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BOOK IV
Obligations and Contracts TITLE I Obligations CHAPTER I General Provisions
ARTICLE 1156.
“An obligation is a juridical necessity to give, to do or not to do. (n)” “Ang obligasyon ay isang Juridical necessity na magbigay, gawin at hindi gawin.” Obligation is derived from the latin word “obligatio” meaning tying or binding. Joridical necessity connote that in case of noncompliance, there will be legal sanction. Elements: Active Subject – the one is demanding the performance (Creditor) Passive Subject – the one bound to perform the prestation to give, to give, to do or not to do Prestation or Object – the subject matter of the obligation Efficient Cause – the juridical tie or vinculum by virtue of which the debtor has become bound to perform the prestation
ARTICLE 1157.
Obligation arise from:
**1. Law;
- Contracts;
- Quasi-Contracts;
- Act or omissions punished by law; and 5. Quasi-delicts** Ang obligasyon ay maaaring manggaling:
- Batas;
- Kontrata;
- Quasi-Kontrata
- Kilos o kilos na masama na pinaparusahan ng batas; at
- Quasi-delicts Sources of Obligations Law (obligation ex lege)-like the duty to pay taxes and to support one’s family. Contracts (obligation ex contractu) – like the duty to repay a loan by virtue of an agreement. Quasi-contracts (obligations ex quasi-contractu) – like the duty to refund an “over change” of money because of the quasi-contract of solution indebiti or “undue payment.” Crimes or Acts of Omissions Punished by Law (obligations ex maleficio or ex delicto) – like the duty to return a stolen carabao. Quasi-delicts or Torts- (obligation ex quasi-delicto or ex quasi-maleficio)- like the duty to repair damage due to negligence.
ARTICLE 1158.
“Obligations derived from law are not presumed. Only those expressly determined in this Code or in special laws are demandable, and shall be regulated by the precepts of the law which establishes them; and as to what has not been foreseen, by the provisions of this Book. (1090)” “Ang mga obligasyon na hango sa batas ay hindi inaakala. Ang mga obligasyon lamang na hayagang nakasaad sa Code na ito at sa mga espesyal na batas ang may bisa, at pinapatakbo ng mga utos ng batas na nagtatag ng mga ito; para sa mga obligasyon na hindi inaasahan, sila ay bibigyang bisa ng probisyon ng Libro na ito.” Discussion: When obligations are not expressly provided by law, they cannot be presumed to exist – thus making the not demandable nor enforceable. When the act itself is the source of the obligation and not the law: The law merely acknowledges the existence of an obligation generated by an act; It constitutes a contract, quasi-contract, delict or quasi-delict; Its only purpose is to regulate the obligation which did not arise from the law. When the source of the obligation is the law itself: 1. The law creates the obligation;
- The act upon which it is based is nothing more than a mere factor for determining the moment when it becomes demandable.
ARTICLE 1159.
“Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.” “Ang mga obligasyon na nag simula sa mga kontrata at nagkaroon ng bisa sa batas sa pagitan ng mga nagkasundong partido ay dapat gampanan ito ng may mabuting kalooban.” *Distinction between Obligation and Contract Obligation – is a judicial necessity to give, to do or not to do (1156), while Contract – is the meeting of the minds between two persons whereby one bind himself with respect to the other, to give something or to render some services. (Art.1305) Obligation Arising from contracts – it is an established doctrine of law and sustained by the settled practice of the courts, that a man obligates himself to do that to which he promises to be bound, because that which is agreed to in a contract is the law between such contracting parties. This rule, however, is subject to a condition that a court is not contrary to law, morals, good customs, public order, or public policy.
ARTICLE 1160.
“Obligations derived from quasi-contracts shall be subject to the provisions of Chapter I, Title XVII of this Book.” “Ang mga obligasyong galing sa quasi-contracts ay maipapasailalim sa mga probisyong nakasaad sa Chapter I, Title XVII ng Librong ito.”
Crime Distinguished from Quasi delict.
