Oblicon Syllabus DLSU FEU Dela Cruz 2011

OBLIGATIONS

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CONTRACTS 2011

OBLIGATIONS AND CONTRACTS OBLIGATIONS By: Atty. Enrique V. dela Cruz, Jr.1

A: It is a conduct that may consist of giving, doing, or not doing something. Q: What are the requisites of an object? A:

Q: What is obligation?

a b

A: “It is a juridical relation whereby a person (creditor) may demand from another (debtor) the observance of a determinative conduct (the giving, doing, or not doing), and in case of breach, may demand satisfaction from the assets of the latter”. (Arias Ramos) CIVIL OBLIGATION Binding force is from positive law Can be enforced by court action

NATURAL OBLIGATION Binding force is from equity and justice Cannot be enforced in court. It depends exclusively upon the good conscience of the debtor.

c d

Licit (otherwise void) Possible, physically & judicially (otherwise void) Determinate or determinable (otherwise void) Pecuniary value/possible equivalent in money

Note: Form is not generally considered essential, though sometimes added as the 5th requisite.

Q: What are the accessory obligations? A: Exercise diligence Preserve the thing

/

Q: What are the elements of an obligation? A: JAPOC 1. Juridical/legal tie 2. Active subject (obligee/creditor) 3. Passive subject ( obligor/debtor ) 4. Object – prestation; the conduct which has to be observed by the debtor/obligor 5. Cause

Delivery of fruits

A: That of a good father of a family – unless the law or stipulation requires higher degree or standard of care. Q: When does the right begin to exist? A: From the time deliver to arises. *When there is no term/condition – from the perfection of the contract

Q: What is prestation?

1

Atty. Dela Cruz is an MCLE lecturer and a Bar Reviewer at the Jurist Bar Review Center and the Cosmopolitan Review Center. He teaches law at UST, Ateneo, FEU-DLSU and the Bulacan State University. He obtained his Master of Laws (with Distinction) from the London Metropolitan University, and a Postgraduate Diploma in International Trade Law from the University College London (UCL), U.K., both as a Chevening scholar of the British government. He completed a Postgraduate Fellowship on Public Policy and International Relations from the John F. Kennedy School of Government, Harvard University, USA, as a Fulbright Scholar. He also holds a Masters in Public Management degree from the Ateneo School of Government. He obtained his Bachelor of Laws degree (with honors) and an AB Legal Management degree (cum laude) from the University of Santo Tomas as a Rector’s Scholar. He was recently elected as Board Member of the 2nd District of Bulacan. He is also a Partner at the Ponce Enrile Reyes & Manalastas (PECABAR) Law Office in Makati City.

Q: What is the degree of diligence or Standard of care?

Delivery of accessories & accessions

*When there is a term/condition – from the moment the term or condition arises Required in an obligation to deliver determinate thing

Q: Differentiate accessories from accessions. A: a. Accessories - Those joined to or included with the principal for the latter’s better use, perfection or enjoyment. b. Accessions Additions improvements upon a thing.

to

ATTY. ENRIQUE V. DELA CRUZ, JR. Obligations & Contracts 2011

or

OBLIGATIONS & CONTRACTS 2011 Q: What are the principal forms or kinds of Quasi-Contract? Q: What are the five sources of obligations? A: A: LCQ-DQ

1.

1. 2.

Law (Obligation ex lege) Contracts (Obligation ex contractu) 3. Quasi-contracts (Obligation ex quasi-contractu) 4. Delicts (Obligation ex maleficio/ ex delicto) 5. Quasi-delict (Obligation ex quasi maleficio/ ex quasi- delicto ) Note: The enumeration is exclusive. Note: Obligations arising from law: a. does not need the consent of the obligor b. must be expressly/impliedly set forth and it cannot be presumed c. in order that the law may be a source of obligation, it should be the creator of the obligation itself. Note: Obligations arising from contracts: a. Presupposes that the contracts entered into are valid and enforceable. b. must be complied with in good faith

Q: What is “compliance in good faith”? A: Performance in accordance with the stipulation, clauses, terms and conditions of the contract. The contract is the “law” between the parties. GR: Neither party may unilaterally evade his obligation in the contract XPNS: 1. contract authorizes it 2. other party assents Note: Parties may freely enter into any stipulations provided not contrary to law, morals, good customs, public order or public policy

Q: What is quasi-contract? A: A juridical relation arising from lawful, voluntary and unilateral acts based on the principle that no one should unjustly enrich himself at the expense of another.

2.

Negotiorium Gestio (Inofficious manager) arises when a person voluntarily takes charge of the management of the business or property of another without any power from the latter. Solutio Indebiti (Unjust enrichment) takes place when a person received something from another without any right to demand for it, and the thing was unduly delivered to him through mistake (must not be through liberality or some other cause).

Q: In September 1972, upon declaration of martial rule in the Philippines, A, together with his wife and children, disappeared from his residence along A. Mabini Street, Ermita, Manila. B, his immediate neighbor, noticing that mysterious of A and his family, closed the doors and windows of his house to prevent it from being burglarized. Years passed without B hearing from A and his family. B continued taking care of A’s house, even causing minor repairs to be done at his house to preserve it. In 1976, when business began to perk up in the area, an enterprising man, C, approached B and proposed that they build stores at the ground floor of the house and convert its second floor into a pension house. B agreed to C’s proposal and together they spent for the construction of stores at the ground floor and the conversion of the second floor into a pension house. While construction was going on, fire occurred at a nearby house. The houses at the entire block, including A’s, were burned. After the EDSA revolution in February 1986, A and his family returned from the United States where they took refuge in 1972. Upon learning of what happened to his house, A sued B for damages. B pleaded as a defense that he merely took charge of his house under the principle of negotiorum gestio. He was not liable as the burning of the house is a fortuitous event. Is B liable to A for damages under the foregoing circumstance? Q: In fear of reprisals from lawless elements besieging his barangay, X abandoned his fishpond, fled to Manila and left for Europe. Seeking that the fish in the fishpond were ready

OBLIGATIONS

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for harvest, Y, who is in the business of managing fishponds on a commission basis, took possession of the property, harvested the fish and sold the entire harvest to Z. Thereafter, Y borrowed money from W and used the money to buy new supplies of fish fry and to prepare the fishpond for the next crop. a) What is the Juridical relation between X and Y during X's absence? b) Upon the return of X to the barangay, what are the obligations of Y to X as regards the contract with Z? c) Upon X's return, what are the obligations of X as regards Y's contract with W? d) What legal effects will result if X expressly ratifies Y's management and what would be the obligations of X in favor of Y? Explain all your answers. Q: What is delict? A: Acts or omissions punished by law Q: What is the scope of civil liability? A:

1. 2. 3.

Restitution; Reparation for damage caused; Indemnity for consequential damages

Q: What is quasi-delict/tort? A: It is an act or omission arising from fault or negligence which causes damage to another, there being no pre-existing contractual relations between the parties.

CONTRACTS 2011

A:

1.

Viewpoint of Sanction a. Civil Obligations- give a right of action to compel their performance b. Natural Obligations- not based on positive law but on equity and natural law; does not grant a right of action to enforce their performance, but after voluntary fulfillment by the obligor, they authorize retention of what has been delivered/ rendered by reason thereof. c. Moral Obligations- cannot be enforced by action but which are binding on the party who makes it in conscience and natural law. 2. Viewpoint of Performance a. Positive Obligation- to give; to do b. Negative Obligation- not to do 3. Viewpoint of Subject Matter a. Personal Obligation- to do; not to do b. Real Obligation- to give I. Determinate/Specificobject particularly designated or physically segregated from all other of the same class. II. Generic- object is designated merely by its class or genus. III. Limited Genericgeneric objects confined to a particular class, e.g. an obligation to deliver one of my horses (Tolentino, Vol. IV, p. 91) 4. Viewpoint of Person Obliged a. Unilateral- only one party is bound b. Bilateral- both parties are bound

NATURE AND EFFECTS OF OBLIGATIONS (Arts. 1163-1178)

Q: What are the elements of quasi-delict? A:

1. 2.

3. 4.

5.

Act or omission; Fault/negligence attributable to the person charged Damage/injury; Direct relation of cause and effect between the act arising from fault/negligence and the damage/injury (proximate cause) No pre-existing contractual relation between the parties

Q: What are the kinds of obligation?

Q: What are the obligations of the debtor? A: Determinate 1. Deliver the thing agreed upon

1.

Take care of the thing with the proper diligence of a good father of a family

Generic

1. Deliver the thing

2.

which is neither of superior nor inferior quality Damages in case of breach of obligation by reason of delay, fraud, negligence or

ATTY. ENRIQUE V. DELA CRUZ, JR. Obligations & Contracts 2011

OBLIGATIONS & CONTRACTS 2011 unless the law requires/parties stipulate another standard of care (Art. 1166) 2. Deliver all accessions, accessories and fruits of the thing

contravention of the tenor thereof

Q: When does the obligation to deliver arises? A:

3. If the object is generic, but the source is specified or delimited, the obligation is to preserve the source

Law, quasi-contracts, delict, quasi-delict Contract

3. Pay damages in case of breach of obligation by reason of delay, fraud, negligence, contravention of the tenor thereof

XPNS:

1. When the parties

Q: What are the rights of the creditor? A: Specific Obligation Generic Obligations 1.Specific performance 1.Specific performance 2.Damages, exclusive or 2.Ask that the obligation in addition to specific be complied with at the performance debtor’s expense 3.Right to demand 3.Damages preservation of the thing, its accessions, accessories, and the fruits. Right to the fruits and interests from the time the obligation to deliver arises Q: What is the nature of the right of the creditor with respect to the fruits? A:

1. 2.

