Notes On Article 1156 - 1175.docx

ARTICLE 1157 - 1162 Q. What are the different sources of an obligation? A. Obligation may arise from LAW, CONTRACT, QUASI-CONTRACT, DELICT (acts or omissions punished by law) and QUASI-DELICTS. 1. LAW - when an obligation is imposed by law itself. It may also be referred to as LEGAL OBLIGATION. Ex. Obligation to pay taxes; support one’s family. Legal obligations are not presumed. They must be clearly set forth in the law to be demandable. Why? Because obligations imposed by law, just like any other obligations sourced from other sources are burdens upon the debtor. 2. CONTRACTS - when they arise from the stipulation of the parties. It may also be referred to as CONTRACTUAL OBLIGATIONS or VOLUNTARY AGREEMENTS. Ex. Contract of loan, sale, lease, employment, etc. Contract is the meeting of the minds between two (2) persons whereby one binds himself, with respect to the other, to give something or to render some service.(Art. 1305) Obligation arising from contracts have the force of law between the contracting parties. They have same binding effect of a legal obligation. Does this mean that contract is superior to the law? NO. Take note that for a contract to be valid, it must not be against the law, morals, good customs, public order and public policy. Otherwise, contract is invalid. In the eyes of the law, there is no contract to speak of. Consequently, no obligation will arise. If a party to the obligation violates the contract by one’s failure or refusal to comply with his obligation, said party shall be liable for breach of contract. Parties to the obligation are mandated to comply in good faith with the contract, i.e. they comply or perform their contractual obligation on accordance with the stipulations and terms of the contract or agreement. 3. QUASI-CONTRACTS - when they arise from lawful, voluntary and unilateral acts which are enforceable to end that no one shall be unjustly enriched or benefited at the expense of another. It may also be referred to QUASICONTRACTUAL OBLIGATIONS or obligations arising from contracts implied in law. A quasi-contract is not a contract per se. As there is no meeting of the minds between the parties to the obligation. The element of consent in contracts is

lacking. It is a juridical relation created by law resulting from lawful, voluntary and unilateral acts by virtue of which the parties become bound to each other to the end that no one will be unjustly enriched or benefited at the expense of another. The law considers the parties as having entered into a contract, although they have not actually done so, and irrespective of their intention, to prevent injustice or the unjust enrichment of a person at the expense of another. Under the Civil Code, there two popular kinds of quasi-contracts, i.e. Negotiorum Gestio and Solutio Indebiti. NEGOTIORUM GESTIO - it is the voluntary management of the property or affairs of another without the knowledge or consent of the latter. (Unauthorized management of ones property.) Ex. House almost razed by fire but was prevented. Civil obligation to reimburse expenses incurred for saving the house from being burned. SOLUTIO INDEBITI - it is juridical relation which is created when something is received when there is no right to demand it and it was unduly delivered through mistake. The requisites are: a. A things was received; b. There is no right to demand its delivery; and c. The thing was delivered through mistake. This creates a civil obligation on the part of the recipient to return the thing mistakenly delivered. Ex. Debtor pays Creditor more than the amount of his debt. Creditor must return the excess. 4. CRIMES or ACTS OR OMISSIONS PUNISHED BY LAW - when they arise from civil liability for damages which is the consequence of a criminal offense (crime or delict). Basis: Article 100 of the Revised Penal Code provides that “every person criminally liable for an act or omission is also civilly liable for damages.” Justification: Commission of a crime causes not only moral evil but also material damage. However, there are crimes does not result to material damage like contempt, insults to person of authority, gambling, violations of traffic regulations, etc. In such cases, no civil liability can be enforced. Scope of Civil Liability - (1) Restitution, (2) Reparation for the damage caused; and (3) Indemnification for consequential damages. (Art. 104, RPC)

