Week 1 – Welcome / Introduction to Law

I. Introduction to Law

1. Not Divine Law, law of religion and faith2. Not Natural Law, justice, fairness and righteousness3. Not Moral Law, norms of good and right conduct4. Not Physical Law, order or regularity in nature

a. a. Sources of Law

i) i) Constitution – Fundamental Law of the land ii) ii) Legislations – Passed by Senate and House

of Representatives

iii) iii) Administrative issuances – Quasi Legislative Functions

iv) iv) Jurisprudence – Decisions of the Supreme

Court (SCRA) Stare decisis

v) v) Treaties and Generally accepted principles of International Law - Art II Sec 2, Pacta sund servanda

vi) vi) Customs – habits and practices through long

and accepted usage have become binding rules of conduct

vii) vii) Principles of Justice and Equity – common

law jurisdiction

a. b. Characteristics of Law

- - Rule of Conduct- - Obligatory- - Promulgated by legitimate authority- - Of common observance and benefit

b. c. Organization of courts

- Supreme Court - Court of Appeals, Sandiganbayan, Court of Tax

Appeals- Regional Trial Court- Metropolitan Trial Court, Municipal Trial Court

- Quasi Judicial Bodies1. 1. Comelec2. 2. NLRC3. 3. LTFRC4. 4. ERB

c. d. Quantum of Evidence- - Criminal cases: Proof Beyond Reasonable

Doubt - - Civil cases: Preponderance of Evidence-

greater weight of all the evidence which as a whole shows that the act sought to be proved is more probable than not.

- - Administrative cases: Substantial

Evidence – Such evidence that a reasonable mind might accept as adequate to support a conclusion

d. e. Effects and Applications of law

- - Requirement for publication1. 1. 15 days after publication in OG or

newspaper 2. 2. Ignorance of the law excuses no one

from compliance3. 3. Due Process

- - Law is prospective except:

1. 1. If the law provides for retroactivity2. 2. Penal law insofar as it favors the

accused3. 3. Remedial or curative law

- - Computing time1. 1. Year is 12 calendar months2. 2. Month is 30 days, except when it

refers to a calendar month3. 3. First day excluded, last day included

- - Conflict of Laws Provisionsi. i. Penal laws apply to all who sojourn to

Phils

ii. ii. Family Law and inheritance based on national law of the party regardless of where he lives

iii. iii. Forms and solemnities of contracts and other instrument based on the place where it is executed

e. f. Obligations and Contracts Defined

The body of rules which deals with the nature and sources of obligations and the rights and duties arising from agreements and the particular contracts. Obligation – A Juridical relation whereby a person may demand from another the observance of a determinative conduct (giving, doing, not doing), and in case of breach, may demand satisfaction from the assets of the latter. Contract – Meeting of the mind between two persons whereby one binds himself, with respect to the other, to give something or to render some service. A contract necessarily gives rise to an obligation but an obligation does not always need to have a contract.

f. g. Corporation and Partnership Defined

Partnership – Two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves. Corporation – Artificial being created by operation of law, having right of succession and the powers, attributes, properties expressly authorized by law or incident to its existence.

Weeks 2 to 4 – Obligations

I. General Provisions, Nature and Effects of Obligations

a. General Provision

- - Juridical Necessity – enforce compliance; seek damages

- - To give, to do, and not to do – Examples - - Four essential requisites of an obligation

(i) (i) A passive subject (Debtor – to give; Obligor – to do)

(ii) (ii) An active subject (Creditor/Obligee)(iii) (iii) Object (Prestation) – subject matter(iv) (iv) Juridical tie (Vinculum) – Source of

Obligation

- - Form as a manifestation of intent; but no specific form unless required by law

(b)(b) Kinds of Obligations

1. 1. According to subject mattera. a. Real Obligation – to giveb. b. Personal Obligation – to do

i. i. Positive – to give or doii. ii. Negative - not to do or not to give

A borrower agreed to pay his debt in 60 days, and in case of non-payment to render free service as driver/servant. When due date came, borrower refused to render free service. Decide.

2. 2. According to person obliged

a. a. Unilateralb. b. Bilateral (Reciprocal or non-reciprocal)

(c) (c) Sources of Obligation

1. 1. LAW – Imposed by law - - A wife was about to deliver a child. Her

neighbor brought her to hospital. Who should pay the hospital bill – Husband or Neighbor?

- - P.D. 1517 grants the right of first refusal

to person who has leased for more than 10 years an urban land and who construct his house thereon. Lessee of a Condo in Manila now claims his right of first refusal because he has been living in the unit for almost 15 years. Decide.

Obligations derived from law are not presumed.

- - In a newspaper ad, there was an offer to

replace 30 sachets of Tide for one Venetian cut Glass until the end of the year. At the end of the year, you present your tide sachets, but Tide refused to honor it anymore since the ad was posted more than half a year ago. Decide. 657

a. a. Quasi-contracts – Juridical relations based

on the principle that no one shall be unjustly enriched or benefited at the expense of another.

i. i. Negotiorum Gestio – When a person

voluntarily takes charge of the management of a business or property of another that has been neglected or abandoned, without any power from the latter, as a consequence of which, he is obliged to continue the same until the termination of the affair or to require the owner to substitute him. Ex. NPA infested area Fishpond

ii. ii. Solutio indebiti – When a person

unduly delivers a thing through mistake to another who has no right to demand it. (melon bank v. Javier)

b. b. Crimes (acts or omission punished by law) If you commit a crime, you are liable both criminally and civilly for the consequence of your acts or omissions such as restitution, reparation for damages caused and indemnification for consequential damages. Ex. Support for impregnated rape victim; loss of earning capacity of murder victim

c. c. Quasi delict or Torts – The fault or

negligence of a person who, by his act or

omission, independent from any contractual relation, causes damage to another person

A 3-year-old child was bitten by a

dog of her neighbor. As a result, she got infected by rabies and died. Can the neighbor be held liable for the acts of the dog?

