OBLIGATIONS AND CONTRACTS • neither party may unilaterally evade his obligation

in the contract, unless:

TITLE 1 - OBLIGATION a. Contract authorizes it
b. Other party assents
• Parties may freely enter into any stipulations
Art. 1156. An obligation is a juridical necessity provided they are not contrary to law, morals,
to give, to do or not to do. (n) good customs, public order or public policy

QUASI-CONTRACT (OBLIGATION EX QUASI-

CHAPTER 1. – GENERAL PROVISIONS CONTRACTU)
See Arts. 1156 - 1162 • Juridical relation resulting from lawful, voluntary
and unilateral acts, which has for its purpose, the
ELEMENTS OF AN OBLIGATION: payment of indemnity to the end that no one shall
1. Active subject (obligee/creditor): one in whose be unjustly enriched or benefited at the expense
favor the obligation is constituted of another.
2. Passive subject (obligor/debtor): one who has • Distinguished from other Sources
the duty of giving, doing or not doing 1. act giving rise to a quasi contract must be
3. Object: prestation; the conduct which has to be LAWFUL distinguishing it from delict;
observed by the debtor/obligor 2. act must be VOLUNTARY distinguishing it from
quasi-delict which is based on fault or
REQUISITES negligence;
1. it must be licit (otherwise it is void) 3. act must be UNILATERAL distinguishing it from
2. it must be possible, physically and juridically contract which is based on agreement.
(otherwise it is void) (Tolentino, Volume IV, p. 68)
3. it must be determinate or determinable
(otherwise it is void) KINDS OF QUASI-CONTRACT
4. it must have pecuniary value • Negotiorum gestio: unauthorized management;
a. Vinculum Juris: juridical/legal tie; binds the arises whenever a person voluntarily takes
parties to the obligation charge of the agency or management of
b. Causa (causa debendi/causa obligationes): another’s abandoned business or property
why obligation exists without the latter’s authority
• Solutio indebiti: undue payment. Arises when a
SOURCES OF OBLIGATION person unduly delivers a thing through mistake to
another who has no right to demand it (must not
be through liberality or some other cause)
Art. 1157. Obligations arise from:
(1) Law; DELICTS (OBLIGATION EX MALEFICIO OR EX
(2) Contracts; DELICTO )
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and RPC: Art. 100 Every person criminally liable for a
(5) Quasi-delicts. (1089a) felony is also civilly liable.

GOVERNING RULES
LAW (OBLIGATION EX LEGE)
1. Articles 100-113 of the RPC and other penal laws
• Must be expressly or impliedly set forth and subject to Art 2177 Civil Code (quasi-delict);
cannot be presumed 2. Chapter 2, Preliminary title, on Human Relations
( Civil Code )
CONTRACT (OBLIGATION EX CONTRACTU) 3. Title 18 of Book IV of the Civil Code on damages
• Must be complied with in good faith
• it is the “law” between parties;
SCOPE OF CIVIL LIABILITY
1. Restitution 2. Real Obligations: obligations to give; where the
2. Reparation for damage caused subject matter is a thing which the obligor must
3. Indemnity for Consequential damages deliver to the obligee
a. Determinate or specific – object is particularly
EFFECT OF ACQUITTAL IN CRIMINAL CASE designated or physically segregated from all
1. When due to reasonable doubt – no civil liability other things of the same class
2. When due to exempting circumstances – there is b. Generic –object is designated by its class or
civil liability genus
3. When there is preponderance of evidence – there c. Limited Generic – generic objects confined to
is civil liability a particular class
Ex: An obligation to deliver one of my horses
CRIMES WITHOUT CIVIL LIABILITY (Tolentino, Volume IV, p. 91; De Leon, 2003 ed.,
1. Contempt p. 7)
2. Insults to persons in authority
3. gambling EFFECT OF OBLIGATIONS
4. violations of traffic regulations (De Leon, 2003
ed.,p. 23) DUTIES OF DEBTOR IN AN OBLIGATION TO GIVE
A DETERMINATE THING (See Arts. 1163, 1164,
QUASI-DELICT/TORTS (OBLIGATION EX QUASI- 1166.)
DELICTO Or EX QUASI MALEFICIO )
1. To preserve or take care of the thing due with the
• It is an act or omission arising from fault or
diligence of a good father of a family
negligence which causes damage to another,
there being no pre-existing contractual relations
between the parties DILIGENCE OF A GOOD FATHER OF A FAMILY –
• ELEMENTS: ordinary care or that diligence which an average or
1. There must be an act or omission reasonably prudent person would exercise over his
2. There must be fault or negligence attributable to own property
the person charged
3. There must be damage or injury NOTE: Rule on Standard of Care
4. There must be a direct relation of cause and • That which the law requires; or
effect between the act arising from fault or • That stipulated by the parties; or
negligence and the damage or injury (proximate • In the absence of the two, diligence of a good
cause ); father of a family
5. There is no pre-existing contractual relation
between the parties. 2. To deliver the fruits of the thing: Right to the
fruits of the thing from the time the obligation to
NEGLIGENCE deliver it arises
• Failure to observe for the protection of the
interests of another person, that degree of care, WHEN OBLIGATION TO DELIVER ARISES
precaution and vigilance which the circumstances • GENERAL RULE: From the time of the
justly demand, whereby such other person perfection of the contract (i.e. meeting of the
suffers injury. (US v. Barrias, 23 Phil. 434 [1912]) minds between the parties)
• EXCEPTIONS
CHAPTER 2. – NATURE & EFFECTS OF a. when the parties made a stipulation as
OBLIGATIONS regards the right of the creditor to the fruits of
See Arts. 1163 - 1178 the thing
b. when the obligation is subject to a
NATURE OF OBLIGATIONS suspensive condition or period; arises upon
1. Personal Obligations: obligations to do or not fulfillment of the condition or arrival of the
to do; where the subject matter is an act to be period
done or not to be done
a. Positive – obligation to do
b. Negative – obligation not to do
 Real Personal
Remedies Obligations Obligations
Specific Gener To do Not to
ic do
PERSONAL V. REAL RIGHT specific undo the
Personal Real performance X X X things
Jus ad rem, a right Jus in re, a right already
enforceable only enforceable against done
against a definite the whole world equivalent Can
person or group of performance X X only X
persons be
Right pertaining to a Right pertaining to a dema
person to demand person over a specific nded
from another, as a thing, without a definite if
definite passive passive subject oblig
subject, the against whom the right ation
fulfillment of the may be personally is not
prestation to give, to enforced very
do or not to do. perso
nal
substitute Undo the
performance X X things
3. To deliver its accessions and accessories already
• Accessions – additions to or improvements done at
upon a thing. Ex: air conditioner in a car. debtor's
• Accessories – things joined to, or included expense
rescission/
with the principal thing for its better use,
cancellation X X X
embellishment or completion. Ex:key of a
house; frame of a picture (De Leon, 2003
ed., pp. 37-38)
4. To deliver the thing itself
5. To pay damages in case of breach of the
obligation by reason of delay, fraud, negligence BREACH OF OBLIGATIONS (See Arts. 1170 –
or contravention of the tenor of the obligation. 1174)
1. Voluntary – debtor in the performance of the
DUTIES OF DEBTOR IN AN OBLIGATION TO GIVE obligation is guilty of:
A GENERIC THING
• fraud (Dolo)
1. To deliver the thing which is neither of superior
• negligence (culpa)
nor of inferior quality
2. To pay damages in case of breach of the • delay (mora)
obligation by reason of delay, fraud, negligence • contravention of the tenor of the obligation
or contravention of the tenor of the obligation. • NOTE: debtor is liable for damages
2. Involuntary – debtor is unable to comply with his
REMEDIES OF THE CREDITOR IN CASE OF NON- obligation due to fortuitous event/s
PERFORMANCE (See Arts 1165 – 1168) • NOTE: debtor is not liable for damages
1. Specific Performance: Performance by the
debtor of the prestation itself FRAUD (Dolo)
2. Substitute Performance: someone else • It is the deliberate or intentional evasion of the
performs or something else is performed at the normal fulfillment of an obligation. (8 Manresa 72)
expense of debtor
3. Equivalent Performance: damages O’leary Macondray & Co., 45 Phil. 812 [1924[ It
implies some kind of malice or dishonesty and it
cannot cover cases of mistake and errors of
judgment made in good faith. It is synonymous to
bad faith

TYPES OF FRAUD
1. Causal Fraud (Dolo Causante): fraud employed
2. in the execution of the contract
3. Incidental Fraud (Dolo Incidente): fraud in
performance of obligation already existing
because of a contract
 • NOTE: Negligence can be waived except in
Fraud in the Causal Fraud Incidental cases where the nature of the obligation or public
Performance (Art. 1338) Fraud (Art. policy requires another standard of care.
(Art. 1170) 1344) • EXCEPTIONS: Nature of Obligation of a
Present Present Present Common carrier
during the during the during the
performance perfection of a perfection of a
of a pre- contract contract FRAUD V. NEGLIGENCE
existing Fraud Negligence
obligation There is deliberate There is no deliberate
Purpose is to Purpose is to Purpose is to intention to cause intention to cause
evade the secure the secure the damage. damage.
normal consent of consent of the Liability cannot be Liability may be
fulfillment of another to other party but mitigated. mitigated.
the obligation enter into the the fraud was Waiver for future fraud Waiver for future
contract not the is void. negligence may be
principal allowed in certain
inducement in cases
making the
contract KINDS OF NEGLIGENCE, DISTINGUISHED
Results in the Results in Does not Culpa Aquiliana Culpa Contractual
breach of an vitiation of result in the Negligence is Negligence merely an
obligation consent; vitiation of substantive and incident of performance
voidable consent independent of an obligation
contract There may or may There is a pre-existing
Gives rise to a Gives rise to a Gives rise to a not be a pre-existing contractual relation
right in favor right of an right of an contractual obligation
of the creditor innocent party innocent party Source of the Source of the obligation
to recover to annul the to claim for obligation is the is the breach of the
damages contract damages negligence itself contractual obligation
Negligence must be Proof of existing of the
NOTE: Future fraud cannot be waived. However, the proved contract and its breach
law does not prohibit renunciation of the action for is prima facie sufficient
damages on the ground of fraud already committed. to warrant recovery
Diligence in the Diligence in the
REMEDIES OF DEFRAUDED PARTY selection and selection and
• Insist on specific performance (Art 1233) supervision of the supervision of the
• Resolve contract (Art 1191) employees is a employees is not
• Claim damages, in either case defense available as a defense

