based on breach of
contract
c. c. Proof of contract and breach is enough for
recovery of damage
d. 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
delict
b. b. No pre existing contract
c. 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
circumstance
4. 4. Waiver of future negligence allowed

(k) (k) Presumptions


1. 1. Receipt of principal without reservation as to
interest = presumption of interest paid
2. 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 debtor
2. 2. Subrogated to rights and actions of debtors,
except those inherent to person
3. 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 extinguished
b. b. If lost thru fault of debtor, obliged to pay
damages
c. c. When deteriorate without fault of debtor,
creditor bores the impairment
d. 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 stipulated
ii. 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 period


b. 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 undertaking
e. 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 damages
b. b. If only one remain, simple obligation to
deliver remaining
c. 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 debtor


b. b. If lost before substitution, debtor not
liable.
c. c. Debtor liable for loss due to his fault once
substitution has been made
d. 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 partnership
3. 3. If principal allowed agent to act
as though he has full power
4. 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


solidarity
1. 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 performance
b. b. To liquidate the amount of damage to be
awarded
c. 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 contrary


b. b. When obligor is sued for refusal to pay
agreed penalty
c. c. When obligor is guilty of fraud

4. 4. When court may reduce penalty

a. a. If principal obligation partly complied with


b. b. If principal obligation irregularly complied
with
c. 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 debtor
i. i. Recover from debtor the
entire amount
ii. 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 interest
c. 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 Tender


a. a. Foreign currency may be
used as currency of contract
b. 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 ones
b. b. One bearing interest more
onerous than one that is not
c. c. Secured debt more
onerous than unsecured
d. d. Debt as principal more
onerous than debt as guarantor
e. e. Solidary obligation more
onerous than sole debtor
4. 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 Cession
a. a. Dacion usually only one
creditor
b. b. Dacion does not require
insolvency
c. c. Dacion does not involve all
the property of debtor
d. d. Dacion makes creditor
owner of the property
e. 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 Consignation
a. a. Debt Due
b. 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, partly
4. 4. When debtor incurs delay
5. 5. When debtor promises to deliver same thing
to two or more persons
6. 6. When obligation to deliver arises from
criminal offense
7. 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
person
1. 1. Between principal debtor and principal
creditor
2. 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 partial
d. 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 demandable
4. 4. Two debts are liquidated (amount is
certain)
5. 5. No retention or controversy commenced by
3rd party
b. 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 assignment
c. 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 obligation


b. b. Must be declared in unequivocal terms
c. 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 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 contract


1. 1. Preparation – Preliminary to formation
2. 2. Perfection – birth of the contract
3. 3. Consummation - fulfillment

Essential 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
contract
a. a.

Different 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 Contracts

 Consent of the contracting parties


 Object certain subject matter of the contract
 Cause of the obligation which is established

Elements of Consent
 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 Insolvents
o o Persons prohibited from giving donations
o o Adultery, concubinage
o o In consideration of criminal offense
o o Made to public officer, spouse, by reason of
office
o o Persons with fiduciary relations
o o Guardian, for property under his guardianship
o o Agents, for property entrusted to them
o o Executor/administrator
o Public officers, judges, for property under their
jurisdiction
o o

 Intelligently, freely given, consciously


- - Vices of the will

 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 o
 Mistake of Law

o 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

o 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


irresistible
o 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 parties
o o Must be Serious
o Must have induced the other party to
enter into the contract

- - Vices of Declaration
 Simulated Contracts

1. 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

Objects

 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 appropriated
o o Not contrary to Law Moral Good Conduct Public
Order Public Policy
o o Real or possible
o o Determinate or determinable

Cause

 Essential reason why the parties enter into the contract

o Cause should be in existence


o Licit or lawful
o True
 Interchangeable with consideration, but not same as motive

o General rule: Particular motive of the party in entering


into a contract are not material. Except: When it
predetermines the purpose of the contract

Form

 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 o Donation exceeding P 5,000


o o Sale of piece of land or interest therein by an agent
o o Antichresis - Creditor acquires rights to fruits of
immovable but applying to payment of interest
o 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

Reformation

 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 o What may not be reformed


o o Simple Donations with no condition
o o Wills
o o Those where real agreement is void

Defective Contracts

o o As to defect
o o Rescissible - Injury or damage
o o Voidable - Vitiation of consent or legal capacity
o o Unenforceable - In excess of authority or do not
complyy with S of Fraud
o o Void - Lack of an element of a valid contract

o o As to effect
o o Rescissible and Voidable - Valid until annulled
o o Unenforceable - Cannot be enforced by action in
court
o o Void - No legal effects at all

o o As to parties who can file action


o o Rescissible and Void – May be attack directly By
contracting parties or by third parties
o o Voidable and Unenforceable - Cannot be
attacked by third persons
 Resolution (Rescission of reciprocal obligation

o 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

o 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 inadequate


o o Transfer made after suit has begun or pending
o o Sale on credit by an insolvent debtor
o o Evidence of large indebtedness or complete
insolvency
o o Transfer of all or nearly all of debtor properties
o o Between father and son, with any of above
circumstances
o o Failure of vendee to take exclusive possession

Voidable Contracts
 Where one party is incapable of giving consent to a contract
 Where the consent is vitiated by mistake, violence,
intimidation, fraud, undue influence

Convalidation
 Prescription (Four years)
 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 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 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 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 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

Estoppel

 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 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 transmissible
disease.
(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
illegitimate filiation.