COLLEGE OF ACCOUNTANCY AND BUSINESS ADMINISTRATION

LAW ON OBLIGATIONS

I. GENERAL PRINCIPLES susceptible of pecuniary substitution in case of

noncompliance. It is a conduct that may consist of giving,
doing, or not doing something (Pineda, 2000). NOTE: In
A. Definition of Obligation order to be valid, the object or prestation must be: 1. Licit
or lawful; 2. Possible, physically, & judicially; 3.
An obligation is a juridical necessity to give, to do, or not Determinate or determinable; and 4. Pecuniary value or
to do (Art. 1156). possible equivalent in money.

It is a juridical relation or a juridical necessity whereby a

person (creditor) may demand from another (debtor) the C. Classifications of obligations
observance of a determinative conduct (giving, doing, or
not doing), and in case of breach, may demand From the viewpoint of:
satisfaction from the assets of the latter (Makati Stock
Exchange v. Campos, G.R. No. 138814, April 16, 2009). 1. Creation:
a. Legal – imposed by law (Art. 1158);
It is a juridical necessity because in case of non- b. Conventional – established by the agreement of
compliance, the courts of justice may be called upon by the parties (eg. Contracts).
the aggrieved party to enforce its fulfillment or, in default
thereof, the economic value that it represents. 2. Nature:
a. Personal – to do; not to do;
Art. 1156 refers only to civil obligations which are b. Real – to give.
enforceable in court when breached. It does not cover
natural obligations (Arts. 1423 -1430) because the latter 3. Object:
are obligations that cannot be enforced in court on equity a. Determinate / specific - particularly designated or
and natural law and not on positive law (Pineda, 2000). physically segregated from all others of the same
When there is a right, there is a corresponding obligation. class;
Right is the active aspect while obligation is the passive b. Generic – designated merely by its class or genus;
aspect. Thus, the concepts of credit and debt are two c. Limited generic – generic objects confined to a
distinct aspects of unitary concept of obligation (Pineda, particular class or source (Tolentino, 2002). (e.g. An
2000). obligation to deliver one of my horses).

4. Performance:
B. Elements of an obligations a. Positive - to give; to do;
b. Negative – not to do (ex. an obligation not to run
The following are the elements of an obligation (JAPO): for an elective post).

1. Juridical tie or vinculum juris or efficient cause - the 5. Person obliged:

efficient cause by virtue of which the debtor becomes a. Unilateral – only one party is bound;
bound to perform the prestation (Pineda, 2000). NOTE: b. Bilateral – both parties are bound.
The vinculum juris is established by: a. Law; b. Bilateral
acts; c. Unilateral acts (Tolentino, 2002). NOTE: A bilateral obligation may be reciprocal or
non-reciprocal. Reciprocal obligations are those
2. Active subject [creditor (CR) or obligee] - The person which arise from the same cause, wherein each party
demanding the performance of the obligation. It is he in is a debtor and a creditor of the other, such that the
whose favor the obligation is constituted, established, or performance of one is conditioned upon the
created (Pineda, 2000). simultaneous fulfillment of the other.

3. Passive subject [debtor (DR) or obligor] - The person 6. Existence of burden or condition
bound to perform the prestation to give, to do, or not to a. Pure – not burdened with any condition or term. It
do (Pineda, 2000). is immediately demandable (Art. 1179);
b. Conditional – subject to a condition which may be
4. Object or prestation - The subject matter of the suspensive (happening of which shall give rise to the
obligation which has a corresponding economic value or
1
 obligation) or resolutory (happening of which Characteristics of a legal obligation: 1. Does not need
terminates the obligation) (NCC. 1181). the consent of the obligor; 2. Must be expressly set forth
in the law creating it and not merely presumed; and 3. In
7. Character of responsibility or liability order that the law may be a source of obligation, it should
a. Joint – each debtor is liable only for a part of the be the creator of the obligation itself (NCC, Art. 1158).
whole liability and to each creditor shall belong only
a part of the correlative rights (8 Manresa 194 ; NCC. Determining whether an obligation arises from law or
1207); from some other source: 1. Arises from law if it
b. Solidary – debtor is answerable for the whole of establishes obligation; 2. Arises from the act itself if the
the obligation without prejudice to his right to collect law merely recognizes the existence of an obligation
from his co-debtors the latter’s shares in the generated by an act (Manresa).
obligation (NCC. 1207).
e.g.
8. Susceptibility of partial fulfillment 1. According to Art. 2014 of the NCC, a loser in a game
a. Divisible – obligation is susceptible of partial of chance may recover his loss from the winner, with
performance (NCC. 1223; and 1224); legal interest from the time he paid the amount lost
b. Indivisible – obligation is not susceptible of partial (Leung Ben v. O’Brien, G.R. No. L-13602, April 6,
performance (NCC. 1225). 1918);
2. The obligation of the spouses to support each other;
9. Right to choose and substitution 3. The obligation of the employers under the Worker’s
a. Alternative – obligor may choose to completely Compensation Act;
perform one out of the several prestations (NCC. 4. The obligations of the owners of the dominant and
1199); servient estates in legal easements and others
b. Facultative – only one prestation has been agreed scattered in the NCC and in special laws (Jurado,
upon, but the obligor may render one in substitution 2009);
of the first one (NCC. 1206). 5. The obligation to pay taxes (Rabuya, 2017).