From the time designated by the law creating/regulating them. GR: from the time of the perfection of the contract (i.e. meeting of the minds)

Before delivery- personal right After delivery- real right

Q: What is the difference between Personal and Real Right?

made stipulation on the right of the creditor to the fruits of the thing 2. When the obligation is subject to a suspensive condi- tion/period; arises upon fulfillment of the condition/arrival of the period.

Q: What is the principle of balancing of equities as applied in actions for specific performance? A: Read Agcaoili v. GSIS, G.R. 30056, Aug. 30, 1988. Q: What are the forms of breach of obligations? A: Voluntary-DR is liable for Involuntary- DR is unable damages if he is guilty of: to perform the obligation due to fortuitous event thus a. default( mora) not liable for damages b. fraud (dolo) c. negligence (culpa) d. breach through contravention of the tenor thereof

A: Personal 1. Jus ad rem, right enforceable only against a definite person/group of persons 2. Right pertaining to a person to demand from another, as a definite passive subject, the fulfillment of the prestation to give, to do or not to do.

Real 1. Jus in re, a right enforceable against the whole world 2. Right pertaining to a person over a specific thing, without a definite passive subject against whom the right may be personally enforced.

Q: What is the concept of a good father of the family? A: Read Picart v. Smith, G.R. No. L-12406, March 15, 1918. Q: What are the effects of breach of obligation? A: If a person obliged to do something fails to do it, or if he does it in contravention of the tenor of the

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CONTRACTS 2011

obligation, the same shall be executed at his cost. And what has been poorly done, be undone. (Art. 1167)

2.

When the obligation consists in not doing, and the obligor does what has been forbidden him, it shall also be undone at his expense. (Art.1168)

4.

Q: What are the instances where the remedy under Art. 1168 is not available? A: 1.

2.

Where the effects of the act which is forbidden are definite in character- even if it is possible for the CR to ask that the act be undone at the expense of the DR, consequences contrary to the object of the obligation will have been produced which are permanent in character. Where it would be physically/legally impossible to undo what has been undone- because of the very nature of the act itself/ because of a provision of law/ because of conflicting rights of third persons.

Note: In either case, remedy is to ask for damages.

A. DEFAULT (MORA)

3.

5.

Obligation is determinate, due and demandable, and liquidated; Obligation has not been performed on its maturity date; There is judicial or extrajudicial demand by the creditor; Failure of the debtor to comply with such demand

Note: Mora Solvendi does not apply to natural obligations (Article 1423) (because performance is optional/voluntary on debtor’s part) and negative obligations (because one can never be late in not giving or doing something)

Q: What are the effects of mora solvendi? A: 1.

2.

DR is liable for damages; if obligation to pay money- must pay interest. If obligation to deliver a determinate thing, liable even if the object of the obligation may have been lost or destroyed through a fortuitous event.

Note: If DR can prove that loss would have resulted even if he had not been in default, the court may equitably mitigate (Art. 2215 [4]) 1. DR shall bear the risk of loss 2. Resolution (Art. 1170, in proper cases)

Q: What is default or delay?

Q: What are the requisites of mora accipiendi?

A: Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. (Art.1169)

A:

1. 2.

Q: What are the kinds of delay/default? A:

1.

2. 3.

Mora solvendi – default on the part of the debtor/obligor a. Ex re- default in real obligations (to give) b. Ex persona- default in personal obligations (to do) Mora accipiendi – default on the part of the creditor/obligee Compensatio morae – default on the part of both the debtor and creditor in reciprocal obligations

Q: What are the requisites of mora solvendi?

3.

Offer of performance by a capacitated debtor Offer must be to comply prestation as it should be performed. Refusal of the creditor without just cause

Q: What are the effects of mora accipiendi? A: 1. Responsibility of DR is limited to fraud and gross negligence 2. DR is exempted from risk of loss of thing; CR bears risk of loss 3. Expenses by DR for preservation of thing after delay is chargeable to CR 4. If the obligation bears interest, DR does not have to pay from time of delay 5. CR liable for damages 6. DR may relieve himself of obligation by consigning the thing Q: What are the rules on default?

A: 1.

Obligation pertains to the debtor;

ATTY. ENRIQUE V. DELA CRUZ, JR. Obligations & Contracts 2011

OBLIGATIONS & CONTRACTS 2011 A:

1.

Unilateral Obligations

GR: Default or Delay begins from extrajudicial or judicial demand- mere expiration of the period fixed is not enough in order that DR may incur delay. XPNS:

a. The

obligation or the law expressly so dictates b. time is of the essence of the contract c. demand would be useless, as DR has rendered it beyond his power to perform d. DR has acknowledged that he is in default

2.

Reciprocal Obligations- created and established at the same time, out of the same cause and which results in the mutual relationship between the parties.

GR: Fulfillment by both parties should be simultaneous- In reciprocal obligations one party incurs in delay from the moment the other party fulfills his obligation, while he himself does not comply/ is not ready to comply in a proper manner with what is incumbent upon him. XPN: When different dates for the performance of obligation is fixed by the parties. Note: In reciprocal obligation, demand is still necessary only when the respective obligations are to be performed on separate dates. If neither party complies with his prestation, default of one compensates for the default of the other.

Q: When is there cessation of the effects of mora?

Note: Fraud must be present during the performance of the obligation, not at the time of the birth of the obligation (causal or incidental fraud) Note: Future fraud cannot be waived because it is contrary to law and public policy. However, the law does not prohibit renunciation of the action for damages on the ground of fraud already committed. Note: Waiver of past fraud is valid since such can be deemed an act of generosity. What is renounced is the effect of fraud, particularly the right to indemnity.

Fraud in the Performance (Art. 1170) Present during the performance of a preexisting obligation. Purpose is to evade the normal fulfillment of the obligation

Results in the breach of an obligation Gives rise to a right in favor of the CR to recover damages

Incidental Fraud (Art. 1344)

Present during the perfection of a contract

Present during the perfection of a contract

Purpose is to secure the consent of another to enter into the contract

Purpose is to secure the consent of the other party BUT the fraud was not the principal inducement in making the contract Does not result in the vitiation of consent

Results in vitiation of consent; VOIDABLE contract Gives rise to a right of an innocent party to annul the contract

Gives rise to a right of an innocent party to claim for damages

Q: What are the remedies of the defrauded party? A: 1. Insist on specific performance (Art. 1233) 2. Resolve contract (Art. 1191) 3. Claim damages, in either case

A: 1. 2.

Causal Fraud (Art. 1338)

Renunciation (express/implied) Prescription

B. FRAUD (DOLO)

C. NEGLIGENCE (CULPA)

Q: What is fraud?

Q: What is the difference between fraud and negligence?

A: It is an intentional evasion of the faithful performance of the obligation (8 Manresa 72).

A: Fraud There is deliberate

Negligence There is no deliberate

OBLIGATIONS intention to cause damage Liability cannot be mitigated Waiver for future fraud is void

AND

intention to cause damage or injury even if the act was done voluntarily Liability may be mitigated GR: Waiver for future negligence may be allowed in certain cases

CONTRACTS 2011 Proof of diligence in the selection & supervision of the employees is not an available defense

Q: What is the degree of diligence required? A:

1. 2.

XPN: nature of the obligation/ public policy requires extraordinary diligence (e.g. common carrier)

3.

Note: When negligence is so gross that it amounts to wanton attitude on the part of the DR, the laws in case of fraud shall apply.

of

contributory

A:

Note: Under Art. 1170, the phrase “in any manner contravene the tenor” of the obligation includes any illicit act which impairs the strict and faithful fulfillment of the obligation, or every kind of defective performance.

GR: Reduces/ mitigates the damages which he can recover XPN: If the negligent act/omission of the creditor is the proximate cause of the event which led to the damage/ injury complained of, he cannot recover. Q: What is the difference between Culpa Contractual and Culpa Aquiliana? A: Culpa Contractual Negligence merely an incident in the performance of an obligation There is always a preexisting contractual relation The source of obligation of defendant to pay damages is the breach/non-fulfillment of the contract Proof of the existence of the contract and of its breach/ non fulfillment is sufficient prima facie to warrant recovery

Culpa Aquiliana/ Culpa Ex Contractu (Quasi-Delict) Negligence is substantive and independent There may/may not be a pre-existing contractual relation The source of obligation is defendant’s negligence itself The negligence of the defendant must be proved

That agreed upon In the absence of such, that which is required by the law In the absence of the foregoing, diligence of a good father of a family (that reasonable diligence which an ordinary prudent person would have done under the same circumstances).

BREACH THROUGH CONTRAVENTION OF TENOR OF OBLIGATION

Situation exempting from liability for gross negligence is null and void because such negligence amounts to fraud

Q: What are the effects negligence of the creditor?

Proof of diligence in the selection & supervision of the employees is a defense

FORTUITOUS EVENT Q: What are the requisites of a fortuitous event? A:

1. 2. 3.

4.

Cause is independent of the will of the debtor The event is unforeseeable/unavoidable Occurrence renders it absolutely impossible for the DR to fulfill his obligation in a normal manner; impossibility must be absolute not partial, otherwise not force majeure DR is free from any participation in the aggravation of the injury to the CR.

GR: No liability for loss in case of fortuitous event. XPNS: LaNS- PC,Bag 1. Law 2. Nature of the obligation requires the assumption of risk 3. Stipulation 4. The debtor is guilty of dolo, malice or bad faith, has promised the same thing to two or more persons who does not have the same interest

ATTY. ENRIQUE V. DELA CRUZ, JR. Obligations & Contracts 2011

OBLIGATIONS & CONTRACTS 2011 5.

2.

