Art. 1156.

An obligation is a juridical
necessity to give, to do or not to do.
Why is obligation
necessity?

juridical

Obligation is a juridical necessity

because in case of non-compliance,
the courts of justice may be called
upon by the aggrieved party to
enforce its fulfillment or, in default
thereof, the economic value that it
represents.
In other words, the
debtor must comply with his
obligation whether he likes it or not;
otherwise, his failure will be visited
with some harmful or undesirable
consequences.

TWO KINDS OF OBLIGATION

Civil obligation - is one which has a
binding force in law, and which gives
to the obligee or creditor the right of
enforcing it against the obligor or
debtor in a court of justice. This is
the obligation which is defined in Art.
1156 of the Civil Code.
Natural obligation - is one which
cannot be enforced by action but
which is binding on the party who
makes it in conscience and
according to the natural law.
Essential Requisites of Obligation
1. Juridical or legal tie (vinculum
juris) - which binds the parties to the
obligation, and which may arise from
either bilateral or unilateral acts of
persons;
2. Active subject - known as the
obligee or creditor, who can demand
the fulfillment of the obligation;
3. Passive subject - known as the
obligor or debtor, against whom the
obligation is juridically demandable;
and

4. Object or prestation - the subject

matter of the obligation; the conduct
required to be observed by the
debtor. It may consist in giving,
doing, or not doing.
How is vinculum juris established?
Vinculum juris is established by law,
by bilateral acts (contracts) and by
unilateral acts (crimes and quasidelicts)
Requisites of a Valid Object
1) Object must be licit and lawful;
2) Object must be physically and
judicially possible;
3) Object must be determinate or at
least determinable; and
4) There must be pecuniary value or
possible equivalent in money.
(Note: Absence of the first three makes
the object void.)
Different Kinds of Prestation
1. Obligation to give - consists of the
delivery of a movable or immovable
thing to the creditor.
2. Obligation to do - covers all kinds
of works or services whether
physically or mentally.
3. Obligation not to do - consists of
refraining from doing some acts.

Art. 1157. Obligations arise from (1)

law, (2) contracts, (3) quasi-contracts,
(4) acts or omissions punished by law,
and (5) quasi-delicts.
Sources of Obligations
1. Law
2. Contracts
3. Quasi-Contracts
4. Criminal Offenses
5. Quasi-Delict

Art. 1158. Obligations derived from law

are not presumed. Only those expressly
determined in this book or in special
laws are demandable, and shall be
regulated by the precepts of law which
establishes them, and as to what has
not been foreseen by the provisions of
this book.
Why does legal obligations or
obligations arising from law not
presumed?
Legal obligations are not presumed
because they are considered a
burden upon the obligor. They are
the exception, not the rule. To be
demandable, they must be clearly
set forth in the law, i.e., the Civil
Code or the special law.

How can we determine if the law itself

is the source of the obligation or
some other sources?
According to Manresa, When the
law establishes the obligation and
the act or condition upon which it is
based is nothing more than a factor
for determining the moment when it
becomes demandable, then the law
itself is the source of the obligation;
however, when the law merely
recognizes the existence of an
obligation generated by an act which
may constitute a contract, quasicontract, criminal offense, or quasidelict, and the purpose of the law is
to regulate such obligation, then the
act itself is the source of the
obligation and not the law.

Characteristics of a Legal Obligation

or Obligation Arising From Law
1. It does not need the consent of the
obligor;
2. It must be expressly set forth in the
law creating it and not merely
presumed;
3. In order that the law may be a
source of obligation, it should be the
creator of the obligation itself.

Cite some examples of obligations

arising from law?
1. The obligation of the spouses and
close relatives to support each other
under the Family Code;
2. The obligation of employers to pay
13th month pay;
3. The obligation to pay taxes under the
National Internal Revenue Code.

What governs obligation arising from

law?
Obligations arising from law shall be
governed by the provisions of the
law which establishes them.

contracts have the force of law between

the contracting parties and should be
complied with in good faith.

When does obligations arising from

law perfected?
Obligations arising from law shall be
perfected from the time designated
by the law creating or regulating
them.

Art. 1159. Obligations arising from

CONTRACT - A contract is a meeting of

two minds between two persons
whereby one binds himself, with respect
to the other, to give something or to
render some service.
What does Art. 1159 emphasizes?
1. That contract is the law between the
parties; and
2. Contract must be complied with in
good faith, meaning, the contract

itself governs the relationship of the

parties and they are required to
perform the acts required in the
contract. The parties must follow the
terms and conditions stated therein.
What is compliance in good faith?
Compliance in good faith means
performance in accordance with
the stipulations, clauses, terms
and conditions of the contract.
Good faith must be observed to
prevent one party from taking unfair
advantage over the other party.
Evasion by a party of legitimate
obligations after receiving the
benefits under the contract would
constitute unjust enrichment on his
part.
What rules logically flow from Art.
1159?
1. One party cannot unilaterally change
the provisions of the contract without
the consent of the other.
2. The parties cannot refuse to comply
with the obligations stated in the
contract.
3. Any party can file a case in court if
the other party will fail to perform his
obligation.
When do contractual obligations
arise?
General rule: Contractual obligations
arise from the moment it is perfected
(i.e. meeting of the minds.
Exceptions:
1) Where the parties made stipulations
on the right of the creditor to the
fruits of the thing; or
2) When the obligation is subject to
suspensive condition or period, the
obligations arises upon fulfillment of
the condition or expiration of the
period.

What governs obligations arising

from contracts?
General rule: Obligations arising from
contracts shall be governed primarily by
the stipulations, clauses, terms and
conditions as agreed by the contracting
parties.
Exception: Those contracts with
prestations that are unconscionable or
unreasonable.
What kinds of obligations arise from
the moment of perfection of the
contract?
1. Unilateral obligation - where only
one party is obliged to do or to give
something
2. Bilateral/Reciprocal obligation both parties are mutually obliged to
do or to give something to one
another
May a party unilaterally evade his
obligation in the contract?
General Rule: Neither of the parties
may unilaterally evade his obligations in
the contract.
Exceptions:
1) Where the contract itself authorizes
such evasion, or
2) When the other party assents
thereto.
Is there a limitation on the right of the
parties
to
freely
enter
into
stipulation?
Yes. Parties may freely enter into
any stipulations provided such are
not contrary to law, morals, good
customs, public order or public
policy.

Art. 1160. Obligations derived from

quasi-contracts shall be subject to the
provisions of chapter 1, title xvii of this
book.