EFFECTS OF CONTRIBUTORY NEGLIGENCE OF

NEGLIGENCE THE CREDITOR
• Consists in the omission of that diligence which is • GENERAL RULE: Reduces or mitigates the
required by the nature of the obligation and damages which he can recover
corresponds with the circumstances of the • EXCEPTION: If the negligent act or omission of
persons, of the time and of the place. the creditor is the proximate cause of the event
which led to the damage or injury complained of,
KINDS OF NEGLIGENCE he cannot recover.
1. Quasi-Delict (Culpa aquiliana/culpa extra
contractual)- source of obligation DELAY (MORA)
2. Contractual Negligence (Culpa Contractual)-
negligence in the performance of a contract 1. Ordinary Delay – failure to perform an obligation
on time
2. Legal Delay/ Default – failure to perform an
obligation on time which failure constitutes a
breach of the obligation. (De Leon, 2003 ed., p.
42)
 c. Obligations to deliver a determinate
thing, liable for fortuitous events. If debtor
can prove that loss would have resulted
REQUISITES OF DELAY even if he had not been in default, the
1. Obligation must be due, demandable and court may equitably mitigate the
liquidated; damages (Art. 2215[4])
2. Debtor fails to perform his positive obligation on d. Resolution (Art 1170, in proper cases)
the date agreed upon;
3. A demand (not merely a reminder or notice), 2. Mora Accipiendi – default on part of creditor
judicial or extra-judicial, made by the creditor when he unjustifiably refuses to accept the
upon the debtor to fulfill, perform or comply with performance of the obligation.
his obligation otherwise, he will be in default; and • REQUISITES:
4. Failure of the debtor to comply with such a. Offer of performance by the debtor
demand. b. Offer must be to comply with the
prestation as it should be performed
KINDS OF DELAY c. Creditor refuses the performance without
1. Mora Solvendi– default on the part of the debtor: just cause
• Mora Solvendi Ex re – default in real • EFFECTS:
obligations a. Responsibility of debtor is limited to
• Mora Solvendi Ex persona – default in fraud and gross negligence
personal obligations b. Debtor is exempted from risk of loss
• REQUISITES: of thing; creditor bears risk of loss
a. The obligation must be due, enforceable c. Expenses by debtor for preservation
and already liquidated or determinate in of thing after delay is chargeable to
amount; creditor
b. There must be non-performance; and d. If obligation bears interest, debtor does
c. There must be a demand, unless not have to pay from time of delay
demand is not required. e. Creditor liable for damages
• GENERAL RULE: Those obliged to deliver f. Debtor may relieve himself of
or to do something incur in delay from the obligation by consigning the
time the obligee judicially or extrajudicially thing
demands from them the fulfillment of their
obligation. 3. Compensatio morae – both parties are in
• EXCEPTIONS (no demand necessary) default (in reciprocal obligations); there is no
a. When the obligation or the law expressly actionable default on the part of both parties
so declare; or
b. When from the nature and the • Rule in Reciprocal Obligations: In reciprocal
circumstances of the obligation it obligations, neither party incurs in delay if the
appears that the designation of the time other does not comply or is not ready to comply
when the thing is to be delivered or the in a proper manner with what is incumbent upon
service is to be rendered was a him. From the moment one of the parties fulfills
controlling motive for the establishment his obligation, delay by the other begins.
of the contract; or • Performance must be simultaneous unless
c. When demand would be useless, as different dates for the performance of the
when the obligor has rendered it beyond obligation were fixed by the parties
his power to perform
• EFFECTS: CESSATION OF THE EFFECTS OF MORA:
a. Debtor is guilty of breach of the • renunciation (express or implied)
obligation • prescription
b. Liability: If obligation to pay money- must • NOTE: There is no delay in negative obligations
pay interest. If no extra-judicial demand, and natural obligations.
interest runs from the filing of the
complaint. In other obligations, pay FORTUITOUS EVENT – An event which could not be
damages. foreseen, or which though foreseen, was inevitable
REQUIREMENTS: (Nakpil and Sons vs. CA): Art. 1178 Subject to the laws, all rights acquired in
1. The cause of the breach of the obligation must be virtue of an obligation are transmissible, if there has
independent of the will of the debtor been no stipulation to the contrary. (1112)
2. The event must be either unforeseeable or Art. 1191. The power to rescind obligations is implied
unavoidable in reciprocal ones, in case one of the obligors should
3. The event must be such as to render it not comply with what is incumbent upon him.
impossible for the debtor to fulfill his obligation in The injured party may choose between the fulfillment
a normal manner and the rescission of the obligation, with the payment
4. The debtor must be free from any participation in, of damages in either case. He may also seek
or aggravation of injury to the creditor rescission, even after he has chosen fulfillment, if the
latter should become impossible.
RULE ON FORTUITOUS EVENT: The court shall decree the rescission claimed, unless
• GENERAL RULE: No liability for fortuitous event there be just cause authorizing the fixing of a period.
• EXCEPTIONS: This is understood to be without prejudice to the
1. When expressly declared by law ( bad faith, rights of third persons who have acquired the thing, in
subject matter is generic, debtor is in delay ) accordance with Articles 1385 and 1388 and the
2. When expressly declared by stipulation or Mortgage Law. (1124)
contract Art. 1192. In case both parties have committed a
3. When nature of obligation requires assumption of breach of the obligation, the liability of the first
risk infractor shall be equitably tempered by the courts. If
4. When the obligor is in default or has promised to it cannot be determined which of the parties first
deliver the same thing to two or more persons violated the contract, the same shall be deemed
who do not have the same interest (Art. 1165[3]) extinguished, and each shall bear his own damages.
(n)
EFFECT OF FORTUITOUS EVENT
Determinate Generic Obligation REMEDIES AVAILABLE TO CREDITORS FOR THE
Obligation SATISFACTION OF THEIR CLAIMS
Obligation is Obligation is not 1. Exact fulfillment of the obligation by specific or
extinguished extinguished based on the substitute performance with a right to damages in
rule that the genus never either case;
perishes (genus nunquam 2. In case of reciprocal obligations, petition the court
peruit) to resolve the contract;
3. Pursue the leviable (not exempt from attachment
Art. 1176 The receipt of the principal by the creditor, under the law) property of the debtor;
without reservation with respect to the interest, shall 4. Accion directa (Arts. 1729 and 1652):Right of
give rise to the presumption that said interest has been the lessor to go directly to sublessee for unpaid
paid. rents of the lessee. Right of the laborers or
The receipt of a later installment of a debt without persons who furnish materials for a piece of work
reservation as to prior installments, shall likewise raise undertaken by a contractor to go directly to the
the presumption that such installments have been paid. owner for any unpaid claims due to the contractor
5. Accion subrogatoria – to be subrogated to all
the rights and actions of the debtor save those
PRINCIPLE IN ARTICLE 1176 which are inherent in his person
• Before the presumption that a prior installment • REQUISITES:
had been paid may arise, the receipt must a. The debtor to whom the right of action
specify the installment for which payment is properly pertains must be indebted to the
made. creditor;
b. The creditor must be prejudiced by the
Art. 1177 The creditors, after having pursued the inaction or failure of the debtor to proceed
property in possession of the debtor to satisfy their against the third person;
claims, may exercise all rights and bring all the c. The creditor must have pursued first or
actions of the latter for the same purpose, save those exhausted all the properties of the debtor
which are inherent in his person; they may also which are not exempt from execution;
impugn the acts which the debtor may have done to d. The debtor's assets are insufficient to satisfy
defraud them. (1111) his claims; and
 PURE AND CONDITIONAL OBLIGATIONS
(See Arts. 1179 – 1190)
PURE – one whose effectivity or extinguishment
does not depend upon the fulfillment or non-
e. The right of account is not purely personal fulfillment of a condition or upon the expiration of a
6. Accion Pauliana – asking the court to rescind or period and is demandable at once
to impugn all the acts which the debtor may have CONDITIONAL – one whose effectivity is
done to defraud the creditors (Arts. 1380-1389) subordinated to the fulfillment or non-fulfillment of a
• REQUISITES: future AND uncertain event or upon a past event
a. There is a credit in favor of plaintiff unknown to the parties
b. The debtor has performed an act subsequent CONDITION - Future and uncertain event or a past
to the contract, giving advantage to other event unknown to the parties
persons
c. The creditor is prejudiced by the debtor's act 1. Suspensive – happening of condition gives rise
which are in favor of 3rd parties and to obligation
rescission will benefit the creditor • Effects:
d. The creditor has no other legal remedy a. Effectivity retroacts to the day of the
e. The debtor's acts are fraudulent constitution of the obligation
b. No retroactivity with reference to fruits or
Without the With the fault of the
interest and prescription
fault of the debtor
debtor c. Creditor may preserve rights
Loss Obligation is Debtor obliged to pay d. Debtor – recovery of payment by mistake or
extinguished damages even w/o mistake
Deterioration Impairment Creditor may choose
borne by the between rescission RULES ON LOSS, DETERIORATION, AND
creditor or its fulfillment with IMPROVEMENTS DURING PENDENCY OF A
damages in either SUSPENSIVE CONDITION (Art. 1189)
case

