Obligation and Contract - Notes (ECSalao)

7/29/2019 Obligation and Contract - Notes (ECSalao)

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CHAPTER 1GENERAL PROVISIONS

Art. 1156. An obligation is a juridical necessity to give, to do or not to do.

1. JURIDICAL NECESSITY MAY BE ENFORCED THRU COURT ACTION AS DISTINGUISHEDFROM NATURAL OBLIGATIONS.

2. ELEMENTS OF OBLIGATION (CIVIL)

- Juridical or Legal Tie

- Active Subject (One who has right to compel)

- Passive Subject (One who is directed to perform)

- Prestation (Object of the obligation)

Art. 1157. Obligations arise from:(1) Law;(2) Contracts;(3) Quasi-contracts;(4) Acts or omissions punished by law; and(5) Quasi-delicts. (1089a)

NOTES:

1. QUASI-CONTRACTS (OR IMPLIED CONTRACT) LAWFUL, VOLUNTARY OR UNILATIRAL

ACTS CAN GIVE RISE TO QUASI-CONTRACTS (E.G. UNJUST ENRICHMENT, SOLUTIO

INDEBITI (E.G. PAYMENT BY MISTAKE)

2. QUASI-DELICTS ACTS OR OMISSION CAUSES DAMAGE TO ANOTHER THERE BEINGFAAULT OR NEGLIGENCE IF THERE IS NO PRE-EXISTING CONTRACTUAL RELATIONS

Art. 1158. Obligations derived from law are not presumed.

NOTE: ONLY THOSE EXPRESSED BY LAW ARE DEMANDABLE.

Art. 1159. Obligations ARISING FROM CONTRACTS HAVE FORCE OF LAW BEWEEN

PARTIES. SHOULD BE COMPLIED WITH IN GOOD FAITH.

Art. 1160. Obligations from QUASI-CONTRACTS governed by Chap 1, Titles XVII

Art. 1161. Civil obligations from CRIMINAL OFFENSES - governed by the penal laws,

subject to the provisions of Article 2177, and of the pertinent provisions of Chapter 2,

Preliminary Title, on Human Relations, and of Title XVIII of this Book, regulating damages.

Art. 1162. Obligations derived from QUASI-DELICTSshall be governed by the

provisions of Chapter 2, Title XVII of this Book, and by special laws.


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CHAPTER 2

NATURE AND EFFECT OF OBLIGATIONS

Obligation Debtors obli. Creditors right CRs right to damages

To give a

determinate

thing

1. To deliver2. Take care of thing (1163)

To demand delivery In case of debtors:1. fraud2. negligence3. delay4. breach (1170)

Responsible if thing is lost

due to fortuitous event if he

promised to deliver thing to

2 or more person (1165)

Right to fruits only from

time deliver arises.

No real right until thing

delivered (1164)

If there is fraud,

damages is

demandable. Waiver of

action against FUTURE

fraud is void (1171)

Deliver accessions and

accessories even if not

mentioned (1166)

Note: To exclude accessions

and accessories, it must be

made clear

If there is negligence,

liability is regulated by

court (1172)

To give generic

thing1. To deliverNote: No obligation to take

care of thing since it is

replaceable

Ask obligation to be

complied with at the

expense of debtor

(1165)

NO LIABILITY IF NON-

PERFORMANCE IS DUE

TO UNFORSEEN

EVENT, ORFORTUITOUS EVENT

To do Perform the obligation atdebtors cost (1167)

No to do Undo at debtors expense(1168)

Notes:

Delay: There is delay when creditor demands and debtors fail to perform. There is delay also when (1)law provides, (2) nature and circumstance of obligation, (3) when demand is useless like when debtorcannot perform the obli.

Reciprocal obligation, one party is in delay when one party fulfilled his obligation (1169)

Negligence: omission of diligence required by the nature of obligation

CHAPTER 3: KINDS OF OBLIGATIONS


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PURE when

obligation does not

depend on any

condition

Example:

I will give you P1,000.

Demandable at once (pwede ng hingin agad) (1179)

Obligation based on resolutory condition is also demandable at once.