Note: The fortuitous event must not only be the proximate cause but it must also be the only and sole cause

Accion subrogatoria (subrogatory action) – an indirect action brought in the name of the debtor by the creditor to enforce the former’s rights except: a. personal rights of the debtor b. rights inherent in the person of the debtor c. properties exempt from execution (eg.family home) Accion pauliana (rescissory action) – an action to impugn or assail the acts done or contracts entered into by the debtor in fraud of his creditor;

Note: Contributory negligence of the DR renders him liable despite the fortuitous event.

Note: The remedies must be in the above order. (Art. 1178)

6. 7.

The debtor contributed to the loss (Tan Chiong Sian v. Inchausti & Co., G.R. No. L-6472, March 7, 1912) The possessor is in bad faith (Art. 552) The obligor is guilty of fraud, negligence or delay or if he contravened the tenor of the obligation (Juan Nakpil v. United Construction Co., Inc. v. CA, G.R. No. L47851, April 15, 1988)

3.

Q: What are the effects of fortuitous event?

GR: All rights acquired are transmissible.

A:

1. 2.

On determinate obligation – obligation extinguished On generic obligation –obligation not extinguished (genus never perish)

Q: What is usury? A: Contracting for/receiving something in excess of the amount allowed by law fro the loan/forbearance of money, goods or chattels. Note: CB Circular 224 suspended the usury law CB Circular 905 allows the parties to freely stipulate on the interest rates

Q: How does interest and prior installments extinguished? A: GR: Receipt of the principal without reservation as to the interest shall give rise to a disputable presumption that the interest has been paid. XPNS: 1. Receipt does not recite that it was issued for a particular installment due 2. Payment of taxes 3. Where the non-payment of prior obligations has been proven Q: What are the 3 remedies in connection with specific performance? A:

1.

Exhaustion of the properties of the debtor (not exempt from attachment under the law)

XPN: Those not transmissible by La.N.S. 1. Law 2. Nature eg. purely personal rights 3. Stipulation of parties

DIFFERENT KINDS OF OBLIGATIONS (Arts. 1179-1230) Q: What is a pure obligation? A: One whose effectivity/extinguishment does not depend upon the fulfillment/ non fulfillment of a condition/upon the expiration of a period and is demandable at once. (Art. 1179) Q: What is a conditional obligation? A: An obligation subject to a condition and the effectivity of which is subordinated to the fulfillment or non-fulfillment of a future and uncertain event, or upon a past event unknown to the parties. Q: What is the difference between period and condition? A: Basis 1. As to time

Period Condition Refers to the May refer to future past event unknown to the parties 2.As to fulfillment It will happen at May or may an exact date or not happen at an indefinite time, but is sure to arrive. 3.As to its No effect or May give rise influence on the influence upon to an obligation to be the existence of obligation fulfilled or the obligation (suspensive)

OBLIGATIONS performed

AND

CONTRACTS 2011 of a party to the obligation and partly upon chance and/or the will of a third person 3. Positive – Involves the doing of an act 4. Negative – Involves the omission of an act 5. Divisible – Is susceptible of partial performance 6. Indivisible – Is not susceptible of partial performance 7. Conjunctive – There are several conditions in an obligation all of which must be performed 8. Alternative – There are several conditions in an obligation but only one must be performed 9. Possible – Is capable of fulfillment according to the nature, law, public policy or good customs. 10. Impossible – Is not capable of fulfillment according to nature, law, public policy or good customs (Art. 1183)

but only in its or the demandability or cessation of performance one already existing (resolutory)

Q: Distinguish suspensive from and resolutory conditions? (Art. 1181-1182) A: Suspensive condition 1. If fulfilled, obligation arises or becomes effective 2. If not fulfilled, no juridical relation is created 3. Rights are not yet acquired, but there is hope or expectancy that they will soon be acquired

Resolutory condition 1. If fulfilled obligation is extinguished 2. If not fulfilled, juridical relation is consolidated 3. Rights are already acquired, but subject to the threat or danger of extinction

Q: What is the meaning of constructive fulfillment of condition? A: It means that the condition shall be deemed fulfilled when the debtor actually prevents the fulfillment of the condition. Q: What are condition?

the

effects

of

Q: What is the effect of an impossible/unlawful condition? A: GR: Impossible Conditions annuls the obligation which depends upon the parties but not of a 3rd person.

potestative

XPNS: P.D.Do.N.T. 1. Pre-existing obligation 2. Obligation is Divisible 3. in simple or remuneratory Donations 4. in case of conditions Not to do an impossible thing 5. in Testamentary dispositions

A:

1.

If the fulfillment depends exclusively upon the will of the debtor, both the condition and the obligation are void.

Note: If the obligation is a pre-existing one, only the condition is void, leaving unaffected the obligation itself. Note: If the condition is resolutory and it depends on the sole will of the debtor, it is valid because what is left to the sole will of the debtor is not the existence or fulfillment of the obligation but merely its extinguishment.

2.

If the fulfillment depends upon the will of the creditor, the condition and obligation are valid.

Note: In the foregoing, the obligations remain valid, only the condition is void and deemed to have not been imposed. It is applicable only to obligations not to do and gratuitous obligations.

Q: When will the effect of fulfillment of a condition retroact? A:

1.

Q: What are the other types of condition? A:

1. 2.

2. Casual – The performance or fulfillment of the condition depends upon chance and/or the will of a third person Mixed – The performance or fulfillment of the condition depends partly upon the will

In an obligation to give - retroacts to the day of the constitution of the obligation In an obligation to do or not to do - The courts shall determine whether or not there will be a retroactive effect or when retroactivity will take effect

ATTY. ENRIQUE V. DELA CRUZ, JR. Obligations & Contracts 2011

OBLIGATIONS & CONTRACTS 2011 Q: What are the effects of loss, deterioration and improvement in real obligations? (During the pendency of the condition and the suspensive condition has been fulfilled) A: Loss Deterioration

Improvement

W/ DR’S fault W/O DR’s fault DR pays Obligation damages extinguished CRchoose Impairment b/w rescission borne by CR of obligation or fulfillment (w/ indemnity for damages in either case) a. by the thing’s nature or by time – inure to the benefit of the CR b. at the debtor’s expense-DR shall have no right other than that granted to a usufructuary

Q: What are the requisites for Art. 1189 to apply? A: 1. 2.

3. 4. 5.

Must be a real obligation Object is a specific/determinate thing Obligation is subject to a suspensive condition The condition is fulfilled There is loss, deterioration/ improvement of the thing during the pendency of the happening of the condition

Note: Applicable to obligations with a period Applicable to whoever has the duty to return in case of loss, deterioration/improvement of the thing in an obligation with a resolutory condition (Art. 1190, par. 2).

Q: What are reciprocal obligations? A: Those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. Q: What are the characteristics of right to rescind? A: 1. 2. 3. 4.

can be demanded only if plaintiff is ready, willing and able to comply with his own obligation and defendant is not not absolute Needs judicial approval in certain cases subject to judicial review if availed of extra judicially

5. 6.

may be waived expressly or impliedly Implied to exist in reciprocal obligations therefore need not be expressly stipulated upon

Note: (Resolution under Art. 1191, not Rescission under Arts. 1380-1381) GR: The right to rescind must be availed of judicially. XPN: if there is an express stipulation of automatic rescission

OBLIGATIONS WITH A PERIOD Q: What is an obligation with a period or a term? A: An obligation whose demandability or extinguishment is subject to the expiration of a period or a term. (Art. 1193) Requisites: 1. future 2. certain 3. possible, legally and physically Note: When the debtor binds himself to pay when his means permit him to do so, the obligation is deemed with a period or term. Note: The moment of payment is dependent upon the will of the debtor, but not the payment itself. Note: As the time of payment is not fixed, the court must fix the same before any action for collection may be entertained, unless, the prior action of fixing the term or period will only be a formality and will serve no purpose but delay.

Q: For whose benefit the period is constituted? A: GR: When a period has been agreed upon for the performance or fulfillment of an obligation, it is presumed to have been established for the benefit of both the creditor and the debtor XPN: When it appears from the tenor of the period or other circumstances that it was established for the benefit of one of the parties. Note: When it is for the benefit of the CR- CR may demand the performance of the obligation at any time but the DR cannot compel him to accept payment before the expiration of the period (e.g. “on demand”) When it is for the benefit of the DR- DR may oppose any premature demand on the part of the CR for performance of the obligation, or if he so desires, he may renounce

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the benefit of the period by performing his obligation in advance (Manresa).

Q: What is the effect of a fortuitous event in an obligation with a period? A: It only relieves the contracting parties from the fulfillment of their respective obligation during the term/period. Q: When may the court fix the period? A:

1.

2. 3. 4.

If the obligation does not fix a period, but from its nature & circumstances it can be inferred that a period was intended by the parties If the duration of the period depends upon the will of the DR In case of reciprocal obli, when there is a just cause for fixing the period If the DR binds himself when his means permit him to do so

Q: When may a debtor lose his right to make use of the period? A: 1.

2. 3.

4. 5.

Insolvency of the DR, unless security provided Did not deliver security promised Impaired security through his own acts/ through fortuitous event, unless he gives a new security equally satisfactory (If impairment is without the fault of DR, he shall retain the right). Violates undertaking in consideration of extension of period DR attempts to abscond (Art. 1198)

ALTERNATIVE OBLIGATION Q: Distinguish obligations?

facultative

from

alternative

5. May be complied with by substitution of one that is due 6. If principal obligation is void, the creditor cannot compel delivery of the substitute 7. If there is impossibility to deliver the principal thing or prestation, the obligation is extinguished, even if the substitute obligation is valid.

