1. OBLIGATIONS AND CONTRACTS IN THE PHILIPPINES Co, V China Marian B. SEMFILA EA2

2. OBLIGATIONS AND CONTRACTS  Book 4 of RA No. 386: An Act to Ordain the Institute the Civil Code of the Philippines

3. TITLE I: OBLIGATIONS

4. CHAPTER 1: GENERAL PROVISIONS  4 Elements of an Obligation: 1.Active Subject – called the obligee or creditor; the possessor of a right; he in whose favour the obligation is constituted. 2.Passive Subject – called the obligor or the debtor; he who has the duty of giving, doing, or not doing. 3.Object or Prestation – the subject matter of the obligation. 4.Efficient Cause – the vinculum or the juridical tie; the reason why the obligation exists.

5. CHAPTER 1: GENERAL PROVISIONS  Kinds of Obligations:  From the viewpoint of “sanction”: 1.Civil Obligation – the sanction is judicial process 2.Natural Obligation – the duty not to recover what has voluntarily been paid although payment was no longer required. The essential element is ‘voluntariness”. 3.Moral Obligation – the sanction here is conscience or morality; or the law of the church.

6. CHAPTER 1: GENERAL PROVISIONS  Kinds of Obligations:  From the viewpoint of “subject matter”: 1.Real Obligation – the obligation to give 2.Personal Obligation – the obligation to do or not do.

7. CHAPTER 1: GENERAL PROVISIONS  Kinds of Obligations:  From the viewpoint of “affirmativeness and negativeness of the obligation”: 1.Positive or Affirmative Obligation – the obligation to give or to do 2.Negative Obligation – the obligation not do (which naturally includes “not to give”)

8. CHAPTER 1: GENERAL PROVISIONS  Kinds of Obligations:  From the viewpoint of “persons obliged”: 1.Unilateral Obligation – where only one of the parties is bound. (NOTE: Every obligation has two parties; if only one of them is bound, we have a unilateral obligation.) 2.Bilateral Obligation – where both parties are bound.  Two Kinds of Bilateral Obligation: 1.Reciprocal Obligation – the performance of an obligation is conditioned on the simultaneous fulfilment of the other obligation. 2.Non-Reciprocal Obligation – where the performance by one is not dependent on the performance by the other.

9. CHAPTER 1: GENERAL PROVISIONS  Kinds of Obligations:  From the viewpoint of “persons obliged”: 1.Unilateral Obligation – where only one of the parties is bound. (NOTE: Every obligation has two parties; if only one of them is bound, we have a unilateral obligation.) 2.Bilateral Obligation – where both parties are bound.  Two Kinds of Bilateral Obligation: 1.Reciprocal Obligation – the performance of an obligation is conditioned on the simultaneous fulfilment of the other obligation. 2.Non-Reciprocal Obligation – where the performance by one is not dependent on the performance by the other.

10. CHAPTER 1: GENERAL PROVISIONS  Sources of Obligation: 1.Law – like the duty to pay taxes and to support one’s family. 2.Contracts – like the duty to repay loan by virtue of an agreement. 3.Quasi-Contracts – like the duty to refund an over change of money because of the quasi-contract of solutio indebiti or undue payment. 4.Crimes or acts or omissions punished by law – like the duty to return a stolen carabao. 5.Quasi-Delicts or TORTS - like the duty to repair damage due to negligence.

11. CHAPTER 1: GENERAL PROVISIONS  The law says “obligations derived from law are not presumed”. This means that the obligation must be clearly set forth in the law (the Civil Code or Special Laws).  If regarding an obligation by virtue of law, there is a conflict between the new Civil Code and a special law, the latter prevails unless the contrary has been expressly stipulated in the new Civil Code.  Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.

12. CHAPTER 1: GENERAL PROVISIONS  Obligation vs Contract  Obligation is the result of a contract or some other source. Hence, while a contract, if valid, always results in obligation, not all obligations come from contracts.  A contract always presupposes a meeting of the minds; this is not necessarily true for all kinds of obligations.

13. CHAPTER 1: GENERAL PROVISIONS  Quasi-Contracts  Is that juridical relation resulting from a lawful, voluntary and unilateral act, and which has for its purpose the payment of indemnity to the end that “no one shall be unjustly enriched or benefited at the expense of another”.