A signboard of hanging out of a

building dropped on a car resulting in total wreck of the car. The car owner sues the building owner and demand to replace the car. Building owner cites the strong wind as force majeure condition indicating no fault on his part. Decide.

2. 2. Contracts

Have the force of law between the contracting parties and should be complied with in good faith.

Sincerity and Honesty

II. Nature and Effect of Obligations

(a)(a) Specific v. Generic Thing1. 1. Specific is designated or physically

segregated from others of the same class.2. 2. Generic refers to a class or genus and

cannot be determined with particularity.

(b)(b) Duties of debtor in delivery of generic thing1. 1. To delivery a thing which must neither be of

superior nor inferior quality (1246)2. 2. To pay damages in case of breach (1170)

(c) (c) Duties of debtor in delivery of specific thing1. 1. To deliver the thing which he has obligated

himself to give2. 2. To take care of the thing with the proper

diligence of a good father of a family♦ The ordinary care that an average or

reasonably prudent person exercises over his property

♦ Another standard of c are may be required by law or by stipulation of the parties

3. 3. To deliver all the accessions and accessories4. 4. To pay damages in case of breach

(d)(d) Remedies of Creditors in breach of obligation 1. 1. To Give Determinate Thinga. a. To compel specific performanceb. b. To recover damages

2. 2. To Give Indeterminate Thinga. a. To ask for performance of the obligationb. b. To ask that obligation be complied with

by another at expense of debtorc. c. To recover damages

3. 3. To Do a. a. To have the obligation performed at

debtor’s expenseb. b. To recover damages

4. 4. Not to Do a. a. Undone at his expense b. b. To recover damages

(e)(e) Rules on Fruits1. 1. Kinds of fruits

a. a. Natural – product of the soil, young and other products of animals

b. b. Industrial – produced thru cultivation or labor

c. c. Civil – derived by juridical relations

2. 2. Creditor has rights to the fruits from the time the obligation to deliver arises

3. 3. Real rights acquired only when delivered to

hima. a. Real rights - right over a specific thing

without any passive subject, directed against the whole word.

b. b. Personal rights – right to demand from another debtor the fulfillment of the latter’s obligation

(f) (f) Accessions and accessories

♦ Accessions – fruits of a thing or additions to or improvement upon a thing

♦ Accessories – joined to or included with the principal thing for better use or completion.

1. 1. Even if not mentioned, accessories follow

the principal 2. 2. But obligation to deliver accessions or

accessories does not include the principal

(g)(g) Legal Delay1. 1. From the time obligee judicially or extra-

judicially demand fulfillment; not mere notice 2. 2. No demand from creditor necessary in

following cases:a. a. When obligation or law expressly so

declaresb. b. Time is of the essence (controlling

motive)c. c. When demand would be useless

3. 3. In reciprocal obligation, from the moment one party fulfills his obligation, delay by the other begins.

4. 4. Kinds of Delay

a. a. Mora solvendi – delay on the part of debtor

b. b. Mora acccipiendi – delay of creditorc. c. Compensatio more – delay in reciprocal

obligation

5. 5. Effects of Delaya. a. Liable for interest and damagesb. b. Liable even for fortuitous event when the

obligation is to delivery a determinate thing

(h)(h) Fortuitous Events1. 1. Any event which cannot be foreseen or

which though foreseen is inevitable, independent of the will or from aggravation of the debtor, render impossible the fulfillment of obligation

2. 2. No person shall be responsible for fortuitous events, except:

a. a. Where expressly specified by law or stipulated in contract

b. b. When nature of the obligation requires assumption of risk

c. c. When debtor incurs delayd. d. When debtor promises to deliver same

thing to two or more personse. e. When obligation to deliver arises from

criminal offensef. f. When obligation is generic

(i) (i) Fraud (deceit or dolo) Deliberate or intentional

evasion of the normal fulfillment of an obligation;1. 1. Dolo incidente (Incidental Fraud) -

committed in the performance of pre-existing obligation, remedy is damages

2. 2. Dolo causante (Causal Fraud) – Fraud employed at the time of the execution of a contract in order to secure consent, remedy is annulment bec of vitiation of consent

3. 3. Demandable in all obligations4. 4. Waiver of future fraud is void

(j) (j) Negligence (culpa) Omission of that diligence which is required by the nature of the obligation, but no malice

1. 1. Culpa contractual – Negligence in the performance of contractual obligation, a. a. Pre-existing contractb. b. Liable for damages based on breach of

contract c. c. Proof of contract and breach is enough

for recovery of damaged. d. Negligence of employee conclusive

presumption of employer’s negligence e. e. Proof of due diligence in the selection of

employee not a defense

2. 2. Culpa aquiliana – Negligence between parties not so related by any pre-existing contract, a. a. Obligation for damages based on quasi

delictb. b. No pre existing contractc. c. Negligence must be proved for recovery

of damage

d. d. Negligence of employee prima facie presumption of employer’s negligence

e. e. Due diligence in the selection and supervision of employee is a valid defense

3. 3. Can be regulated by the Court depending on

circumstance4. 4. Waiver of future negligence allowed

(k) (k) Presumptions 1. 1. Receipt of principal without reservation as to

interest = presumption of interest paid2. 2. Receipt of later installment of debt without

reservation of prior ones = presumption that prior ones paid

(l) (l) Remedies to satisfy claim

1. 1. Exhaust property of debtor2. 2. Subrogated to rights and actions of debtors,

except those inherent to person3. 3. Impugn all of acts by debtor done to defraud

creditor

II. Different Kinds of Obligations

(a)(a) Pure and Conditional Obligations

1. 1. Pure Obligation – One whose effectivity or extinguishments does not depend upon the fulfillment or nonfulfillment of a condition or upon the expiration of a term or period. Characterized by Immediate Demandability.