QUASI-CONTRACT - A quasi-contract
is that juridical relation resulting from
lawful, voluntary, and unilateral acts by
virtue of which the parties become
bound to each other to the end that no
one will be unjustly enriched or
benefited at the expense of another.
Elements of Quasi-Contract
1. There must be a lawful, voluntary
and unilateral act; and
2. If no obligation is imposed, one will
be unjustly enriched at the expense
of another.
Distinguish quasi-contract from an
implied contract?
It is important that the act is
unilateral because if there was
mutual agreement, a contract arises
rather than a quasi-contract. Hence,
quasi-contracts
should
be
distinguished from implied contracts
because in the latter, consent of both
parties although not expressly given,
may be inferred from their acts or
declarations. In quasi-contract, there
is no such consent of both parties.
Two Principal Types of QuasiContract
1. NEGOTIORUM GESTIO - is the
voluntary management of the
property or affairs of another without
the knowledge or consent of the
latter.
2. SOLUTIO INDEBITI - is the juridical
relation which is created when
something is received when there is
no right to demand it and it was
unduly delivered through mistake.
When does Negotiorum Gestio arise?
Negotiorum gestio arises whenever
a person voluntary takes charge of
the agency or management of the

business or property of another

without the consent or authority from
the latter.
When does Negotiorum Gestio not
arise?
Negotiorum gestio does not arise (1)
when the property or business is not
neglected or abandoned; and (2) if in
fact the manager has been tacitly
authorized by the owner.
Requisites of Negotiorum Gestio?
1. There must be a property which was
abandoned or neglected;
2. A person took charge of the business
or property of another;
3. The person must have voluntarily
taken charge of that business or
property;
4. There was no agreement, express or
implied, or authority from the owner
of the property.
When does Solutio Indebiti arise?
Solutio indebiti arises if something is
received when there is no right to
demand it, and it was unduly
delivered through mistake, the
obligation to return it arises.
Requisites of Solutio Indebiti?
1. There is an unduly delivery of a thing
through mistake;
2. The object was delivered to another
who has no right to demand it.
What is presumptive consent?
Presumptive consent refers to a
case in a quasi-contract where no
express consent is given by the
other party, the consent needed in a
contract is provided by law through
presumption.

Art. 1161. Obligations arising from

criminal offenses shall be governed by
the penal laws, subject to the provisions
of Art. 2177, and of the pertinent
provisions of Chapter 1, Preliminary
Title, on Human Relations, and of Title
XVIII of this Book, regulating damages.
What is the nature and the basis for
obligations arising from delicts or
crimes?
Art. 1161 deals with civil liability for
damages arising from criminal
offenses or delicts since generally,
the commission of a crime causes
not only moral evil but also material
damage. From this principle, the
rule has been established that every
person criminally liable for an act or
omission is also civilly liable for
damages (Art. 100, Revised Penal
Code), except for those offenses or
special crimes which causes no
material damage, hence there is no
civil liability to be enforced thereof
(Ex. crimes of treason, rebellion,
illegal
possession
of
firearm,
gambling,
violations
of
traffic
regulations, et al)
Dual Aspects of a Crime
1. Criminal aspect - one that affects
the social order, the purpose of
which is to punish or correct the
offender
2. Civil aspect - one that affect the
private rights and the purpose of
which is to repair the damages
suffered by the aggrieved party.
What includes civil liability arising
from crimes or delicts?
1. Restitution;
2, Reparation for the damage caused;
and

3. Indemnification
damages.

for

consequential

What are the rules to be observed in

the enforcement or prosecution of
civil liability arising from criminal
offenses?
1. Institution of criminal and civil
actions - when a criminal action is
instituted, the civil action for recovery
of civil liability is impliedly instituted,
except:
a. the offended party expressly
waives the civil action
b. the offended party reserves his
right to institute it separately, or
c. the offended party institutes the
civil action prior to the criminal
action.
2. Independent civil action - where
the civil action shall proceed
independently
of
the
criminal
prosecution and shall require only a
preponderance of evidence.
3. Other civil actions arising from
offenses - criminal and civil actions
arising from the same offense may
be instituted separately except:
a. When the criminal action has
already commenced, the civil
action cannot be instituted until
final judgment has been rendered
in the criminal action.
b. If the civil action has been filed
ahead of the criminal action, the
civil action shall be suspended in
whatever
stage
until
final
judgment in criminal action has
been rendered; If no final
judgment has been rendered in
the civil action, the same may be
consolidated with the criminal
action and both the criminal and
the civil action shall be tried and
decided jointly.

c. Extinction of the penal action

does not carry with it extinction of
the civil, unless provided in the
final judgment.
4. Judgment in civil action not a bar
- a final judgment rendered in a civil
action absolving the defendant from
civil liability is no bar to a criminal
action.
5. Suspension
by
reason
of
prejudicial question - a previously
instituted civil action which involves
an issue similar or intimately related
to the issue raised in the subsequent
criminal action, and the resolution of
such issue determines whether or
not the criminal action may proceed.

Art. 1162. Obligations derived from

quasi-delicts shall be governed by the
provisions of Chapter 2, Title XVII of this
Book, and by special laws.
QUASI-DELICT is a source of
obligation that arises whenever a
person, through his negligent act or
omission, causes damage to another.
The negligent act or omission itself
creates the vinculum juris or juridical tie
which gives the right to the injured party
to demand payment from the negligent
person.
Requisites of Quasi-Delict
1. There must be an act or omission
constituting fault or negligence;
2. Damage must have been caused by
the said negligent act or omission;
3. The negligent act or omission must
have been the proximate cause of
the damage or injury.
Distingush between
Quasi-delict

Crime

and

CRIME
There is criminal or
malicious intent or
criminal
negligence
The purpose is
punishment

QUASI-DELICT
There
is
only
negligence

The purpose is
indemnification of
the offended party
Affects the public Concerns private
interest
interest
There
are There is only civil
generally
two liability
liabilities, criminal
and civil liability
The guilt of the The
fault
or
accused must be negligence of the
proved
beyond defendant need be
reasonable doubt
proven
by
preponderance of
evidence
Persons liable for obligations arising
from quasi-delicts
Except from the person directly
responsible for the damage incurred,
obligations arising from quasi-delicts
are demandable also against the
following:
1. The father, and, in case of his death
or incapacity, the mother, are liable
for any damages caused by the
minor children who live with them;
2. Guardians are liable for damages
done by minors or incapacitated
persons subject to their authority and
living with them;
3. Owners
or directors
of an
establishment or business are equally
liable for any damages caused by
their employees while engaged in the
branch of the service in which
employed, or on occasion of the
performance of their duties;