- In crime, there is criminal or malicious intent or criminal negligence, while in quasi delict, there is only negligence;
- In crime, the purpose is punishment, while in quasi delict, indemnification of the offended party; 3. Crime affects public interest, while quasi delict concerns private interest in crime, there are generally two liabilities: criminal and civil, while in quasi-delict, there is only civil liability;
- Criminal liability cannot be compromised or settled by the parties themselves, while the liability for quasi delict can be compromised as any other civil liability;
- In crime, the guilt of the accused must be proved beyond reasonable doubt, while in quasi de1ict the fault or negligence of the defendant need only be proved by preponderance (i.e., superior or greater weight) of evidence. CHAPTER II Nature and Effect of Obligation
ARTICLE 1163.
“Every person obliged to give something is also obliged 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. (1094a)” “Ang bawat tao na obligado na magbigay ng isang bagay ay obligado rin na pangalagaan ito na may tamang pagkalinga tulad ng isang ama ng tahanan, maliban kung ang batas o ang stipulasyon ng mga partido ay nangangailangan ng iba pang pamantayan ng pagaalaga.” Discussion: “The diligence of a good father of a family” is the diligence required on this article and if extraordinary diligence is required, then the obligor shall exercise extraordinary diligence.
ARTICLE 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. (1095)” “And nagpautang ay may karapatan sa mga bunga ng bagay mula sa oras na ang obligasyon na ihatid ito ay nagsimula. Ngunit, Siya ay dapat walang “real right” sa mga bagay na nasaad hanggang ang mga ito ay maihatid sa kanya.” Discussion: The Debtor’s Obligation to deliver arise when: 1. When the obligation is based on law, quasi delict, quasi-contract or crime, specific provisions of the applicable law shall determine when the delivery shall be done or affected.
- When the obligation is subject to a suspensive condition, the obligation to deliver arises from the happening of the condition.
- When the obligation is subject to a suspensive term or period, the obligation to deliver arises from the lapse of the term or period.
- When there is no condition or term, the obligation to deliver arises from the constitution, creation or perfection of the obligation.
ARTICLE 1165.
“When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by Article 1170, may compel the debtor to make the delivery. If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor. If the obligor delays, or has promised to deliver the same thing to two or more persons who do not have the same interest, he shall be responsible for fortuitous event until he has effected the delivery.” “Kapag kung ano ang upang maihatid ay isang maliwanag na bagay, ang pinagkakautangan , bilang karagdagan sa kanan ipinagkaloob sa kanya ng Article 1170, maaaring pilitin ang may utang upang gawin ang paghahatid. Kung ang bagay ay hindi tiyak o generic, maaari niyang hilingin na ang obligasyon na nakasunod sa sa kapinsalaan ng ang may utang. Kung ang obligor pagkaantala, o ipinangako upang maihatid ang parehong bagay sa dalawa o higit pang mga tao na hindi magkaroon ng parehong interes, siya’y magiging responsable para sa di inaasahang pangyayari hanggang sa siya ay maapektuhan ang paghahatid.” Yu Tek v. Gonzales Facts: A obligated himself to sell for a definite price a certain specified quantity of sugar of a given quality, without designating a particular lot. Issue: In case the sugar is lost by a fortuitous event, who bears loss prior to delivery, the seller or the buyer? Held: In this case, the seller bears the loss because what was delivered was not a specific thing, but a generic thing. And genus never perishers. Incidentally, the sale here cannot be said to have been already perfected because of the lack of physical segregation from the rest of the sugar.
ARTICLE 1166.