CONDITIONAL when

obligation depends on a

condition (1181)

2 Types:

1. Suspensive if this

happens, it will give rise

to the obligation

Example:

I will give you P1,000 if

you pass the final exams

2. Resolutory if this

happens, the obligation

stops

Example:

I will give you P1,000

monthly until you

graduate from college

Condition based on sole will (solong kagustuhan) of debtor, the

OBLIGATION is VOID. NOTE: THIS IS CALLED POTESTATIVE

CONDITION

If it depends on 3rd person or by chance, VALID (1182)

Impossible conditions. Physical (hindi talaga pwedeng mangyari) or

Legal (ipinagbabawal ng batas o ng kabutihang asal o ngpublic policy),

the obligation is ANNULED

Just disregard condition NOT to do IMPOSSIBLE THING (1183)

Condition that something happens at a DETERMINATE thing, obligation

will be EXTINGUISHED if:1. Time expires2. Sure that it will not happen

example:

I will give you P1,000 if you will win as Class President on October 1,

2012.

I will not be obligated (hindi ko kailangan magbayad) if:1. Oct. 1, 2012 came and you are not yet elected class president2. You dropped out even before October 1, 2012, hence it is sure that

you will not be class president (1184)

Condition that event will NOT happen at a determinate date shall render

obligation EFFECTIVE when:

1. time elapsed

2. it is evident that the event cannot occur

example:

I will give you P1,000 if you DONT become class president on Oct. 1,

2012

1. I need to pay you on Oct. 1, 2012 if you are not yet class president


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then even if no election was called

2. I need to pay you even if its still August 2012 if you dropped out since

you will never be elected class president if you are not a student

anymore (1185)

Condition deemed fulfilled (hence, obligation arises) when debtor

(obligor) voluntarily prevents its fulfillment (sinadya ng may utang wag

matupad ang kondisyon) (1186)

Obligation to give: Effect retroacts to the day obligation was constituted.

Example:

On August 7, 2012, I promised to give you my car with plate numberXXX 888 if you pass the exam on October 1, 2012.

You sold the car on August 10, 2012. You passed the exam on October 1, 2012. The sale you made is valid since you are deemed owner ofthe car on August 7, 2012 (retroactive effect)

Reciprocal obli fruits and interests mutually compensated. (No need to

turnover, unless there is an agreement)

Example:

I promise to give you 2 cows. You promised to give me yourapartment for rent.

Until delivery of the cows and the galaxy tab, I will own the milk

and

the young of the cows assuming that it produces milk and give birth

to

young. You will own the rent of the apartment until you give it to me.

Unilateral obli fruits and interests belong to the debtor (Unless there is

agreement) (1187)

I promise to give you the 2 cows. I will own the milk and the youngunless there is a contrary stipulation (pwere na lang kung

napagkasunduan natin na pati iyon ay ibibigay ko sayo)

While condition is NOT yet happening:

1. Creditor may file action to preserve his right (1188)

2. Debtor may recover if he paid by mistake


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3. When thing is LOST, DETERIORATED or IMPROVED

Lost without fault of debtor obli is extinguishedWith fault debtor liable for damages

Deteriorated without fault cost borne by creditorWith fault Creditor may chose (1) rescind (2) fulfillWith damages on both cases

Improved by nature inure to the benefit of creditorBy expense of debtor debtor enjoy right to use (1189)

In case of Resolutory Condition is fulfilled:

a. Obligation is to Give (determinate thing):

1. Parties to RETURN to each other what they have received

2. In case of LOST, DETERIORATED or IMPROVED, apply rule in Art.

1189 WITH RESPECT TO THE DEBTOR

b. Obligation to Do or Not to do: Apply Art. 1187 (1190)

Reciprocal obligation:

1. Power to rescind by the party willing and able to comply is IMPLIED.

2. Injured party may choose:

a. Fulfillment with damages (may still be rescinded if fulfillment isimpossible)b. Rescission with damages (1191)

If BREACH committed by both parties:

1. Liability of FIRST infractor will be equitably tempered (pabababain ng

husgado) by the court

If first infractor cannot be determined, obligation is extinguished and

each party shall bear his own damages

WITH A PERIOD when

obligation is based on a

day certain (exact date)

or an event sure to come

Payable when means of the DEBTOR permits him (1180)

Demandable when day comes.


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even though not known

when (death, next rain,

next sunrise).