2. 2. Conditional Obligation – Effectivity is subordinated to the fulfillment or non-fulfillment of a future or uncertain fact or event

Future and uncertain event or Past event and unknown to the

parties

a. a. Suspensive v. Resolutory

In suspensive condition, fulfillment give rise to an obligation – acquisition of rights

In resolutory condition, fulfillment extinguishes obligation – loss of rights acquired

b. b. Casual, Potestative, Mixed

Casual – Depends on chance or will of third party (Valid)

Potestative – Depends on the will of one of the contracting parties

(1) (1) If suspensive condition depends on will of debtor, the obligation is void

(2)(2) If resolutory condition depends on will of debtor, the obligation is valid

(3)(3) If depends on will of creditor, it is valid.

Mixed – Depends partly upon the will of a party and partly upon chance or third party (Valid)

c. c. Impossible Conditions - - Physically Impossible or legally

impossible- - If “to do”, whole obligation is void - - If “not to do”, obligation is valid, as if

not written- - If divisible, part not affected by

impossible condition is valid.

d. d. Positive v. Negative

i. i. Positive Condition (event will happen) extinguished:

As soon as time expires without

the event taking place As soon as it becomes indubitable

that the event will not take place

ii. ii. Negative Condition (event will not happen) effective:

As soon as time expired without

event taking place As soon as it becomes evident

the event cannot occur

e. e. Reciprocal v. Unilateral

i. i. If reciprocal, the fruits are deemed mutually compensated

ii. ii. If unilateral, fruits and interest belongs

to debtor

3. 3. Condition deemed fulfilled when obligor prevents its fulfillment

4. 4. Creditor may before the fulfillment of the condition bring appropriate actions for the preservation of the rights.

5. 5. Debtor may recover what he has paid by

mistake before the fulfillment of condition.

6. 6. Effects of the fulfillment of a condition retroacts to the day of the constitution of the obligation.

7. 7. Rule on loss or deterioration, improvements

before the fulfillment of condition

Lost – when perished, go out of commerce, or disappear in such a way that its existence unknown or cannot be recovered

a. a. If without the fault of debtor, the

obligation is extinguishedb. b. If lost thru fault of debtor, obliged to pay

damagesc. c. When deteriorate without fault of debtor,

creditor bores the impairmentd. d. When deteriorate with fault of debtor,

creditor may rescind or fulfillment with damages

e. e. When improved by nature, or by time, inure to the benefit of creditor

f. f. When improved by debtor, no right to be indemnified, but may remove such improvement, or set off against damage

8. 8. Remedies in reciprocal obligation

a. a. Specific Performance or Rescission b. b. With damages in either case

c. c. Alternative remedy not cumulative – can

choose one but not both

d. d. After action for specific performance impossible, option for rescission

e. e. Injured party must resort to judicial rescission, i. i. Except where automatic rescission

expressly stipulatedii. ii. Or where there is no performance yet

f. f. Power of the court to fix period g. g. Subject to right of good faith third party

h. h. Substantial breach not slight breach

i. i. Where both parties have breach, liability

of first infractor equitably tempered; where first infractor not know, both parties bear own damages

(b)(b) Obligations with a Period

1. 1. Demandability or extinguishments subject to

expiration of a term or period 2. 2. Term or period – future and certain event

3. 3. Rules on loss, deterioration, improvements

of conditional obligation applicable

4. 4. If paid or delivered before period arrives, debtor may recover the thing, with fruits and interests.

5. 5. Established for the benefit of both debtor

and creditor, unless otherwise stated

6. 6. Court may fix period

a. a. If obligation does not fix a periodb. b. Depends on will of debtor

“When means permit” not condition, but period

Period fixed by court cannot be changed

7. 7. Debtor loses right to make use of the period

a. a. Debtor becomes insolvent, unless he gives guaranty or security

b. b. When debtor does not furnish guaranties or securities promised

c. c. When guaranties or securities impaired or disappear

d. d. When debtor violates an undertakinge. e. When debtor attempts to abscond

(c) (c) Alternative Obligations

Alternative – several objects or prestations but performance of one sufficient

Facultative – One object or prestation but debtor may substitute.