“The obligation to give a determinate thing includes that of delivery of all its accessions and accessories, even though they may not have been mentioned. (1097a)” “Kasama sa obligasyon na magbigay ng determinadong bagay ang pagbibigay ng lahat ng accessions at accessories nito kahit na hindi sila nabanggit.” Discussion: Accession – includes everything produced by a thing, as well as all incorporated or attached with it, may it be natural or artificial Accession discreta – right to the fruits Accession continua – includes both accession natural (i.e. alluvial deposits) and accession industrial (i.e. those built, planted or sowed on the land of the landowner) Accessories – includes things that are united or attached as ornaments to the principal thing, for the latter’s use or perfection (i.e. spare tire of a car, television antennas, cellphone chargers, moviehouse chairs, etc.) Note: Although the delivery of determinate thing includes all its accessions and accessories, the parties in the contract may stipulate that certain accessions or accessories may not be included in the delivery. Both parties have the freedom to stipulate such things.
obligasyon, ang balam ng isa ay magsisimula. The delay contemplated in the article is legal delay or default and not ordinary delay. To put an obligor in default (or mora), there must be a demand made upon him for the performance of the obligation either judicially or extrajudicially. Demand is not necessary to place the obligor in default under the following circumstances: 1. When the law or obligation expressly declares; 2. When from the nature of the contract, it appears that the time is of the essence and this is the motivating factor in the establishment of the contract;
- When demand would be useless;
- When the debtor admits, he is in default. Classes of Default
- Mora solvendi – the default on the part of the debtor/obligor;
- Mora accipiendi – the default on the part of the creditor/obligee;
- Compensatio morae – the default on the part of both the debtor/obligor and creditor/obligee which arises in reciprocal obligations the effect is the default of one party neutralizes the default of the other. ARTICLE 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. (1101)” “Ang mga nagsasagawa ng kanilang obligasyon na may kasalanan ng fraud, nagligence, o delay o balam at sa mga nagsasagawa ng kanilang obligasyon na hindi ayon sa napagkasunduan ay mananagot sa mga danyos.” Discussion Fraud – A false representation of a matter of fact —whether by words or by conduct, by false or misleading allegations, or by concealment of what should have been disclosed—that deceives and Intended to deceive another so that the individual will act upon it to her or his legal injury. Negligence – Conduct that falls below the standards of behavior established by law for the protection of others against unreasonable risk of harm. A person has acted negligently if he or she has departed from the conduct expected of a reasonably prudent person acting under similar circumstances.
ARTICLE 1171.
“Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void.” “Ang mga responsibilidad mula sa pandaraya ay maaaring hingin sa lahat ng obligasyon. Kahit anong pagtalikdan sa aksyon sa pandaraya sa hinaharap ay walang bisa.” ARTICLE 1172. “Responsibility arising from negligence in the performance of every kind of obligation is also demandable, but such liability may be regulated by the courts, according to the circumstances. (1103)” “Ang responsibilidad na sanhi ng kapabayaan ng pag gawa ng bawat obligasyon ay demandable, subalit ang nasabing pananagutan ay regulated ng hukuman na aayon sa pagkakataon.” ARTICLE 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the person, of the time and of the place. When negligence shows bad faith, the provisions of Articles 1171 and 2201, paragraph 2, shall apply. If the law or contract does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family shall be required. Ang kasalanan o kapabayaan ng obligor ay binubuo sa pagkukulang ng na sipag na kung saan ay kinakailangan sa pamamagitan ng likas na katangian ng obligasyon at tumutugma sa mga pangyayari ng mga tao, ng oras at ng lugar. Kapag kapabayaan ay nagpapakita masamang hangarin, ang mga probisyon ng Artikulo 1171 at 2201, talata 2, ay dapat mag-apply. Kung ang batas o kontrata ay hindi ipinapahayag na kung saan ay na-obserbahan sa pagganap, na kung saan ay inaasahan ng isang mahusay na ama ng isang pamilya ay dapat atasan. Far East Bank and Trust Co. v. Estrella O. Querimit Facts: Respondents filed a complaint against petitioner bank and certain officials of the latter, alleging that the they refused to allow her to withdraw her time deposit evidenced by four certificates of deposit in the total amount of $60,000. The trial court ordered petitioner-bank and its officials to allow respondent to withdraw her time deposit plus accrued interests. The Court of Appeals (CA) affirmed the decision of the trial court with the modification that petitioner-bank was solely liable because the latter has a personality separate from its officers and stockholders. On appeal, the Supreme Court affirmed the CA. Held: Petitioner-bank failed to prove that it had already made payment considering that the subject certificates of deposit were still in the possession of the depositors. The principle that payment, in order to discharge a debt, must be made to someone authorized to receive it is applicable to the payment of certificates of deposit. Petitioner should, thus, not have paid respondent’s husband or any third party the amount of the time deposit without requiring the surrender of the certificates of deposit. Laches would also not defeat respondent’s claim as she did not withdraw her deposit because she relied on petitioner bank’s assurance that the interest would accumulate annually even after maturity of the time deposit and she set aside the money therein for the retirement. ARTICLE 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the
as declared in the case of Liam Law vs Olympic Sawmill Co. 129 SCRA 439 (1984). An excerpt from the case goes: The special laws that used to govern usury are: 1. Act No. 2655 as amended by Act No. 3998 2. Commonwealth Act No. 399
- Republic Act No. 337 and
- Presidential Decree No. 116, 858 and 1684 Rules governing interest rates in relation to usurious transactions:
- CBC No. 905 does not repeal the Usury Law. Only a law can repeal a law. The circular merely suspended the law’s effectivity.