Example:

1. On August 7, 2012, I

promised to pay you

P1,000 on October 1,

2012 (day certain).

2. On August 7, 2012, I

promised to pay you

P1,000 on the opening of

the enrollment for School

Year 2013-14 (sure to

come but not known

when)

If resolutory period, obligation is terminated when period comes. (1193)

In case of Loss, Deterioration, or Improvement, apply 1189 (1194)

Payment by mistake (debtor unaware that period has not yet arrived)

may be recovered together with fruits and interest (1195)

Period is for the benefit of both parties unless it is clear that period is for

the benefit of one party only (1196)

Hence, a creditor cannot be forced to receive early payment if it is not

agreed upon.

Court will fix the period if:

1. parties failed to fix it (as long as intention to fix the period is clear)2. period depends on sole will of debtor (1179)

Debtor loses right to use the period when:

1. He becomes insolvent and he did not give new security2. He did not give promised security to the creditor3. When his security was impaired (nasira) by own act (after

establishment) or when they disappear thru fortuitous event4. He violated any undertaking (kasunduan) which is the reason why

creditor agreed to the period5. He attempts to abscond (tumakas) (1198)

ALTERNATIVE when

the debtor is bound by

different prestations

(obligation)

Example:

A is obliged to deliver 2

labrador dogs or 1 iphone

4s or sing until the

creditor

Only one prestation is due

Creditor cannot be compelled (mapipilit) to receive part of both

obligation.

Example:In the given example, A cannot be compelled (hindi pwede pilitin) togive just 1 labrador dog and to sing for the creditor for 4 days only.Unless of course A would approve it (pwera na lang kung papayag siA) (1199)

Right of choice belongs to the Debtor unless expressly granted to the

debtor (1200)

Effective only when choice was communicated (1201)

Right is lost when only one prestation is practicable (1202)

If debtor cannot make a choice because of the creditor, the debtor may

rescind the contract with damages (1203)


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Creditor has right to indemnity (mabayaran) when:

Debtors fault, all choices were lost or become impossible.

Basis: value of last thing disappeared or service last became impossible.

Damages may also be awarded (1204)

When choice given to CREDITOR:

Obligation ceases (tumigil) to be alternative from day selection has been

communicated to the debtor.Until then, debtors responsibility is:

1. To perform the choice of the creditor from the remainder of the

prestation when original choice is lost thru fortuitous event (di sinasadya

at inaasahang pangyayari)

2. If only one remains, perform that remaining prestation

3. If loss is due to fault of debtor, creditor may ask for the price of that

lost thing with right to damages

4. If all things were lost due to fault, the creditor may choose with right

to damages also.

Same rule applies to obligation to do or not to do. (1205)

FACULTATIVE - when

only one obligation agreed

upon but debtor may

render another in

substitution.

Example:

A is obliged to deliver 2

labrador dogs to B. They

agreed that A may give

just his iphone 4s as a

substitute .

Loss or deterioration of substitute does not make debtor liable UNLESS

the substitution has been made and there is delay, negligence or fault of

the debtor. (1206)

JOINT when there are

2 or more debtors and

each of them answers

only their part.

When there are 2 or more debtors or 2 or more creditors. General rule is

obligation is joint (obligation is divided into as many equal shares as

there are creditors or debtors) (1208)

Example:


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Example:

Peter, John and Paul owed

Mary P1,000 each. Mary

can demand only P1,000

per person. She cannot

demand entire amount to

only one or two.

Peter, John and Paul owed Mary P3,000 each. Mary can demand onlyP1,000 per person since without any stipulation, the obligation isdeemed joint.

If division is impossible, rights of creditors may be prejudiced (masisira)

only by collective acts and the debt can be enforced only by proceeding

against all the debtors. If one of the debtor should be insolvent, others

shall be liable for his share. (1209)

Example:

Jose and Carlo are obliged to deliver a horse to Mario. Mario must sueboth Jose and Carlo for specific performance since law provides that

debt can be enforced only by proceeding against ALL debtors.

SOLIDARY when there

are 2 or more debtors and

the entire debt may be

demanded from just 1

debtor

Example:

Peter, John and Paul owed

Mary P3,000 jointly and

severally. Mary can

demand P3,000 to any ofthe debtors.