8. Loss of substitute before the substitution through the fault of the debtor doesn’t make him liable.

Note: In alternative obligations, choice takes effect only upon communication of the choice to the other party and from such time the obligation ceases to be alternative (Art. 1205). Note: No special form communication/notification.

is

required

for

the

Note: Choice of the DR when communicated to CR does no require the latter’s concurrence. To hold otherwise would destroy the very nature of the right to select & its alternative character. Once choice is made, it can no longer be renounced & parties are bound thereto. When choice is rendered impossible through the CR’s fault, the DR may bring an action to rescind the contract with damages (Art. 1203).

Q: What are the limitations on the right of choice of the DR?

A: Facultative Obligations 1. Fortuitous loss extinguishes the obligation 2. Culpable loss obliges the debtor to deliver substitute prestation without liability to debtor 3. Choice pertains only to debtor

4. Only one object is due

XPN: Expressly granted to creditor or third person 4. Several objects are due 5. May be complied with by fulfilling any of those alternately due 6. If one prestation is void, the others free from vices preserve the validity of the obligation 7. If various prestations are impossible to perform except one, this one must be delivered. If all prestations are impossible to perform, the obligation is extinguished 8. Where the choice is given to the creditor, the loss of the alternative through the fault of the debtor renders him liable for damages.

Alternative Obligations 1. Fortuitous loss of all prestation will not extinguish the obligation 2. Culpable loss of any object due will give rise to liability to debtor 3. GR: Choice pertain to debtor

A: Debtor cannot choose prestations which are: 1. impossible 2. unlawful 3. could not have been the object of the obligation Q: When does an alternative converted to a simple obligation?

obligation

ATTY. ENRIQUE V. DELA CRUZ, JR. Obligations & Contracts 2011

OBLIGATIONS & CONTRACTS 2011 A:

1. 2.

3. When the person who has a right of choice has communicated his choice When only one is practicable. (Art. 1202)

4.

Q: What are the effects of loss of objects of alternative obligations? A: When choice belongs to debtor: 1. Due to fortuitous event a. All are lost- DR released from the obligation b. Some but not all are lost- deliver that which he shall choose from among the remainder c. Only one remains- deliver that which remains 2.

5.

Q: What are the legal consequences if the obligation is joint? A: 1. 2. 3.

Debtor’s fault a. All are lost- CR shall have a right to indemnify for damages based on the value of the last thing which disappeared/service which become impossible b. Some but not all are lost- deliver that which he shall choose from among the remainder without damages c. Only one remains- deliver that which remains

When choice belongs to creditor 1. Due to fortuitous event (same rule as above) 2. Debtor’s fault a. All are lost- CR may claim the price/value of any of them with indemnity for damages b. Some but not all are lost- CR may claim any of those subsisting without a right to damages OR price/value of the thing lost with right to damages

JOINT AND SOLIDARY OBLIGATIONS Q: What are joint and solidary obligations? A: GR: When 2 or more CR or 2 or more DR concur in one and the same obligation, the presumption is joint obligation XPNS: 1. When expressly stipulated that there is solidarity 2. When the law requires solidarity

When the nature of the obligation requires solidarity When a charge/condition is imposed upon heirs/legatees & the will expressly makes the charge/condition in solidum (Manresa) When a solidary responsibility is imputed by a final judgment upon several defendants (Gutierrez v. Gutierrez)

4.

5. 6. 7.

Each debtor is liable only for a proportionate part of the entire debt; Each creditor, if there are several, is entitled only to a proportionate part of the credit; The demand made by one creditor upon one debtor, produces effects of default only as between them; Interruption of prescription caused by the demand made by one CR upon one DR, will NOT benefit the co-creditors or the codebtors; Insolvency of a debtor will NOT increase the liability of his co-debtors; Vices of each obligation emanating from a particular DR or CR will not affect the others; In indivisible or joint obligation, the defense of res judicata of one, does not extend to the others.

Q: What are joint indivisible obligations? A:

1.

2.

3.

If there are 2 or more DRs, compliance with the obligation requires the concurrence of all the DRs, although each for his own share. The obligation can be enforced only by preceding against all of the DRs. If there are 2 or more CRs, the concurrence/collective act of all the CRs, although each of his own share, is also necessary for the enforcement of the obligation. In case of insolvency of one of the DRs, the others shall not be liable for his shares. To hold otherwise would destroy the joint character of the obligation.

Q: What is the effect of breach? A: If one of the joint DRs fails to comply with his undertaking, the obligation can no longer be fulfilled or performed. It is the converted into one of

OBLIGATIONS

AND

indemnity for damages. Innocent joint DR shall not contribute to the indemnity beyond their corresponding share of the obli. Q: What is the effect of solidary obligation? A: Each one of the debtors is obliged to pay the entire obligation, and each one of the creditors has the right to demand from any of the debtors the payment or fulfillment of the entire obligation Q: Joey, Jovy and Jojo are solidary debtors under a loan obligation of P300, 000.00 which has fallen due. The creditor has, however, condoned Jojo's entire share in the debt. Since Jovy has become insolvent, the creditor makes a demand on Joey to pay the debt.

CONTRACTS 2011 Q: What are the effects of prejudicial and beneficial acts? A: Each one of the solidary CRs may do whatever may be useful/ beneficial to the others, but may not anything which may be prejudicial to the latter. (Art. 1212) Q: What are the effects of assignment of rights in solidary obligation? A: GR: Solidary CR cannot assign his right because it is predicated upon mutualconfidence, meaning personal qualification of each CR had been taken into consideration when obli was constituted. (Art.1213)

1. How much, if any, may Joey be compelled to pay? 2. To what extent, if at all, can Jojo be compelled by Joey to contribute to such payment?

XPNS: 1. Assignment to co-creditor 2. Assignment is with consent of co-creditor Q: To whom payment must be made in solidary obligation? A: GR: To any of the solidary CRs.

Q: What are the kinds of solidary obligation?

XPN: If demand, judicial/extra-judicial, has been made by one of them, payment should be made to him. (Art. 1214)

A:

1. 2. 3.

Passive – solidarity on the part of the debtors Active – solidarity on the part of the creditors Mixed – solidarity on both sides

Q: What is the difference between solidarity and indivisibility? A: Indivisibility Solidarity 1. Refers to the prestation 1. Refers to the vinculum or object of the contract existing between the subjects or parties 2. Does not require 2.Requires the plurality of plurality of subjects or parties or subjects parties 3. In case of breach, it is 3. In case of breach, the converted to one of liability of the solidary indemnity for damages debtors for damages and the indivisibility of the remains solidary obligation is terminated

DIVISIBLE AND INDIVISIBLE OBLIGATIONS Divisible Indivisible Susceptibility of an non-susceptibility to be obligation to be performed performed partially partially Partial performance is tantamount to nonperformance Note: Divisibility/indivisibility of the obligation refers to the performance of the prestation and not to the thing which is the object thereof. The obligation to deliver a divisible thing may be considered indivisible when: a. the law so provides b. stipulation of the parties

OBLIGATIONS WITH A PENAL CLAUSE Q: What are obligations with penal clause?

ATTY. ENRIQUE V. DELA CRUZ, JR. Obligations & Contracts 2011

OBLIGATIONS & CONTRACTS 2011 A: In obligations with a penal clause, the penalty shall substitute the indemnity for damages and the payment of interests in case of noncompliance, if there is no stipulation to the contrary. Nevertheless, damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation. (Art. 1226)

Payment may consist not only in the delivery of money but also the giving of a thing (other than money), the doing of an act, or not doing of an act. GR: Creditor is not bound to accept payment or performance by a third person.

Q: What is a Penalty Clause?

XPNS: 1. When made by a third person who has interest in the fulfillment of the obligation 2. Contrary stipulation

A: It is an accessory obligation attached to the principal obligation to assure greater responsibility in case of breach.

Q: What are the requisites of a valid payment?

Q: What is the effect of penalty? A: GR: The penalty fixed by the parties is a compensation or substitute for damages in case of breach. XPNs: 1. Stipulation to the contrary 2. Debtor is sued for refusal to agreed penalty 3. Debtor is guilty of fraud

pay the

Q: When may penalty be reduced (Judicially)? A: P.I.U. 1. Partial performance of the obligation 2. Irregular performance of the obligation 3. penalty is unconscionable even if there has been no performance

EXTINGUISHMENT OF OBLIGATIONS (Arts 1232-1304) Q: What are the modes of extinguishment of an obligation? A: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Payment/performance Loss of the thing due Condonation/ remission of debt Confusion/ merger Compensation Novation Annulment Rescission Fulfillment of a resolutory condition Prescription

Note: Enumeration under Art. 1231 is not exclusive.

PAYMENT OR PERFORMANCE (Art. 1232) I.

A: C.C-P.A.D. 1. Capacity of the payor 2. Capacity of the payee 3. Propriety of the time, place, manner of payment 4. Acceptance by the creditor 5. Delivery of the full amount or the full performance of the prestation Q: What are the characteristics of payment? A:

1. Integrity of payment GR: Performance should always be in full XPNS: a. Substantial performance – b. Intent to comply in good faith c. Deviation must only be slight d. Estoppel or waiver – CR accepts incomplete or irregular performance without protest or objection e. Express stipulation f. Debt is partly liquidated and partly unliquidated

2. Identity GR: Thing paid must be the very thing due and cannot be another thing even if of same quality and value XPN: 1. Dation in payment 2. Obligation is facultative

3. Indivisibility GR: Debtor cannot be compelled by the creditor to perform obligation in parts and neither can the debtor compel the creditor to accept obligation in parts XPNS:

OBLIGATIONS a. b. c.

AND

CONTRACTS 2011 legal tender in the Philippines. However, the parties may agree that the obligations or transactions shall be settled in any other currency at the time of payment.

When partial performance has been agreed upon When part of the obligation is Liquidated and part is unliquidated when to require the debtor to perform in full is impractical

2.