14. CHAPTER 1: GENERAL PROVISIONS  Two Kinds of Quasi-Contract 1.Negotiorium Gestio (Unauthorized Management) – This takes place when a person voluntarily takes charge of another’s abandoned business or property without the owner’s authority. Reimbursement must be made to the gestor for necessary and useful expenses, as a rule. 2.Solutio Indebiti (Undue Payment) – This takes place when something is received when there is no right to demand it and it was unduly delivered thru mistake. The recipient has the duty to return it.  Requisites for Solutio Indebiti: a.He who paid was NOT under obligation to do so; b.The payment was made by reason of an essential mistake of fact.

15. CHAPTER 1: GENERAL PROVISIONS  Civil Obligations from Criminal Offenses  Governing Rules: 1.Pertinent provisions of the Revised Penal Code and other penal laws, subject to the provisions of Article 2177 of the Civil Code; 2.Chapter 2, Preliminary Title, on Human Relations of the Civil Code; 3.Title 18 of Book VI of the Civil Code on Damages

16. CHAPTER 1: GENERAL PROVISIONS  QUASI-DELICTS (Tort or Culpa Acquiliana)  A quasi-delict is a fault or act of negligence (or omission of care) which causes damages to another, there being no pre-existing contractual relations between the parties.  Culpa Acquiliana (Quasi-Delicts) can refer to acts which are criminal in character, whether the same be voluntary or negligent.

17. CHAPTER 1: GENERAL PROVISIONS  Requirement before a Person can be held Liable for Quasi- Delict: 1.There must be fault or negligence attributable to the person charged; 2.There must be damage or injury; 3.There must be a direct relation of cause and effect between the fault or negligence on the one hand and the damage or injury on the other hand (proximate cause).  PROXIMATE CAUSE – is that adequate and efficient cause, which in the natural order of events necessarily produces the damages or injury complained of.

18. CHAPTER 2: NATURE AND EFFECT OF OBLIGATIONS  DUTY TO EXERCISE DILIGENCE  This is the first effect of an obligation – to deliver a determinate thing (as distinguished from a generic thing – or one of a class) – namely – the duty to exercise proper diligence.  Diligence Needed: 1.That which is required by the nature of the obligation and corresponds with the circumstances of person, time, and place. This is really diligence of a good father of a family. 2.However, if the law or contract provides for a different standard of care, said law or stipulation must prevail.

19. CHAPTER 2: NATURE AND EFFECT OF OBLIGATIONS  The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. However, he shall acquire no real right over it until the same has been delivered to him.  WHEN CREDITOR IS ENTITLED TO THE FRUITS  Personal Right – is called “jus in personam” or “jus ad rem”; a personal right is power demandable by one person of another – to give, to do, or not to do.  Real Right – is a “jus in re”; a real right is a power over a specific thing (as in ownership or possession) and is binding on the whole world.

20. CHAPTER 2: NATURE AND EFFECT OF OBLIGATIONS  SPECIFIC OR DETERMINATE THINGS  A thing is said to be specific or determinate when it is capable of a particular designation.  GENERIC OR INDETERMINATE THINGS  A thing is generic or indeterminate when it refers only to a class, to a genus, and cannot be pointed out with particularity.

21. CHAPTER 2: NATURE AND EFFECT OF OBLIGATIONS  Effect of Fortuitous Events  A specific obligation, that is, an obligation to deliver a specific thing is, as a rule, extinguished by a fortuitous event or act of God.  Upon the other hand, generic obligations are never extinguished by fortuitous events.  Two Instances where Fortuitous Event does not exempt: 1.If the obligor delays 2.If the obligor is guilty of bad faith

22. CHAPTER 2: NATURE AND EFFECT OF OBLIGATIONS  Remedies of the Creditor when the Debtor Fails to Comply with his Obligation: 1.Demand specific performance or compliance of the obligation. This is true whether the obligation be generic or specific. 2.Demand rescission or cancellation (in some cases). 3.Demand damages either with or without either of the first two (1 or 2).

23. CHAPTER 2: NATURE AND EFFECT OF OBLIGATIONS  WHAT THE OBLIGATION TO GIVE A DETERMINATE THING INCLUDES:  If I am obliged to deliver a determinate or particular thing, I must also give the accessories. If I am obliged to deliver a land, I must give also the accessions (like the building constructed thereon).  This true even if no mention of them was made in the contract.  ACCESSORIES – those joined to or included with the principal for the latter’s better use, perfection, or enjoyment.  Example: the keys to a house, the dishes in restaurant

24. CHAPTER 2: NATURE AND EFFECT OF OBLIGATIONS  ACCESSIONS – additions or improvements upon a thing. These include alluvium and whatever is built, planted, or sown on a person’s parcel of land.  EFFECT OF STIPULATION:  Of course, if there is a stipulation to said effect, accessions and accessories do not have to be included.

