Obligation and Contracts

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Incomplete definition because it focuses on the passive

aspect of the obligation.
An obligation is a juridical relation whereby a person
(called the creditor) may demand from another (called
the debtor) the observance of a determinate conduct,
and, in case of breach, may obtain satisfaction from the
assets of the latter.
The obligation pertaining to Art. 1156 refers only to civil
obligations.
Civil Obligations can be enforced in court, while Natural
Obligations are not enforceable in courts. Should the
debtor choose to honor his obligation and perform it,
there is nothing wrong with it. The enforceability of
natural obligation is more or less dictated by the
conscience of the debtor. But it does not make it less
than an obligation. It is still an obligation only that you
do not have any recourse in law to enforce it. You are
totally at the mercy of the debtorhis conscience,
whether or not he would like to comply with his
obligation.
Prescription does NOT extinguish the obligation. What
does it extinguish is the right to enforce the action.
ELEMENTS OF OBLIGATION:
(1) Active subject, one who has the power to demand
the prestation, known as the creditor or obligee;
(2) Passive subject, one, who is bound to perform the
prestation, known as the debtor or obligor;
(3) Object or Prestation, is the conduct which calls for
the giving, doing or not doing on the part of the
debtor; should be susceptible of valuation in terms
of money, because the thing that gives an
obligatory force to an obligation is the possibility of
sanction, and it is only possible if failing fulfillment of
the prestation, you are able to proceed to the assets
of your debt;
(4) Efficient cause or the juridical tie refers to the reason
why the obligation exists; the source of the
obligation.
The personal elements of the Obligation (active and
passive subjects) need not be identified or determined in
the act constituting the obligation, but they must at least
be identifiable or determinable by some kind of criteria.
The prestation need not be of an economic value
because, all interest, even moral ones, in view of the
protection given to them by law, have some pecuniary
value.
An example of an obligation which is economic in
character is a contract of sale. We can easily appreciate
that there is pecuniary valuation in case of breach. If the
party does not pay by way of the purchase price, then
the other party may sue and recover the value of the
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ARTICLE 1156. An obligation is a juridical necessity to give, to

do or not to do.
purchase price. We can quantify it. Or, if the property is

not delivered, again, it can still be quantified because the
sanction is economic in character. It can be easily be
translated into monetary value.
But what about an obligation which is NOT economic
in character, because it is our theory that all interest are
susceptible of pecuniary valuation. What can be an
example of an obligation which is not of economic in
character but is susceptible of monetary value?
Obligation between Husband and wife. In case of
breach, the remedy of the aggrieved spouse is to seek
damages. It cannot be really quantified because it is not
economic in character but we have to quantify it. We
have to assume that it is susceptible of monetary
valuation. There is no clear basis of the damages but we
have to assume that there is.
Our theory is that all interests are susceptible of
pecuniary valuation and this has to be so, otherwise,
whatever remedy we may have under the law will be all
for naught. If we cannot obtain satisfaction from the
assets of the debtor, it is useless to have cause of action,
right of action and judgment in our favor.
REQUISITES FOR A VALID PRESTATION:
(1) It must be licit, possible, physically and judicially;
(2) Must be determinate or at least determinable; and
(3) Must have a possible equivalent in money or
susceptible of economic valuation.
OBLIGATION TO GIVE: one in which the prestation
consists in the delivery of a movable or an immovable
thing, in order to create a real right, or for the use of the
recipient, or for its simple possession, or in order to
return it to its owner.
OBLIGATION TO DO: It includes all kinds of work or
services; Obligation to do and Obligation to give:
sometimes overlap. The remedies available to obligation
to give are different from the remedies available to
obligation to do.
OBLIGATION NOT TO DO: Obligation not to do an
obligation which he may otherwise do. This already
includes the obligation to give.
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BOOK IV - Obligations and Contracts

TITLE I - Obligations
CHAPTER 1 - General Provisions
ARTICLE 1157. Obligations arise from:

(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Quasi-delicts
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o Pelayo vs. Lauron, 12 Phil. 453, January 12, 1909 - In this
case, why are the in-laws not responsible for the claim of
the doctor? The approach should be one of elimination.
If we are going to answer this question, we should not
jump right away that there is no provision in the law
making the in-laws of a person liable for her medical
expenses. We have to say that: Under the law an
obligation can be sourced from the law, contract, delict,
quasi-delict or quasi-contract. Obviously, this case does
not involve a quasi-delict. We can only look only into
two possible sources, i.e. law and contract. There is no
Civil Law Review II | Obligations and Contracts | UST Law
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contract between the doctor and in-laws. Based on the