Ex. Carnapping. Civil liability includes: (1) To return the car or to pay its value if it was lost or destroyed; (2) to pay for any damage caused to the car; and (3) to pay such other damages suffered by as a consequence of crime. 5. QUASI-DELICTS or TORTS - when they arise from damage caused to another through an act or omission, there being fault or negligence, but no contractual relation exists between the parties. Quasi-delict is an act or omission by a person which causes damage to another in his person, property, or rights giving rise to an obligation to pay for the damage done, there being fault or negligence but there is no pre-existing contractual relation between the parties. (Art. 2176) Requisites of Quasi-Delict 1. There must be an act or omission; 2. There must be fault or negligence; 3. There must be damage caused; 4. There must be a direct relation or connection of cause and effect between the act or omission and the damage; and 5. There is no pre-existing contractual relation between the parties. Ex. Playing softball, broke the window glass of neighbor. Possessor of an animal. Crime vs. Quasi-Delict 1. 2. 3. 4. 5. 6.

C - criminal or malicious intent QD - negligence only C - purpose is punishment QD - purpose is indemnification of the offended party C - affects public interest QD - concerns private interest C - two liabilities: criminal and civil liability QD - civil liability only C - can nor be compromised or settled by the parties themselves QD - can be compromised as any other civil liability C - guilt of the accused must be proved beyond reasonable doubt QD - fault or negligence need only to be proved by preponderance of evidence

ARTICLE 1163 - 1166

REAL OBLIGATION

These articles speak of real obligations or the obligation to give or deliver a thing.

What are the different kinds of things? SPECIFIC OR DETERMINATE THING - particularly designated or physically segregated others of the same class. - identified by its individuality. - debtor cannot substitute it with another although the latter is of the same kind and quality without the consent of the creditor. GENERIC OR INDETERMINATE THING - when it refers only to a class or genus or specie. - it cannot be pointed out with particularity. - the debtor can give anything of the same class as long as it is of the same kind. What are the duties of the debtor in obligation to give a determinate thing? 1) Preserve the thing. (1163) - Every person obliged to give something is also oblige to take care of it with the proper diligence of a good father of a family, unless the law or the stipulation of the parties requires another standard of care. The obligor has the INCIDENTAL duty to take care of the thing due with the diligence of a good father of a family pending delivery. What is the standard of care required? GR: Diligence of a good father of a family - equated with ordinary care or that diligence which an average, a reasonably prudent, person exercises over his own property. EXN: Unless the law or the stipulation of the parties provides another standard of care like slight or extraordinary diligence. In such a case, the law or stipulation must prevail. Rationale of the debtor’s obligation to preserve the thing? To insure that the thing to be delivered would subsist in the same condition as it was when the obligation was contracted as the debtor is oblige to deliver the very same thing which is the subject of the obligation. Without this duty, the debtor would be able to afford being negligent and he would not be liable if the property is lost or destroyed, rendering the obligation to give illusory. 2) Deliver the fruits of the thing. (1164) - The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. However, he shall acquire no real right over it until the same has been delivered to him. What are the different kinds of fruits being referred in the law? (a) Natural fruits - the spontaneous products of the soil, and the young and other products animals. Ex. grass, trees, plants on lands produced without the intervention of human labor.

(b) Industrial fruits - produced by lands of any kind through cultivation or labor. Ex. Sugar cane, vegetables, rice, all products of lands Brough about by reason of human labor. (c) Civil fruits - derived by virtue of juridical relations. Ex. Rents, price of leases, perpetual or like annuities, royalties. Why is the creditor accorded the right over the fruits of the thing? - To secure and protect his interest should the debtor commit delay in the performance of or fulfillment of his obligation. When is the obligation to deliver the fruits arise? - from the time of the perfection of the contract, i.e. from the birth of the contract or to the meeting of the minds between the parties. Second part of Art. 1164 states that, he, pertaining to the creditor, shall acquire no real right over it, the fruit of the thing, until the same has been delivered to him. What do you mean by real right? - Real right is the right or interest of a person over a specific thing (ownership, possession, mortgage), without definite passive subject against whom the right may be personally enforced. Prior to the delivery of the thing, what then is the right of the creditor in relation to the fruit of the thing? - He may only exercise his personal right, i.e. to demand from the debtor the fulfillment of the latter’s obligation to give, to do, or not to do. Distinguish personal right from real right. - in PR, there is definite active subject and passive subject while in RR, there is only a definite passive subject. -in PR, binding or enforceable only against a particular person while in RR, directed against the whole world. When is ownership over the thing acquired? - it is acquired by tradition or by delivery. Without delivery, actual or constructive, no transfer of ownership of the thing. “The creditor shall acquire no real right over it until the same has been delivered to him.” 3) Delivery of Accession and Accessories. (1166) - The obligation to give a determinate thing includes that of delivering all its accessions and accessories, even though they may not have been mentioned. What is an accession? - fruit of a thing, addition to or improvements upon a thing (the principal). Ex. House or trees on a land; rents of a building; air conditioner in a car; profits or dividends accruing from shares of stocks.