10. Imposition of penalty

a. Simple – there is no penalty imposed for violation 2. CONTRACTS
of the terms thereof (NCC. 1226);
b. Obligations with a penal clause – obligation which Requisites of a contractual obligation 1. It must contain
imposes a penalty for violation of the terms thereof all the essential requisites of a contract (NCC, Art. 1318);
(NCC. 1226; Pineda, 2000). and 2. It must not be contrary to law, morals, good
customs, public order, and public policy (NCC, Art.
11. Sanction 1306).
a. Civil – gives a right of action to compel their
performance; Rules governing the obligations arising from contracts:
b. Natural– not based on positive law, but on equity
and natural law; does not grant a right of action to GR: These obligations arising from contracts shall be
enforce their performance, but after voluntary governed primarily by the stipulations, clauses, terms,
fulfillment by the obligor, they authorize retention of and conditions of the parties’ agreements.
what has been delivered rendered by reason thereof.
XPN: Contracts with prestations that are unconscionable
or unreasonable (Pineda, 2009).
D. Sources of obligations
Binding force of obligation ex contractu:
1. Law; 2. Contracts; 3. Quasi-contracts; 4. Delict; and 5.
Quasi-delict. Obligations arising from contracts have the force of law
between the parties and should be complied with in good
Note: Actually, there are only two sources (i.e., law and faith (NCC, Art. 1159). This is known as the “principle of
contracts) because obligations arising from quasi- obligatory force of contracts” (Rabuya, 2017).
contracts, delicts, and quasi-delicts are imposed by law
(Leung Ben v. O’Brien, 38 Phil. 182) Good faith is performance in accordance with the
stipulation, clauses, terms, and conditions of the contract
1. LAW (Pineda, 2000).

Obligations derived from law are not presumed. Only

those expressly determined in the Code or in special 3. QUASI-CONTRACTS
laws are demandable and shall be regulated by the
precepts of the law which establishes them and as to A juridical relation arising from lawful, voluntary, and
what has not been foreseen by the provisions of Book IV unilateral acts based on the principle that no one shall be
of NCC (NCC, Art. 1158). unjustly enriched or benefited at the expense of another
(NCC, Art. 2142).
NOTE: If there is conflict between the NCC and a special
law, the latter prevails unless the contrary has been Characteristics of a quasi-contract (LUV) 1. It must be
expressly stipulated in the NCC (NCC, Art. 18; Paras, Lawful; 2. It must be Unilateral; and 3. It must be
2008). Voluntary (Pineda, 2000).

Principal forms of quasi-contracts:

2
1. Negotiorum gestio (inofficious manager) – Arises
when a person voluntarily takes charge of the
management of the business or property of another
without any power from the latter (NCC, Art. 2144);

2. Solutio indebiti (unjust enrichment) – Takes place

when a person received something from another without
any right to demand for it, and the thing was unduly
delivered to him through mistake (NCC, Art. 2154)

Contract v. Quasi-contract

Contract Quasi-Contract
There is a meeting of the There is no consent, but
minds or consent; the the same is supplied by
parties must have fiction of law; to prevent
deliberately entered into a injustice
formal agreement

4. DELICT

Delict is an act or omission punishable by law.

Basis

GR: Art. 100 of the RPC provides: “Every person

criminally liable for a felony is also civilly liable.”

XPNs: Crimes of treason, rebellion, espionage, contempt

and others wherein no civil liability arises on the part of
the offender either because there are no damages to be
compensated or there is no private person injured by the
crime (Reyes, 2008).

Scope of civil liability (IRR) 1. Restitution; 2. Reparation

for damage caused; and 3. Indemnity for consequential
damages (Art. 104, RPC)

5. QUASI-DELICT

An act or omission arising from fault or negligence which

causes damage to another, there being no pre-existing
contractual relations between the parties (NCC, Art.
2176).

NOTE: A single act or omission may give rise to two or

more causes of action. Thus, an act or omission may give
rise to an action based on delict, quasi-delict, or contract.

Elements of a quasi-delict:
1. Negligent or wrongful act or omission;
2. Damage or injury caused to another;
3. Causal relation between such negligence or fault
and damage; and
4. No pre-exisitng contractual relationship between the
parties (NCC, Art. 2176).