4. Employers with respect to damages

caused by their employees and
household helpers acting within the
scope of their assigned tasks, even
though the former are not engaged in
any business or industry;
5. The State when it acts through a
special agent, but not if the damage
shall have properly devolved the duty
of doing the act performed, in which
case the provisions of the next
preceding article shall be applicable;
6. Teachers or directors of arts and
trades are liable for any damages
caused by their pupils or apprentices
while they are under their custody.
(Note: The liability shall cease in case
the persons mentioned therein prove
that they exercised all the diligence of a
good father of a family to prevent the
damage)
Basic Provisions Under the Civil
Code for Quasi-Delicts
Art. 2177 Responsibility for fault or
negligence under the preceding
article is entirely separate and
distinct from the civil liability arising
from negligence under the Penal
Code.
But the plaintiff cannot
recover damages twice from the
same act or omission of the
defendant.
Art. 2718 The provisions of Articles
1172 to 1174 are also applicable to a
quasi-delict.
Art. 2179 When the plaintiffs own
negligence was the immediate and
proximate cause of his injury, he
cannot recover damages. But if his
negligence was only contributory, the
immediate and proximate cause of
the injury being the defendants lack
of due care, the plaintiff may recover

damages, but the courts shall

mitigate the damages to be awarded.
Art. 2194 The responsibility of two
or more persons who are liable for
quasi-delict is solidary.

Can an action based on quasi-delict

be maintained even if there is an
existing contractual relation between
the parties?
It is well-settled that an action based
on quasi-delict can be maintained
even if there is an existing
contractual relation between the
parties. In other words, an action for
damages based on quasi-delict can
be filed even if there is a contract.
To illustrate:
A person is riding a bus when he
was injured because of the negligent
driving or the bus driver. There is a
contract here between the bus
company and the passenger known
as the contract of carriage. The bus
company breached their contract
through the negligence of the driver.
The bus company failed to comply
with its obligation to bring the
passenger safely to his destination
and with extraordinary diligence. At
the same time, the negligent act that
violated that contract of carriage,
which is the negligent driving of the
bus driver, is also a negligent act
that may give rise to an obligation
based on quasi-delict. Thus, the
option of the passenger is to recover
damages based on quasi-delict or
based on contract.

CHAPTER 2
Nature and Effect of Obligations
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.
Things to be delivered in an
Obligation to Give
1. Determinate or Generic
Determinate/Specific - when the
object is particularly designated or
physically segregated from all others
of the same class. The object is a
concrete,
particularized
thing,
indicated by its own individuality.
Generic or Indeterminate - when
the object is designated merely by its
class or genus without any particular
designation or physical segregation
from all others of the same class.
The
object
is
one
whose
determination is confined to that of
its nature.
2. Fungible or Non-Fungible
Fungibles things that can be
replaced by another of the same kind
Non-Fungibles things that cannot
be replaced and not equivalent of
others even if similar things
3. Consumable or Non-Consumable
Consumable movables which
cannot be used in a manner
appropriate to their nature without
their being consumed.
Non-Consumable those which
can be used in a manner appropriate
to their nature without being
consumed
4. Real or Personal
Real or Immovable those
specified in Art. 415 of the New Civil
Code such as land and building
Personal or Immovable those
specified in Art. 416 an 417 of the
New Civil Code such as a pencil, a
sack of rice, table or chair.

What are the principal purposes in

obligations to give?
1. To transfer ownership
2. To transfer mere possession
Nature of Obligation Under Art. 1163
1. Principal obligation to give a
determinate or specific thing
2. Accessory obligations that are
deemed included in the obligation to
give a determinate thing. These
include the following:
a. To take care of the thing to be
delivered with the diligence of a
good father of a family;
b. To deliver the accessions and
accessories; and
c. To deliver the fruits from the
moment the obligation to deliver
arises.
Diligence Of A Good Father Of A
Family - The duty to exercise due
diligence is imposed because if the
same is not present, the obligation may
be rendered illusory. If the thing will not
be preserved, then it would be unfair to
the obligee or creditor who may be
receiving a property that is already
damages or he may not receive the
property altogether because it may have
been destroyed in the meantime.
The standard being used is the diligence
of a good father of a family. Sometimes,
the good father of a family is called a
reasonable man or a man of ordinary
diligence or prudence. What this means
is that the diligence should be the
behaviour of an ordinary man in a
particular situation.
What is the effect if there is failure to
exercise due diligence?

1. The obligor or debtor may be liable

for damages;
2. The obligor or debtor is liable even if
there was fortuitous event.
When does diligence of a good father
not required?
1. When the law requires a different
degree of diligence
2. When the parties stipulate a different
standard of care.
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.
Art. 1164 provides that the creditor has
the right to the fruits of the thing from
the time the obligation to deliver arises.
This applies only to an obligation to give
a determinate or specific thing.
To Illustrate:
The moment the contract of sale of a
specified thing is perfected, all the
fruits of the thing should be
delivered. Thus if Mr. X sold a
specific cow to Mr. Y, and Mr. Y paid
the price and agreed with Mr. X that
the latter will deliver three days
thereafter, all the fruits of the cow
like its young or calf from the time
they entered into the contract of sale
up to the time of the actual delivery
should be delivered to Mr. Y.
However, if the obligation is to
deliver any cow (generic), there is no
need to deliver the calf of the cow of
the seller because any other cow
can be delivered.
Different Kinds of Fruits
1. Natural fruits spontaneous
products of the soil, and the young

and other products of animals, Ex.

grass that naturally grows on the
land, calf of a cow
2. Industrial fruits those produced
by lands of any kind through
cultivation or labor, Ex. rise that were
planted on the land, or fruits of
bananas that were planted.
3. Civil fruits rents or building, the
prices of lease and similar income.
When does the obligation to deliver
the thing and the fruits arise?
In obligations arising from law, quasicontracts, criminal offenses, and
quasi-delicts - from the time
designated by the provisions of the
Civil Code or of special laws creating
or regulating them.
In obligations arising from contracts,
as a general rule, from the moment
of the perfection of the contract.
Exception: If there is a contrary
stipulation of the parties as to the
time when the thing or fruits shall be
delivered, such stipulation shall
govern.
To illustrate:
1. If the obligation is subject to
suspensive
condition,
the
obligation to deliver arises only
from the moment of the fulfillment
of the condition.
2. If the obligation is subject to a
suspensive term or period, the
obligation to deliver arises only
upon the expiration of the
designated term or period.
Nature of Right of the Creditor
1. Personal right it is the right or the
power of one person to demand from
another, as a definite passive
subject, the fulfilment of prestation to
give, to do or not to do, Ex. the buyer

has the right to compel the seller to

deliver the car that he purchased.
2. Real right it is the right or the
power belonging to a person over a
specific thing, without passive
subject
individually
determined,
against whom such right may be
exercised, Ex. ownership, right of
possession.

Therefore, before delivery, the

creditor, in obligations to give, has
merely personal right against the
debtor - a right to ask for delivery of
the thing and the fruits thereof.
Once the thing and the fruits are
delivered, then he acquires a real
right over them, a right which is
enforceable against the whole world.