CHAPTER 3. - DIFFERENT KINDS OF Improvement If by nature or If at the expense of

OBLIGATIONS by timeÆ the debtorÆ debtor’s
See Arts. 1179 - 1230 inures to the right is only that of a
benefit of the usufructuary
PRIMARY CLASSIFICATION OF OBLIGATIONS debtor
UNDER THE CIVIL CODE
1. Demandability REQUISITES FOR THE APPLICATION OF
a. pure, ARTICLE 1189
b. conditional a. 1.The obligation must be a real obligation
c. with a period b. 2.The object is a specific or determinate thing
2. Plurality of object c. The obligation is subject to a suspensive
a. simple condition
b. alternative d. The condition is fulfilled
c. facultative e. There is loss, deterioration or improvement of
3. Plurality of subject the thing during the pendency of the
a. Simple happening of the condition
b. Joint
c. solidary 2. Resolutory – happening of condition
4. Performance extinguishes obligation
a. Divisible EFFECTS:
b. indivisible a. No retroactive effect
5. Sanctions for breach b. Obligation extinguished
a. with a penal clause c. Restore to each other what was received
b. without a penal clause plus interest/fruits

3. Potestative – dependent on sole will of 1 party; if

on part of debtor and suspensive – void
4. Casual – dependent on chance or hazard
5. Mixed – chance, or any of parties
6. With term
 a. Positive – extinguished if time expires or
indubitable of condition to happen
b. Negative – effective from moment of time
elapsed or evident it can't happen
WHEN COURTS MAY FIX PERIOD:
IMPOSSIBLE AND ILLEGAL CONDITIONS
1. If the obligation does not fix a period, but from its
• GENERAL RULE: They shall annul the nature and circumstances it can be inferred that a
obligation which depends upon them period was intended by the parties
• EXCEPTIONS: 2. If the duration of the period depends upon the will
a. pre-existing obligation of the debtor
b. if obligation is divisible 3. In case of reciprocal obligations, when there is a
c. in simple or remuneratory donations just cause for fixing a period
d. testamentary dispositions 4. If the debtor binds himself when his means
e. conditions not to do an impossible thing permit him to do so
OBLIGATIONS WITH A PERIOD
PERIOD FOR WHOSE BENEFIT
WITH A PERIOD – An obligation which depends on a • GENERAL RULE: When a period is designated
future and certain event (See Arts 1193, 1196) for the performance or fulfillment of an obligation,
it is presumed to have been established for the
WHEN STIPULATION SAYS “PAYABLE WHEN benefit of both creditor and debtor.
ABLE” – IT IS WITH A PERIOD, REMEDY: • EXCEPTION: When it appears from the tenor of
1. Agreement among parties the obligation or other circumstances that the
2. Court shall fix period of payment when period has been established in favor of one or the
parties unable to agree other.

KINDS: PERIOD FOR THE BENEFIT OF THE CREDITOR

1. Resolutory ( in diem ) – demandable at once but • Creditor may demand the fulfillment of the
terminates upon arrival of the day certain obligation at any time but the debtor cannot
• Day certain – that which must necessarily compel him to accept before the expiration of the
come, although it may not be known when period
2. Suspensive ( ex die ) –obligation becomes
demandable on the day stipulated PERIOD FOR THE BENEFIT OF THE DEBTOR
• Debtor may oppose any premature demand of
TERM CONDITION the creditor but he may renounce the benefit of
Interval of time which Fact or event which is the period by performing his obligation in
is future and certain future or uncertain or a advance (Manresa)
past event unknown to
the parties WHEN DEBTOR LOSES RIGHT TO PERIOD:
Time w/c must Future and uncertain fact • Insolvency of debtor, unless security provided
necessarily come or event which may or • Did not deliver security promised
although it may not be may not happen • Impaired security through his own acts or through
known when fortuitous event unless he gives new securities
Exerts an influence Exerts an influence upon equally satisfactory
upon the time of the very existence of the • Violates undertaking in consideration of
demandability or obligation itself extension of period
extinguishment of an • Attempts to abscond
obligation
Does not have any Has retroactive effect
retroactive effect
unless there is an
agreement to the
contrary
When it is left When it is left exclusively
exclusively to the will to the will of the debtor,
of the debtor, the the obligation is void
existence of the
obligation is affected
 upon the price of any 1 of them, also with
indemnity for damages.

ALTERNATIVE OBLIGATIONS (See Arts. 1199 – REQUISITES FOR MAKING THE CHOICE:
1206) 1. Made properly so that creditor or his agent will
actually know
FACULTATIVE - only one prestation has been 2. Made with full knowledge that a selection is
agreed upon but another may be given in substitution indeed being made
3. Made voluntarily and freely
EFFECT OF LOSS OR DETERIORA0TION THRU 4. Made in due time – before or upon maturity
NEGLIGENCE, DELAY OR FRAUD OF OBLIGOR: 5. Made to all proper persons
• Of thing intended as substitute - no liability 6. Made w/o conditions unless agreed by the
• Of the substitute after substitution is made – with creditor
liability 7. May be waived, expressly or impliedly

ALTERNATIVE vs. FACULTATIVE

ALTERNATIVE – bound by different prestations but
ALTERNATIVE FACULTATIVE
only one is due
a) Various a) Only one thing is due
things are due but but a substitute may be
RIGHT OF CHOICE IN ALTERNATIVE
the giving principally given to render
OBLIGATIONS
of one is sufficient payment/fulfillment easy
• As a general rule the right of choice belongs to b) If one of b) If principal obligations
debtor prestations is illegal, is void and there is no
others may be valid necessity of giving the
EFFECT OF LOSS OF OBJECTS OF
but obligation substitute; nullity of P
ALTERNATIVE OBLIGATIONS
remains carries with it nullity of S
1. If the right of choice belongs to the debtor
• If through a fortuitous event all were lost, c) If it is impossible c) If it is impossible
debtor cannot be held liable for damages to give all except to give the principal, the
• If 1 or more but not all of the things are lost one, the last one substitute does not have
or one or some but not all of the prestations must still be given to be given; if it is
cannot be performed due to fortuitous event impossible to give the
or fault of the debtor, creditor cannot hold the substitute, the principal
debtor liable for damages because the debtor must still be given
can still comply with his obligation d) Right to choose d) The right of choice is
• If all things, except one, were lost, the debtor may be given either given only to the debtor
must comply by performing that which remain to debtor or creditor
• If all were lost by fault of the debtor the later
is liable for the value of the last thing or JOINT AND SOLIDARY OBLIGATIONS (See Arts.
service which became impossible 1207 – 1222)
2. If right of choice belongs to the creditor
JOINT – presumption when two or more creditors or
• If 1 of the things is lost through a fortuitous two or more debtors concur in one and the same
event, the debtor shall perform the obligation obligation
by delivering that which the creditor should
choose from among the remainder or that
which remains if only 1 subsists
EXCEPTIONS TO THE PRESUMPTION
• If the loss of 1 of the things occurs through
1. when expressly stated that there is solidarity
the fault of the debtor, the creditor may claim
2. when the law requires solidarity
any of those subsisting or the price of that
3. when the nature of the obligation requires
which, through the fault of the former, has
solidarity
disappeared with a right to damages
4. when a charge or condition is imposed upon
• If all the things are lost through the fault of heirs or legatees and the testament expressly
the debtor, the choice by the creditor shall fall makes the charge or condition in solidum
(Manresa)
5. when a solidary responsibility is imputed by a
final judgment upon several defendants SOLIDARY – must be expressed in stipulation or
(Gutierrez v. Gutierrez) provided by law or by nature of obligation