There is solidary obligation when:

1. Stipulated (words like jointly and severall, in solidum, Ipromise

to pay signed by 2 or more2. Provided by law3. When nature of obligation requires

Indivisibility (hindi mahahati) of an obligation does not necessarily gives

rise to solidarity. (1210)

May exist although creditors and debtors may not be bound in the same

manner and by the same periods and condition. (1211)

Example:

Peter, John and Paul owed Mary P3,000jointly and severally. Peters isliable to pay on August 15, 2012 while John is liable when B-Megbecame champion this PBA conference. Pauls obligation is pure.

Mary can demand only P2,000 from any of the debtors on August 16,2012 since B-Meg lost in the championship.

Solidary Creditors may do whatever is useful to the others but not

anything which may be prejudicial to other creditors. (1212)

Solidary Creditor cannot assign (ilipat) his rights without consent (pagsangayon) of others. (1213)

Debtor may pay any of the solidary creditors. But if demand was made

by one of them, payment must be made to that creditor. (1214)

Obligation extinguished when there is novation, compensation,


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confusion, or remission of debt made by any of the solidary creditors

without prejudice to Art. 1219.

The creditor who executed any of the acts as well as he who collects the

debt shall be liable to the others for the share in the obligation

corresponding to them. (1215)

Creditor may proceed against anyone of the solidary debtor or some or

all of them simultaneously. Others may be run after if debt is not fully

paid yet. (1216)

Debt extinguished if any of debtor pay. Creditor may choose if 2 or more

solidary debtors offer to pay.

He who made payment may claim from co-debtors. When one solidary

debtor cannot pay, such share shall be borne by all his co-debtors in

proportion to the debt of each. (1217)

If debt prescribed (lumipas na), solidary debtor who paid does not have

right to reimbursement (1218)

Remission (pagpapatawad ng utang):

Remission made by creditor to solidary debtor does not release that

debtor from his responsibility to co-debtors in case debt has been fully

paid by any one of them BEFORE remission. (1219)

When obtained by one debtor, does not entitle him to reimbursement

from other debtors. (1220)

Obligation extinguished when:

Thing lost or if prestation becomes impossible without fault of the

solidary debtors.

If with fault on any debtor, ALL shall be responsible to the creditor.

Same thing when thing is lost when there is delay on any of the debtor.

(1221)

Defenses: Solidary debtor may avail:

1. All defenses derived from nature of obligation2. All defensPersonal to him3. Pertain to his share

If personal to other debtor, he may avail thereof only as regards that

part of the debt for which the latter is responsible.


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(1222)

DIVISIBLE when

obligation may be

performed partially

Example:

Obligation to deliver 10

sacks of rice. It is possible

the 5 sacks will be

delivered today and the

rest, tomorrow.

When obligation may be executed for a certain number of days, or by

metrical units, or analogous things, it is divisible.

Example:

Certain number of days: House painting job that will last for 10 days. Metrical units: 10 sacks of riceAnalogous: Typing job per paper

But even if thing may be divisible, the obligation is indivisible if it is

provided by law or by intention of the parties. (1125)

INDIVISIBLE when

obligation is not capable

of partial performance.

Example:

Obligation to deliver a

specific mobile phone

Joint indivisible obligation gives rise to indemnity for damages from time

any of the debtors does not comply with his undertaking. Debtor who is

ready to comply with his obligation shall not contribute to the indemnity

beyond his portion of the price of the obligation. (1224)

Example:

Peter and John are obliged to give to Maria a specific Nokia Phone.Obligation is NOT solidary but it is indivisible.

If the phone is worth P10,000. Peter and John for whatever reasoncannot deliver the phone. Their obligation is converted to monetary.Peter is ready with is P5,000 but John is not.

Peter is only duty bound to give P5,000 to Maria. He is not answerableto the P5,000 debt of John (unless the obligation is SOLIDARY)

WITH PENAL CLAUSE

obligation that contains

provision that debtor will

pay a penalty for failure to

perform the obligation

according to agreement

Example:

Obligation to pay on 10

equal monthly

installments. For failure to

pay any of the

installments, the debtor

will be charged with 10%

interest and the entire

Penalty shall substitute the indemnity for damages and payment of

interests if there is no contrary stipulation. Damages will have to be

paid if debtor refuses to pay penalty or is guilty of fraud. (1226)

Debtor cannot excuse himself from performing the obligation by paying

the fine, unless that right is expressly granted to him.