1. 1. Must completely perform one of them 2. 2. Right of choice to debtor, unless expressly

granted to creditor Except those impossible, unlawful,

which could not have been the object of the obligation or only one prestation is practicable

3. 3. Choice no effect until communicated,

irrevocable once communicated 4. 4. Debtor may rescind the contract with

damages if thru creditor’s acts debtor cannot make a choice

5. 5. If lost due to fortuitous event,

a. a. If two or objects remain, the obligation subsists

b. b. If only one object remain, it becomes simple obligation

c. c. If none remains, obligation is extinguished

6. 6. If lost due to fault of debtor,

When right of choice belongs to debtor

a. a. If 2 or more objects remain, debtor can

choose from remaining, not liable for damages

b. b. If only one remain, simple obligation to deliver remaining

c. c. If none remains, debtor indemnify damages based on value of last object

When right of choice belongs to

creditor

a. a. If alternative object still remain, creditor can choose the one lost and ask value of object lost and damages; if creditor choose the remaining object, debtor cannot be liable for damages

b. b. If none remains, debtor to indemnify for damages based on the price of the object chosen by the creditor plus consequential damages

7. 7. Facultative Obligation

a. a. Right of choice only to debtorb. b. If lost before substitution, debtor not

liable. c. c. Debtor liable for loss due to his fault

once substitution has been maded. d. If after substitution, it is lost thru

fortuitous event, obligation extinguished, debtor not liable

(d)(d) Joint and Solitary Obligations

1. 1. Joint Obligation – Each of creditor has right to demand, and each debtor is bound to render compliance, with his proportionate part of the prestation

a. a. Default rule is obligation is JOINT b. b. Joint creditor cannot act in representation

of the other creditors

c. c. Joint debtor cannot be compelled to answer for liability of other debtors

d. d. “Jointly”, “We promise to pay”, “Pro

rata”, “proportionately”

2. 2. Solidary Obligation – Each creditor has a

right to demand, and each debtor is bound to render compliance, with the entire prestation; but as to co-debtor he is liable only for his share

a. a. Instances when obligation is solidary:

i. i. When obligation expressly states so ii. ii. When law requires solidarity:

1. 1. If 2 or more heirs take possession of estate

2. 2. Partners in partnership3. 3. If principal allowed agent to act

as though he has full power4. 4. If 2 or more appointed an agent

for common undertaking or transaction

5. 5. 2 or more bailees to whom a thing is loaned

6. 6. 2 or more officious managers, unless management was assumed to save thing from imminent danger

7. 7. 2 or more persons liable for quasi delict

8. 8. 2 or more payees when there has been payment of what is not due

9. 9. Principal, accomplices, and accessories of a felony.

iii. iii. When nature of obligation requires

solidarity1. 1. Ex. Accident fr “Kabit” system

b. b. “Solidarily”, “Jointly and severally”, in

solidum, together and/or separately, “I promise to pay”

c. c. Creditors and debtors need not be bound

in the same manner and by the same periods and conditions

d. d. Not same as indivisible obligation

i. i. Solidary refers to vinculum; Indivisibility refers to prestation

ii. ii. Solidary requires plurality of subjects

iii. iii. In solidary, all debtors liable for breach

of obligation; In indivisibility, only debtor guilty of breach of obligation is liable for damage

iv. iv. In indivisible obligation, other debtors

not liable for insolvency; if solidary debtor becomes insolvent, the co-debtors bore his debt in proportion

e. e. Solidary creditors may do whatever may

be useful to others, but not anything which may be prejudicial to the others

f. f. A solidary creditor cannot assign his

rights without the consent of the others, except if to co-creditors

g. g. Debtor must pay to the creditor who

made demand, if none demanded, then he may pay any one of the solidary creditor

h. h. Novation, compensation, confusion or

remission of a solidary creditor shall extinguish the obligation but the creditor who did these acts shall be liable to the other creditors

i. i. No re-imbursement if payment made

after obligation prescribed or illegal

j. j. Remission of the whole obligation obtained by a solidary debtor does not entitle him to reimbursement from his co-debtors

k. k. Defenses available to solidary debtors

i. i. Derived from nature of obligation

Payment, fraud, prescription, remission, illegality, non performance of condition

ii. ii. Personal to the debtor

Insanity, incapacity, mistake, violence, minority

iii. iii. Personal to the other solidary debtors

Partial defense

(e)(e) Obligations with a Penal Cause

1. 1. With accessory undertaking in case of breach of obligation

a. a. To insure performanceb. b. To liquidate the amount of damage to be

awardedc. c. To punish the obligor in case of breach

2. 2. No need to prove actual damage 3. 3. Shall substitute for damages and interest,

except

a. a. When there is stipulation to the contraryb. b. When obligor is sued for refusal to pay

agreed penaltyc. c. When obligor is guilty of fraud

4. 4. When court may reduce penalty

a. a. If principal obligation partly complied withb. b. If principal obligation irregularly complied

withc. c. If penalty is iniquitous or unconscionable

Weeks 5 to 7 - Extinguishments of Obligations Modes of Extinguishing Obligations

1. Payment or performance 2. Loss of the thing due 3. Condonation or remission 4. Confusion or merger of the rights of creditor and debtor 5. Compensation 6. Novation 7. Death of a party in personal obligation 8. Annulment or Rescission of contract 9. Arrival of Resolutory period or fulfillment of resolutory conditon 10. Impossibility of fulfillment 11. Prescription

I. Payment(a)(a) General Provisions Payment

(i) (i) Complete Delivery of money, performance of obligation

(ii) (ii) If substantially performed in good

faith, obligor may recover as though there had been complete fulfillment less damages

(iii) (iii) Third party cannot compel

creditor to accept payment or performance, except

a. a. When there is stipulation to the contrary

b. b. When third person has an interest in the fulfillment of obligation

(iv) (iv) Rights available to third party

who pays:a. a. If payment made with the

consent of the debtori. i. Recover from debtor

the entire amountii. ii. Subrogated to all the

rights of creditor

b. b. If payment made without

the knowledge or against the will of debtor, he can recover only insofar as payment has been beneficial to the debtor