Q: Who may pay the obligation? A: The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary. (Art. 1236)

Payment in check or other negotiable instrument - not considered payment, they are not considered legal tender and may be refused by the creditor except when:

a.

When the document has been cashed b. When it had been impaired through the fault of the creditor

Q: What are the rights of a 3rd person who paid the debt?

Q: What are the special forms of payment?

A:

A:

1.

2.

With knowledge and consent of the debtor — a. Can recover entire amount paid (absolute reimbursement ) b. Can be subrogated to all rights of the creditor Without knowledge or against the will of the debtor – Can recover only insofar as payment has been beneficial to the debtor (right of conditional reimbursement )

Q: To whom payment should be made? A: Payment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized to receive it. (Art. 1240) GR: Payment to an unauthorized person is not a valid payment. XPNS: 1. Payment to an incapacitated person if: a. He kept the thing delivered, or b. It has been beneficial to him 2. Payment to a 3rd person insofar as it redounded to the benefit of the CR 3. Payment in GF to the possessor of credit Q: What are the rules on monetary obligation? A:

1.

Payment in cash- must be made in the currency stipulated, if not possible, then in the legal tender in the Philippines Note: RA 8183 – all monetary obligations shall be settled in the Philippine currency which is

1. Application of Payment- The designation of the debt to which the payment must be applied when the DR has several obligations of the same kind in favor of the same CR The choice is given to the debtor but may be transferred to the CR as when the DR makes payment and does not make application and DR accepts a receipt in which the application is made Requisites: 1. one debtor and one creditor 2. two or more debts of the same kind 3. amount paid by the debtor must not be sufficient to cover all debts 4. debts are all due 5. parties have not agreed previously on the application Legal Application Of Payment - application by law when neither the debtor nor the creditor made the application. The payment is applied to the most burdensome obligation of the debtor. The More Burdensome Rule is allowed only in legal application and neither the DR nor the CR can invoke it. If the debts happen to be of same nature and burden, the payment shall be applied proportionately. 2. Dation in payment (dacion en pago) – Property alienated by DR to CR in satisfaction of the debt in money; transmission of ownership of a thing by DR to CR as an accepted equivalent of the performance of the obligation

ATTY. ENRIQUE V. DELA CRUZ, JR. Obligations & Contracts 2011

OBLIGATIONS & CONTRACTS 2011 Consent of the CR is essential. 3. Payment in cessation – DR abandons all of his property for the benefit of his CRs in order that from the proceeds thereof, the latter may obtain payment of credits Presupposes insolvency of the DR All the DR’s CRs must be involved and the consent of all CRs must be obtained Dation in payment (Art. 1245) 1. Maybe one creditor 2. Not necessarily in state of financial difficulty

Payment in cession (Art. 1255) 1. Plurality of creditors 2. Debtor must be partially or relatively insolvent 3. Thing delivered is 3. Universality or property considered as equivalent of debtor is what is ceded of performance 4. Payment extinguishes 4. Merely releases debtor obligation to the extent of for net proceeds of the value of the thing things ceded or assigned, delivered as agreed upon, unless there is contrary proved or implied from the intention conduct of the creditor 5. Ownership is transferred 5. Ownership is not to CR upon delivery transferred 6. An act of novation 6. Not an act of novation 7. Does not presuppose 7. Presupposes insolvency insolvency

XPNS: A.R.T- i.T 1. CR is absent or unknown, doesn’t appear at place of payment 2. when w/out just cause CR refuses to give a receipt 3. when the title of the obligation has been lost 4. CR is incapacitated to receive payment at the time it is due 5. when two or more persons claim the right to collect

II. LOSS OF THE THING DUE (Art. 1262-1269) Q: When is a thing considered lost? A: When: D.O.P.E 1. It disappears in such a way that its existence is unknown; 2. It goes out of commerce; 3. It perishes; 4. Its existence is unknown or if known, it cannot be recovered. Note:

1. In Determinate Obligations to Give – GR: The obligation is extinguished when the object of the obligation is lost. XPNS:

a. b.

Law Nature of the obligation requires the assumption of risk c. Stipulation d. Debtor contributed to the loss e. Loss the of the thing occurs after the DR incurred in delay f. when DR promised to deliver the same thing to 2 or more persons who do not have the same interest g. when the debt of a certain and determinate thing proceeds from a criminal offense h. when the obligation is generic

4. Tender of payment and consignation (arts. 1256-1261) Q: What are the requisites of consignation? A: V.P-C.P.A’S 1. Valid existing debt which is already due 2. Prior valid tender except when prior tender of payment is dispensable 3. CR unjustly refuses the tender of payment 4. Prior notice of consignation given to persons interested in the fulfillment of the obligation 5. Amount or thing is deposited at the disposal of judicial authority 6. Subsequent notice of the fact of consignation to persons interested in the fulfillment of the obligation GR: Consignation shall produce effects of payment only if there is a valid tender of payment.

2.

In Generic Obligations to Give –

GR: obligation not extinguished because the genus of a thing never perish. XPN: a. In case of generic obligations whose object is a particular class or group with specific or determinate qualities (Limited Generic Obligations)

OBLIGATIONS

AND

b. In Obligations to Do: obligation extinguished when prestation becomes legally or physically impossible

CONTRACTS 2011 Note: The obligation is extinguished from the time the characters of creditor and debtor are merged in the same person. (Art. 1275)

Note: Merger which takes place in the person of the principal debtor or creditor benefits the guarantors. Confusion which takes place in the person of any of the latter does not extinguish the obligation. (Art. 1276)

Q: What is the effect of partial loss? A:

1.

Due to the fault or negligence of the DR – CR has the right to demand the rescission of the obligation or to demand specific performance, plus damages, in either case.

2.

Note: Confusion does not extinguish a joint obligation except as regards the share corresponding to the creditor or debtor in whom the two characters concur. (Art. 1277)

Due to fortuitious event: a. Substantial loss – obligation is extinguished. b. Unsubstantial loss – the CR shall deliver the thins in its impaired condition

Q: What are the requisites of confusion of rights?

Q: What is the effect when the thing is lost in the possession of the DR?

A:

1.

A:

2.

GR: Loss due to DR’s fault (disputable)

3.

XPN: natural calamity, earthquake, flood or storm Q: What is rebus sic stantibus? A: An agreement is valid only if the same conditions prevailing at time of contracting continue to exist at the time of performance; DR may be released in whole or in part based on this ground.

III.

V.

COMPENSATION Q: What are the requisites of compensation? A: 1. 2.

CONDONATION

3. 4.

Q: What are the requisites of condonation?

5.

A: GAIDE 1. Must be Gratuitous 2. Acceptance by the debtor 3. Must not be Inofficious 4. Formalities provided by law on Donations must be complied with 5. An Existing demandable debt

IV. CONFUSION Q; When is there confusion or merger of rights? A: Meeting in one person the qualities of a creditor and debtor of the same obligation.

Merger in the same person of the characters of both a CR and d DR Must take place in the persons of a principal CR and a principal DR Merger is definite and complete

6.

Both parties must be mutually CRs and DRs- in their own right and as principals Both debts must consist in sum of money/ if consumable, of the same kind/quality Both debts are due Both debts are liquidated & demandable Neither debt must be retained in a controversy commenced by 3rd person & communicated w/ DR (neither debt is garnished) Compensation must not be prohibited by law

Q: Distinguish compensation from payment A: Compensation Capacity of parties not necessary

Payment Debtor must have capacity to dispose of the thing paid and the creditor must have capacity to receive

ATTY. ENRIQUE V. DELA CRUZ, JR. Obligations & Contracts 2011

OBLIGATIONS & CONTRACTS 2011 payment The performance must be complete unless waived by the creditor Involves delivery or action

There can be partial extinguishment of the obligation Legal compensation takes place by operation of law without simultaneous delivery

Q: Distinguish compensation from confusion Compensation (Arts 1278-1279) 1. Two persons who are mutual debtors and creditors of each other 2. At least two obligations

Confusion (Arts 1275-1277) 1. One person where qualities of debtor and creditor are merged 2. One obligation

Q: What are the kinds of compensation? A:

1. 2. 3.

Legal compensation – By operation of law Conventional – By agreement of the parties Judicial – By judgment of the court when there is a counterclaim duly pleaded, and the compensation decreed

Q: What are the compensation?

debts

not

subject

to

A:

1. 2. 3. 4. 5.

Debts arising from contracts of deposit Debts arising from contracts of commodatum Claims for support due by gratuitous title Obligations arising from criminal offenses Certain obligations in favor of government (e.g. taxes, fees, duties, and others of a similar nature)

Q: Stockton is a stockholder of Core Corp. He desires to sell his shares in Core Corp. in view of a court suit that Core Corp. has filed against him for damages In the amount of P10 million, plus attorney's fees of PI million, as a result of statements published by Stockton which are allegedly defamatory because it was calculated to injure and damage the corporation's reputation and goodwill. The articles of incorporation of Core Corp. provide for a right of first refusal in favor of the corporation. Accordingly, Stockton gave written notice to

the corporation of his offer to sell his shares of P10 million. The response of Core Corp. was an acceptance of the offer in the exercise of its rights of first refusal, offering for the purpose payment in form of compensation or set-off against the amount of damages it is claiming against him, exclusive of the claim for attorney's fees. Stockton rejected the offer of the corporation, arguing that compensation between the value of the shares and the amount of damages demanded by the corporation cannot legally take effect. Is Stockton correct? Give reasons for your answer. Q: Define compensation as a mode of extinguishing an obligation, and distinguish it from payment. Q: X, who has a savings deposit with Y Bank in the sum of PI, 000,000.00, incurs a loan obligation with the said bank in the sum of P800,000.00 which has become due. When X tries to withdraw his deposit, Y Bank allows only P200,000.00 to be withdrawn, less service charges, claiming that compensation has extinguished its obligation under the savings account to the concurrent amount of X's debt. X contends that compensation is improper when one of the debts, as here, arises from a contract of deposit. Assuming that the promissory note signed by X to evidence the loan does not provide for compensation between said loan and his savings deposit, who is correct?