EFFECTS OF JOINT LIABILITY 1. Active – on the part of creditor or oblige

1. Demand on one produces delay only with respect • EFFECTS:
to the debt • Death of 1 solidary creditor transmits share
2. Interruption in payment by one does not benefit to heirs (but collectively)
or prejudice the other • Each creditor represents the other in the act
3. Vices of one debtor to creditor has no effect on of recovery of payment
the others • Credit is divided equally between creditors as
4. Insolvency of one debtor does not affect other among themselves
debtors • Debtor may pay any of the solidary creditors
2. Passive – on the part of debtors or obligors
JOINT DIVISIBLE OBLIGATIONS • EFFECTS:
1. Each creditor can demand for the payment of his • Each debtor may be requested to pay whole
proportionate share of the credit, while each obligation with right to recover from co-
debtor can be held liable only for the payment of debtors
his proportionate share of the debt • Interruption of prescription to one creditor
2. A joint creditor cannot act in representation of the affects all
other creditors while a joint debtor cannot be • Interest from delay on 1 debtor is borne by all
compelled to answer for the acts or liability of the 3. Mixed – on the part of the obligors and obligees,
other debtors or the part of the debtors and the creditors
4. Conventional – agreed upon by the parties
JOINT INDIVISIBLE OBLIGATIONS 5. Legal – imposed by law
1. If there are 2 or more debtors, the fulfillment of or • Instances where law imposes solidary
compliance with the obligation requires the obligation:
concurrence of all the debtors, although each for
a. Obligations arising from tort
his own share. The obligation can be enforced
b. Obligations arising from quasi-contracts
only by proceeding against all of the debtors.
c. Legal provisions regarding obligation of
2. If there are 2 or more creditors, the concurrence devisees and legatees
or collective act of all the creditors, although each
d. Liability of principals, accomplices, and
for his own share, is also necessary for the
accessories of a felony
enforcement of the obligation
e. Bailees in commodatum
• EFFECTS:
EFFECT OF BREACH
a. Payment made before debt is due, no
• If one of the joint debtors fails to comply with
interest can be charged, otherwise – interest
his undertaking, the obligation can no longer
can be charged
be fulfilled or performed. Consequently, it is
b. Insolvency of one – others are liable for
converted into one of indemnity for damages.
share pro-rata
Innocent joint debtor shall not contribute to the
c. If different terms and conditions – collect only
indemnity beyond their corresponding share of
what is due, later on collect from any
the obligation.
d. No reimbursement if payment is made after
prescription or became illegal
INDIVISIBILITY SOLIDARITY e. Remission made after payment is made – co-
Refers to the Refers to the legal tie and debtor still entitled to reimbursement
prestation which consequently to the f. Effect of insolvency or death of co-debtor –
constitutes the object subjects or parties of the still liable for whole amount
of the obligation obligation g. Fault of any debtor – every one is
Plurality of subjects is Plurality of subjects is responsible – price, damage and interest
not required indispensable
In case of breach, When there is liability on
obligation is converted the part of the debtors
into 1 of indemnity for because of the breach,
damages because of the solidarilty among the
breach, indivisibility of debtors remains
the obligation is
terminated
 h. Complete/ personal defense – total or partial
( up to amount of share only ) if not personal CHAPTER 4. - EXTINGUISHMENT OF
to him OBLIGATIONS
See Arts. 1232 - 1304
EFFECT OF LOSS OR IMPOSSIBILITY OF THE
PRESTATION: MODES OF EXTINGUISHMENT OF OBLIGATION
1. If without fault – no liability (Art. 1231):
2. If with fault – there is liability (also for damage 1. Payment or performance
and interest) 2. Loss of the thing due
3. Loss due to fortuitous event after default – there 3. Condonation or remission of debt
is liability (because of default) 4. Confusion or merger of rights
5. Compensation
DIVISIBLE AND INDIVISIBLE OBLIGATIONS (See 6. Novation
Arts. 1223 – 1225) 7. Annulment
8. Rescission
DIVISIBLE - obligation that is capable of partial 9. Fulfillment of resolutory condition
performance
PAYMENT OR PERFORMANCE
• Execution of certain no of days work - delivery of money and performance, in any other
• Expressed by metrical units manner of the obligation
• Nature of obligation – susceptible of partial
fulfillment REQUISITES FOR VALID
PAYMENT/PERFORMANCE
INDIVISIBLE – one not capable of partial
performance 1. With respect to prestation itself
a. Identity
• To give definite things b. Integrity or completeness
• Not susceptible of partial performance c. Indivisibility
• Provided by law 2. With respect to parties - must be made by
• Intention of parties proper party to proper party
a. Payor
OBLIGATIONS WITH A PENAL CLAUSE (See i. Payor - the one performing, he can be
Arts. 1226 – 1230) the debtor himself or his heirs or assigns
or his agent, or anyone interested in the
fulfillment of the obligation; can be
WITH PENAL CLAUSE – One to which an accessory
anyone as long as it is with the creditor's
undertaking is attached for the purpose of insuring its
consent
performance by virtue of which the obligor is bound to RD
ii. 3 person pays/performs - only the
pay a stipulated indemnity or perform a stipulated
creditor's consent; If performance is done
prestation in case of breach
also with debtor's consent - he takes the
place of the debtor. There is subrogation
CHARACTERISTICS OF PENAL CLAUSES: rd
except if the 3 person intended it to be
1. Subsidiary - As a general rule, only penalty can a donation
be demanded, principal cannot be demanded, iii. 3rd person pays/performs with consent of
except: Penalty is joint or cumulative creditor but not with debtor's consent, the
2. Exclusive - takes place of damage, damage can repayment is only to the extent that the
only be demanded in the ff. cases: payment has been beneficial to debtor
a. Stipulation – granting right b. Payee
b. Refusal to pay penalty i. Payee - creditor or obligee or successor
c. With dolo ( not of creditor ) in interest of transferee, or agent
ii. 3rd person - if any of the ff. concur:
CAUSES FOR REDUCTION OF PENALTY: • It must have redounded to the
1. Partial/irregular performance obligee's
2. Penalty provided is iniquitous/ unconscionable
• benefit and only to the extent of such
benefit
 • It falls under art 1241, par 1,2,3 - the Art. 1235. When the obligee accepts the
benefit is total so, performance is performance, knowing its incompleteness or
total irregularity, and without expressing any protest or
iii. Anyone in possession of the credit - but objection, the obligation is deemed fully complied
will apply only if debt has not been with. (n)
previously garnished
• Attempt in Good Faith to perform without willful or
PAYMENT MADE TO AN INCAPACITATED
intentional departure
PERSON, VALID IF
• Deviation is slight
1. Incapacitated person kept the thing delivered, or
• Omission/Defect is technical or unimportant
2. Insofar as the payment has been beneficial to
him • Must not be so material that intention of parties is
not attained
RD
PAYMENT TO 3 PARTY NOT AUTHORIZED,
VALID IF PROVED AND ONLY TO THE EXTENT EFFECT OF SUBSTANTIAL PERFORMANCE IN
OF BENEFIT; PRESUMED IF GOOD FAITH
1. After payment, 3rd person acquires the creditor’s • Obligor may recover as though there has been
rights strict and complete fulfillment, less damages
rd
2. Creditor ratifies payment to 3 person suffered by the oblige
3. By creditor’s conduct, debtor has been led to • Right to rescind cannot be used for slight breach
make the payment (estoppel)
SPECIAL RULES/FORMS OF PAYMENT
PAYMENT MADE IN GOOD FAITH TO A PERSON
IN POSSESSION OF CREDIT SHALL RELEASE 1. APPLICATION OF PAYMENTS – the designation
DEBTOR; REQUISITES: of the debt which payment shall be made, out of
1. Payment by debtor must be made in good faith 2 or more debts owing the same creditor:
2. Creditor must be in possession of the credit and stipulation or application of party given benefit of
not merely the evidence of indebtedness period – OK; to be valid: must be debtor’s choice
or w/ consent of debtor
• NOTE: With respect to time and place of
payment - must be according to the obligation REQUISITES FOR THE APPLICATION OF
PAYMENT:
WHERE PAYMENT SHOULD BE MADE a. Various debts of the same kind
1. In the place designated in the obligation b. Same debtor
2. If there is no express stipulation and the c. Same creditor
undertaking is to deliver a specific thing – at the d. All debts must be due
place where the thing might be at the moment the • EXCEPTION: there may be application of
obligation was constituted payment even if all debts are not yet due if:
3. In other case – in the place of the domicile of the a. Parties so stipulate
debtor b. When application of payment is made by the
• Time of payment - time stipulated party for whose benefit the term has been
• Effect of payment – extinguish obligation constituted
Except: order to retain debt c. Payment is not enough to extinguish all debts

SUBSTANTIAL PERFORMANCE HOW APPLICATION IS MADE:

a. Debtor makes the designation
b. If not, creditor makes it by so stating in the
Art. 1233. A debt shall not be understood to have receipt that he issues – unless there is cause
been paid unless the thing or service in which the for invalidating the contract
obligation consists has been completely delivered or c. If neither the debtor nor creditor has made
rendered, as the case may be. (1157) the application or if the application is not
valid, then application, is made by operation
Art. 1234. If the obligation has been substantially of law
performed in good faith, the obligor may recover as
though there had been a strict and complete
fulfillment, less damages suffered by the obligee. (n)
WHO MAKES APPLICATION OF DEBTS
• GENERAL RULE: Debtor d. Abandonment of all debtor’s property not
• EXCEPTION: Creditor exempt from execution
a. Debtor without protest accepts receipt in e. Acceptance or consent on the part of the
which creditor specified expressly and creditors
unmistakably the obligation to which such
payment was to be applied – debtor in this EFFECTS OF ASSIGNMENT:
case renounced the right of choice a. Creditors do not become the owner; they are
b. When monthly statements were made by the merely assignees with authority to sell
bank specifying the application and the b. Debtor is released up to the amount of the
debtor signed said statements approving the net proceeds of the sale, unless there is a
status of her account as thus sent to her stipulation to the contrary
monthly by the bank c. Creditors will collect credits in the order of
d. In case no application is made: preference agreed upon, or in default of
• Apply payment to the most onerous agreement, in the order ordinarily established
• If debts are of the same nature and by law
burden, application shall be made to all
proportionately DATION IN CESSION IN
PAYMENT PAYMENT
2. DACION EN PAGO One creditor Plurality of creditors
Not necessarily in Debtor must b partially
DACION EN PAGO – mode of extinguishing an state of financial or relatively insolvent
obligation whereby the debtor alienates in favor of the difficulty
creditor property for the satisfaction of monetary debt; Thing delivered is Universality of property
extinguish up to amount of property unless w/ considered as of debtor is what is
contrary stipulation; A special form of payment equivalent of ceded
because 1 element of payment is missing: IDENTITY performance
Payment extinguishes Merely releases debtor
CONDITIONS FOR A VALID DACION: obligation to the extent for net proceeds of
a. If creditor consents, for a sale presupposes of the value of the things ceded of,
the consent of both partie thing delivered as assigned, unless there
b. If dacion will not prejudice the other creditors agreed upon, proved is a contrary intention
c. If debtor is not judicially declared insolvent or implied from the
• NOTE: DACION is governed by the law on sales conduct of the creditor

4. CESSION or ASSIGNMENT
4. CONSIGNATION
CESSION/ASSIGNMENT IN FAVOR OF
CREDITORS – the process by which debtor transfer TENDER -the act of offering the creditor what is
all the properties not subject to execution in favor of due him together with a demand that the creditor
creditors is that the latter may sell them and thus, accept the same (When creditor refuses w/o just
apply the proceeds to their credits; extinguish up to cause to accept payment, he becomes in mora
amount of net proceeds ( unless w/ contrary accepiendi and debtor is released from
stipulation ) responsibility if he consigns the thing or sum due)