(v) (v) To whom payment must be

made (1240)a. a. To the person in whose

favor obligation has been constituted

b. b. His Successor in interestc. c. Any person authorized to

receive it

d. d. Third person provided it has redounded to benefit of creditor. (1241, 1242) Presumption of benefit in the following case:

If after payment, third person acquires creditor’s rights

If creditor ratifies payment to third party

If creditor’s conduct let debtor to believe that the third person had authority to receive payment

e. e. Possessor of the credit

(vi)(vi) Payment must be in Legal Tender

a. a. Foreign currency may be used as currency of contract

b. b. Promissory notes, bills of exchange, checks not legal tender. They produce effect of legal tender only when encashed or impaired thru the fault of creditor (1249)

c. c. In case of extraordinary

inflation or deflation, the basis is the value of currency at the time obligation is established. (1250)

(b)(b) Applications of Payments

1. 1. The right belongs to the debtor, but if he does not exercise it, creditor may do it

2. 2. If creditor issues a receipt designating the debt to be applied, debtor can accept or reject

3. 3. Where neither debtor nor creditor made a choice, it shall be applied on the debt which is most onerous a. a. Older debts more onerous

than newer onesb. b. One bearing interest more

onerous than one that is notc. c. Secured debt more

onerous than unsecuredd. d. Debt as principal more

onerous than debt as guarantore. e. Solidary obligation more

onerous than sole debtor4. 4. If similar nature and burden,

payment shall be applied proportionately

(c) (c) Payment by Cession

Assignment or abandonment of all the properties of the debtor for the benefit of his creditors in order that the latter may sell same and apply proceeds thereof to

1. 1. Cession does not make the creditors owners of the property

2. 2. Unless stipulation to contrary,

debtor still required to pay balance

3. 3. Requires two or more creditors, debtors insolvent, cession accepted by creditors

(d)(d) Dacion en pago

Dation in payment is the transmission of the ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of an obligation.

Governed by law on sales

1. 1. Difference between Dacion and Cessiona. a. Dacion usually only one

creditorb. b. Dacion does not require

insolvencyc. c. Dacion does not involve

all the property of debtord. d. Dacion makes creditor

owner of the propertye. e. Dacion is a novation

(e)(e) Tender of Payment and

Consignation Tender of payment – The act of the debtor of

offering to the creditor the thing or amount due Consignation – Deposit of the object or the

amount due with the proper court after refusal or inability of the creditor to accept the tender of payment

1. 1. Requisites of Consignationa. a. Debt Dueb. b. Tender of payment by

debtor and refusal by creditor to accept it without justifiable reason

c. c. Previous notice of the consignation had been given to persons interested in fulfillment of obligation

d. d. Thing or amount due has been deposited with judicial authority

e. e. Subsequent notice of consignation to interested parties

2. 2. Exception to requirement for

tender of payment:a. a. When creditor is absent or

unknown or does not appear at place of payment

b. b. When he is incapacitated to receive payment

c. c. When he refuses to give receipt, without just cause

d. d. When two or more persons claim same right to collect

e. e. When title of the obligation has been lost

3. 3. Expenses of consignation for

Creditor’s account

a. a. If creditor allows debtor to withdraw the consignation, creditor lose preference over the thing. Co-debtor, guarantors, sureties shall be released.

II. Loss of the Thing Due

(a)(a) Lost – when perished, go out of commerce, or disappear in such a way that its existence unknown or cannot be recovered Or becomes legally or physically impossible to perform, or so difficult as to be manifestly beyond the contemplation of the parties

(b)(b) The obligation to deliver specific thing is

extinguished if 1. 1. Without the fault of debtor, and 2. 2. Debtor not in delay

(c) (c) No person shall be responsible for fortuitous events, except:

1. 1. Where expressly specified by law or stipulated in contract

2. 2. When nature of the obligation requires assumption of risk

3. 3. When debtor is at fault, partly4. 4. When debtor incurs delay5. 5. When debtor promises to deliver same thing

to two or more persons6. 6. When obligation to deliver arises from

criminal offense7. 7. When obligation is generic

(d)(d) In case of partial loss the court shall determine whether it is so important as to extinguish the obligation

(e) (e) In case lost when the thing is in the possession of debtor, presumption is it is his fault

Except earthquake, flood, storm or other natural calamity

(f) (f) Creditor shall have right to go against any third

person responsible for the loss.

III. III. Condonation or Remission of Debt

g. h. Act of liberality by virtue of which creditor abandons his right

Gratuitous Accepted by debtor Obligation must be demandable Parties must be capacitated Donation not inofficious Forms in express condonation

h. i. Implied remission- - Delivery of private document evidencing

credit- - If thing pledge is found in the possession

of debtor or owner of thing - - Renunciation of principal extinguish

accessory obligation IV. Confusion or Merger of Rights

Creditor and Debtor merged in the same person1. 1. Between principal debtor and principal

creditor2. 2. Complete and definite merger

a. a. Merger of debtor and creditor benefits the guarantor

b. b. Extinguish only the portion of the joint obligation corresponding to the creditor and debtor merged

c. c. Merger of one solidary debtor with creditor extinguishes obligation

V. Compensation

a. a. Persons who in their own rights are debtors and creditors of each other extinguishes the debts to the concurrent amount

b. b. Guarantor can set up compensation of what principal debtor may owe creditor

c. c. Compensation may be total or partial

d. d. Parties may agree to compensate debts not yet due

e. e. When one or both debts are rescissible or voidable, they may be compensated before they are judicially rescinded or avoided

f. f. Requisites of legal compensation (by operation of law ):