VI. NOVATION Q: What is novation? A: It is the change of an obligation by another, resulting in its extinguishment or modification, either by changing the object or principal conditions, or by substituting another in the place of the debtor or by subrogating a 3rd person to the rights of the creditor. Q: What are the requisites? A:

1. Previous valid obligation 2. an Agreement by the parties to create a new one or a modified version

OBLIGATIONS

AND

3. Extinguishment or modification the old obligation 4. valid New obligation Q: What are the effects of novation? A:

1.

2.

Extinguishment of principal also extinguishes the accessory, except: a. Stipulation to the contrary b. Stipulation pour autrui unless beneficiary consents If the new obligation is void, the old obligation shall subsist since there is nothing to novate, except when the parties intended that the old obligation be extinguished in any event. If the new obligation is voidable; novation can take place, except when such new obligation is annulled. If the old obligation has a condition: - if Resolutory & it occurred – old obligation already extinguished; no new obligation since nothing to novate - if suspensive & it never occurred – as if no obligation; nothing to novate If old obligation has condition, must be compatible with the new obligation; if new is w/o condition – deemed attached to new If new obligation has condition - if resolutory: valid - if suspensive & did not materialize: old obligation is enforced

3. 4.

5. 6.

Q: What are the forms of substitution of DRs? A:

CONTRACTS 2011 Subrogation 1. governed by Arts. 13001304 2.debtor’sconsent is required 3.extinguishes the obligation and gives rise to a new one 4.defects and vices in the old obligation are cured 5.takes effect upon moment of novation or subrogation

Subrogation and Assignment of Rights Conventional

Assignment of rights

5. as far as the debtor is concerned, takes effect upon notification

XPNS: 1. CR pays another CR who is preferred, w/out DR’s knowledge 2. A 3rd person not interested in the obligation pays with the express or tacit approval of the DR 3. Even w/o DR’s knowledge, person interested in fulfillment of obligation pays w/o prejudice to effects of confusion as to latter’s share.

CONTRACTS Elements (COC) 1. Consent 2.Object or Subject Matter

3.Cause or Consideration

Characteristics (ROMA) 1.Relativity (1311) 2.Obligatoriness and consensuality(1315) 3. Mutuality(1308) 4..Autonomy(1306)

Note: GR: Contracts are perfected by mere consent;

Expromission – effected with the consent of the CR at the instance of the new DR even w/out the consent or even against the will of the old DR. Delegacion – effected with the consent of the CR at the instance of the old DR with the concurrence of the new DR.

4. not cured

Note: GR: Subrogation cannot be presumed.

1.

2.

1. governed by Arts. 1624-1627 2.debtor’s consent is not required 3.Does not modify or extinguish the obligation

XPN: in case of real contracts, such as deposit, pledge and commodatum, which are not perfected until delivery of the thing subject of the contract. (Arts. 1315 and 1316)

Q: What is relativity of contracts? A: GR: A contract is binding not only between parties but extends to the heirs, successors in interest, and assignees of the parties, provided that the contract involves transmissible rights by their nature, or by stipulation or by provision of law XPNS:

ATTY. ENRIQUE V. DELA CRUZ, JR. Obligations & Contracts 2011

OBLIGATIONS & CONTRACTS 2011 1.

1. 2.

Stipulation pour autrui (stipulation in favor of a 3rd person) – benefits deliberately conferred by parties to a contract upon 3rd persons

3.

Requisites:

4.

a.

The stipulation must be part, not whole of the contract b. Contracting parties must have clearly & deliberately conferred a favor upon 3rd person c. 3rd person must have communicated his acceptance d. Neither of the contracting parties bears the legal representation of the 3rd person

2.

When a 3rd person induces a party to violate the contract Requisites:

a. Existence of a valid contract b. 3rd person has knowledge of such contract c. 3rd person justification

interferes

without

3.

3rd persons coming into possession of the object of the contract creating real rights

4.

By the stipulation of the parties By the general principles of obligations and contracts By the rules governing the most analogous nominate contracts By the customs of the place.

ESSENTIAL REQUISITES OF A CONTRACT (Arts. 1318-1355) CONSENT Q: What are the elements of consent? A: LM-CR 1. Legal capacity of the contracting parties 2. Manifestation of the conformity of the contracting parties 3. Parties’ conformity to the object, cause, terms and condition of the contract must be intelligent, spontaneous and free from all vices of consent 4. The conformity must be real Note: We follow the theory of cognition & not the theory of manifestation. Under our Civil Law, the offer & acceptance concur only when the offeror comes to know, & not when the offeree merely manifests his acceptance.

Offer – may be made orally or in writing unless the law prescribes a particular form

Contracts entered into

in fraud of CRs

Acceptance – no specified form but when the offeror specifies a form, such must be complied with

Q: What is the obligatory force of contracts? A: The parties are bound not only by what has been expressly provided for in the contract but also to the natural consequences that flow out of such agreement. (Art. 1315)

Acceptance by letter or telegram does not bind the offeror except from the time it came to his knowledge.

Q: What is mutuality of contracts?

Offer or acceptance, or both, expressed in electronic form, is valid, unless otherwise agreed by the parties (electronic contracts).

A: Contract must be binding to both parties and its validity and effectivity can never be left to the will of one of the parties. (Art. 1308)

Q: What are Contracts of Adhesion?

Q: What is the principle of autonomy of contracts?

A: One party has already a prepared form of a contract, containing the stipulations he desires, and he simply asks the other party to agree to them if he wants to enter into the contract.

A: The freedom of the parties to contract and includes the freedom to stipulate provided the stipulations are not contrary to law, morals, good customs, public order or public policy. (Art. 1306) Q: How are innominate contracts regulated? A:

Q: What are the elements of a valid offer and acceptance? A: 1. Definite- unequivocal 2. Intentional 3. Complete- unconditional

OBLIGATIONS

AND

CONTRACTS 2011 Q: What is an Option Contract?

Q: When does offer become ineffective? A:

1. 2. 3. 4.

Death, civil interdiction, insanity/ insolvency of either party before acceptance is conveyed Express/implied revocation of the offer by the offeree Qualified/conditional acceptance of the offer, which becomes counter-offer Subject matter becomes illegal/ impossible before acceptance is communicated

A: Preparatory contract in which one party grants to the other, for a fixed period, to decide whether or not to enter into a principal contract. Q: What are the effects of Option? A: Option may be withdrawn anytime before acceptance is communicated but not when supported by a consideration other than purchase price: option money.

Q: What is the period for acceptance?

Q: Who are the persons incapacitated to give consent?

A:

A: DIM 1. 2.

1.

Stated fixed period in the offer No stated fixed period a. Offer is made to a person present- acceptance must be made immediately b. Offer is made to a person absentacceptance may be made within such time that, under normal circumstances, an answer can be received from him

2. 3.

Note: Acceptance may be revoked before it comes to the knowledge of the offeror (withdrawal of offer)

Q: What is the rule on Complex Offer? A:

1. 2.

Offers are interrelated-contract is perfected if all the offers are accepted Offers are not interrelated- single acceptance of each offer results in a perfected contract unless the offeror has made it clear that one is dependent upon the other & acceptance o both is necessary.

Q: What is the rule on Advertisements as Offers? A:

1.

Business advertisements- not a definite offer, but mere invitation to make an offer, unless it appears otherwise

2.

Advertisement for Bidders- only invitation to make proposals & advertiser is not bound to accept the highest/lowest bidder, unless appears otherwise.

Deaf-mutes who do not know how to read and write (Illiterates) Insane or demented persons, unless the contract was entered into during a lucid interval Minors except: a. Contracts for necessaries b. Contracts by guardians or legal representatives & the court having jurisdiction had approved the same c. When there is active misrepresentation on the part of the minor. (minor is estopped) d. Contracts of deposit with the Postal Savings Bank provided that the minor is over 7 years of age e. Upon reaching age of majoritythey ratify the same

Q: What are the vices of consent? (MIVUF) A:

1.

Mistake – Must refer to the substance of the thing; substantial mistake and not merely an accidental mistake

Note: 2 General Kinds of Mistake: a. Mistake of Fact- When 1 or both of the contracting parties believe that a fact exist when in reality it does not, or that such fact does not exist when in reality it does. b. Mistake of Law- When 1 or both parties arrive at erroneous conclusion or interpretation of a question of law/ legal effects of a certain act/transaction. GR: refers to mistake of facts and not of law.

ATTY. ENRIQUE V. DELA CRUZ, JR. Obligations & Contracts 2011

OBLIGATIONS & CONTRACTS 2011 XPN: when mistake of law involves error as to the effect of an agreement when the real purpose of the parties is frustrated (Art. 1334). Requisites:

Note: Kinds of Fraud: 1. Fraud in the perfection of the contract a. Causal Fraud (Dolo Causante) b. Incidental fraud (Dolo Incidente)

1. Mistake must be with respect to the legal effect of the agreement; 2. It must be mutual; and 3. Real purpose of the parties must have been frustrated.

2.

Q: What is a Reluctant Consent? A: A contract is valid even though one of the parties entered into it against his wishes & desires/ even against his better judgment. Contracts are also valid even though they are entered into by one of the parties without hope of advantage/profit (Martinez v. Hongkong and Shanghai Bank, 15 Phil. 252). Violence – An external physical force exerted upon a person to prevent him from doing something or to compel him to do an act.

Q: What is the difference between Causante and Dolo Incidente?

5.