25. CHAPTER 2: NATURE AND EFFECT OF OBLIGATIONS  If a person obliged to do something fails to do it, the same shall be executed at his cost. (Positive Personal Obligation – to do)  This same rule shall be observed if he does it in contravention of the tenor of the obligation.  Furthermore, it may be decreed that what has been poorly done be undone.

26. CHAPTER 2: NATURE AND EFFECT OF OBLIGATIONS  When the obligation consists in not doing, and the obligor does what has been forbidden him, it shall also be undone at his expense. (Negative Personal Obligation)  Remedies of the Creditor when the Debtor Violates Negative Personal Obliagtion: 1.The creditor can demand that the act be undone at the expense of the debtor. 2.Plus Damages.

27. CHAPTER 2: NATURE AND EFFECT OF OBLIGATIONS  Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages.

28. CHAPTER 3: DIFFERENT KINDS OF OBLIGATIONS 1.Pure vs. Conditional 2.Pure vs. Obligation with a Period or Term 3.Alternative or Facultative Obligation vs. Conjunctive 4.Joint Obligation vs. Solidary Obligation 5.Divisible Obligation vs. Indivisible Obligation 6.Obligation with a Penal Clause vs. Without a Penal Clause

29. CHAPTER 3: DIFFERENT KINDS OF OBLIGATIONS  Every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once. (Pure Obligation)  Every obligation which contains a resolutory condition shall also be demandable, without prejudice to the effects of the happening of the event.

30. CHAPTER 3: DIFFERENT KINDS OF OBLIGATIONS  Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that day comes.  Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain.  A day certain is understood to be that which must necessarily come, although it may not be known when.  If the uncertainty consists in whether the day will come or not, the obligation is conditional.

31. CHAPTER 3: DIFFERENT KINDS OF OBLIGATIONS  ALTERNATIVE OBLIGATIONS – or also known as FACULTATIVE obligation is one where out of the two or more prestations which may be given, only one is due.  A person alternatively bound by different prestations shall completely perform one of them.  The creditor cannot be compelled to receive part of one and part of the other undertaking.

32. CHAPTER 3: DIFFERENT KINDS OF OBLIGATIONS  OBLIGATION WITH A TERM vs ALTERNATIVE OBLIGATIONS  In obligation with a term, the general rule is that the term is for the benefit of both the debtor and creditor.  In alternative obligation, however, the general rule is that the debtor has the right of choice.

33. CHAPTER 3: DIFFERENT KINDS OF OBLIGATIONS  When only one prestation has been agreed upon, but the obligor may render another in substitution, the obligation is called facultative. (FACULTATIVE OBLIGATION)  The loss or deterioration of the thing intended as a substitute, through the negligence of the obligor, does not render him liable. But once the substitution has been made, the obligor is liable for the loss of the substitute on account of his delay, negligence or fraud.

34. CHAPTER 3: DIFFERENT KINDS OF OBLIGATIONS  FACULTATIVE OBLIGATION – It is where only one prestation has been agreed upon but the debtor or obligor may render another in substitution.

35. CHAPTER 3: DIFFERENT KINDS OF OBLIGATIONS  JOINT OBLIGATION vs. SOLIDARY OBLIGATION  In a JOINT OBLIGATION, each obligor answers only for a part of the whole liability and to each obligee (creditor) belongs only a part of the correlative rights. “TO EACH HIS OWN.”  In a SOLIDARY OBLIGATION (or JOINT AND SEVERAL OBLIGATION), the relationship between the active and passive subjects is so close that each of the former or of the latter may demand the fulfilment of or must comply with the whole obligation. “ALL FOR ONE, ONE FOR ALL.”

36. CHAPTER 3: DIFFERENT KINDS OF OBLIGATIONS  INDIVISIBLE JOINT OBLIGATION – “Indivisible” referring to the object; “joint” referring to the tie between the parties who are merely proportionately liable, UNLESS solidarity has been stipulated by the parties or the law, in which case, it is called a SOLIDARY INDIVISBLE OBLIGATION

37. CHAPTER 3: DIFFERENT KINDS OF OBLIGATIONS  INDIVISIBLITY vs. SOLIDARITY  Indivisibility – refers to the OBJECT  Solidarity – refers to the TIE between the parties.

38. CHAPTER 3: DIFFERENT KINDS OF OBLIGATIONS  INDIVISIBLITY vs. SOLIDARITY  Indivisibility – refers to the OBJECT  Solidarity – refers to the TIE between the parties.