CONSIGNATION – the act of depositing the thing

due with the court or judicial authorities whenever
the creditor cannot accept or refuses to accept
are needed to see t
KINDS OF ASSIGNMENT: payment; generally requires prior tender of
a. Legal – governed by the insolvency law payment
b. Voluntary – agreement of creditors
REQUISITES OF VALID CONSIGNATION:
REQUISITES OF VOLUNTARY ASSIGNMENT: a. Existence of valid debt
a. More than one debt b. Consignation was made because of some
b. More than one creditor legal cause - previous valid tender was
c. Complete or partial insolvency of debtor
 unjustly refused or circumstances making a. Debtor is at fault
previous tender exempt b. Debtor is made liable for fortuitous event
c. Prior Notice of Consignation had been given because of a provision of law, contractual
to the person interested in performance of stipulation or the nature of the obligation
st
obligation (1 notice) requires assumption of risk on part of debtor
d. Actual deposit/Consignation with proper
judicial authorities OBLIGATION TO DELIVER A GENERIC THING
nd
e. Subsequent notice of Consignation (2 • GENERAL RULE: Not extinguished
notice) • EXCEPTIONS:
a. If the generic thing is delimited
EFFECTS: EXTINGUISHMENT OF OBLIGATION b. If the generic thing has already been
a. Debtor may ask judge to order cancellation of segregated
obligation c. Monetary obligation
b. Running of interest is suspended
c. Before creditor accepts or before judge OBLIGATION TO DO
declares consignation has been properly • GENERAL RULE: Debtor is released when
made, obligation remains ( debtor bears risk prestation becomes legally or physically
of loss at the meantime, after acceptance by impossible without fault on part of debtor
creditor or after judge declares that
consignation has been properly made – risk EFFECT OF PARTIAL LOSS
of loss is shifted to creditor) a. When loss is significant – may be enough to
extinguish obligation
CONSIGNATION W/O PRIOR TENDER – allowed in: b. When loss insignificant – not enough to
a. Creditor absent or unknown/ does not appear extinguish obligation
at the place of payment NOTE: judicial determination of extent is necessary
b. Incapacitated to receive payment at the time
it is due
c. Refuses to issue receipt w/o just cause WHEN THING IS LOST IN THE POSSESSION OF
d. 2 or more creditor claiming the same right to THE DEBTOR
collect • Presumption: Loss due to debtor’s fault
e. Title of obligation has been lost (disputable)
5. LOSS OF THE THING DUE • Exception: natural calamity, earthquake, flood,
storm
LOSS OF THE THING DUE – partial or total/
includes impossibility of performance 5. REBUS SIC STANTIBUS

WHEN IS THERE A LOSS REBUS SIC STANTIBUS - agreement is valid only if

a. When the object perishes (physically) the same conditions prevailing at time of contracting
b. When it goes out of commerce continue to exist at the time of performance; Obligor
c. When it disappears in such a way that: its may be released in whole or in part based on this
existence is unknown or it cannot be ground.
recovered
REQUISITES
WHEN IS THERE IMPOSSIBILITY OF a. The event or change could not have been
PERFORMANCE: foreseen at the time of the execution of the
a. Physical impossibility contract
b. Legal impossibility b. The performance is extremely difficult, but
i. Directly – caused as when prohibited by not impossible (because if it is impossible, it
law is extinguished by impossibility)
ii. Indirectly – caused as when debtor is c. The event was not due to the act of any of
required to enter a military draft the parties
d. The contract is for a future prestation
OBLIGATION TO DELIVER A SPECIFIC THING
• GENERAL RULE: Extinguished 6. CONDONATION
• EXCEPTIONS:
CONDONATION/REMISSION OF THE DEBT –
gratuitous abandonment of debt; right to claim; 6. CONFUSION OR MERGER
donation; rules of donation applies; express or
implied CONFUSION OR MERGER OF RIGHTS– character
of debtor and creditor is merged in same person with
REQUISITES: respect to same obligation
a. There must be an agreement
b. There must be a subject matter (object of the
remission, otherwise there would be nothing
to condone) REQUISITES:
c. Cause of consideration must be liberality a. It must take place between principal debtor
(Essentially gratuitous, an act of liberality ) and principal creditor only
d. Parties must be capacitated and must b. Merger must be clear and definite
consent; requires acceptance by obligor; c. The obligation involved must be same and
implied in mortis causa and expressed inter identical – one obligation only
vivos d. Revocable, if reason for confusion ceases,
e. Formalities of a donation are required in the the obligation is revived
case of an express remission
f. Revocable – subject to rule on inofficious 7. COMPENSATION
donation ( excessive, legitime is impaired )
and ingratitude and condition not followed COMPENSATION –
g. Obligation remitted must have been Set off; it is a mode of extinguishment to the
demandable at the time of remission concurrent amount the obligation of persons who are
h. Waivers or remission are not to be presumed in their own right reciprocally debtors or creditors
generally
REQUISITES:
a. Both parties must be mutually creditors and
Forms: Extent: Kinds: debtors - in their own right and as principals
a. Express – a. total a. Principal – accessory b. Both debts must consist in sum of money or
formalities of also condoned if consumable , of the same kind or quality
donation c. Both debts are due
b. Implied – b. partial b. accessory – principal d. Both debts are liquidated and demandable
conduct is still outstanding (determined)
sufficient e. Neither debt must be retained in a
rd
controversy commenced by 3 person and
c. accessory obligation communicated w/ debtor (neither debt is
of pledge – condoned; garnished)
presumption only,
rebuttable KINDS OF COMPENSATION
a. Legal – by operation of law; as long as 5
requisites concur- even if unknown to parties
REQUISITES OF IMPLIED CONDONATION
and if payable in diff places; indemnity for
1. Voluntary delivery – presumption; when
expense of exchanges; even if not equal
evidence of indebtedness is w/ debtor –
debts – only up to concurring amount
presumed voluntarily delivery by creditor;
b. Conventional – agreement of parties is
rebuttable
enough, forget other requirement as long as
2. Effect of delivery of evidence of indebtedness
both consented
is conclusion that debt is
c. Facultative – one party has choice of
condoned – already conclusion; voluntary
claiming/opposing one who has benefit of
delivery of private document
period may choose to compensate:
a. If in hands of joint debtor – only his share is
i. Not all requisites are present
condoned
ii. Depositum; commodatum; criminal
b. If in hands of solidary debtor - whole debt is
offense; claim for future support; taxes
condoned
c. Tacit – voluntary destruction of instrument by
creditor; made to prescribe w/o demanding
 d. Judicial – set off; upon order of the court; b. Old obligation subsists if new obligation is
needs pleading and proof; all requirements void or voidable but annulled already
must concur except liquidation (except: intention of parties)
e. Total – when 2 debts are of the same c. If old obligation has condition
amount i. If Resolutory and it occurred – old
f. Partial – when 2 debts are not of the same obligation already extinguished; no new
amount obligation since nothing to novate
ii. If Suspensive and it never occurred –as
EFFECT OF ASSIGNMENT OF CREDIT TO 3RD if no obligation; also nothing to novate
PERSON; CAN THERE STILL BE d. If old obligation has condition, must be
COMPENSATION compatible with the new obligation; if new is
a. If made after compensation took place – no w/o condition – deemed attached to new
effect; compensation already perfected e. If new obligation has condition
b. If made before compensation took place – i. If resolutory: valid
depends ii. If suspensive and did not materialize:
i. With consent of debtor – debtor is old obligation is enforced
estopped unless he reserves his right
and gave notice to assignee KINDS OF NOVATION:
ii. With knowledge but w/o consent of a. REAL/OBJECTIVE – change object,
debtor – compensation may be set up as cause/consideration or principal condition
to debts maturing prior to assignment b. PERSONAL/SUBJECTIVE
iii. W/o knowledge – compensation may be i. Substituting person of debtor
set-up on all debts prior to his knowledge (passive)
• EXPROMISION; initiative is from 3rd
8. NOVATION person or new debtor; new debtor and
creditor to consent; old debtor released
NOVATION – from obligation; subject to full
extinguishment of obligation by creating/ substituting reimbursement and subrogation if made
a new one in its place w/ consent of old debtor; if w/o consent
or against will , only beneficial
• Changing object or principal conditions reimbursement; if new debtor is
• Substituting person of debtor insolvent, not responsible since w/o his
consent
•
rd
Subrogating 3 person in right of creditor
• DELEGACION; initiative of old debtor; all
REQUISITES: parties to consent; full reimbursement; if
a. Valid obligation insolvent new debtor – not responsible
b. Intent to extinguish old obligation – old debtor because obligation
expressed or implied: extinguished by valid novation unless:
completely/substantially incompatible old and insolvency already existing and of public
new obligation on every point knowledge or know to him at time of
c. Capacity and consent of parties to the new delegacion
obligation 1. Delegante – old debtor
d. Valid new obligation 2. Delegatario - creditor
3. Delegado – new debtor
rd
EFFECTS OF NOVATION: ii. Subrogating 3 person to rights of
creditor ( active )
a. Extinguishment of principal carries
1. Conventional - agreement and
accessory, except:
consent of all parties; clearly
i. Stipulation to contrary
ii. Stipulation pour autrui unless beneficiary established
consents 2. Legal - takes place by operation of
iii. Modificatory novation only; obliged to w/c law; no need for consent; not
is less onerous presumed except as provided for in
iv. Old obligation is void law:
PRESUMED WHEN-
a. Creditor pays another preferred 4. Fulfill what has been expressly stipulated
creditor even w/o debtor’s 5. All consequences w/c may be in keeping with
knowledge good faith, usage and law
rd
b. 3 person not interested in 6. Relativity – binding only between the parties,
obligation pays w/ approval of their assigns, heirs; strangers cannot demand
debtor enforcement
c. Person interested in fulfillment of
obligation pays debt even w/o EXCEPTION TO RELATIVITY:
knowledge of debtor 1. Accion pauliana
2. Accion directa
Difference from Change of debtor 3. Stipulation pour autrui
payment by 3rd
person REQUISITES OF STIPULATION POUR AUTRUI
1. debtor is not 1. debtor is released 1. Parties must have clearly and deliberately
necessarily conferred a favor upon a 3rd person
released from debt 2. The stipulation in favor of a 3rd person should be
2. can be done w/o 2. needs consent of creditor a part of, not the whole contract
consent of creditor – express or implied 3. That the favorable stipulation should not be
conditioned or compensated by any kind of
obligation whatsoever
3. one obligation 3. two obligations; one is
4. Neither of the contracting parties bears the legal
extinguished and new one rd
created representation or authorization of 3 party
4. 3rd person has no 4. new debtor is obliged to pay 5. The third person communicates his acceptance
obligation to pay if before revocation by the original parties
insolvent 6. Art 1312; Art 1314