Creditor cannot demand fulfillment of the obligation and payment of the

penalty at the same time unless this right has been expressly grandted.

(1227)

Proof of actual damage not necessary to demand penalty payment.

(1228)

Judge shall equitable reduce penalty when obligation has been partly or

irregularly complied with. Penalty may also be reduced even if there is


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debt shall be considered

due and demandable.no performance at all, if it is iniquitous or unconscionable (hindi na

makatarungan dahil sobra sobra na)(1229)

Nullity of penalty clause does not carry nullity of principal obligation. But

nullity of principal obligation carries with it nullity of penalty clause.

(1230)

Chapter 4 Extinguishment of Obligations

Reasons 1. Payment or performance2. Loss of thing due3. Condonation or remission4. Confusion or merger of the rights of creditor and debtor5. Compensation6. Novation

PAYMENT when money

owed is delivered or

obligation has been

complied with (nabayaran

na o nagawa na ang dapat

gawin) (1232)

Requisite for Payment:

1. Thing or service itself must be paid (Identity)2. Completely delivered or rendered (Integrity) (1233)

Less than perfect payment:

If obligation has been substantially performed in good faith (pwede na,

hanggat sa abot ng makakaya) the debtor may recover as if there wascomplete performance, less damages suffered by the creditor. (1234)

When creditor accepts knowing incompleteness or irregularity of

performance, and did not express protest or objection, obligation is

deemed fully complied with. (1235)

Creditor not bound to accept payment from third person who has NO

interest in the fulfillment of obligation, unless there is stipulation to the

contrary.

Whoever pays for another may demand from debtor what he has paid.

Except: When he paid WITHOUT knowledge or against the will of the

debtor, he can recover only insofar as the payment has been beneficial

to the debtor. (1236)

Example:

Peter paid the airline ticket of Maria for P2,000.00. It was done


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without the knowledge (or against the will) of Maria. Later, Mariatold Peter that she is entitled to half-the-price for the ticket.

In this case, Peter can only recover P1,000 from Maria.

Whoever pays on behalf of the debtor without the knowledge or againstthe will of the latter, cannot compel (pilitin) the creditor to subrogate

(ilipat sa kanya) him in his rights, such as those arising from a mortgage

guaranty, or penalty. (1237)

Example:

Peter owed Maria P10,000.00. They agreed that in case Peter cantpay, Maria will own Peters iphone. John paid the debt of Peter. It

was

done without the knowledge of Peter.

In this case, John can recover P10,000.00 from Peter. But if Peter

cannot pay, he cannot have Peters iphone. Reason: No subrogation.

Payment made by third person who does NOT INTEND TO BE

REIMBURSED (di nya gusto mabayaran) by the debtor is deemed to be a

DONATION (bigay) which requires debtors consent. But the payment is

valid as to the creditor who has accepted it. (1238)

Obligation to give: Payment by someone who does not have the FREE

DISPOSAL (pagaari) and CAPACITY TO ALIENATE (kakayahang ibenta) it

shall NOT be valid. Without prejudice to provisions on Natural

Obligations. (1239)

To whom payment must be made:

1. To the person in whose favor the obligation has been constituted2. Or his successor in interest (tagapagmana)3. Or any person authorized to receive it (1240)

If payment was made to INCAPACITATED or UNAUTHORIZED persons,

payment is INVALID as a general rule.

Incapacited persons who by law are not capable of administering(pangalagaan) their properties. Example: Insane (mga baliw)

Unauthorized person who is not authorized (hindi binigyan ngkatungkulan)

Payment to incapacitated valid when he kept the thing delivered or

insofar as the payment has been beneficial to him.


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Payment to unauthorized person is valid if it has redounded to the

benefit of the creditor (nakabuti).

Benefit need not be proved in the following cases:

1. if after payment, the third person acquires creditors rights2. if the creditor ratifies the payment (sinangayunan)3. if by creditors conduct, debtor has been led to believe that the third

person had authority to receive the payment. (1241)

If payment was made to any person in possession of credit (evidence of

indebtedness), it will release the debtor if it was done in good faith.