Art. 1165. When what is to be delivered

is a determinate thing, the creditor, in
addition to the right granted him by Art.
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 Creditor in Determinate
Obligations
1. To compel specific performance
2. To recover damages for breach of
the obligation through delay, fraud,
negligence or contravention of the
tenor thereof.

Rights of Creditor in Generic

Obligations
1. To ask for performance of the
obligation
2. To ask that the obligation be
complied with at the expense of the
debtor.
3. To recover damages for breach of
the obligation non-compliance of the
debtor with his obligation, or in case
of breach by reason of fraud,
negligence, delay or contravention of
the tenor of the obligation.
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 the fruits of the thing, as
well
as
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.
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.
Obligations of the Debtor for
Fortuitous Event Under Art. 1165
In an obligation to deliver or to give,
the debtor shall be liable for any loss
due to fortuitous event which
occurred before delivery in the
following instances:

1. The obligor or debtor delays;

2. The obligor or debtor promised to
deliver the same thing to two or
more persons who do not have
the same interest.
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.

Accessions - signifies all of those

things which are produced by the
thing which is the object of the
obligation as well as all of those
which are naturally or artificially
attached thereto.
Accessories - signifies all of those
things which have for their object the
embellishment, use or preservation
of another thing which is more
important and to which they are not
incorporated or attached.
As already noted earlier, the
obligation to deliver or give a
determinate thing carries with it
the accessory obligation to deliver
the accessions and accessories,
even though they may not have
mentioned.

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.
1. Failure of the obligor to comply
with the obligation to do

Remedy: The obligee can have the

obligation performed or executed by
another at the expense of the obligor.
Exception: When such prestation
consists of an act where the personal
and special qualifications of the obligor
is the principal motive for the
establishment of the obligation.
2. If the obligation has been
performed but in contravention of
the tenor thereof
Remedies:
a. The obligee can have the obligation
performed or executed at the
expense of the obligor
b. The obligee can ask that what has
been poorly done be undone
c. The obligee can recover damages
because of breach of the obligation.
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.
If the obligor/debtor did what he was
obliged not to do, there are two
remedies
available
to
the
obligee/creditor:
Remedy No. 1 To have it undone at
the debtors expense.
Exception:
a. Where the effects of the act which is
forbidden are permanent or definite
in character.
b. Where it would be physically or
legally impossible to undo what has
been done because of the very
nature of the act itself, or because of
a provision of the law, or because of
conflicting rights of third persons.

Remedy 2 To ask for damages in

accordance with Art. 1170.
Art. 1169. Those obliged to deliver or to
do something incur in delay from the
time
the
oblige
judicially
or
extrajudicially demands from them the
fulfilment 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 declares;
(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 the 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 fulfils his obligation, delay by the
other begins.
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
Art. 1171. Responsibility arising from
fraud is demandable in all obligations.
Any waiver of an action for future fraud
is void.
Art. 1172. Responsibility arising form
negligence in the performance of every

kind of obligation is also demandable,

but such liability may be regulated by
the
courts,
according
to
the
circumstances.
Art. 1173. The fault or negligence of the
obligor consists in the omission of that
diligence which is required by the nature
of the obligation and corresponds with
the circumstances of the persons, of the
time and of the place. When negligence
shows bad faith, the provisions of
Articles 1171 and 2201, paragraph 2,
shall apply.
If the law or contract does not state the
diligence which is to be observed in the
performance, that which is expected of a
good father of a family shall be required.
Performance of Obligation
1. Identity of obligations this means
that obligations must be complied
with precisely, that is, what was
obliged to be done or given is exactly
what should be done or must be
given. What is obliged and what is
performed must be identical.
2. Integrity of Obligations this
means that compliance with an
obligation must be complete.
There is breach of obligation if there
was non-compliance altogether or if
the compliance is without identity or
integrity.
Breach of Contract is also defined as
the failure without legal excuse to
perform any promise which forms the
whole or part of the contract.
Classification of Breach
1. Total Breach breach or nonfulfillment by not doing anything at all
or doing all things that is not
supposed to be done.

2. Defective Performance
a. By doing something that was not
agreed upon;
b. By partial performance;
c. By poorly or badly performing the
obligation;
d. By delay in the performance, that
is, the defect relates to the time
of performance;
e. By performing the obligation but
not
in
accordance
with
specifications,
terms
and
conditions.
Two Types of Breach
1. Voluntary - if the debtor or obligor in
the performance of his obligation is
guilty of default (mora), or fraud
(dolo), or negligence (culpa), or in
any manner contravenes the tenor
thereof. The obligor is liable for
damages.
2. Involuntary - if he is unable to
comply with his obligation because
of an event which cannot be
foreseen, or which, though foreseen,
was inevitable (fortuitous event).
The obligor is not liable for damage.
Causes of Non-Performance
1. Cause that is attributable to the
obligor or debtor (fraud, malice,
negligence) the obligor or debtor is
responsible.
2. Cause that cannot be attributed to
the obligor or debtor in whole or in
part (fortuitous event) the obligor or
debtor is not responsible.
Art.1169 refers to non-fulfillment of the
obligation by the obligor or creditor
within the time agreed upon or within the
time contemplated by the nature of the
obligation. There is non-fulfillment with
respect to time, and this is called
DELAY or MORA.

(Note: By its nature, there is no delay in

obligations not to do).
Kinds of Delay or Mora
1. Mora Solvendi delay on the part
of the obligor or debtor
a. Mora Solvendi Ex Re delay in
the obligations to give.
b. Mora Solvendi Ex Persona
delay in obligations to do.
2. Mora Accipiendi or Creditoris
delay on the part of the creditor or
obligee.
3. Compensatio Morae both parties
are in delay.
Requisites of Default
1. When the obligation to give or to do
is
demandable
and
already
liquidated;
2. When the obligor or debtor delays
performance for reasons imputable
to him; and
3. When the creditor demands the
performance of the obligation
judicially or extrajudicially.
Two Kinds of Demand
1. Judicial - if the creditor files a
complaint against the debtor for the
fulfillment of the obligation
2. Extrajudicial - if the creditor
demands from the debtor the
fulfillment of obligation either orally
or in writing.
Rule on Demand
General Rule: Demand, whether judicial
or extrajudicial, is indispensable before
the obligor can be considered to be in
delay.
Exceptions: Demand by the creditor
shall not be necessary in order that
delay may exist in the following cases:

1. When the obligation or the law

expressly so declare;
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;
and
3. When demand would be useless, as
when the obligor has rendered it
beyond his power to perform.
Reciprocal Obligations
The last paragraph of Art. 1169
provides
that
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. Delay begins from the moment
one of the parties fulfills his
obligation.
General rule: Fulfillment by both
parties should be simultaneous or at
the same time.
Exception: Where different dates for
performance or fulfillment of the
reciprocal obligations may be fixed
by the parties, in which case, Art.
1169 par. 1 shall apply.
Effect of Default
Once the obligor or debtor has
incurred in delay, he can be held
liable for damages even if the thing
which constitutes the object of the
obligation may have been lost or
destroyed through a fortuitous event.
If the obligation consists in the
payment of sum of money, the
indemnity for damages, there being
no stipulation to the contrary, shall be
the payment of the interest agreed
upon, and in the absence of

stipulation, the legal interest which is

computed from the time it is judicially
demanded.