What is an accessory? - things joined to or included with the principal thing for the latter’s embellishment, better use, or completion. Ex. Key of a house, frame of a picture, bracelet of a watch, machinery in a factory, bow of a violin. What is the rule as regards the accessions and accessories of a thing? - all accessions and accessories are considered included in the obligation to deliver a determinate thing although they may not have been mentioned. - based on the principle of law that the accessory follows the principal. - in order that they will be excluded, there must be a stipulation to that effect. 4)

Deliver the thing itself. (1163)

5) Answer for damages in case of non-fulfillment or breach. (1170) - Those who in the performance of their obligations are guilty of fraud, negligence, or delay and those who in any manner contravene the tenor thereof, are liable for damages. What are the duties of the debtor in obligation to give an indeterminate thing? 1) Deliver a thing which is of the quality intended by the parties taking into consideration the purpose of the obligation and other circumstances. (1246) - When the obligation consists in the delivery of an indeterminate or generic thing, whose quality and circumstances have not been stated, the creditor cannot demand a thing of superior quality. Neither can the debtor deliver a thing of inferior quality. The purpose of the obligation and other circumstances shall be taken into consideration. 2) Answer for damages in case of fraud, negligence, or delay, in the performance of his obligation, or contravention of the tenor thereof. (1170)

ARTICLE 1167

POSITIVE PERSONAL OBLIGATION

If a person obliged to do something fails to do it, the same shall be executed at his cost. The same rule shall be observed if he does it in contravention of the tenor of the obligation. Furthermore, it may be decreed that what has been poorly done be undone.

What are the three (3) situations contemplated in the article tantamount to breach of an obligation to do? (1) the debtor fails to perform an obligation to do; (2) the debtor performs an obligation to do but contrary to the terms thereof; or (3) the debtor performs an obligation to do but in a poor manner. What are the remedies of the creditor in the three (3) situations contemplated by the article? (1) If the debtor fails to comply with his obligation to do, the creditor has the right to: (a) have the obligation performed by himself, or by another, unless personal consideration are involved (damages only), at the debtor’s expense; and (b) recover damages. (2) In case the obligation is done in contravention of the terms of the same or is poorly done, it may be ordered (by the court upon complaint) that it be undone if it is still possible to undo what was done. Can you compel the debtor by court order the performance of an obligation to do that he fails to perform? No. A specific performance cannot be ordered in a personal obligation to do because this may amount to involuntary servitude which, as a rule, is prohibited under our Constitution (Art. III, Section 18[2]). ARTICLE 1168

NEGATIVE PERSONAL OBLIGATION

When the obligation consists in not doing, and the obligor does what has been forbidden him, it shall also be undone at his expense. How is a negative personal obligation fulfilled? The obligation is fulfilled by not doing what is forbidden. The duty of the obligor is to abstain from an act. Specific performance is not a remedy. What is remedy of the creditor if the debtor perform what is forbidden? Undo the forbidden thing at his expense plus damages. However, if it is not possible to undo what was done, physically or legally, remedy is an action for damages caused by the debtor’s violation of his obligation.