1. 1. Parties are principal creditors and debtors of each other

2. 2. Both debts consist in sum of money or consumable of same kind and quality

3. 3. Both debts are due and demandable4. 4. Two debts are liquidated (amount is

certain)5. 5. No retention or controversy commenced

by 3rd partyb. g. Compensation after assignment

i. Assignment made with consent of debtor Debtor cannot set up compensation

against previous creditor

ii. Assignment with knowledge but without consent Debtor can set up compensation for debts

before the notification Debtor cannot set up compensation with

respect to debts which matured after notification

iii. Assignment without knowledge of debtor Debtor can set up compensation for debts

maturing before he learned of assignmentc. h. Compensation cannot take place in following case:

i. Debts from Contracts of Depositum (A person receives a thing belonging to another for safekeeping and of returning the same; not bank deposits)

ii. Debts from Commodatum (One person delivers to another something for him to use and return it)

iii. Claims for support due by gratuitous title

iv. Debts from Criminal offense

v. Taxes

VI. Novation – extinction of an obligation through the creation of a new one which substitutes it

a. a. Requisites:

i. Previous valid obligation

ii. Agreement to enter new obligation

iii. Extinguishments of old

iv. Creation of new valid obligationb. b. Must be declared in unequivocal termsc. c. Or incompatible on every point – Test: Whether

old and new contract can stand together each having its own independent existence

d. d. Substitution of Debtor

i. Expromision – Without the knowledge or consent of debtor, at the instance of the new debtor

1. 1. Payment by new debtor gives him right to beneficial reimbursment

2. 2. Insolvency or non fulfillment of obligation by new debtor will not give rise to liability of old debtor

ii. Delegacion – Substitution made at the instance of old debtor

3. 1. Payment by new debtor entitles him to reimbursement and subrogation

4. 2. Non fulfillment of obligation by new debtor will not give rise to liability of old debtor

5. 3. Insolvency of new debtor will revive action against old debtor if insolvency was already existing and of public knowledge, or known to the debtor when he delegated his debt

e. e. If new obligation is void, the original one shall subsists

f. f. If original obligation is void, novation is void; except when annulment may be claimed only by debtor or when voidable acts have been ratified

g. g. Subrogation – Substitution of Debtor

i. Conventional – By express agreement of the old creditor, debtor and the new creditor

ii. Legal –Without agreement, by operation of law

1. 1. When creditor pays another creditor who is preferred, even without the debtor’s knowledge

2. 2. When a third person, not interested in the obligation, pays with the express or tacit approval of debtor

3. 3. When a third person interested in the fulfillment of obligation pays, even without the knowledge of debtor

Definition of a ContractDefinition of a Contract A meeting of the minds Between two persons Whereby one binds himself, with respect to the other To give something or to render some service Different phases or stages in the life of a contractDifferent phases or stages in the life of a contract1. Preparation – Preliminary to formation

1. 2. Perfection – birth of the contract2. 3. Consummation - fulfillment

Essential characteristics of ContractsEssential characteristics of Contracts

1. 1. Obligatory force – must be complied with in good faith 2. 2. Autonomy – parties are free to enter such stipulations,

clauses, terms and conditions – Clauses and condtions must not be contrary to:

LAW Morals Good Customs Public Order Public Policy

3. 3. Mutuality – contract must bind both parties

Determination can be left to third party, whose decision shall be binding only when communicated to both parties

Unless such determination be evidently inequitable 4. 4. Relativity – takes effect only bet parties, their assigns and

heirs Stipulation pour autrui accepted by third party Where third persons comes into possesion of the object

of contract creating real rights Where contract is to defraud a third person Where third person induces a contracting party to violate his

contracta. a.

Different Classes of ContractsDifferent Classes of Contracts According to perfection

– Consensual – Perfected by mere agreement of the parties

– Real – Requires not only consent, but also the delivery of the object

According to form

– Common – Do not require particular form – Formal – Those which require particular form, like

donation, mortgage According to nature of vinculum

– Unilateral – Obligation of one party only – Bilateral – Reciprocal obligations for both parties

According to cause

– Onerous – Giving of an equivalent or compensation – Gratuitous – Given without compensation, just pure

liberality According to risks involved

– Commutative – Prestation is pecuniarily appreciable and determined at the moment of celebration of contract

– Aleatory – Pecuniarily appreciable but not yet determined at the moment of celebration, since it depends upon the happening of an uncertain event. Ex. Insurance

According to name

– Nominate – with specific names or designation in law – Innominate – no specific name

Essential Requisites of ContractsEssential Requisites of Contracts

Consent of the contracting parties

Object certain subject matter of the contract Cause of the obligation which is established

Elements of ConsentElements of Consent

Concurrence of the offer and the acceptance o Definite Offer that may be exactly fixed o Assent to the terms without qualifications or conditions o Conveyed before the death, civil interdiction, insanity, or

insolvency o Qualified acceptance is a counter offer o Perfected when acceptance comes to knowledge of offeror o Offer can be withdrawn anytime before acceptance, unless

option is founded on consideration o If offer made thru agent, accepted when communicated to

the agent

By parties with legal capacity to contract o Not minors, insane or demented, deaf-mutes who do not

know how to write, incompetents under guardianship, civil interdiction

o Minor can be liable if he misrepresents his age o Prohibited by law from entering into contracts