Damages where one is injured by a

breach of a contract, or by a
wrongful act or omission, shall have
a fair and just compensation
commensurate to the loss sustained
as a consequence of the defendant's
act.

Two Kinds of Civil Fraud

1. Fraud
or
Dolo
in
the
Performance of an Obligation
a. Present
only
during
the
performance of a pre-existing
obligation
b. Employed for the purpose of
evading the normal fulfillment of
an obligation
c. Results in the non-fulfillment or
breach of the obligation
d. Gives rise to a right of the
creditor or obligee to recover
damages from the debtor or
obligor
2. Fraud
or
Dolo
in
the
Constitution or Establishment
of an Obligation
a. Present only at the time of the
birth of the obligation.
b. Employed for the purpose of
securing the consent of the
other party to enter into the
contract.
c. Results in the vitiation of his
consent.
d. Gives rise to a right of the
innocent party to ask for the

annulment of the contract if the

fraud is causal or to recover
damages if it is incidental.
Effect of Fraud
-

If there is a breach or non-fulfillment

of the obligation by reason of fraud
or dolo, the obligor or debtor can be
held liable for damages.

Malice or dishonesty is implied as a

ground for damages. Fraud or dolo
is synonymous with bad faith.

Waiver or renunciation of liability

made in anticipation of the fraud is
VOID for being contrary to law and
public policy.

Waiver or renunciation of liability

made after the fraud has already
been committed is VALID since such
waiver can be deemed an act of
generosity.

What is renounced is the effect of

fraud or the right of the party to
indemnity.

Extent of Damages in Case of Breach

or Non-Fulfillment of the Obligation
by Reason of Fraud or Dolo
-

All damages which may be

attributable to the breach or nonfulfillment
of
the
obligation,
regardless
of
whether
such
consequences
are
natural
or
unnatural, probable or improbable,
foreseeable or unforeseeable.
Moral and exemplary damages.

VOLUNTARY BREACH THROUGH

NEGLIGENCE OR CULPA - consists in

the omission of that diligence which is

required by the nature of the obligation
and corresponds with the circumstances
of the persons, of the time and of the
place.
Negligence is simply the
absence of due care required by the
nature of the obligation.
Two Kinds of Civil Negligence
1. Culpa Contractual - fault of
negligence of the obligor by virtue
of which he is unable to perform
his obligation arising from a preexisting contract because of the
omission of the diligence which is
required by the nature of the
obligation and corresponds with
the circumstances of the persons,
of the time, and of the place.
2. Culpa Aquiliana - the fault of
negligence of a person, who,
because of the omission of the
diligence which is required by the
nature of the obligation and which
must
correspond
with
the
circumstances of the persons, of
the time and of the place, causes
damage to another.
Distinction
between
Contractual (CC) and
Aquiliana (CA)

Culpa
Culpa

1. As regards the character of the

negligence of the defendant
CC - incidental in the performance of
an obligation
CA - substantive and independent
2. As regards the relationship of the
parties

CC - there is always a pre-existing

contractual relation
CA - there may or may not be a preexisting contractual relation
3. As regards
obligation

the

source

of

CC - breach or non-fulfillment of the

contract
CA - defendant's negligent act or
omission itself
4. As regards the proof required for
recovery

2. As to characteristics
Negligence - the act or omission is
voluntary in character
Fraud - conscious and intentional
proposition to evade the fulfillment of
an obligation
3. As to governing rule
Negligence - Art. 1173 shall also
govern if the act or omission shows
bad faith
Fraud - Art. 1173 par. 1
4. As to waiver of a future action

CC - existence of the contract and of

its breach or non-fulfillment is
sufficient prima facie to warrant
recovery
CA - negligence of the defendant
must be proved
5. As regards the availability of due
diligence as a defense
CC - proof of diligence in the
selection
and
supervision
of
employees is not available as a
defense
CA - proof of diligence in the
selection
and
supervision
of
employees is available as a defense.

Negligence - can be waived unless

the nature of the obligation and
public policy requires extraordinary
diligence
Fraud - any waiver of an action for
future fraud is void.
Test of Negligence
Did the defendant in doing the alleged
negligent act use the reasonable care
and caution which an ordinarily prudent
person would have used in the same
situation? If not, then he is guilty of
negligence.
Effects of Negligence

Negligence (Culpa) Distinguished

from Fraud (Dolo) in Relation to
Obligations
1. As to the element of intention
Negligence - if there is merely
abandonment,
inattention,
carelessness, or lack of diligence
Fraud - if there is intent to cause
damage or injury

If the debtor or obligor is unable to

comply with his obligation because of
his fault or negligence, the creditor or
obligee can hold him liable for damages
even if he has been acquitted in a
criminal action based on his negligent
act or omission.
Waiver to an action for future negligence
is allowed unless the nature of the
obligation and public policy should

require extraordinary diligence, as in the

case of common carriers.
Regulatory Powers of the Court

If the negligent act of the obligee is

the proximate cause of the event
which led to the damage or injury
complained of, he cannot recover.

The Court may increase or decrease

the liability of the party at fault
depending upon the circumstances
of each case. The Court may take
into consideration the good or bad
faith of the obligor or the conduct of
the obligee when the damage was
incurred.

VOLUNTARY BREACH THROUGH

CONTRAVENTION OF TENOR OF
OBLIGATION - The phrase in any
manner that contravenes the tenor
of the obligation includes not only any
illicit act which impairs the strict
fulfillment of the obligation but also
every kind of defective performance.

If there is bad faith, the provisions of

Art. 1173 and Art. 2201, par. 2 will
apply. If done in good faith, liability
will only be on natural and probable
consequences of the breach of
obligation.

CONCEPT OF FORTUITOUS EVENT

(Art. 1174)

Damages resulting from negligence

is reduced or mitigated if there was
contributory negligence of the
obligee.