facts, they only summoned the doctor. They did not
really engage his services. So we are left with the law.
But there is nothing in the law which makes an in-law
(medical expenses) of a spouse liable. This liability
devolves upon the other spouse.
ARTICLE 1158. Obligations derived from law are not
presumed. Only those expressly determined in this Code or
in special laws are demandable, and shall be regulated by
the precepts of the law which establishes them; and as to
what has not been foreseen, by the provisions of this Book.
In the first case, the provisions of Articles 1317, 1403, No. 1,

and 1404 regarding unauthorized contracts shall govern.
In the second case, the rules on agency in Title X of this Book
shall be applicable.
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ARTICLE 1159. Obligations arising from contracts have the

force of law between the contracting parties and should be
complied with in good faith.
A contract entered into in the name of another by one who

has no authority or legal representation, or who has acted
beyond his powers, shall be unenforceable, unless it is
ratified, expressly or impliedly, by the person on whose
behalf it has been executed, before it is revoked by the other
contracting party.
Art. 1403. The following contracts are unenforceable, unless
they are ratified: (1) Those entered into in the name of
another person by one who has been given no authority or
legal representation, or who has acted beyond his powers.
Art. 1404. Unauthorized contracts are governed by Article
1317 and the principles of agency in Title X of this Book.
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Art. 1317. No one may contract in the name of another

without being authorized by the latter, or unless he has by
law a right to represent him.
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A juridical relation which arises from certain lawful,

unilateral and voluntary acts to the end that no one
shall be unjustly enriched or benefited at the expense of
another (Art. 2412, NCC).
Principally, we have two (2) principal kinds of quasicontracts:
(1) Negotiorium Gestio, which is the obligation to
indemnify or to reimburse; and
(2) Solutio Indebiti, which is the obligation to return the
thing by mistake and the obligation to give back
what has been received by mistake.
Both are based on the presumed will of the debtor that
he would want to give back what he had received by
mistake; he would want to reimburse the officious
manager for all his troubles in managing his business in
his absence in accordance with the principle of equity,
specifically, the principle that no one shall be unjustly
enriched at the expense of the another (Unjust
Enrichment). We presume that such is the intent of the
debtor because he will not want to be unjustly enriched
at the expense of the payor or officious manager.
NEGOTIORIUM GESTIO:
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ARTICLE 1160. Obligations derived from quasi-contracts shall

be subject to the provisions of Chapter 1, Title XVII, of this
Book.
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Principle of Autonomy of Will states that the will of the

parties in the contracts has the force of law and should
be complied with in good faith. The contract will serve
as the law between the parties.
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It is a juridical relation which takes place when

somebody takes charge of the agency or management
of the business or property of another without any
power from the latter.
If there is tacit authorization, we do not have
negotiorium gestio; we have a contract of agency.
There may be obligation that is created but it is not
sourced from a quasi-contract. Its source would be a
contract, specifically, a contract of agency.
If the property or business was not actually abandoned
or neglected, the same will be governed by Arts. 1317,
1403 (1), and 1404.
Art. 2144. Whoever voluntarily takes charge of the agency

or management of the business or property of another,
without any power from the latter, is obliged to continue the
same until the termination of the affair and its incidents, or to
require the person concerned to substitute him, if the owner
is in a position to do so. This juridical relation does not arise
in either of these instances:
(1) When the property or business is not neglected or
abandoned;
(2) If in fact the manager has been tacitly authorized by
the owner.
The status of contracts that the officious manager

entered into in the name of the owner without
authority from the latter is "unenforceable." No one can
enter into a contract in the name of the other person
without the consent of such other person. And if he
does so, the contract is unenforceable as against the
supposed principal. But as against him (officious
manager), that contracts will be his personal liability.
Art. 2149. The ratification of the management by the owner

of the business produces the effects of an express agency,
even if the business may not have been successful.
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Under Article 2149, the law says that if there has been
ratification, then there will be an obligation for
reimbursement but it will be under the provisions of the
express agency that has been created.
If there is no ratification for the acts of the officious
manager, meaning to say that an agency has not been
constituted, then we need to look for benefits that may
have been accrued to the owner.
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If there are benefits that had been accrued to him, the

officious manager shall be entitled to reimbursement for
necessary and useful expenses, as well as
indemnification for any damage that he may have
suffered as a result of his management.
Art. 2150. Although the officious management may not

have been expressly ratified, the owner of the property or
business who enjoys the advantages of the same shall be
liable for obligations incurred in his interest, and shall
reimburse the officious manager for the necessary and
useful expenses and for the damages which the latter may
have suffered in the performance of his duties.
Art. 2154. If something is received when there is no right to

demand it, and it was unduly delivered through mistake, the
obligation to return it arises.
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The same obligation shall be incumbent upon him when

the management had for its purpose the prevention of an
imminent and manifest loss, although no benefit may have
been derived.
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At the very least, to be entitled to reimbursement, the