ARTICLE 1169

DELAY (LEGAL) or MORA

Those oblige 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. However, the demand by the creditor shall not be necessary in order that delay may exist: (1)

when the obligation or the law expressly so declares; or

(2) when from the nature and the circumstances of the obligation it appears that he designation of time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or (3) when demand would be useless, as when the debtor has rendered it beyond his power to perform. In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins. What is DELAY? Ordinary Delay - merely failure to perform an obligation on time. Legal Delay or Default or Mora - failure to perform an obligation on time which failure constitute a breach of obligation. Kinds of Delay or Default (1) Mora Solvendi - delay on the part of the debtor to fulfill his obligation i.e. to give or to do. (2) Mora Accipiendi - delay on the part of the creditor to accept the performance of the obligation; and (3) Compensatio Morae - delay of the obligors in reciprocal obligation i.e. the delay of the obligor cancels the delay of the obligee, and vice versa. The net result is that there is no actionable default on the part of both parties. May a debtor in negative personal obligation incur delay? No. In an obligation not to do, non-fulfillment may take place but delay is impossible for the debtor fulfills his obligation by not doing what has been

forbidden him. Delay is incurred when there is failure to timely do a positive act. What are the requisites of delay or default by the debtor (mora solvendi)? (1) obligation is due and demandable; (2) failure of the debtor to perform his positive obligation on the date agreed upon; (3) demand (not merely a reminded or notice) made by the creditor upon the debtor to comply with the obligation which demand may be either judicial (complaint is filed in court) or extrajudicial (outside court, oral or in writing); and (4) failure of the debtor to comply with such demand. What are the effects of delay? (1) Mora Solvendi (a) the debtor is guilty of breach or violation of the obligation; (b) debtor is liable to the creditor for interest or damages which shall commence from the demand; (c) He is liable even for fortuitous event when the obligation is to deliver a determinate thing. If what is to be delivered is a generic thing, not liable because genus does not perish. (2) Mora Accipiendi (a) creditor is guilty for breach (b) liable for damages suffered by the debtor; (c) he bears the risk of loss of the thing due; (d) where the obligation is to pay money, debtor is not liable for interest from the time of creditor’s delay; and (e) debtor may release himself from the obligation by consignation or deposit in court of the thing or sum due. (3) Compensatio Morae Delay of the obligor cancels the delay of the obligee and vice versa. No default or delay on the part of both parties. What are the instances when demand is not necessary to put the debtor in delay? (1) when the obligation so provides.

(2) when the law so provides. (taxes) (3) when time is of the essence; (4) when demand would be useless; and (5) when there is performance of a party in a reciprocal obligation. ARTICLE 1170

GROUNDS FOR LIABILITY

Those who in the performance of their obligations are guilty of fraud, negligence, or delay and those who in any manner contravene the tenor thereof, are liable for damages. What are the difference grounds for liability? i.e. which entitles the injured party to damages. Results to voluntary breach of obligation as distinguished from involuntary breach as provided by Art. 1174 on fortuitous event. (1) FRAUD (deceit or dolo) - deliberate or intentional evasion of the normal fulfillment of an obligation. It implies some kind of malice or dishonesty. There is bad faith which involves a design to deceive another. Ex. Obligation to deliver a wine of particular branch. When he made a delivery, he replaced its content with a cheaper wine. Damages. Two Types of Fraud (a) Incidental Fraud - the one which is governed by A1170, those committed in the performance of the obligation; (b) Causal Fraud - the which is governed by A1338, those fraud employed in the execution of a contract and vitiates consent. Ex. Obligation to deliver a wine with the representation that the wine is that as represented by the labels. No consent, annulment of contract. (2) NEGLIGENCE (fault or culpa) - any voluntary act or omission, there being no bad faith or malice, which prevents the normal fulfillment of an obligation. Ex. Contract of carriage between a passenger and a common carrier. In confederation of the fare, the latter has the obligation to deliver the passenger safely to his destination. If due to the recklessness of the driver, singing Kathang Isip which driving and closes his eyes while singing, an accident occurs and resulted to the

injury of the passengers, common carrier is liable for damages due to negligence. (3)

DELAY (default or mora)

(4) Contravention of the terms of the obligation - violation of the terms and conditions stipulated in the obligation. It must not be due to a fortuitous event or force majure. Ex. Contract of Lease - Lessee has the obligation to pay the rent while the Lessor has the duty to maintain the peaceful possession of lessee. Ejectment must be for a valid reason. FRAUD vs. NEGLIGENCE (1) (2) (3) (4)

