OBLIGATIONS AND CONTRACTS

HANDOUT NO. 2

Good father of a family or bonum pater family If a person is obliged to give

something, he must take good care of it as if he is the real owner.

Rule on the Creditors rights to the fruits, personal and real rights

1. Before delivery of the Fruits the creditors right is personal or jus in personam, a
right which is enforceable only against a definite passive subject, the debtor.

2. After delivery of the fruits the creditor has now a real right over the fruits from the
time of delivery and becomes enforceable against the whole word.

KINDS OF FRUITS

1. Natural frutis spontaneous products of the soil without the intervention of human
labor, and the young and other product of animals with or without the intervention
of human labor, such as forest products
2. Industrial fruits product of the soil through cultivation or human labor, such as
palay and vegetables, planted by farmers.
3. Civil fruits fruits as a result of civilization or fruits arising out of a juridical relation,
such as rent of lands, apartments and buildings.

CREDITORS RIGHT IN AN OBLIGATION TO DO SOMETHING

1. If the debtor fails to perform the obligation.

a. The creditor may demand that the obligation be performed by the debtor himself or
by third person at the expense of the debtor. However, the debtor cannot be
compelled to comply with his obligation for this will amount to involuntary servitude
in violation of his constitutional right. Even when the obligation is too personal that
only the debtor can do it, the only remedy is to recover damages in case of non-
performance.
b. To demand damages against the debtor for breach of contract

2. If the debtor performed the obligation but in contravention of the agreement

a. The creditor may ask that another person perform the obligation at the expense of
the debtor
b. The creditor may demand damages against the debtor for breach of contract
3. IF the obligation is poorly done
a. The creditor may ask that it be undone at his (debtors) expense
b. The creditor may demand damages

OBLIGATIONS AND CONTRACTS 1

Atty. Cherry L. Balanquit-Granado
BREACH OF OBLIGATIONS

1. Voluntary debtor, in the performance of obligation, is guilty of:

a. Default (mora)
b. Fraud (dolo)
c. Negligence (culpa)
d. Contravention of the tenor of the obligation

Note: debtor is liable for damages

2. Involuntary debtor is unable to comply with his obligation because of fortuitous

event.
Note: debtor is not liable for damages

Creditors right against the debtor is the debtor does what has been forbidden

1. To ask that it be undone at the expense of the debtor

2. Demand damages for breach of contract

When does the obligation to deliver arises?

1. If there is no term or condition, then from the perfection of the contract

2. If there is a term or a condition, then from the moment the term arrives or the
condition happens

DEFAULT/DELAY (MORA)

Ordinary Delay failure to perform an obligation on time

Legal Delay - failure to perform an obligation on time which constitutes breach of

the obligation.

Requisites:
1. Obligation is demandable and already liquidated
2. The debtor delays performance
3. The creditor requires performance judicially or extra-judicially

Kinds of Delay
1. Mora Solvendi default on the part of the debtor.

a. Mora Solvendi Ex re default in obligation to give (real obligations)

b. Mora Solvendi Ex persona default in obligation to do (personal obligations)
Requisites:

OBLIGATIONS AND CONTRACTS 2

Atty. Cherry L. Balanquit-Granado
 i. The obligation must be due, enforceable and already liquidated or
determine in amount
ii. There must be non-performance; and
iii. There must be a demand, unless demand is not required

General Rule: Those obliged to deliver or to do something incur in delay

from the time the oblige judicially or extra0judicially demands from them
the fulfillment of their obligation.

Exceptions:
i. When the obligation of the law expressly so declare; or
ii. 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
iii. When demand would be useless, as when the obligor has rendered
it beyond his power to perform.
Effects:
i. Debtor is guilty of breach of the obligation
ii. Liability- if obligation to pay money; must pay interest; if no extra-
judicial demand, interest runs from the filing of the complaint. In
other obligations, pay damages
iii. Obligations to deliver a determinate thing, liable for fortuitous
events. If debtor can prove that loss would have resulted even if he
had been in default, the court may equitably mitigate the damages
iv. Resolution, in proper cases

2. Mora accipiendi delay of the creditor to accept the delivery of the thing which is
the object of the obligation

Requisites:
a. Offer of performance by the debtor
b. Offer must be to comply with the prestation as it should be performed
c. Creditor refuses the performance without just cause

Effects:
a. Responsibility of debtor is limited to fraud and gross negligence
b. Debtor is exempted from risk of loss of thing; creditor bears risk of loss
c. Expenses by debtor for preservation of thing after delay is chargeable to
creditor
d. If obligation bears interest, debtor does not have to pay from time of delay
e. Creditor liable for damages
f. Debtor may relieve himself of obligation by consigning the thing

3. Compensatio morae both parties are in delay (in reciprocal obligations); there is
no actionable default on the part of the both parties.

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Atty. Cherry L. Balanquit-Granado
 Rule in Reciprocal Obligations: In reciprocal obligations, neither party incurs in
delay if the other does not comply or is not ready to comply in a proper manner
with what is incumbent upon him. From the moment one of the parties fulfills his
obligation, delay by the other begins.
- Performance must be simultaneous unless different dates for the performance
of the obligation were fixed by the parties.

Cessation of the Effects of Mora

1. Renunciation (express or implied)
2. Prescription

Grounds for liability to pay damages

1. Fraud or dolo
2. Negligence or culpa
3. Delay or mora
4. Contravention of the term of the agreement.

Non-performance by fraud : Fraud may be defined as the voluntary execution of a

wrongful act, or a willful omission, knowing and intending the effect which will arise from
such act or omission. This is distinguished from negligence, in the sense, that in fraud, there
is intentional evasion of the normal fulfillment of the obligations. This fraud is called
incidental fraud or dolo incidente, committed in the performance of the obligation or after
the contract is already perfected.