Elements of Fortuitous Event

Other circumstances
mitigate the damages:

can

Two General Causes of Fortuitous

Event (Arturo M. Tolentino)

a. When
the
plaintiff
himself
contravenes the terms of the
contract;
b. Where the plaintiff has derived
some benefit as a result of the
contract;
c. In cases where exemplary
damages are to be awarded,
where the defendant acted upon
advice of counsel;
d. Where the loss would have
resulted in any event;
e. Where upon filing of the action,
the defendant has done his best
to lessen the plaintiff's loss or
injury.

1. By nature, such as earthquakes,

storms, floods, epidemics, fires,
etc.
2. By the act of man, such as an
armed invasion, attack by
bandits,
governmental
prohibitions, robbery, etc.

that

Fortuitous event (caso fortuito) - an

event which could not be foreseen, or
which, though foreseen, was inevitable.

1. Unforeseability
2. Inevitability

Classification of Fortuitous Event

As to fortuitous even proper
1. Acts of God - those which are
absolutely independent of human
intervention such as rains,
typhoons,
floods,
cyclones,
earthquakes or any other similar

calamity brought about by natural

forces.
2. Force Majeure - events which
arise
from
legitimate
or
illegitimate acts of persons other
than the obligor, such as
commotions, riots, wars, robbery,
and similar acts.
As to foreseeability
1. Ordinary - an event which
usually happens or which could
have been reasonably foreseen.
2. Extraordinary - an event which
does not usually happen and
which could not have been
reasonably foreseen, such as
fire, war, pestilence, unusual
flood, locust, earthquake, and
others of a similar nature.
Effect Upon Obligation
General rule:
If the obligor is
unable to comply with his obligation
by reason of a fortuitous event, he is
exempted
from
any
liability
whatsoever. In other words, his
obligations is extinguished.
Exceptions:
1. Where
such
liability
is
expressly specified by law (Arts.
552 (2), 1165 (3), 1268, 1942, 1979,
2147, 2148 and 2159 NCC)
2. Where it is declared by
stipulation of the parties - if the
contracting parties expressly agree
that the debtor can be held liable
even in case of fortuitous events,
such agreement shall be binding.

3. Where the nature of the

obligation
requires
the
assumption of risk. this is an
aspect of what is known as the
Doctrine of Assumption of Risk
where the obligor or debtor, with full
knowledge of the risk, voluntarily
enters into some obligatory relation
with the creditor or obligee.
PRINCIPLE OF VOLENTI NON FIT
INJURIA - no wrong is done to one
who consents. If the obligor enters into
an obligation which by its nature
involves the assumption of risks, he
shall be liable to the obligee for breach
even in case of fortuitous events.
Essential Requisites or Conditions to
be Exempted from Liability by Caso
Fortuito
1. The event must be independent
of the will of the obligor;
2. The event must be either
unforeseeable or inevitable;
3. The event must be of such
character as to render it
impossible for the obligor to fulfill
his obligation in a normal
manner;
4. The obligor must be free from
any
participation
in
the
aggravation of hte injury resulting
to the obligee or creditor;
5. There must be an entire
exclusion of human agency from
the cause of injury or loss.
In the following instances, a person
is still civilly liable for failure to
comply with his obligation although
he was prevented from doing so by a
fortuitous event:

1. When by law, the debtor is liable

even for fortuitous event;
2. When by stipulation of the
parties, the debtor is liable even
for fortuitous events;
3. When the nature of the obligation
requires the assumption of risk;
4. When the object of the obligation
is lost and the loss is due partly
to the fault of the debtor;
5. When the object of the obligation
is lost and the loss occurs after
the debtor has incurred in delay;
6. When the debtor promised to
deliver the same thing to two or
more persons who do not have
the same interest;
7. When the obligation to deliver
arises from a criminal offense;
and
8. When the obligation is generic.
USURIOUS TRANSACTIONS
Usury - contracting for or receiving
something in excess of the amount
allowed by law for the loan or
forbearance of money, goods or
chattels. It is the taking of more interest
for the use of money, goods or chattels
or credit than the law allows.
Extinguishment of Interests and Prior
Installments (Art. 1176)
-

There is a presumption that the

interests has been paid if on the face
of the receipt that the creditor issued
to the obligor that the principal has
been paid without reservation with
respect
to
the
interest.
(in
accordance with Art. 1253).

If the debtor is issued a receipt by

the creditor acknowledging payment
of a latter installment without

reservation to prior installments,

there is also a presumption that such
prior installments have already been
paid.
-

For the presumption to arise, the

receipt should clearly state that the
payment is for the installment for a
latter installment or as payment for
the interest.
This presumption,
however, can be properly rebutted by
competent evidence to the contrary.

Remedies
Credit

of

Creditor

to

Protect

1, To exhaust the property in

possession of the debtor;
2. To be subrogated to all of the
rights and actions of the debtor
save those which are inherent in
his person;
3. To impugn all of the acts which
the debtor may have done to
defraud him.
Exhaustion of Debtor's Property - the
debtor is liable with all his property,
present and future, for the fulfillment of
his obligations subject to the exemptions
provide by law.
Accion Subrogatoria - actually, the
debtor may defeat the right of the
creditor by mere omission or inaction.
He may simply fail, or neglect, or refuse
to collect any credit which he may have
against a third person. In order to
prevent this, the law expressly grants to
the creditor the right to exercise all of
the rights and bring all of the actions
which the debtor may have against third
persons.

Conditions for the Creditor to

Avail of the Remedy of Accion
Subrogatoria
1. The debtor to whom the right or
action properly pertains must be
indebted to the creditor;
2. The latter must be prejudiced by
the inaction or failure of the
debtor to proceed against the
third person;
3. The creditor must have first
pursued or exhausted all of the
properties of the debtor which are
not exempted from execution.
Exception: Rights which are purely
personal in the sense that they are
inherent in the person of the debtor,
such as rights arising from purely
personal or family relations or those
which are public or honorary in
character, cannot be included within
the scope of this remedy.
Accion Pauliana - refers to the right
available to the creditor by virtue of
which he can secure the rescission of
any act of the debtor which is in fraud
and to the prejudice of his rights as a
creditor. This can only be availed of in
the absence of any other legal remedy
to obtain reparation for the injury.
Transmissibility of Rights
General rule: Rights of obligations
or those rights which are acquired by
virtue
of
an
obligation
are
transmissible in character. They may
be alienated or assigned to third
persons.
Exceptions:

1. Where they are not transmissible

by their very nature, such as in
the case of purely personal right;
2. Where there is a stipulation of the
parties that they are not
transmissible; and
3. Where they are not transmissible
by operation of law.
(Note: Intransmissibility by stipulation
of the parties, being exceptional and
contrary to the general rule, must be
clearly established or clearly inferable
from the provisions of the contract
itself.)