39. TITLE II: CONTRACTS

40. CHAPTER 1: GENERAL PROVISIONS  A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.

41. CHAPTER 1: GENERAL PROVISIONS  Elements of a Contract 1.Essential elements – without which there can be no contract  Consent  Object  Cause 2.Natural elements – exist as part of the contract even of the parties do not provide for them 3.Accident elements – agreed upon by the parties and which cannot exist without being stipulated

42. CHAPTER 1: GENERAL PROVISIONS  Characteristics of a Contract 1.Obligatory force – constitutes the law as between parties 2.Mutuality – validity and performance cannot be left to the will of only one of the parties 3.Relativity – binding only upon the parties and their successors 4.Consensuality 5.Freedom – the right to freely enter a contract

43. CHAPTER 1: GENERAL PROVISIONS  Parties in a Contract 1.Auto-contracts  Necessary for the existence of a contract that two distinct persons enter into it  Generally valid as long as there are two distinct parties 2.Freedom to contract – the contracting parties may establish such stipulations, clauses, terms, and conditions as they may deem convenient provided they are not contrary to law, morals, good customs, public order, and public policy.

44. CHAPTER 1: GENERAL PROVISIONS  Classification of Contracts 1.According to subject matter 2.According to name 3.According to perfection 4.According to its relation to other contracts, degree of dependence 5.According to form 6.According to purpose 7.According to nature of the vinculum/obligation produced 8.According to cause 9.According to risk

45. CHAPTER 1: GENERAL PROVISIONS  Classification of Contracts 1.According to subject matter 2.According to name 3.According to perfection 4.According to its relation to other contracts, degree of dependence 5.According to form 6.According to purpose 7.According to nature of the vinculum/obligation produced 8.According to cause 9.According to risk

46. CHAPTER 2: ESSENTIAL REQUISITES OF CONTRACTS  Consent  Manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract.  The offer must be certain and the acceptance absolute.  A qualified acceptance constitutes a cpunter-offer.

47. CHAPTER 2: ESSENTIAL REQUISITES OF CONTRACTS  Requisites of Consent 1.Plurality of subjects 2.Capacity 3.Intelligent and free will 4.Express of tacit manifestation of will 5.Conformity of the internal will and its manifestation

48. CHAPTER 2: ESSENTIAL REQUISITES OF CONTRACTS  Vices of Consent 1.Mistake or error – a wrong or false notion about such matter, a belief in the existence of some circumstance, fact or event which in reality does not exist 2.Violence and Intimidation – serious of irresistible force is employed in order to wrest consent and when one of the contracting parties is compelled by a reasonable and well- grounded fear of an imminent and grave evil upon his person or property 3.Undue influence – any means employed upon a party which he could not well resist and which controlled his volition and induced him to give his consent to the contract which otherwise he would not have entered.

49. CHAPTER 2: ESSENTIAL REQUISITES OF CONTRACTS  Vices of Consent 4.Fraud or Dolo – every kind of deception whether in form of manipulations, misrepresentation, for the purpose of leading a party into error 5.Misrepresentation – may be by a third person, error, or with respect to legal capacity especially age 6.Simulation of contracts – declaration of a fictitious will for the purposes of deception

50. CHAPTER 2: ESSENTIAL REQUISITES OF CONTRACTS  Objects of Consent 1.All things not outside the commerce of man 2.All rights not intransmissible 3.All services not contrary to law, morals, good customs, public order or public policy

51. CHAPTER 3: FORM OF CONTRACTS  Contracts shall be obligatoy in whatever form they may have been entered into provided all essential requisites for their validity is present.

52. CHAPTER 4: REFORMATION OF INSTRUMENTS  When there have been a meeting of the minds of the parties to a contract, their true intention is not expressed in the instrument purporting to embody the agreement by reason of mistake, fraud, inequitable conduct, or accident, one of the parties may ask for the reformation of the instrument to the end that such true intention may be expressed.

53. CHAPTER 5: INTERPRETATION OF CONTRACTS  If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control.  However general the terms of a contract may be, they shall not be understood to comprehend things that are distinct and cases that are different from those upon which the parties intended to agree.