REQUISITES OF ART 1312:

CONVENTIONAL ASSIGNMENT OF RIGHTS 1. Existence of a valid contract
SUBROGATION 2. Knowledge of the contract by a 3rd person
governed by Arts. governed by Arts. 1624 to 1627 rd
3. Interference by the 3 person
1300-1304
debtor’s consent is debtor’s consent is not required KINDS OF CONTRACTS
required
extinguishes the transmission of right of the
1. As to perfection or formation
obligation and gives creditor to third person without
rise to a new one modifying or extinguishing the a. Consensual – perfected by agreement of
obligation parties
defects and vices in defects and vices in the old b. Real – perfected by delivery ( commodatum,
the old obligation obligation and not cured pledge, deposit )
are cured c. Formal/solemn – perfected by conformity to
takes effect upon as far as the debtor is essential formalities (donation )
moment of novation concerned, takes effect upon 2. As to cause
or subrogation notification a. Onerous – with valuable consideration
b. Gratuitous – founded on liberality
TITLE II – C O N T R A C T S c. Remunerative – prestation is given for
service previously rendered not as obligation
CHAPTER 1. GENERAL PROVISIONS 3. As to importance or dependence of one upon
See Arts. 1305 - 1317 another
a. Principal – contract may stand alone
PRINCIPAL CHARACTERISTICS: b. Accessory – depends on another contract
1. Autonomy of wills – parties may stipulate for its existence; may not exist on its own
anything as long as not illegal, immoral, etc. c. Preparatory – not an end by itself; a means
2. Mutuality – performance or validity binds both through which future contracts may be made
parties; not left to will of one of parties 4. As to parties obliged
3. Obligatory Force – parties are bound from a. Unilateral – only one of the parties has an
perfection of contract: obligations
 b. Bilateral – both parties are required to offeror comes to know, and not when the offeree
render reciprocal prestations merely manifests his acceptance
5. As to name or designation
a. Nominate ELEMENTS OF VALID OFFER / ELEMENTS OF
b. Innominate VALID ACCEPTANCE
I. Do ut des – I give that you may give 1. Definite--unequivocal
II. Do ut facias – I give that you may do 2. Complete--unconditional
III. Facio ut des – I do that you may give 3. Intentional
IV. Facio ut facias – I do that you may do
WHEN OFFER BECOMES INEFFECTIVE:
STAGES IN A CONTRACT: 1. Death, civil interdiction, insanity or insolvency of
1. Preparation - negotiation either party before acceptance is conveyed
2. Perfection/birth 2. Express or implied revocation of the offer by the
3. Consummation – performance offeree
3. Qualified or conditional acceptance of the offer,
CHAPTER 2. – ESSENTIAL REQUISITES OF A which becomes a counter-offer
CONTRACT 4. Subject matter becomes illegal or impossible
See Arts. 1318 - 1355 before acceptance is communicated

ESSENTIAL ELEMENTS: PERIOD FOR ACCEPTANCE

1. Consent 1. Stated fixed period in the offer
2. Subject Matter 2. No stated fixed period
3. Consideration a. Offer is made to a person present –
acceptance must be made immediately
CONSENT b. Offer is made to a person absent –
acceptance may be made within such time
CONSENT – meeting of minds between parties on that, under normal circumstances, an answer
subject matter and cause of contract; concurrence of can be received from him
offer and acceptance • NOTE: Acceptance may be revoked before it
REQUIREMENTS: comes to the knowledge of the offerror.
1. Plurality of subject
2. Capacity AMPLIFIED ACCEPTANCE
3. Intelligence and free will • under certain circumstances, a mere
4. Manifestation of intent of parties amplification on the offer must be understood as
5. Cognition by the other party an acceptance of the original offer, plus a new
6. Conformity of manifestation and cognition offer which is contained in the amplification.

AUTO CONTRACTS RULE ON COMPLEX OFFERS

• made by a person acting in another’s name in 1. Offers are interrelated – contract is perfected if
one capacity all the offers are accepted
2. Offers are not interrelated – single acceptance
COLLECTIVE CONTRACTS of each offer results in a perfected contract
• will of majority binds a minority to an agreement unless the offeror has made it clear that one is
notwithstanding the opposition of the latter dependent upon the other and acceptance of
both is necessary.
CONTRACTS OF ADHESION
Malbarosa vs. CA 2003 G.R.12576 - Offer
• one party has already a prepared form of a
inter praesentes must be accepted
contract, containing the stipulations he desires,
IMMEDIATELY. If the parties intended that there
and he simply asks the other party to agree to
should be an express acceptance, the contract
them if he wants to enter into the contract
will be perfected only upon knowledge by the
• NOTE: We follow the theory of cognition and not offeror of the express acceptance by the offeree
the theory of manifestation. Under our Civil Law, of the offer. An acceptance which is not made in
the offer and acceptance concur only when the the manner prescribe by the offeror is NOT
EFFECTIVE, BUT A COUNTER-OFFER which
the offeror may accept or reject.
 c. They were contracts for necessities such as
food, but here the persons who are bound to
RULE ON ADVERTISEMENTS AS OFFERS give them support should pay therefor
• Business advertisements – Not a definite offer, d. Minor is estopped for having misrepresented
but mere invitation to make an offer, unless it his age and misled the other party (when age
appears otherwise is close to age of majority as in the Mercado
• Advertisement for Bidders – only invitation to v Espiritu and Sia Suan v Alcantara cases.
make proposals and advertiser is not bound to
accept the highest or lowest bidder, unless
appears otherwise
*In the Sia Suan v Alcantara case, there is a
OPTION - option may be withdrawn anytime before strong dissent by J.Padilla to the effect that the
acceptance is communicated but not when supported minor cannot be estopped if he is too young to give
by a consideration other than purchase price: option consent; one that is too young to give consent is
money too young to be estopped. Subsequently, in
Braganza v Villa-Abrille, the dissent became the
ruling. Minors could not be estopped.

DISQUALIFIED TO ENTER INTO CONTRACTS:

*Ang Yu v. CA (1994) states that a unilateral
(contracts entered into are void)
promise to buy or sell, if not supported by a distinct
1. Those under civil interdiction
consideration, may be withdrawn but may not be
2. Hospitalized lepers
done whimsically or arbitrarily; the right of the 3. Prodigals
grantee here is damages and not specific 4. Deaf and dumb who are unable to read and write
performance; Equatorial v. Mayfair(264 SCRA 483)
5. Those who by reason of age, disease, weak mind
held that an option clause in order to be valid and
and other similar causes, cannot without outside
enforceable must indicate the definite price at which
aid, take care of themselves and manage their
the person granting the option is willing to sell, property, becoming an easy prey for deceit and
contract can be enforced and not only damages;
exploitation
Paranaque Kings V CA (1997) states that right of
Incapacity Disqualification
PERSONS WHO CANNOT GIVE CONSENT TO A Restrains the exercise Restrains the very right
CONTRACT: of the right to contract itself
1. Minors May still enter into Absolutely disqualified
2. Insane or demented persons contract through
3. Illiterates/ deaf-mutes who do not know how to parent, guardian or
write legal represemtative
4. Intoxicated and under hypnotic spell Based upon subjective Based upon public policy
5. Art 1331 - person under mistake; mistake may circumstance of and morality
deprive intelligence certain person
6. Art 1338 - person induced by fraud (dolo Contracts entered into Contracts entered into
causante) are merely voidable are void
• NOTE: Dolus bonus (usual exaggerations in
trade) are not in themselves fraudulent
CAUSES WHICH VITIATE FREEDOM
RULE ON CONTRACTS ENTERED INTO BY 1. Violence
MINORS • REQUISITES
• GENERAL RULE: VOIDABLE a. Irresistible physical force
• EXCEPTIONS: b. Such force is the determining cause for
a. Upon reaching age of majority – they ratify giving consent
the same 2. Intimidation
b. They were entered unto by a guardian and • REQUISITES:
the court having jurisdiction had approved a. Determining cause for the contract
the same b. Threatened act is unjust and unlawful
c. Real and serious
 CAUSA

CAUSA
d. Produces a well grounded fear that the • immediate, direct and most proximate reason
person making it will carry it over why parties enter into contract
3. Undue influence • REQUISITES:
1. It must exist
SIMULATED CONTRACTS 2. It must be true
1. Absolute – no intention to be bound at all, 3. It must be licit
fictitious only – void from beginning
2. Relative – there is intention to be bound but MOTIVE
concealed; concealed contract binds: • purely private reason; illegality does not
a. No prejudice to 3rd persons invalidate contract except when it predetermines
b. Not contrary to law, morals, etc. purpose of contract; when merged into one