Fraud, as a ground for damages, implies some kind of malice or dishonesty and it does not
cover cases of mistake and error of judgment made in good faith. The test is the element of
mistake, and not the actual harm done.

FAULT OR NEGLIGENCE or CULPA

This fault or negligence is called CULPA CONTRACTUAL AND NOT CULPA

AQUILIANA OR CULPA EXTRA-CONTRACTUAL. Culpa contractual is the fault or
negligence of the debtor as an incident in the fulfillment of an obligation, while culpa
aquiliana is the fault or negligence which constitutes an independent source of an obligation
between parties not previously bound.

IN CONTRAVENTION OF THE TERMS OF THE AGREEMENT

In general, every debtor who fails in the performance of his obligation is bound to
indemnify the aggrieved party for the losses and damages caused thereby. By the phrase in
any manner contravenes the tenor means any illicit act which impairs the strict and faithful
fulfillment of the obligation, or every kind of defective performance.

OBLIGATIONS AND CONTRACTS 4

Atty. Cherry L. Balanquit-Granado
 Performance in the contravention of the tenor or terms of the obligations means
where performance is contrary to what is agreed upon or stipulated, thus, making the debtor
liable for damages.

KINDS OF DAMAGES

1. Moral and physical anguish

2. Exemplary corrective or to set an example
3. Nominal to vindicate a right
4. Temperate exact amount cannot be determined
5. Actual actual losses and unrealized profit
6. Liquidated predetermined beforehand by agreement

DAMAGE refers to the harm done and what may be recovered.

INJURY Refers to the wrongful or unlawful act.

FRAUD (DOLO) the deliberate or intentional invasion of the normal fulfillment of an

obligation.

Types of Fraud
1. Fraud in obtaining consent
2. Fraud in performing a contract

RENUNCIATION OF FRAUD
1. Future fraud cannot be renounced because the advance renunciation of the creditor
would be practically leave the obligation without effect.
2. Past fraud can be renounce.

Remedies of Defrauded Party

1. Insist of specific performance
2. Resolve contract
3. Claim damages, in either case

NEGLIGENCE 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.

Kinds of Negligence
Culpa Aquiliana Culpa Contractual
Negligence is substantive and independent Negligence merely an incident of
performance of an obligation
There may or may not be a pre-existing There is a pre-existing contractual relation
contractual obligation

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Atty. Cherry L. Balanquit-Granado
 Source of the obligation is the negligence
itself
Negligence must be proved
Diligence in the selection and supervision
of the employees is a defense
Source of the obligation is the breach of the
contractual obligation
Proof of existing contract and its breach is
prima facie sufficient to warrant recovery
Diligence in the selection and supervision
of the employees is not available as a
defense

General Rule: Negligence can be waived except in cases where the nature of the
obligation or public policy requires another stand of care.
Exception: Nature of obligation of a common carrier

Diligence Required
1. That agreed upon by the parties
2. In the absence of stipulation, that required by law in the particular case
3. If both the contract and law are silent, diligence of a good father of a family

Diligence of a Good Father of a Family That reasonable diligence which an

ordinary prudent person would have done under the same circumstances.

Test of Negligence The test of negligence can be determined by this standard: If the
defendant, in committing or causing the negligent act, had used reasonable care and
vigilance which a man of ordinary prudence would have employed under the same
situation, he is not guilty of negligence. Otherwise, he is guilty.

Effect of Contributory Negligence of the Creditor

General Rule: Reduces or mitigates the damages which he can recover.
Exception: If the negligent act or omission of the creditor is the proximate cause of
the event which led to the damage or injury complained of, he cannot recover.

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

Requirements:
1. The cause of the breach of the obligation must be independent of the will of
the debtor
2. The event must be either unforeseeable or unavoidable
3. The event must be such as to render it impossible for the debtor to fulfill his
obligation IN A NORMAL MANNER
4. The debtor must be free from any participation in, or aggravation of injury to
the creditor

General Rule: No liability for fortuitous event

Exceptions:

OBLIGATIONS AND CONTRACTS 6

Atty. Cherry L. Balanquit-Granado
 1. When expressly declared by law (bad faith subject matter is generic, debtor is
in delay)
2. When expressly declared by stipulation or contract
3. When nature of obligation requires assumption or contract
4. When nature of obligation requires assumption of risk
5. When the obligor is in default or has promised to deliver the same thing two
or more persons who do not have the same interest

Effects of Fortuitous Event

Determinate Obligation Generic Obligation

Obligation is extinguished Obligation is not extinguished based on the
rule that a genus never perishes

RECEIPT OF THE PRINCIPAL WITHOUT RESERVATION AS TO THE INTEREST

Rules:

1. If debt produces interest, payment of the principal shall not be deemed to have
been made until the interest has been covered.
2. The receipt of the principal without reservation as to the payment of interest shall
raise the presumption that the said interest has been paid.

RECEIPT OF A LATER INSTALLMENT WITHOUT RESERVATION AS THE

PRIOR INSTALLMENTS

A receipt acknowledging the payment of a later installment without reservation as the

earlier installment due, will raise the presumption that the prior installment is also paid. But
this presumption is not conclusive. It can be controverted by proof to the contrary.

THE RIGHT OF THE CREDITOR AS AGAINST THE DEBTOR

In order to satisfy his claim against the debtor, the creditor has the following successive
rights.

1. To demand fulfillment of the obligation or specific or specific performance.

2. To attach the properties of the debtor, except those exempt by law from execution.
3. To exercise all the rights of the debtor except those inherent and personal to him
4. To ask for the rescission of the contracts intended to defraud him.

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Atty. Cherry L. Balanquit-Granado