Husband and Wife to each other o o Insolventso o Persons prohibited from giving donationso o Adultery, concubinageo o In consideration of criminal offenseo o Made to public officer, spouse, by reason of officeo o Persons with fiduciary relationso o Guardian, for property under his guardianshipo o Agents, for property entrusted to them o o Executor/administratoro Public officers, judges, for property under their jurisdictiono o

Intelligently, freely given, consciously

- - Vices of the will

Mistake - False notion of a thing or a fact materrial to the contract

• Simple mistake gives rise to correction

• Render voidable in following cases:

Mistake as to object of the contracto Identity of thing, Substance, Condition

, Quantity only if principal reason o o Mistake of Law

o Will not make it voidable except:

Mutual error as to the legal effect of an agreement when the real purpose of the parties is frustrated

Mistake as to person

o If such identity or qualification is principal cause of contract

Violence – Employment of external physical force, irresistible and serious to wrest consent

Intimidation – Moral compulsion to influence another to give his consent thru fear of imminent or grave evil

o o Force employed must be serious or

irresistibleo o Determining cause for the party in

entering into the contract

Undue Influence – Improper advantage of his power over the will of another depriving the latter of reasonable freedom of choice

• Confidential, Family, Spiritual and other

relations or • Person influenced suffering from mental

weakness, ignorant, financial distress

Fraud – Insidious words or machinations of one of the contracting parties induced the other to enter into a contract, which without them he would not

have agreed; Failure of one party to disclose facts to other party when there is a duty to reveal them

Dolo incidente (Incidental Fraud) - committed in the performance of pre-existing obligation, remedy is damages

Dolo causante (Causal Fraud) – Fraud employed at the time of the execution of a contract in order to secure consent, remedy is annulment bec of vitiation of consent

o o Must be employed by one of the contracting parties,

o o but not by both or by third partieso o Must be Seriouso Must have induced the other party to

enter into the contract

- - Vices of Declaration

Simulated Contracts

1. Absolute1. Absolute

– Contracting parties do not intend to be bound by the contract at all– –Void

2. Relative

– Contracting parties conceal their true intentions– Real agreement binding on the parties if it does not prejudice third person

ObjectsObjects

Thing, right or service which is the subject matter of the obligation created or established

Thing or service must be within the commerce of mano o The law prohibits future inheritance as object of

contracto o Transmissible and can be appropriatedo o Not contrary to Law Moral Good Conduct Public

Order Public Policyo o Real or possibleo o Determinate or determinable

CauseCause

Essential reason why the parties enter into the contract

o Cause should be in existence o Licit or lawful o True

Interchangeable with consideration, but not same as motive

o General rule: Particular motive of the party in entering into a contract are not material. Except: When it predetermines the purpose of the contract

FormForm

Whatever may be the form, Contract shall be obligatory on all provided all the essential requisites are present

Two exceptions: When Law requires a certain form for validity When Law requires form for enforcement

Must appear in Writing to be valid:

o o Donation exceeding P 5,000

o o Sale of piece of land or interest therein by an agento o Antichresis - Creditor acquires rights to fruits of

immovable but applying to payment of interesto o Agreement regarding payment of interest

Must appear in Public Instrument to be valid:

Donations of immovable property Partnership where immovable or real rights are contributed

Must appear in Public Instrument for Enforcement Creation, transmission, modification, sales or extinguishments of real rights over immovable properties Cession, repudiation, or renunciation of hereditary rights, or those of conjugal partnership of gains Power to administer property Cession of actions or rights proceeding from an act appearing in a public document

ReformationReformation

When the true intention of the parties are not expressed in the instrument, one of the party may ask for the instrument to be changed so that true intention may be expressed.

Requisities

Must be a meeting of the minds of the parties True intention is not expressed in the instrument Failure due to mistake, fraud, inequitable conduct or accident

What may be reformed Mutual mistake of parties cause failure to disclose real agreements One party mistaken and the other acted fraudulently or inequitably One party was mistaken and the other knew that instrument did not state real agreement, yet concealed it Ignorance, lack of skill,, negligence or bad faith on the part of person drafting it Where parties agree on mortgage, but instrument states property is sold absolutely or with right to repurchase

o o What may not be reformed

o o Simple Donations with no conditiono o Willso o Those where real agreement is void

Defective ContractsDefective Contracts

o o As to defecto o Rescissible - Injury or damageo o Voidable - Vitiation of consent or legal

capacityo o Unenforceable - In excess of authority or do

not complyy with S of Fraudo o Void - Lack of an element of a valid contract

o o As to effecto o Rescissible and Voidable - Valid until

annulledo o Unenforceable - Cannot be enforced by

action in courto o Void - No legal effects at all

o o As to parties who can file actiono o Rescissible and Void – May be attack directly

By contracting parties or by third partieso o Voidable and Unenforceable - Cannot be

attacked by third persons

Resolution (Rescission of reciprocal obligation

o Party who may institute action For resolution, only party to the contract

o Causes Failure of one party to comply w/ obligation

o Kind of contract Reciprocal obligation only

o Power of the courts Can grant extension for performance

Rescissible Contracts

Guardian who represent ward, lession of more than ¼ of the value of the thing

In representation of absentee, lession of ¼ In fraud of creditor who is unable to collect Things under litigation, entered into by defendant

without approval of litigants and court Payment made in state of insolvency where debt not

yet due

o Those which may be declared by law

• Partition (1098)• Result of deterioration (1189)• Unpaid seller (1526 and 1534)