officious manager must be in good faith and he did not
cause any damage (thats what the law means that the
property was still intact).
Art. 2156. If the payer was in doubt whether the debt was
due, he may recover if he proves that it was not due.
Art. 2157. The responsibility of two or more payees, when
there has been payment of what is not due, is solidary.
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Art. 2155. Payment by reason of a mistake in the

construction or application of a doubtful or difficult question
of law may come within the scope of the preceding article.
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Art. 2151. Even though the owner did not derive any benefit
and there has been no imminent and manifest danger to
the property or business, the owner is liable as under the first
paragraph of the preceding article, provided:
(1) The officious manager has acted in good faith, and
(2) The property or business is intact, ready to be returned
to the owner.
The payment must have been made by mistake and

must not have been motivated by any act of liberality.
If it is by liberality, then it becomes donation. Usually, the
law refers to Solutio Indebiti as payment by mistake. And
when we speak of mistake, it includes mistake of law.
We are deviating from the provisions of Art. 3. Art. 3 tells
us that ignorance of the law excuses no one, which
means that no one can ever claim a mistake of law as a
defense. But we have a provision that states that
payment by a mistaken interpretation of a difficult
question of law qualifies as a mistake that can justify an
act of recovery of what have been paid under the
principle of solution indebiti. For us to deviate from what
Art. 3 says, we need a solid basis, the basis is Art. 2155.
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Art. 2152. The officious manager is personally liable for

contracts which he has entered into with third persons, even
though he acted in the name of the owner, and there shall
be no right of action between the owner and third persons.
These provisions shall NOT apply:
(1) If the owner has expressly or tacitly ratified the
management, or
(2) When the contract refers to things pertaining to the
owner of the business.
In essence, the obligation of the owner to the officious
manager is to reimburse the officious manager. It is not
required that there should be some benefit that has
accrued to the owner as a result of the management of
the officious manager before the owner reimburses the
officious manager.
Art. 2153. The management is extinguished:

(1) When the owner repudiates it or puts an end thereto;
(2) When the officious manager withdraws from the
management, subject to the provisions of Article 2144;
(3) By the death, civil interdiction, insanity or insolvency of
the owner or the officious manager.
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SOLUTIO INDEBITI: Juridical relation received something

from another without any right to demand for it, and
the thing was unduly delivered to him through mistake.
Art. 2158. When the property delivered or money paid

belongs to a third person, the payee shall comply with the
provisions of article 1984.
Art. 1984. The depositary cannot demand that the depositor
prove his ownership of the thing deposited.
Nevertheless, should he discover that the thing has been
stolen and who its true owner is, he must advise the latter of
the deposit.
If the owner, in spite of such information, does not claim it
within the period of one month, the depositary shall be
relieved of all responsibility by returning the thing deposited
to the depositor.
If the depositary has reasonable grounds to believe that the
thing has not been lawfully acquired by the depositor, the
former may return the same.
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The obligation of the payee was to give back what he

has received. When we speak of payment, we are not
limited to money, we can also pay by delivering
property or some other objects.
If there is damage that is caused to the thing by reason
of the fault or negligence of the payee who is now
obligated to give back what he had received by mistake,
his liability would still be mitigated because his liability
would only to the extent that he has been benefited.
He would not also have any liability in case he has
already disposed on the thing save for the obligation to
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Art. 2160. He who in good faith accepts an undue payment

of a thing certain and determinate shall only be responsible
for the impairment or loss of the same or its accessories and
accessions insofar as he has thereby been benefited. If he
has alienated it, he shall return the price or assign the action
to collect the sum.
Art. 2161. As regards the reimbursement for improvements
and expenses incurred by him who unduly received the
thing, the provisions of Title V of Book II shall govern.
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It is a totally different scenario if the payee is in bad faith.

The payee is liable for the loss or impairment regardless
of the cause. This can include fortuitous event.
Apart from this extended liability for loss or damage to
the property, the payee must pay legal interest if the
thing received by mistake is a sum of money.
If the thing received by mistake is NOT money, then the
payee must pay the fruits of the thing. The extent of his
liability for the payment of fruits includes the fruits
received and or which should have been received if the
thing produces fruits.
Art. 2168. When during a fire, flood, storm, or other calamity,

property is saved from destruction by another person
without the knowledge of the owner, the latter is bound to
pay the former just compensation.
Art. 2169. When the government, upon the failure of any
person to comply with health or safety regulations
concerning property, undertakes to do the necessary work,
even over his objection, he shall be liable to pay the
expenses.
Art. 2170. When by accident or other fortuitous event,
movables separately pertaining to two or more persons are
commingled or confused, the rules on co-ownership shall be
applicable.
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Art. 2167. When through an accident or other cause a

person is injured or becomes seriously ill, and he is treated or
helped while he is not in a condition to give consent to a
contract, he shall be liable to pay for the services of the
physician or other person aiding him, unless the service has
been rendered out of pure generosity.
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He shall furthermore be answerable for any loss or