(1242)

Payment made to the creditor by the debtor after the latter has been

judicially ordered to retain the debt shall not be valid. (1243)

Example:

Peter owed Maria P100,000. Maria owed John P100,000.John sued Maria. Maria claims she is insolvent but claims thatPeter owed her the same amount.

Peter was asked by the court to retain the debt (this is called garnishment). Any payment made by Peter to Maria at thispoint shall be invalid.

Obligation to give:

Debtor cannot compel creditor to receive a different one, even if it is of

same value or more valuable.

Obligation to do or not to do:

An act or forbearance cannot be substituted by another act or

forbearance against the creditors will. (1244)

DATION IN PAYMENT to pay the debt, the debtor gave his property

to the creditor and the creditor agreed with it.

Example:

Peter owed MariaP1,000. Peter gaveMaria his cell phonebecause he did not haveany cash. Maria agree.


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Debt is extinguished.

Governed by the law on Sales. (1245)

Obligation to give a generic thing:

Creditor cannot demand thing of superior quality. Neither can debtor

deliver a thing of inferior quality. The purpose and circumstance of the

obligation shall be taken into consideration. (1246)

Unless agreed upon:

Creditor cannot be compelled to partially receive prestations in which the

obligation consists. Neither may the debtor be required to make partial

payments.(1248)

Payment of debts in money shall be made in currency stipulated. If not

possible, then the currency which is legal tender in the Philippines.

Legal Tender -

All notes and coins issued by the Bangko Sentral shall be legaltender: Provided, however, That, unless otherwise fixed by the MonetaryBoard, coins shall be legal tender in amounts not exceeding Fifty pesos(P50.00) for denominations of Twenty-five centavos and above, and inamounts not exceeding Twenty pesos (P20.00) for denominations of Tencentavos or less.

Delivery of promissory notes or bills of exchange shall produce effect of

payment only when they have been cashed, or when through the fault of

the creditor they have been impaired.In case of extraordinary inflation or deflation, the value of the currency

at the time shall be the basis of payment, unless there is agreement to

contrary. (1250)

INFLATION sharp increase of money without increase in businesstransaction. Results in sharp increase in prices.

DEFLATION opposite of inflation

Place of payment place agreed upon.

If there is no agreement:

To give determinate thing delivery at the place where thing might be

at the moment obligation was constituted.


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In any other cases payment at domicile of the debtor. (1251)

Application of payment out of 2 or more debts owing to the same

creditor, it refers to the debt that is being paid.

Example:

Peter has several debts to Maria, to wit:P1,000 because he bought Marias puppy.P2,000 because he bought Marias new book.P5,000 because he hired Maria to do his project.

If Peter paid P1,000 to Maria, to what debt should Maria apply this

payment?

Peter may declare to which debt his payment must be applied. If Peter

does not say so, the payment may not be applied to debt that is not due.

(1252)

If Maria issued a receipt to Peter stating that his payment is applied to

the P2,000 for the book and Peter accepted it, Peter cannot complain

about it later. The payment will be applied to that debt. (1252)

If Peter did not declare and Maria did not issue a receipt stating where

she applied the payment, the payment will be applied to the most

onerous (pinakamabigat). (1254)

Example:

In the example above:

P 1,000 loan bears no interestP 2,000 loan bears 10% interestP 5,000 loan bears 5% interest

The P2,000 loan is the most onerous.

If the debts due are of the same nature and burden, it will be applied to

all proportionately. (1254)

If debt produces interest, payment shall be applied to the interest first

before it shall be applied to the principal. (1253)

Payment by cession - where debtor transfer all of his properties not

subject to execution (free to dispose) to the creditors so that they may

sell them and apply proceeds to the debt.

Requirements:


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1. More than one debt2. More than one creditor3. Insolvency of debtor, complete or partial4. Abandonment of all debtors property not exempt from execution5. Consent of all creditors

Effect:

1. Creditors shall not own the properties. They shall sell it and apply

proceeds to the debt.

2. Debtor is released up to the amount of the net proceeds of the sale,

unless there is stipulation to the contrary. Debtor still liable to balance.

3. Creditors will collect in the order of preference agreed upon. If no

agreement, based on order established by law.

Tender of Payment act of offering the creditor what is due him

together with a demand that the creditor accept the same.