Dolo Causante (Art. 1338) Refers to fraud which is serious in character It is the cause which induces the party to enter into a contract Renders the contract voidable

Dolo Incidente (Art. 1344) Refers to fraud which is not serious in character It is not the cause which induces the party to enter into a contract Renders the party liable for damages

Q: What are the Kinds of Simulation of Contract? A:

1. 2.

Undue Influence – Any means employed upon a party which, under the circumstances could not be resisted and has the effect of controlling his volition and inducing him to give his consent to the contract, which otherwise, he would not have entered into. Fraud – use of insidious words or machinations in inducing another party to enter into the contract, which without them, he would not have agreed.

Dolo

A:

Requisites: 1. It must be serious/ irresistible 2. It must be the determining cause for the party upon whom it is employed in entering into the contract.

4.

Fraud in the performance of an obligation (Art. 1170). Requisites: 1. Fraud/ insidious words/ machinations must have been employed by one of the contracting parties; 2. It must have been serious; 3. It induced the other party to enter into a contract; 4. Should not have been employed by both contracting parties/ by 3rd persons.

Intimidation – An internal moral force operating in the will and inducing performance of an act

Requisites: 1. One of the parties is compelled to give his consent by a reasonable & well-grounded fear of an evil; 2. The evil must be imminent & grave; 3. It must be unjust; 4. The evil must be the determining cause for the party upon whom it is employed in entering into the contract.

3.

2.

Absolute- the contracting parties do not intend to be bound by the contract at all= void. Relative- the real transaction is hidden; the contracting parties conceal their true agreement; binds the parties to their real agreement when it does not prejudice 3rd person & is not intended for any purpose contrary to law, morals, etc. Effect: the apparent contract is void but the hidden contract is valid, if it is lawful and has the necessary requisites. As to 3rd persons without notice, the apparent contract is valid on the principle of estoppel

OBJECT Q: What are the requisites? A:

OBLIGATIONS 1.

2. 3. 4. 5.

AND

CONTRACTS 2011 1.

Determinate as to kind (even if not determinate, provided it is possible to determine the same without the need of a new contract) Existing or the potentiality to exist subsequent to the contract Must be licit Within the commerce of man Transmissible

Q: What are the things which cannot be the object of contracts?

2. 3. 4.

Cause of onerous contracts – the prestation or promise of a thing or service by the other Cause of remuneratory contracts- the service or benefit remunerated Cause of gratuitous contracts – the mere liberality of the donor or benefactor Accessory- identical with cause of principal contract, the loan which it derived its life & existence (eg: mortgage/pledge)

Q: What is the difference between Cause and Motive?

A: GR: All things/services may be the object of contracts. XPNS: 1. Things outside the commerce of men; 2. Intransmissible rights; 3. Future inheritance, except in cases expressly authorized by law; 4. Services which are contrary to law, morals, etc. 5. Impossible things/services 6. Objects which are not possible of determination as to their kind. Note: The most evident and fundamental requisite in order that a thing, right or service may be the object of a contract, it should be in existence at the moment of the celebration of the contract, or at least, it can exist subsequently/ in the future.

CAUSE

A: It must exist It must be true It must be licit

Q: What are contracts?

the

two

presumptions

in

A:

1. 2.

Every contract is presumed to have a cause The cause is valid

Q: What are the kinds of causes? A:

Cause Direct & most proximate reason of a contract Objective & juridical reason of contract Legality/ illegality of cause affects the existence/ validity of the contract Cause is always the same for each contracting party

Motive Indirect/ remote reasons Psychological/ purely personal reason Legality/ illegality of motive does not affect the existence/ validity of contract Motive differs for each contracting party

Effects on contracts Absence of cause-want of Confers no right and cause; there is total lack/ produces no legal effect absence of cause Failure of cause

Does not render the contract void

Illegality of cause- the Contract is null and void cause is contrary to law, morals, good customs, public order and public policy

Q: What are the Requisites of Causes? 1. 2. 3.

A:

Falsity of cause- the cause Contract is void, unless is stated but the cause is the parties show that not true there is another cause which is true and lawful Lesion/ Causa

Inadequacy

of Does not invalidate the contract, unless (1)there is fraud, mistake, or undue influence (2)when the parties intended a donation or some other contract (3)cases specified by law [contracts entered when ward suffers lesion of more than 25%]

ATTY. ENRIQUE V. DELA CRUZ, JR. Obligations & Contracts 2011

OBLIGATIONS & CONTRACTS 2011 2.

FORM OF CONTRACTS (Arts. 13561358)

3.

Q: What are rules on the form of contracts? A:

1.

2.

3.

Contracts shall be obligatory, in whatever form they may have been entered into, provided all essential requisites for their validity are present

4.

Contracts must be in a certain form - when the law requires that a contract be in some form to be: a. valid b. enforceable or c. for the convenience of the parties The parties may compel each other to reduce the verbal agreement into writing:

A. Solemn contracts (Contracts which must appear in writing) such as: 1. Donations of real estate or of movables if the value exceeding P 5,000; 2. Transfer of large cattle; Stipulation to pay interest in loans ; 3. Sale of land through an agent (authority must be in writing); 4. Partnership to which immovables are contributed; 5. Stipulation limiting carrier’s liability to less than extra-ordinary diligence; 6. Contracts of antichresis and Sale of vessels

5.

6.

Partnership where immoveable property/ real rights are contributed to the common fund (Arts. 1171 & 1773); Acts & contracts which have for their object the creation, transmission, modification/ extinguishment of real rights over immovable property; sales of real property/ of an interest therein is governed by Arts. 1403, No. 2, and 1405 (Art. 1358, no. 1) The cession, repudiation/ renunciation of hereditary rights/ of those of the conjugal partnership of gains (Art. 1358, no. 2) The power to administer property/ any other power which has for its object an act appearing/ which should appear in a public document/ should prejudice a 3rd person (Art. 1358, no. 3) The cession of actions/ rights proceeding from an act appearing in a public document (Art. 1358, no. 4)

Q: What are contracts that must be registered? A: 1. 2.

Chattel mortgages (Art. 2140) Sale/transfer of large cattle Registration Act)

(Cattle

REFORMATION OF INSTRUMENTS (Arts. 1359-1369) Q: What is reformation of instruments? A: Remedy to conform to real intention of the parties due to mistake, fraud, inequitable conduct, accident. (Art. 1359)

Note: In such cases, if contract is not in writing, it is VOID.

Q: What are the requisites in reformation of instruments?

B. Real contracts that require delivery for perfection –creation of real rights over immovable property must be written

A:

1. 2.

C. In contracts under the Statute of Frauds, where the party sued makes a timely objection to the absence of a written memorandum

3. 4.

Meeting of the minds to the contract True intention is not expressed in the instrument By reason of mistake, accident, relative simulation, fraud, or inequitable conduct (MARFI) Clear and convincing proof of MARFI

Q: What are the acts which must appear in a public document?

Q: When there is no reformation?

A:

A:

1.

Donation of immovable properties (Art. 719);

1. 2. 3.

Simple, unconditional donations inter vivos Wills; When the agreement is void

OBLIGATIONS 4.

AND

CONTRACTS 2011 e.

When an action to enforce the instrument is filed (Estoppel)

Payment by an insolvent- on debts w/c are not yet due; prejudices claim of others f. Provided for by law (Art. 1526, 1534, 1538, 1539, 1542, 1556, 1560, 1567 & 1659)

Note: Prescribes in 10 yrs. from date of execution of instrument When one of the parties has brought an action to enforce the instrument, no subsequent reformation can be asked (estoppel)

2.

Reformation is based on justice and equity When there is no meeting of the minds, the proper remedy is annulment and not reformation.

Q: In case of reformation of contracts, is the prescription period in bringing an action for reformation run from the time the contract became disadvantageous to one party? A: In reformation of contracts, what is reformed is not the contract itself, but the instrument embodying the contract. It follows that whether the contract is disadvantageous or not is irrelevant to reformation and therefore, cannot be an element in the determination of the period for prescription of the action to reform.

Q: What are the requisites before a contract entered into in fraud of creditors may be rescinded? A:

1. 2. 3.

Rescissible Contracts Q: What are the rescissible contracts? A: Those which have caused a particular economic damage either to 1 of the parties/ to a 3rd person & which may be set aside even if valid. It may be set aside in whole/in part, to the extent of the damage caused. (Art. 1381) Q: What are the requisites? A: Contract must be rescissible 1. Entered into by persons exercising fiduciary capacity: a. Entered into by guardian whenever ward suffers damage more than ¼ of value of property. b. Agreed upon in representation of absentees, if absentee suffers lesion by more than ¼ of value of property. c. Contracts where rescission is based on fraud committed on creditor (accion pauliana) d. Objects of litigation; contract entered into by defendant w/o knowledge/approval of litigants/ judicial authority

Payments made in state of insolvency: a. Plaintiff has no other means to maintain reparation b. Plaintiff must be able to return whatever he may be obliged to return due to rescission c. The things must not have been passed to 3rd persons in good faith d. It must be made within 4 yrs.

4.

There must be credit existing prior to the celebration of the contract; There must be fraud, or at least, the intent to commit fraud to the prejudice of the creditor seeking rescission ; The creditor cannot in any legal manner collect his credit (subsidiary character of rescission); The object of the contract must not be legally in possession of a 3rd person in good faith.

Q: What is the obligation created by the rescission of the contract? A: Mutual Restitution of things which are the objects of the contract & their fruits and of the price with interest. Q: When is mutual restitution not applicable? A:

1. 2.

Creditor did not receive anything from contract; Thing already in possession of 3rd persons in good faith; subject to indemnity only; if there are 2/more alienations- liability of 1st infractor.

Q: What are the badges of fraud? A:

1.