CHAPTER 3 - DIFFERENT
KINDS OF OBLIGATIONS
Section 1 - Pure and Conditional
Obligations
Pure Obligations - one whose
effectivity or extinguishment does not
depend upon the fulfillment or nonfulfillment of a condition or upon the
expiration of a term or period, and
which,
as
a
consequence,
is
characterized by the quality of
immediate demandability.
Conditional Obligations - one whose
effectivity is subordinated to the
fulfillment or non-fulfillment of a future
and uncertain fact or event.
Requisites
Obligations

of

Conditional

1. The event must be future

2. The event must be uncertain
Classification of Conditions

1. Suspensive
when
the
fulfillment of the condition results
in the acquisition of rights arising
out of the obligation
Resolutory - when the fulfillment
of the condition results in the
extinguishment of rights arising
out of the obligation.
2. Potestative - when the fulfillment
of the condition depends upon
the will of a party to the obligation
Casual - when the fulfillment of
the condition depends upon
chance and/or upon the will of a
third person
Mixed - when the fulfillment of
the condition depends partly
upon the will of a party to the
obligation and partly upon chance
and/or the will of a third person
3. Possible - when the condition is
capable of realization according
to nature, law, public policy or
good customs
Impossible - when the condition
is not capable of realization
according to nature, law, public
policy or good customs
4. Positive - when the condition
involves the performance of an
act
Negative - when the condition
involves the omission of an act
5. Divisible - when the condition is
susceptible of partial realization
Indivisible - when the condition
is not susceptible of partial
realization
6. Conjunctive - when there are
several conditions, all of which
must be realized

Alternative - when there are

several conditions, but only one
must be realized
7. Express - when the condition is
stated expressly
Implied - when teh condition is
tacit.
I. SUSPENSIVE and RESOLUTORY
CONDITIONS
Suspensive Condition - is a future and
uncertain event upon the happening or
fulfillment of which rights arising out of
the obligation are acquired. Here, the
birth or effectivity of the obligation is
suspended until the happening or
fulfillment of the event which constitutes
the condition.
Resolutory Condition - is a future and
uncertain even upon the happening or
fulfillment of which rights which are
already acquired by virtue of the
obligation are extinguished or lost.
Here, when the obligation is subject to a
resolutory condition, the juridical relation
which is established as a result of the
obligation is subject to the threat of
extinction.
Effects
of
Suspensive
Resolutory Conditions

and

1. If an obligation is subject to a
suspensive condition:
a. The acquisition of right shall
depend upon the happening or
fulfillment of the fact or event
whcih constitutes the condition.
b. The obligation shall become
effective only upon the fulfillment
of the condition.

c. What is acquired by the obligee

or creditor upon the constitution
of the obligation is only a mere
hope or expectancy, however, it
is protected by law.
2. If an obligation is subject to a
resolutory condition:
a. Becomes
demandable
immediately
after
its
establishment or constitution.
b.
Rights arising out of the
obligation
are
acquired
immediately and vested in the
obligee or creditor, however, this
is without prejudice to the
happening or fulfillment of the
event which constitutes the
condition.
c. Although rights are immediately
vested in the obligee or creditor
upon the constitution of the
obligation, such rights are always
subject to the threat or danger of
extinction.
Distinctions of Suspensive and
Resolutory Conditions
1. In a Suspensive Condition -a. If the suspensive condition is
fulfilled, the obligation arises or
becomes effective.
b. If the suspensive condition is not
fulfilled, no juridical relation is
created.
c. In a suspensive condition, rights
are not yet acquired, but there is
a hope or expenctancy that they
will soon be acquired.
2. In a Resolutory Condition --

a. If the resolutory condition is

fulfilled,
the
obligation
is
extinguished.
b. If the resolutory condition is not
fulfilled, the juridical relation is
consolidated.
c. In a resolutory condition, rights
are already acquired, but subject
to the threat of extinction.
II.
POTESTATIVE,
MIXED CONDITIONS

CASUAL

and

1. Potestative - one whose fulfillment

depends exclusively upon the will of
either one of the parties to the
obligation.
2. Casual - one whose fulfillment
depends exclusively upon chance
and/or upon the will of third person.
3. Mixed - one whose fulfillment
depends jointly upon the will of either
one of the parties to the obligation
and upon chance and/or the will of
the third person.
Effects of Potestative Conditions
1. If the fulfillment of the condition
depends exclusively upon the will
of the creditor, the conditional
obligation shall be valid.
2. If the fulfillment of the condition
depends exclusively upon the will
of the debtor, the conditional
obligation shall be void.
Exceptions to No. 2:
1. The rule is applicable only to a
suspensive condition. Hence, if
the condition is resolutory and at
the same time potestative, the
obligation is valid even if the

fulfillment of the condition is

made to depend upon the sole
will of the debtor.
2. If the obligation refers to a preexisting indebtedness.

2. If the obligation, however, is a

pre-existing
obligation,
and
therefore, does not depend upon
the fulfillment of the condition for
its perfection, it is quite clear that
only the condition is void, but not
the obligation.
3. If the obligation is divisible, that
part which is not affected by the
impossible or unlawful condition
shall be valid.
4. If the condition is not to do an
impossible thing, it shall be
considered as not having been
agreed upon.

Effects of Casual Conditions

-

If the condition is casual in teh

sense that its fulfillment depends
upon chance and/or upon will of
a third person, the obligation
shall be valid.

Effects of Mixed Conditions

-

If the condition is mixed in the

sense that its fulfillment depends
partly upon the will of a party to
the obligation and partly upon
chance and/or will of a third
person, the obligation shall be
valid.

III.
POSSIBLE and IMPOSSIBLE
CONDITIONS
1. Possible - when it is capable of
realization not only according to its
nature, but also according to the law,
good customs and public policy.
2. Impossible - when it is not capable
of realization either according to its
nature or according to law, good
customs or public policy.
Effects
1. Impossible conditions as well as
those which are contrary to good
customs or public policy and
those which are prohibited by law
shall annul the obligation which
depends upon them.

IV.

POSITIVE
CONDITIONS

and

NEGATIVE

1. Positive - if the condition involves

the performance of an act or
fulfillment of an event
2. Negative - if the condition involves
the non-performance of an act or the
non-fulfillment of an event.
Effects
1. The condition that some event
happen at a determinate time
shall extinguish the obligation as
soon as the time expires or if it
becomes indubitable that the
event will not take place.
2. The condition that some event
will not happen at a determinate
time shall render the obligation
effective from the moment the
time indicated has elapsed, or if it
has become evident that the
event cannot occur.

DOCTRINE
OF
CONSTRUCTIVE
FULFILLMENT
OF
SUSPENSIVE
CONDITIONS
Conditions
Doctrine

or

Requisites

of

the

1. The obligor must have actually

prevented
the
obligee
from
complying with the condition; and
2. That such prevention must have
been voluntary or willful in character.