Consignation act of depositing the thing due with the court whenever

the creditor cannot accept or refuses to accept payment

If the creditor refuses without just cause to accept tender of

payment, the debtor shall be released from responsibility by the

consignation of the thing or sum due.

Consignation ALONE shall produce the same effect if:

(1) When the creditor is absent or unknown, or does not appearat the place of payment;(2) When he is incapacitated to receive the payment at the time

it is due;(3) When, without just cause, he refuses to give a receipt;(4) When two or more persons claim the same right to collect;(5) When the title of the obligation has been lost. (1256)

LOSS OF THING DUE An obligation to deliver DETERMINATE thing is extinguished ifthing lost or destroyed without the fault of the debtor, unless:

1. Debtor incurred delay before loss2. When by law or stipulation, the obligor is liable even for

fortuitous events3. When the nature of the obligation requires the assumption of

risk. (1262)

If loss is partial, court will determine whether loss is so

important to extinguish obligation. (1264)


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When the service has become so difficult as to be manifestly

beyond the contemplation of the parties, the obligor may also be

released therefrom, in whole or in part. (1267)

If obligation is to deliver a GENERIC thing, the loss ordestruction of anything of the same kind does NOT extinguish

the obligation. (1263)

Presumption of fault when the thing is lost while in the

possession of the debtor, unless there is proof to the contrary.

This presumption does not apply in case of earthquake, flood,

storm, or other natural calamity. (1265)

The debtor in obligations to do shall also be released when the

prestation becomes legally or physically impossible without the

fault of the obligor. (1266)

When the debt of a thing certain and determinate proceeds from

a criminal offense, the debtor shall not be exempted from the

payment of its price, whatever may be the cause for the loss,

unless the thing having been offered by him to the person who

should receive it, the latter refused without justification to

accept it. (1268)

Example:

Tonyo stole Annas cellphone. Tonyo was caught and was

asked to return the cellphone. Tonyo lost the cellphone due tofortuitous event. Tonyo is still liable for the amount of thecellphone.

The obligation having been extinguished by the loss of the thing,

the creditor shall have all the rights of action which the debtor

may have against third persons by reason of the loss. (1269)

CONDONATION OR

REMISSION OF DEBT

gratuitous abandonment

by the creditor of his

right.

Needs to be accepted by the debtor expressly (hayagang sinabi)

or impliedly (masasabi dahil sa mga senyales kahit di hayagang

sinabi). (1270)

Example of Implied Condonation:

Delivery of private document evidencing credit, voluntarily by

the creditor to the debtor (1271)

If creditor renounce (pinatawad) the principal debt, it shall

extinguish the accessory obligation. But waiver of accessory


18/18

obligation does not extinguish the principal debt. (1273)

CONFUSION OR

MERGER OF RIGHTS Meeting in one person of

the qualities of creditorand debtor with respect to

the same obligation

Example:

Jun issued a check payable to Cash. It was given to Terry.

Terry paid it to Migs, who later paid it to Jun.

COMPENSATION takes

place when two persons,

in their own right, are

creditors and debtors of

each other (1278)

Kinds:

1. According to effect or extent:a. Total both debts completely extinguished (1281)b. Partial balance remains

2. According to origin:a. Legal takes place by operation of lawb. Voluntary agreement of both partiesc. Judicial set-off (1283)d. Facultative one party has the choice of claiming the

compensation

Requisites:

(1) That each one of the obligors be bound principally, and that

he be at the same time a principal creditor of the other;(2) That both debts consist in a sum of money, or if the things

due are consumable, they be of the same kind, and also of the

same quality if the latter has been stated;

(3) That the two debts be due;(4) That they be liquidated and demandable;(5) That over neither of them there be any retention or

controversy, commenced by third persons and communicated in

due time to the debtor.

Novation change of an

obligation by another,

which extinguishes the

first

Obligations may be modified (changed) by:(1) Changing their object or principal conditions;(2) Substituting the person of the debtor;(3) Subrogating a third person in the rights of the creditor.

In order that an obligation may be extinguished by anotherwhich substitute the same, it is imperative that it be so declared

in unequivocal terms, or that the old and the new obligations be

on every point incompatible with each other. (1292)

Obligation and Contract - Notes (ECSalao)

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Transcript of Obligation and Contract - Notes (ECSalao)