ARTICLE 1174

F, deliberate intention to cause damage or injury. N, no such intention to cause damage or injury. F, waiver of future liability for future fraud is void (A1171). N, waiver of future liability for future negligence is allowed. F, must be clearly proved. N, presumed in contractual obligation. ConNeg, CrimNeg, CivNeg F, liability for cannot be mitigated or reduced by the courts. N, maybe reduced according to the circumstances. FORTUITOUS EVENTS (involuntary breach of obligation)

Except in cases expressly specified by law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events could not be foreseen, or which though foreseen, were inevitable. What is a fortuitous event? Any event which could not be foreseen or which, though foreseen, is inevitable. Event which is either impossible to foresee or impossible to avoid. Fortuitous events are happening which are independent of the will of the debtor and which makes the normal fulfillment of the obligation impossible. Fortuitous event results to the breach (involuntary) of an obligation but, generally, no civil liability will be attached. Fortuitous Event vs. Force Majeure FE, may either be an act of man or an act of God.

(1) Acts of Man - strictly speaking, FE, event independent of the will of the obligor but not of other human wills. (2) Acts of God - majeure or which are totally independent of the will of every human being. Both, FE and FM exempts the obligor from liability because both are independent of the will of the obligor. Requisites of a Fortuitous Event (1) the event must be independent of the human will or at least of the debtor’s will; (2) the event could not be foreseen, or if foreseen, is inevitable; (3) the event must be of such character as to render it impossible for the debtor to comply with his obligation in a normal manner; (4) the debtor must be free from any participation in, or the aggravation of, the injury to the creditor, that is, there is no concurrent negligence on his part. To exempt the obligor from obligation, all the requisites must concur. Rules as to liability in case of fortuitous event GR: A person is not responsible for loss or damage caused to another resulting from the non-performance of his obligation due to fortuitous event. Obligation is extinguished. EXCEPTIONS: (1) When expressly specified by law. (a) the debtor is guilty of fraud, negligence, or delay, or contravention of the tenor of the obligation. (Art. 1170, 1165 par. 3) Ex. Delay (legal), horse died. (b) the debtor has promise to deliver the same (specific thing) to two (2) or more persons who do not have the same interest. Ex. It would be impossible for the debtor to comply with his obligation to both creditors even without any fortuitous event taking place.

(c) the obligation to deliver a specific thing arises from a crime. (Art. 1268) Ex. A person is responsible for the results of whatever cause which flow from his criminal act. Thief is responsible to return stolen item. (d) the thing to be delivered is generic. (Art. 1263) Ex. The debtor can still comply with his obligation by delivering another thing of the same kind in accordance with the principle that “genus never perishes”. (2) When declared by stipulations. Basis: Freedom of contract. Practical Application: stipulation is to better protect the interest of the creditor and procure greater diligence on the part of the debtor in the fulfillment of the obligation. (3) When the nature of the obligation requires the assumption of risk. Here, risk of loss or damage is an essential element. Ex. Insurance contract. ARTICLE 1175. Usurious transactions shall be governed by special laws. Meaning of simple loan or mutual It is contract whereby one of the parties delivers to another, money or other consumable thing, upon the condition that the same amount of the same kind or quality shall be paid. It may be gratuitous or may with a stipulation to pay interest. (Art. 1933) What is Usury? It is contracting for or receiving interest in excess of the amount allowed by law for the loan or use of money, goods, chattels, or credit. Requisites for recovery of interest. (1) the payment of interest must be expressly stipulated (Art. 1956); (2) the agreement must be in writing; (3) the interest must be lawful (Art. 1957).

Note: CBC No. 905, Dec. 10, 1982 effective Jan. 1, 1983 issued by the Monetary Board, rate of interest and other charges on a loan or forbearance of money, goods, or credit, regardless of maturity and whether secured or unsecured, that may be charged or collected shall not be subject to any ceiling prescribed under the Usury Law. Usury is legal non-existent. Parties are now free to stipulate any amount of interest. However, it does not give the creditor the right to charge interest that is “iniquitous or unconscionable (Art. 1229).”