Exception:
1. The doctrine can be applied only to
suspensive and not to resolutory
conditions.
Effect of Suspensive
Before Fulfillment

Conditions

1. Demandability as well as the

acquisition or effectivity of rights
arising from the obligation is
suspended.
2. The right of the creditor is mere hope
and expectancy.
Effect of Suspensive Conditions After
Fulfillment
1. The obligation arises and becomes
effective.
2. The right of the creditor is perfected.
3. Effects are retroactive (applicable
only to consensual contracts).
Retroactivity of Effect
-

Once the event which constitutes the

condition is fulfilled thus resulting in
the effectivity of the obligation, its
effects must logically retroact to the
moment
when
the
essential
elements which gave birth to the
obligation have taken place and not

to the moment when the accidental

element was fulfilled.
The principle of retroactivity can only
apply to consensual contracts.
In obligations to give, when the
obligation
imposes
reciprocal
prestations upon the parties, the
fruits and interests during the
pendency of the condition shall be
deemed to have been mutually
compensated.
When the obligation is unilateral, the
debtor shall appropriate the fruits
and interests received, unless from
the nature and circumstances of the
obligation it can be inferred that the
intention of the person constituting
the same was different.
In obligations to do or not to do, in
case of personal obligaitons, the
courts will have to determine in each
case the retroactive effect of the
condition that has been complied
with.

Effect of Loss,
Improvement

Deterioration

or

1. Losses
- A thing is lost (1) when it perishes; or
(2) when it goes out of commerce; or
(3) when it disappears in such a way
that its existence is unknown or it
cannot be recovered.
- If the thing is lost without any fault of
the debtor, the obligation is
extinguished.
- If the thing is lost through the fault of
the debtor, the obligation is
converted into one of indemnity for
damages.
2. Deterioration
- If the thing deteriorates without the
fault of the debtor, the impairment is
to be borne by the creditor.

If the thing deteriorates through the

fault of the debtor, the creditor may
choose between bringing an action
for rescission of the obligation with
damages and bringing an action for
specific performance with damages.

3. Improvements
- If the thing is improved by its nature
or by time, the improvement shall
inure to the benefit of the creditor
- If the thing is improved at the
expense of the debtor, he shall have
no right than that granted by
usufructuary.
- The debtor cannot ask the creditor to
reimburse his expenses for useful
improvements and improvement for
mere pleasure, but he has the right
to remove the same provided it is
possible to do so without damage to
the thing or property.
- The debtor may also set off the
improvements he may have made
on the property against any damage
to the same.

Effect of Resolutory Conditions After

Fulfillment
1. The rights vested in the obligation is
extinguished.
2. Whatever is paid or delivered to any
of the parties should be returned
(return to status quo).
Retroactivity of effect
-

Usufruct - right or enjoyment of a thing,

the property of which is vested in
another and to draw from the same all
the profit, utilities, and advantage it may
produce
without
altering
the
form/substance of the thing.
Effect of Resolutory
Before Fulfillment

Conditions

1. The obligation is subject to the threat

of extinction
2. The obligor or debtor is placed in a
position which is very similar to that
of the obligee or creditor in
obligations with suspensive condition
such as he has also a hope or
expectancy during the pendency of
the condition.

There are no exceptions in the

retroactive effect of resolutory
condition.
In obligations to give, upon the
fulfillment of the resolutory condition,
the parties shall return to each other
what they have received.
In obligations with a resolutory
condition, the fulfillment of the
condition signifies the nonexistence
of the obligation and what is
nonexistent must not give rise to any
effect whatsoever.
There is no provision of mutual
compensation of fruits and interests
but in connection with the concept of
justice, restitution in Art. 1190 carries
with it the consequence of
reimbursement for all the expenses
incurred
for
the
production,
gathering, and preservation of the
fruits.
Mutual restitution is absolute in
resolutory conditions because the
obligation is extinguished, and it
ceases to have effect thus does not
carry with it fruits and interests.
In obligations to do or not to do, the
retroactive effects shall depend upon
the discretion of the courts as in the
case of suspensive conditions.

Effect of Loss,
Improvement

Deterioration

or

Art. 1189 is also applicable with

regard
the
effects
of
loss,
deterioration, and improvements of
things during the pendency of
resolutory condition.
In
resolutory
condition
the
debtor is the person obliged to
return while the creditor is the
person to whom the thing must be
returned.

CONCEPT
OF
RECIPROCAL
OBLIGATIONS - are those which are
created or established at the same time,
out of the same cause, and which result
in mutual relationships of creditor and
debtor between the parties.
Tacit Resolutory Condition
General rule: If one of the parties fails
to comply with what is incumbent upon
him, there is a right on the part of the
other to rescind (or resolve) the
obligation.
Necessity of Judicial Action
General rule: The right to rescind or
resolve the obligation is a right which
belongs to the injured party alone.
However, it is essential that it must be
invoked jucially. The party entitled to
rescind must invoke judicial aid by filing
the proper action for rescission or
resolution of the contract if he so elects
for it is the judgment of the court and not
the mere will of the vendor which
produces the rescission of the sale.
Exception: Where the contract itself
contains a resolutory provision by virtue
of which the obligation maybe cancelled
or extinguished by the injured party in
case of breach, judicial permission to

cancel or rescind the contract is no

longer necessary.
Notes:
-

If there is no express provision of

rescission inhe contract, rescission
should be invoked judicially.
The termination of a contract must
not be contrary to law, morals, good
customs, public order, or public
policy.
Notice is always important in
rescission so the alleged infractor
can question the propriety of the
rescission.
Art. 1191 is not applicable to
contracts of partnership. There are
special provisions that govern the
latter, thus the general provision will
not prevail. The same applies to
sales of real property (Recto Law)
and sales of personal property by
installment (Maceda Law).

Nature of Breach
General rule:
Rescission will be
ordered only where the breach
complained of is substantial as to defeat
the object of he parties in entering into
the agreement It will not be granted
where the breach is slight or casual.
Alternative Remedies of Injured Party
In case one of the parties should not
comply with what is incumbent upon
him, the injured party may choose
between:
1. Fulfillment of the obligation with
payment for damages (specific
performance with damages)

2. Rescission of the obligation with

payment for damages (resolution
with damages)
Note: The injured party can still seek
the rescission or resolution of the
obligation even if he has opted to
choose the fulfillment of such obligation
if fulfillment should become impossible.
Damages to be Awarded

1. In case of rescission - only those

elements of damages can be
admitted that are compatible with the
idea of rescission.
2. In case of specific performance only the elements of damages can
be admitted which are compatible
with
the
idea
of
specific
performance.