Consideration of the inadequate or fictitious

conveyance

ATTY. ENRIQUE V. DELA CRUZ, JR. Obligations & Contracts 2011

is

OBLIGATIONS & CONTRACTS 2011 2. 3. 4. 5. 6. 7.

Transfer was made by a DR after a suit has been begun and while it is pending against him Sale upon credit by an insolvent DR The presence of evidence of large indebtedness or complete insolvency of the debtor Transfer of all his property by a DR when he is financially embarrassed or insolvent Transfer is made between father and son, where there are present some or any of the above circumstances and Failure of the vendee to take exclusive possession of the property.

Q: When is there a voidable contract? A:

1. 2.

Q: What are the causes of extinction of action to annul? A:

1.

Prescription - the action must be commenced within 4 years from: a. The time the incapacity ends; from time guardianship ceases b. The time the violence, intimidation or undue influence ends or c. The time the mistake or fraud is discovered

2.

Ratification- cleanses the contract of its defects from the moment it was constituted Requisites: a. there must be knowledge of the reason which renders the contract voidable b. such reason must have ceased and c. the injured party must have executed an act which expressly or impliedly conveys an intention to waive his right By loss of the thing which is the object of the contract through fraud or fault of the person who is entitled to annul the contract

Q: Distinguish rescission from resolution. A: Rescission 1. action by the contracting parties even by a third party 2. based on lesion/ fraud of creditors 3. courts cannot grant periods for compliance

Resolution (Art 1191 ) 1. action only by the injured party 2. based on nonfulfillment of the obligation 3. courts may grant

Q: What is the prescriptive period: action for rescission? A:

1. 2. 3.

Under Art 1381 no.1 - within 4 yrs. from the time the termination of the incapacity of the ward; Under Art 1381 no.2 - within 4 yrs. from the time the domicile pf the absentee is known; Under Art 1381 nos. 3 & 4 & Art. 1382within 4yrs. from the time of the discovery of fraud.

When one of the parties is incapacitated to give consent When consent was vitiated

3.

Q: Who may institute action for annulment? A: By all who are thereby obliged principally or subsidiarily.

Voidable Contracts

Note: He who has capacity to contract may not invoke the incapacity of the party with whom he has contracted.

Q: What are the characteristics of a voidable contract?

A 3rd person who is a stranger to the contract cannot institute an action for annulment.

A:

Q: What are the effects of annulment?

a. b.

Effective until set aside May be assailed/attacked only in an action for that purpose c. Can be confirmed d. can be assailed only by the party whose consent was defective/ his heirs/ assigns

A: 1. 2.

If contract not yet consummated- parties shall be released from the obligations arising therefrom. If contract has already been consummated- rules provided in Arts. 1398-1402 shall govern.

OBLIGATIONS

AND

CONTRACTS 2011 2.

Q: What is confirmation? A: Act by which a voidable contract is cured of its vice or defect.

Note: The contracts/agreements under Statute of Frauds require that the same be evidenced by some note/memorandum/ writing, subscribed by the party charged/ by his agent, otherwise, the said contract shall be unenforceable.

Q: What is recognition? A: Act whereby a defect of proof is cured such as when an oral contract is put into writing or when a private instrument is converted into a public instrument.

The Statute of Frauds applies only to executory contracts, not to those that are partially/completely fulfilled.

Q: What is ratification?

Void Contracts

A: Act by which a contract entered into in behalf of another without or in excess of authority is cured of its defect.

Q: What are the kinds of void contracts? A:

Q: What are the modes of ratification? A: 1. For contracts infringing the Statute of Frauds: a. expressly b. impliedly - by failure to object to the presentation of oral evidence to prove the contract, or by the acceptance of benefits under the contract. 2. If both parties are incapacitated, ratification by their parents or guardian shall validate the contract retroactively

Unenforceable Contracts Q: What are unenforceable contracts? A: Those which cannot be enforced by proper acion in court unless they are ratified because either: 1. Those entered into without/ in excess of authority; 2. Those that do not comply with the statute of frauds; 3. Those where both contracting parties do not possess the required legal capacity. Q: What are the 2 ways of curing unenforceable contracts because of not complying with the Statute of Frauds? A: 1.

Failure to object during the trial to the admissibility of parol evidence to support a contract covered by the Statute of Frauds.

Acceptance of Benefits - when the contract has been partly executed because estoppel sets in by accepting performance.

a. b. c. d. e.

1. Those lacking in essential elements: No consent, no object, no cause – essential formalities are not complied with (ex: donation propter nuptias – should conform to formalities of a donation to be valid) Those w/c are absolutely simulated or fictitious – no cause Those which cause or object did not exist at the time of the transaction – no cause/object Those whose object is outside the commerce of man – no object Those w/c contemplate an impossible service – no object Those w/c intention of parties relative to principal object of the contract cannot be ascertained 2.

Contracts prohibited by law

3. Illegal/Illicit contracts (e.g. contract to sell marijuana) Q: What are inexistent contracts? A: Those whose: 1. Cause, object or purpose is contrary to law, morals, etc. 2. Absolutely simulated or fictitious 3. Cause or object did not exist at the time of the transaction 4. Object is outside the commerce of men 5. Contemplate an impossible service 6. Intention of the parties relative to the principal object of the contract cannot be ascertained; and 7. Expressly prohibited/ declared void by law

ATTY. ENRIQUE V. DELA CRUZ, JR. Obligations & Contracts 2011

OBLIGATIONS & CONTRACTS 2011 contract nor may be compelled to comply with such obligation.

Q: What is the Doctrine of Pari Delicto?

CONTRACT and INEXISTENT CONTRACT

A: Both parties are guilty, no action against each other; those who come in equity must come with clean hands; applies only to illegal contracts & not to inexistent contracts; does not apply when a superior public policy intervenes.

Void Contract - those where all the requisites of a contract are present, but the cause, object or purpose is contrary to law, morals, good customs, public order or public policy or the contract itself is prohibited or declared prohibited. Principle of in pari delicto is applicable.

In pari delicto – not only both are at fault but that they are equally at fault GR: When a void contract is such because of illegality of the cause or the object and both parties are at fault, the law leaves them where they are and will not come to their aid. XPNS: 1. payment of usurious interest 2. payment of money or delivery of property for an illegal purpose where the party who paid or delivered repudiated the contract before the purpose has been accomplished or before any damage has been caused to a 3rd person 3. payment of money or delivery of property by a party incapable of giving consent 4. agreement or contract which is not illegal per se but is merely prohibited and the prohibition is designed for the protection of the plaintiff 5. payment of any amount in excess of the maximum price of any article fixed by law or regulation by competent authority 6. contract whereby a laborer undertakes to work longer than the maximum number of hours fixed by law 7. contract whereby a laborer accepts a wage lower than the minimum wage fixed by law 8. one who lost in gambling because of fraudulent schemes practiced on him is allowed to recover his losses Q: What are the Rules when only one of the parties is at fault? A: 1.

2.

Executed Contracts - Guilty party is barred from recovering what he has given to the other party by reason of the contract. Innocent party may demand for the return of what he as given Executory Contracts - Neither of the contracting parties can demand for the fulfillment of any obligation from the

Inexistent Contract - those where one or some of the requisites which are essential for validity are absolutely lacking

Principle of in pari delicto is not applicable.

NATURAL OBLIGATIONS (Arts. 1423-1430) Q: What are Natural obligations? A: They are real obligation to which the law denies an action, but which the debtor may perform voluntarily Q: What are obligations?

the

instances

of

natural

A: 1.

2. 3. 4. 5. 6. 7.

Performance after the civil obligation has prescribed Reimbursement of a 3rd person for a debt that has prescribed Restitution by minor after annulment of contract Delivery by minor of money or fungible thing in fulfillment of obligation Performance after action to enforce civil obligation has failed Payment by heir of debt exceeding value of property inherited and Payment of legacy after will has been declared void Q: What is the difference between Natural and Moral Obligations? A: Natural Obligation There is a juridical tie between the parties which is not enforceable by court action Performance by the debtor is a legal fulfillment of the

Moral Obligation No juridical tie whatsoever The act is pure liberality or generosity.

OBLIGATIONS obligation, not an act of generosity. Voluntary fulfillment of such produces legal effects which the court will recognize & protect

AND

CONTRACTS 2011 1.

Voluntary fulfillment of such does not produce any legal effect which the court will recognize & protect

ESTOPPEL (Arts. 1431-1439) Q: What is estoppel?

2. 3. 4.

conduct on the part of the defendant or one under whom he claims, giving rise to the situation complained of delay in asserting the complainant’s right after obtaining knowledge of the conduct of defendant lack of knowledge or notice on the defendant that the complainant would assert his right injury or prejudice to the defendant in the event relief is accorded to the complainant

A: It is a condition or state by virtue of which an admission or representation is rendered conclusive upon the person making it and cannot be denied or disproved as against the person relying thereon.

1.

Estoppel in Pais (by conduct) a. Estoppel by silence b. Estoppel by acceptance of benefits

2.

Technical Estoppel a. Estoppel by deed b. Estoppel by record c. Estoppel by judgment

3.

Laches - Failure or neglect, for an unreasonable length of time to do that which, by exercising due diligence, could/should have been done earlier. It is negligence/omission to assert a right within a reasonable time warranting a presumption that the party entitled to assert it, either has abandoned it/declined to assert it

Laches and Prescription Laches Prescription 1. concerned with effect 1. concerned with fact of of delay delay 2. inequity of permitting 2. question of matter of the claim to be enforced time 3. not statutory 3. statutory 4. applies in equity not 4. applies at law based on based on a fixed time a fixed time 5. not based on a fixed 5. based on a fixed time time Q: What are the essential elements of laches? A:

ATTY. ENRIQUE V. DELA CRUZ, JR. Obligations & Contracts 2011