- While the Usury Law ceiling on interest rates was lifted by the CB Circular 905, nothing in the said circular could possibly be read as granting carte blanche authority to lenders to raise interest rates to levels which would either enslave their borrowers or lead to a hemorrhaging of their assets (Almeda vs. CA, 256 SCRA 292 [1996]). 3. Increase of interest rate unilaterally without the consent of the debtor is illegal for it violates the principle of mutuality of contracts.
- The determination of the illegality of a stipulated interest rate depends on the circumstances of the case.
- Jurisprudence shows that an interest rate of 12% to 25% per annum is considered legal. ARTICLE 1176. The receipt of the principal by the creditor without reservation with respect to the interest, shall give rise to the presumption that said interest has been paid. The receipt of a later installment of a debt without reservation as to prior installments, shall likewise raise the presumption that such installments have been paid. (1110a) Ang pagtanggap ng prinsipal ng pinagkautangan nang walang reserbasyon sa interest ay magbibigay ng pag-aakala na na ang nabanggit na interes ay bayad na. Ang pagtanggap ng pabaha-bahagyang kabayaran nang walang reserbasyon sa naunang installment ay magbibigay rin ng pag-aakala na ang installment ay bayad na. Discussion: A receipt issued by the lessor dated June 1, 1904 to the lessee covering the rent for the month, shows that the rent for the prior month (May) had already been paid. The presumption is rebuttal and not conclusive. ARTICLE 1177. The creditors, after having pursued the property in possession of the debtor to satisfy their claims, may exercise all the rights and bring all the actions of the latter for the same purpose, save those which are inherent in his person; they may also impugn the acts which the debtor may have done to defraud them. (1111) Ang mga pinagkakautangan, pagkatapos ipaglaban ang kanyang pagmamay-ari na nasa may utang upang ma-satisfy ang claims nito ay maaaring gamitin ang kanyang karapatan na dalhin lahat ng aksyon ng may utang para sa katulad na layunin, maliban na lamang sa mga likas na karapatan sa isang tao; maaari rin nilang ikondena ang mga aksyon na ginawa ng may utang upang lokohin sila. Discussion: Accion subrogatoria is an action where the creditor hose claims had not been fully satisfied, may go after the
debtors (third persons) of the defendant-debtor. Accion pauliana is an action where the creditor files an action in court for the rescission of acts or contracts entered into by the debtor designed to defraud the former. ARTICLE 1178. Subject to the laws, all rights acquired in virtue of an obligation are transmissible, if there has been no stipulation to the contrary. (1112) Naaayon sa batas, lahat ng karapatang nakamtan sa pamamagitan ng isang obligasyon ang maaaring ilipat, kung walang nakasaad na taliwas dito. Discussion: Rights that do not fall under the exceptions are considered assignable or alienable, but as a general rule, rights are transmissible except for the following: a.) those not transmissible by their nature like purely personal rights; b.) those not transmissible by provision of law.