OBJECT Cause Motive

Direct and most Indirect or remote
REQUISITES: proximate reason of a reasons
1. Within the commerce of man - either existing or contract
in potency Objective and juridical Psychological or purely
2. Licit or not contrary to law, good customs reason of contract personal reason
3. Possible Cause us always same The motive differs for
4. Determinate as to its kind or determinable w/o for each contracting each contracting party
need to enter into a new contract party
5. Transmissible
Absence Of Void - produce no legal effect
Causa
• NOTE: Legality or illegality of cause affects the
Illegality Of Void - produce no legal effect
existence of validity of the contract; Legality or
Causa
illegality of motive does not affect the existence
Falsity Of Voidable – party must prove that
or validity of contract
Causa cause is untruthful; presumption of
validity but rebuttable
Causa Not Presumed to Exist - burden of proof is
CAUSA IN SOME CONTRACTS:
Stated In on the person assailing its existence 1. Onerous contracts – the prestation of promise
Contract of a thing or service by the other
Inadequacy Does not Invalidate Contract per se 2. Remuneratory contracts – the service or benefit
Of Causa Exceptions: remunerated
• fraud 3. Pure Beneficence – mere liberality of the donor
• mistake or benefactor
• undue influence 4. Accessory – identical with cause of principal
• cases specified by law contract, the loan which it derived its life and
- contracts entered when ward suffers existence (ex: mortgage or pledge)
lesion of more than 25%
CHAPTER 3. – FORM OF CONTRACTS
THINGS WHICH CANNOT BE THE OBJECT OF See Arts. 1356 - 1358
CONTRACT:
1. things which are outside the commerce of men FORM – in some kind of contracts only as contracts
2. intransmissible rights are generally consensual; form is a manner in which
3. future inheritance, except in cases expressly a contract is executed or manifested
authorized by law
4. services which are contrary to law, morals, good 1. Informal – may be entered into whatever form
customs, public order or public policy as long as there is consent, object and cause
5. impossible things or services
6. objects which are not possible of determination
as to their kind 2. Formal – required by law to be in certain
specified form such as: donation of real property,
stipulation to pay interest, transfer of large cattle,
sale of land thru agent, contract of antichresis,
contract of partnership, registration of chattel
mortgage, donation of personal prop in excess of
5,000
3. Real – creation of real rights over immovable
prop must be written
WHEN FORM IS IMPORTANT: CAUSES/GROUNDS:
1. For validity (formal/solemn contracts) 1. Mutual: instrument includes something w/c should
2. For enforceability (statute of frauds) not be there or omit what should be there
3. For convenience a. Mutual
b. Mistake of fact
• GENERAL RULE: contract is valid and binding in c. clear and convincing proof
whatever form provided that 3 essential d. causes failure of instrument to express true
requisites concur intention
• EXCEPTIONS 2. Unilateral
a. Law requires contract to be in some form a. one party was mistaken
for validity - donation and acceptance of b. other either acted fraudulently or inequitably
real property or knew but concealed
b. Law requires contract to be in some form to c. party in good faith may ask for reformation
be enforceable - Statute of Frauds; contract 3. Mistake by 3rd persons – due to ignorance, lack
is valid but right to enforce cannot be of skill, negligence , bad faith of drafter, clerk,
exercised; need ratification to be typist
enforceable 4. Others specified by law – to avoid frustration of
c. Law requires contract to be in some form true intent
for convenience - contract is valid and • Requisites:
enforceable, needed only to bind 3rd a. There is a written instrument
parties b. There is meeting of minds
Ex: public documents needed for the ff: c. True intention not expressed in instrument
i. Contracts w/c object is creation, d. Clear and convincing proof
transmission or reformation of real e. Facts put in issue in pleadings
rights over immovables • NOTE: prescribes in 10 years from date of
ii. Cession, repudiation, renunciation of execution of instrument
hereditary rights/CPG
iii. Power to administer property for WHEN REFORMATION NOT AVAILABLE:
another 1. Simple donation inter vivos
iv. Cession of action of rights proceeding 2. Wills
from an act appearing in a public inst. 3. When real agreement is void
v. All other docs where amount involved 4. Estoppel when party has brought suit to enforce it
is in excess of 500 ( must be written
even private docs )

• NOTE: RA 8792 (E-COMMERCE ACT) – formal CHAPTER 5. – INTERPRETATION OF

requirements to make contracts effective as CONTRACTS
against third persons and to establish the See Arts. 1370 - 1379
existence of acontract are deemed complied with
provided that the electronic document is
unaltered and can be authenticated as to be CHAPTER 6. - DEFECTIVE CONTRACTS
useable for future reference. See Arts. 1370 - 1422

KINDS OF DEFECTIVE CONTRACTS:

1. RESCISSIBLE CONTRACTS – Those which
CHAPTER 4. – REFORMATION OF INSTRUMENTS have caused a particular economic damage
See Arts. 1359 - 1369 rd
either to one of the parties or to a 3 person and
which may be set aside even if valid. It may be
REFORMATION OF CONTRACTS – remedy to set aside in whole or in part, to the extent of the
conform to real intention of parties due to mistake, damage caused'
fraud, inequitable conduct, accident
REQUISITES:
a. Contract must be rescissible
i. Under art 1381: Contracts entered into by
persons exercising fiduciary capacity:
 1. Entered into by guardian whenever e. transfer of all his property by a debtor when
ward suffers damage by more than he is financially embarrassed or insolvent
1/4 of value of object f. transfer made between father and son where
2. Agreed upon in representation of there is present any of the above
absentees, if absentee suffers lesion circumstances
by more than ¼ of value of property g. failure of the vendee to take exclusive
3. Contracts where rescission is based possession of the property
on fraud committed on creditor
(accion pauliana) Rescission in Art Rescission Proper in
4. Objects of litigation; contract entered 1191 Art 1381
into by defendant w/o knowledge or It is a principal action it is a subsidiary remedy
approval of litigants or judicial retaliatory in character
authority Only ground is non- There are 5 grounds to
5. Payment by an insolvent – on debts performance of one’s rescind. Non-
w/c are not yet due; prejudices claim obligation or what is performance by the other
of others incumbent upon him is not important
6. Provided for by law - art 1526, 1534, Applies only to Applies to both unilateral
1538, 1539, 1542, 1556, 1560, 1567 reciprocal obligation and reciprocal obligations
and 1659 Only a party to the Even a third person who
ii. Under art 1382 - Payments made in a contract may demand is prejudiced by the
state of insolvency fulfillment or seek the contract may demand the
1. Plaintiff has no other means to obtain rescission of the rescission of the contract.
reparation. contract
2. Plaintiff must be able to return Court may fix a period Court cannot grant
whatever he may be obliged to return or grant extension of extension of time for
due to rescission time for the fulfillment fulfillment of the
3. The things must not have been of the obligation obligation
passed to 3rd parties who did not act Its purpose is to cancel Its purpose is to seek
in bad faith the contract reparation for the damage
4. It must be made within the or injury caused, thus
prescribed period (of 4 years) allowing partial rescission
of the contract
OBLIGATION CREATED BY THE RESCISSION OF 2. VOIDABLE CONTRACTS – intrinsic defect; valid
THE CONTRACT: Mutual Restitution until annulled; defect is due to vice of consent or
a. Things w/c are the objects of the contract legal incapacity
and their fruits • CHARACTERISTICS:
b. Price with interest a. Effective until set aside
b. May be assailed or attacked only in an action
MUTUAL RESTITUTION NOT APPLICABLE WHEN for that purpose
a. creditor did not receive anything from c. Can be confirmed ( NOTE: confirmation is
contract the proper term for curing the defect of a
b. thing already in possession of party in good voidable contract)
faith; subject to indemnity only; if there are 2 d. Can be assailed only by the party whose
st
or more alienations – liability of 1 infractor consent was defective or his heirs or assigns
BADGES OF FRAUD WHAT CONTRACTS ARE VOIDABLE:
a. consideration of the conveyance is a. Minors ( below 18 )
inadequate or fictitious b. Insane unless acted in lucid interval
b. transfer was made by a debtor after a suit c. Deaf mute who can’t read or write
has been begun and while it is pending d. Persons specially disqualified: civil
against him interdiction
c. sale upon credit by an insolvent debtor e. In state of drunkenness
d. evidence of indebtedness or complete f. In state of hypnotic spell
insolvency
MISTAKE qualities and giving it qualities it does not
• false belief into something have; LAWFUL misrepresentation
• REQUISITES: • NOTE:
a. Refers to the subject of the thing which is the • Expression of an opinion – not fraud unless
object of the contract made by expert and other party relied on the
b. Refers to the nature of the contract former’s special knowledge
c. Refers to the principal conditions in an • Fraud by third person – does not vitiate
agreement consent; only action for damages except if there
d. Error as to person - when it is the principal is collusion between one party and the third
consideration of the contract person, or resulted to substantial mistake, mutual
e. Error as to legal effect - when mistake is between parties.
mutual and frustrates the real purpose of
parties CAUSES OF EXTINCTION OF ACTION TO ANNUL
a. PRESCRIPTION - Period to bring an action
VIOLENCE for Annulment
• serious or irresistible force is employed to wrest i. Intimidation, violence, undue influence -
consent 4 years from time defect of consent
ceases
INTIMIDATION ii. Mistake, fraud – 4 years from time of
• one party is compelled by a reasonable and well- discovery
grounded fear of an imminent and grave danger iii. Incapacity - From time guardianship
upon person and property of himself, spouse, ceases
ascendants or descendants (moral coercion)
Carantes vs. CA, 76 SCRA 514, discovery of
UNDUE INFLUENCE fraud must be reckoned to have taken place from
• person takes improper advantage of his power the time the document was registered in the
over will of another depriving latter of reasonable office of the register of deeds. Registration
freedom of choice constitutes constructive notice to the whole world