Badges of Fraud

o o Cause or consideration is inadequateo o Transfer made after suit has begun or pendingo o Sale on credit by an insolvent debtoro o Evidence of large indebtedness or complete

insolvencyo o Transfer of all or nearly all of debtor properties

o o Between father and son, with any of above circumstances

o o Failure of vendee to take exclusive possession Voidable ContractsVoidable Contracts Where one party is incapable of giving consent to a

contract Where the consent is vitiated by mistake, violence,

intimidation, fraud, undue influence ConvalidationConvalidation Prescription (Four years) From time incapacity ceases From discovery of such fraud or mistake

Ratification or confirmation Loss of the thing by thru the fault of the person who has

right to annul Effects of annulment of Voidable ContractEffects of annulment of Voidable Contract– If not consummated, then parties are released from

obligation– If consummated, parties are to restore to each other what

they have given, with fruits and interests, plus damages– If to do or not to do, there will be apportionment of

damages–Incapacitated party not obliged to make restitution except for

what he was benefited Unenforceable ContractsUnenforceable Contracts Those entered into in the name of another person by one

who has been given no authority or legal representation or who has acted beyond his powers

Those not complying with Statute of Frauds. Statute of FraudStatute of Fraud–Purpose is to prevent fraud, not to aid the commission of

fraud– – Basic and fundamental principles

Applies only to executory contracts Cannot apply if action is not for damage bec of violation

of agreement or for specific performance Exclusive May be waived

Personal defense Contracts are not void Rule of exclusion Concerns admissibility of evidence, not credibility Does not apply if action is to claim reformation

– Following must be in writing or in some notes or memorandum:

– Agreement not to be performed within a year from the making thereof

– A special promise to answer for debt, defaults or miscarriage of another

– Agreement in consideration of marriage– Sales of goods, chattels, things above P500– Lease of more than one year–Representation as to credit of another

Void ContractsVoid Contracts– No concurrence of offer/acceptance– Cause, object, purpose contrary to law, morals, good

customs, public order, or public policy– Absolutely simulated or fictitious– Cause or object did not exist at the time of the transaction– Object outside commerce of men– Impossible service– Intention of the parties relative to principal object cannot

be ascretained– Prohibited or declared void by law EstoppelEstoppel Estoppel in pais - by one’s conduct or acts,

representatioons, admissions or silence, culpable negligience induces another to believe certain facts to exist and such other rightfully relies and acts on such belief.

Estoppel by Deed - A party to a deed, are precluded from

aasserting against the other party to the deed any right or title in derogation of the deed, or from denying any material fact asserted therein.

Estoppel by Record - A party precluded from denying the truth of matters set forth in a record, whether judicial or legislative.

Estoppel by LachesEstoppel by Laches Estoppel by Laches Failure or neglect to enforce a right for an Unreasonable and unexplained length of time Despite knowledge or notice

EXTINCTIVE PRESCRIPTION(Arts. 1139-1155)

40 days Redhibitory action based on defects

of animals.6 months (a)(a) Action for reduction of price for

rescission in case of breach of sale of real estate, either with a statement of its area at a certain price for a unit of measure or number.

(b)(b) Action for warranty against hidden defects of thing sold.

1 year (a)(a) Action by husband against wife to impugn child’s legitimacy if husband is in the same place as wife.

(b)(b) Action for revocation of donation for acts of ingratitude.

(c) (c) Action for forcible entry or unlawful detainer.

(d)(d) Action for defamation.(e)(e) Action for rescission or for

damages if immovable sold is encumbered with non-apparent burden or servitude.

2 years Action to impugn child’s legitimacy if husband is in the Philippines but not in same place as wife.

3 years Action to impugn child’s legitimacy if husband is abroad.

4 years (a)(a) Action for revocation or reduction of donation based on supervening birth, appearance or adoption of a child.

(b)(b) Action for revocation of

donation based on fulfillment of condition.

(c) (c) Action for recovery of movable (replevin) if possessor is in good faith.

(d)(d) Action upon injury to rights of plaintiff.

(e)(e) Action upon a quasi-delict.(f) (f) Action for rescission of

rescissible contracts.(g)(g) Action for annulment of

voidable contracts.5 years (a)(a) Action for legal separation.

(b)(b) Action for annulment of marriage based on

1. Lack of parental consent.2. Fraud.3. Force, intimidation or undue influence.4. Physical incapacity and afflicted with a sexuality transmissibledisease.(c) (c) Action to claim legitimacy if

child should die during minority or in state of insanity.

(d)(d) Action for declaration of incapacity of heir.

(e)(e) Action for warranty of solvency of debtor if credit is assigned to co-heir during partition.

(f) (f) All other actions whose periods are not fixed by law.

6 years (a)(a) Action upon oral contract.(b)(b) Action upon a quasi-contract.

8 years Action for recovery of movables (replevin) if possessor is in bad faith.

10 years (a) (a) Action for recovery of possession of immovables (accion publiciana) if real right of possession is lost.

(b) (b) Action for recovery of ownership of immovables (accion reinvindicatoria) if possessor is in good faith.

(c) (c) Action upon a mortgage

contract.(d)(d) Action upon a written contract.(e)(e) Action upon an obligation

created by law.(f) (f) Action upon a judgment.

Lifetime (a)(a) Action to claim legitimacy.(b)(b) Action to obtain declaration of

illegitimate filiation.