54. CHAPTER 6&7: RESCISSIBLE & VOIDABLE/ANNULLABLE CONTRACTS

55. CHAPTER 8: UNENFORCEABLE CONTRACTS  Characteristics of Unenforceable Contracts 1.They cannot be enforced by a proper action in court 2.They are susceptible of ratification 3.They cannot be assailed by third persons

56. TITLE III: NATURAL OBLIGATIONS

57.  4 types of obligation in juridical science 1.Moral obligations – duties of conscience completely outside the field of law 2.Natural obligations – duties not sanctioned by any action but have a relative juridical effect 3.Civil obligations – are in conformity with positive law but are contrary to juridical principles and susceptible of being annulled; enforceable by action 4.Mixed obligations – full juridical effect that also falls under civil obligations

58.  Requisites of Natural Obligation 1.Juridical tie between two persons 2.Tie is not given effect by law but instead by the conscience of man

59. TITLE IV: ESTOPPEL

60.  Definition  Admission or representation is rendered conclusive upon the person making it and cannot be denied of disproved as against the person relying thereon.  Bar which precludes a person from denying or asserting anything to the contrary of that which it has been established as the truth  Concludes the truth to prevent falsehood and fraud  Based on moral right and natural justice

61.  Kinds of Estoppel 1.Technical estoppel a.By record – preclusion to deny the truth of matters set forth in a record and also to deny the facts adjudicated by a court of competent jurisdiction b.By deed – bar which precludes on party to a deed and his privies from asserting as against the other party and his privies any right or title in derogation of the deed or from denying the truth of any material facts asserted in it, usually written in documents 2.Equitable estoppel – because of something which he has done or omitted to do, a party is denied the right to plead or prove an otherwise important act

62. TITLE V: TRUSTS

63.  Definition  Is the legal relationship between one person having an equitable ownership in property and another person owning the legal title to such property, the equitable ownership of the former entitling him to the performance of certain duties and the exercise of certain powers by the latter.

64.  Characteristics of Trust 1.A relationship 2.A relationship of fiduciary character 3.A relationship with respect to property, not involving personal duties 4.Involves existence of equitable duties imposed upon holder of the title to the property to deal with it for the benefit of another 5.Arises as a result of a manifestation of intention to create the relationship

65.  Parties in a Trust 1.Trustor – establishes a trust 2.Trustee – one whom confidence is reposed as regards to property for the benefit of another person 3.Beneficiary – person for whose benefit the trust has been created

66.  Kinds of Trust 1.Express trusts – can come into existence only by the manifestation of an intention to create it by one having legal and equitable dominion over the property made subject to it. 2.Implied trusts – come into existence either through implication of an intention to create a trust as a matter of law or through the imposition of the trust irrespective of and even contrary to any such intention.

67. TITLE VI: SALES

68. CHAPTER 1: NATURE AND FORM OF THE CONTRACT  By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.  The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered.  Things having a potential existence may be the object of the contract of sale. The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence.

69. CHAPTER 1: NATURE AND FORM OF THE CONTRACT  The goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or goods to be manufactured, raised, or acquired by the seller after the perfection of the contract of sale, in this Title called "future goods."

70. CHAPTER 1: NATURE AND FORM OF THE CONTRACT  A contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his special order, and not for the general market, it is a contract for a piece of work.

71. CHAPTER 1: NATURE AND FORM OF THE CONTRACT  In order that the price may be considered certain, it shall be sufficient that it be so with reference to another thing certain, or that the determination thereof be left to the judgment of a special person or persons.

72. CHAPTER 1: NATURE AND FORM OF THE CONTRACT  The fixing of the price can never be left to the discretion of one of the contracting parties. However, if the price fixed by one of the parties is accepted by the other, the sale is perfected.  The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price.

73. CHAPTER 1: NATURE AND FORM OF THE CONTRACT  Where goods are put up for sale by auction in lots, each lot is the subject of a separate contract of sale.  A sale by auction is perfected when the auctioneer announces its perfection by the fall of the hammer, or in other customary manner. Until such announcement is made, any bidder may retract his bid; and the auctioneer may withdraw the goods from the sale unless the auction has been announced to be without reserve.  A right to bid may be reserved expressly by or on behalf of the seller, unless otherwise provided by law or by stipulation.

74. CHAPTER 1: NATURE AND FORM OF THE CONTRACT  In the contract of sale of goods by description or by sample, the contract may be rescinded if the bulk of the goods delivered do not correspond with the description or the sample, and if the contract be by sample as well as description, it is not sufficient that the bulk of goods correspond with the sample if they do not also correspond with the description.

75. CHAPTER 1: NATURE AND FORM OF THE CONTRACT  In the contract of sale of goods by description or by sample, the contract may be rescinded if the bulk of the goods delivered do not correspond with the description or the sample, and if the contract be by sample as well as description, it is not sufficient that the bulk of goods correspond with the sample if they do not also correspond with the description.

76. SOURCES  Santos, K. (2012). Obligations and Contracts: Expanded Course Outline.  PARAS NOTES – Obligations and Contracts – Summary.  Obligationscontracts.blogspot.com