Martinez vs. Hongkong and Shanghai Bank, 12 b. RATIFICATION

Phil 252, The doctrine on reluctant consent • REQUISITES
provides that a contract is still valid even if one of i. knowledge of reason rendering contract
the parties entered it against his wishes or even voidable
against his better judgment. Contracts are also ii. such reason must have ceased, except in
valid even though they are entered into by one of case of ratification effected by the guardian
the parties without hope of advantage or profit. to contracts entered into by an
incapacitated,
FRAUD iii. the injured party must have executed an
• thru insidious words or machinations of act which expressly or impliedly conveys
contracting parties, other is induced to enter into an intention to waive his right
contract w/o w/c he will not enter (dolo causante)
c. LOSS OF THE THING which is the object of
KINDS OF FRAUD IN THE PERFORMANCE OF the contract through fraud or fault of the
OBLIGATION OR CONTRACTS person who is entitled to annul the contract
a. Causal Fraud (dolo causante) – deception of • NOTE: Object is lost through a fortuitous
serious charcter without which the other party event, the contract can still be annulled, but
would not have entered into; contract is the person obliged to return the same can be
VOIDABLE (Art. 1338) held liable only for the value of the thing at
b. Incidental Fraud (dolo incidente) – the time of the loss, but without interest
deception which are not serious and without thereon.
which the other party would still have entered • Ratification cleanses the contract of its
into the contract; holds the guilty party liable defects from the moment it was constituted.
for DAMAGES (Art. 1344)
c. Tolerated Fraud – includes minimizing the 3. UNENFORCEABLE CONTRACT – valid but
defects of the thing, exaggeration of its god cannot compel its execution unless ratified;
extrinsic defect; produce legal effects only after
ratified
KINDS:
a. Unauthorized or No sufficient authority – KINDS OF VOID CONTRACT:
entered into in the name of another when: a. Those lacking in essential elements: no
i. No authority conferred consent, no object, no cause (inexistent
ii. In excess of authority conferred ( ultra ones) – essential formalities are not complied
vires) with ( ex: donation propter nuptias – should
b. Curable by Ratification - Both parties conform to formalities of a donation to be
incapable of giving consent -2 minor or 2 valid )
insane persons i. Those w/c are absolutely simulated or
c. Curable by Acknowledgment - Failure to fictitious – no cause
comply with Statute of Frauds ii. Those which cause or object did not exist
i. Agreement to be performed within a year at the time of the transaction – no
after making contract cause/object
ii. Special promise to answer for debt, iii. Those whose object is outside the
default or miscarriage of another commerce of man – no object
iii. Agreement made in consideration of iv. Those w/c contemplate an impossible
promise to marry service – no object
iv. Agreement for sale of goods, chattels or v. Those w/c intention of parties relative to
things in action at price not less than principal object of the contract cannot be
500; exception: auction when recorded ascertained
sale in sales book b. Prohibited by law
v. Agreement for lease of property for more c. Those expressly prohibited or declared
than one year and sale of real property void by law - Contracts w/c violate any legal
regardless of price provision, whether it amounts to a crime or
vi. Representation as to credit of another not
d. Illegal/Illicit ones – Those whose cause,
TWO WAYS OF CURING UNENFORCEABLE object or purpose is contrary to law, morals,
CONTRACTS: good customs, public order or public policy ;
a. Failure of defendant to object in time, to Ex: Contract to sell marijuana
the presentation of parole evidence in court,
the defect of unenforceability is cured
b. Acceptance of benefits under the
contract. If there is performance in either
part and there is acceptance of performance,
it takes it out of unenforceable contracts; also
estoppel sets in by accepting performance,
the defect is waived

4. VOID OR INEXISTENT – of no legal effect

CHARACTERISTICS:
a. It produces no effect whatsoever either
against or in favor of anyone
b. There is no action for annulment necessary
as such is ipso jure. A judicial declaration to
that effect is merely a declaration
c. It cannot be confirmed, ratified or cured
d. If performed, restoration is in order, except if
pari delicto will apply
e. The right to set up the defense of nullity
cannot be waived
f. Imprescriptible
g. Anyone may invoke the nullity of the contract
whenever its juridical effects are asserted
against him
 the purpose has been accomplished, or
before any damage has been caused to a 3rd
CONTRACT DOES NOT person
CONSTITUTE CONSTITUTE c. payment of money or delivery of property
CRIMINAL OFFENSE CRIMINAL OFFENSE made by an incapacitated person
but is ILLEGAL
/UNLAWFUL PER SE
d. agreement or contract which is not illegal per
Parties a. No action for a. No action for se and the prohibition is esigned for the
are in specific specific protection of the plaintiff
pari performance performance e. payment of any amount in excess of the
delicto h. No action for b. No action for maximum price of any article or commodity
restitution on restitution on fixed by law or regulation by competent
either side. either side. The authority
The law will law will leave f. contract whereby a laborer undertakes to
leave you you where you work longer than the maximum number of
where you are are hours fixed by law
i. Both shall be c. No confiscation g. one who lost in gambling because of
prosecuted fraudulent schemes practiced on him is
j. Thing/price to allowed to recover his losses (Art. 313 RPC)
be confiscated even if gambling is prohibited.
in favor of
government REQUISITES OF ILLEGAL CONTRACTS:
Only a. No action for a. No action for a. Contract is for an illegal purpose
one specific specific b. Contract must be repudiated by any of the
party is performance performance parties before purpose is accomplished or
guilty b. Innocent party b. Innocent party is damage is caused to 3rd parties
is entitled to entitled to c. Court believes that public interest will be
restitution restitution served by allowing recovery (discretionary
c. Guilty party is c. Guilty party is upon the court ) – based on remorse;
not entitled to not entitled to illegality is accomplished when parties
restitution restitution entered into contract; before it takes effect
d. Guilty party will – party w/c is remorseful prevents it
be prosecuted
e. Instrument of WHERE LAWS ARE ISSUED TO PROTECT
crime will be CERTAIN SECTORS: CONSUMER PROTECTION,
confiscated in LABOR, USURY LAW
favor of gov’t. a. Consumer protection – if price of
commodity is determined by statute, any
person paying an amount in excess of the
maximum price allowed may recover such
excess
KINDS OF ILLEGAL CONTRACTS
b. Labor – if law sets the minimum wage for
laborers, any laborer who agreed to receive
PARI DELICTO DOCTRINE
• Both parties are guilty, no action against each less may still be entitled to recover the
other; those who come in equity must come with deficiency; if law set max working hours
clean hands; applies only to illegal contracts and and laborer who undertakes to work longer
not to inexistent contracts; does not apply when a may demand additional compensation
superior public policy intervenes c. Interest paid in excess of the interest
allowed by the usury law may be
• EXCEPTION TO PARI DELICTO RULE - If
recovered by debtor with interest from date
purpose has not yet been accomplished and If
of payment
damage has not been caused to any 3rd person
OTHER EXCEPTIONS:
a. Payment of Usurious interest
b. payment of money or delivery of property for
an illegal purpose, where the party who paid
or delivered repudiates the contract before
EFFECTS OF ILLEGAL CONTRACTS
a. If one party is incapacitated, courts may
allow recovery of money, property delivered
by incapacitated person in the interest of
justice; pari delicto cannot apply because an KINDS
incapacitated person does not know what he 1. estoppel in pais (by conduct)
is entering into; unable to understand the c. estoppel by silence
consequences of his own action d. estoppel by acceptance of benefits
b. If agreement is not illegal per se but merely 2. Technical estoppel
prohibited and prohibition is designated for a. Estoppel by deed
the protection of the plaintiff – may recover b. Estoppel by record
what he has paid or delivered by virtue of c. Estoppel by judgment
public policy d. Estoppel by laches

MUTUAL RESTITUTION IN VOID CONTRACTS LACHES OR STALE DEMANDS

• GENERAL RULE: parties should return to each
other what they have given by virtue of the void LACHES
contract in case • Failure or neglect, for an unreasonable and
• Where nullity arose from defect in essential unexplained length of time to do that which, by
elements exercising due diligence, could or should have
a. return object of contract and fruits been done earlier; it is negligence or omission to
b. return price plus interest assert a right within reasonable time warranting a
• EXCEPTION: No recovery can be had in cases presumption that the party entitled to assert it
where nullity of contract arose from illegality of either has abandoned it or declined to assert it
contract where parties are in pari delicto; except: • ELEMENTS
a. incapacitated – not obliged to return what he 1. conduct on part of the defendant, or of one under
gave but may recover what he has given whom he claims, giving rise to the situation of
b. other party is less guilty or not guilty which complaint is made and for which the
complaint seeks a remedy
TITLE 3. – NATURAL OBLIGATIONS 2. delay in asserting the complainant’s rights, the
See Arts. 1423 - 1430 complainant having knowledge or notice, of the
defendant’s conduct and having been afforded
NATURAL OBLIGATIONS the opportunity to institute a suit
• they are real obligations to which the law denies 3. lack of knowledge or notice on the part of the
an action, but which the debtor may perform defendant that the complainant would assert the
voluntarily. right on which he bases his suit
• It is patrimonial, and presupposes a prestation. 4. injury to the defendant in the event relief is
• The binding tie of these obligations is in the accorded to the complainant, or the suit in not
conscience of man, for under the law, they do not held to be barred.
have the necessary efficacy to give rise to an
action.
LACHES PRESCRIPTION
EXAMPLES OF NATURAL OBLIGATIONS Concerned with Concerned with fact of delay
ENUMERATED UNDER THE CIVIL CODE: effect of delay
1. Performance after the civil obligation has Question of Question or matter of time
prescribed inequity of
2. reimbursement of a third person for a debt that permitting the
has prescribed claim to be
3. restitution by minor after annulment of contract enforced
4. Delivery by minor of money or fungible thing in Not statutory Statutory
fulfillment of obligation Applies in equity Applies at law
5. Performance after action to enforce civil Not based on a Based on a fixed time
obligation has failed fixed time
6. payment by heir of debt exceeding value of
property inherited
7. payment of legacy after will have been declared
void
 TITLE 4. – ESTOPPEL
See Arts. 1431 - 1439

ESTOPPEL - a condition or state by virtue of

which an admission or representation is redered
conclusive upon the person making it and
cannot be denied or disproved as against the
person relying thereon.