impairment of the thing from any cause, and for damages to
the person who delivered the thing, until it is recovered.
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Art. 2159. Whoever in bad faith accepts an undue payment,

shall pay legal interest if a sum of money is involved, or shall
be liable for fruits received or which should have been
received if the thing produces fruits.
Art. 2166. When the person obliged to support an orphan,

or an insane or other indigent person unjustly refuses to give
support to the latter, any third person may furnish support to
the needy individual, with right of reimbursement from the
person obliged to give support. The provisions of this article
apply when the father or mother of a child under eighteen
years of age unjustly refuses to support him.
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deliver the price or assign his right to recover the thing

from the person to whom it has been transferred.
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Art. 2162. He shall be exempt from the obligation to restore

who, believing in good faith that the payment was being
made of a legitimate and subsisting claim, destroyed the
document, or allowed the action to prescribe, or gave up
the pledges, or cancelled the guaranties for his right. He
who paid unduly may proceed only against the true debtor
or the guarantors with regard to whom the action is still
effective.
Art. 2163. It is presumed that there was a mistake in the
payment if something which had never been due or had
already been paid was delivered; but he from whom the
return is claimed may prove that the delivery was made out
of liberality or for any other just cause.
Art. 2164. When, without the knowledge of the person
obliged to give support, it is given by a stranger, the latter
shall have a right to claim the same from the former, unless it
appears that he gave it out of piety and without intention of
being repaid.
Art. 2165. When funeral expenses are borne by a third
person, without the knowledge of those relatives who were
obliged to give support to the deceased, said relatives shall
reimburse the third person, should the latter claim
reimbursement.
Art. 2174. When in a small community a nationality of the

inhabitants of age decide upon a measure for protection
against lawlessness, fire, flood, storm or other calamity,
anyone who objects to the plan and refuses to contribute to
the expenses but is benefited by the project as executed shall
be liable to pay his share of said expenses.
Art. 2175. Any person who is constrained to pay the taxes of
another shall be entitled to reimbursement from the latter.
ARTICLE 1161. Civil obligations arising from criminal offenses
shall be governed by the penal laws, subject to the
provisions of article 2177, and of the pertinent provisions of
Chapter 2, Preliminary Title, on Human Relations, and of Title
XVIII of this Book, regulating damages.
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Delicts or crimes are source of obligations because of

Art. 100 of the Revised Penal Code which states that
every person criminally liable for a felony is also civilly
liable.
How will we enforce civil liability arising from a crime?
By default: the civil action is impliedly instituted in the
criminal action.
The default procedure will NOT apply if there is:
(1) Reservation to file a separate civil action;
(2) The civil action was filed ahead of the criminal
action; and
(3) There is waiver of civil liability.
If the civil action is filed ahead of the criminal action and
the criminal action is subsequently filed, the civil action is
suspended. But if the civil action is reserved, it cannot be
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Art. 31. When the civil action is based on an obligation N

arising from the act or omission complained of as a felony,
such civil action may proceed independently of the criminal
proceedings and regardless of the result of the latter.
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Would Art. 31 constitute an independent civil action?

No, because there is no criminal component.
The concept of independent civil action is that it has a
corresponding criminal aspect or criminal liability. If a
civil liability arises from a crime, then we apply Art. 100
of the RPC.
But if there is no criminal component, would the rule of
precedence of criminal action ahead of the civil action
be relevant? No, the precedence will not apply because
there is no criminal component.
What are these independent civil actions recognized by
the law?
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Would your suit against the bus operator involve the

same act? Yes, the act of collusion perpetrated by his
driver.
But what is the cause of action against the owner?
Breach of Contract of Carriage (Culpa Contractual).
Can he proceed independently of the criminal action?
Yes, under Art. 31, NCC. This is not based on the same
criminal act. It is based on a contract of carriage with the
bus operator.
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Art. 32. Any public officer or employee, or any private

individual, who directly or indirectly obstructs, defeats,
violates or in any manner impedes or impairs any of the
following rights and liberties of another person shall be liable
to the latter for damages:
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commenced until the final judgment of the criminal

action.
The prescriptive period of filing the civil action will not
run during the time that the criminal action is pending.
Is there any exception to the rule where the civil action
is either suspended or if the same is not yet filed, its filing
had to be deferred? Yes. The following are the
exceptions:
(1) Prejudicial Questions; and
(2) Independent Civil Actions.
Independent civil actions can be filed before, during or
after the filing of the criminal action.
Do we need to make a reservation for independent civil
actions? Is it considered as impliedly instituted? It is NOT
impliedly instituted anymore. This is one of the changes
in the Rules on Criminal Procedure of 2000.
In the same act, we have two (2) actions:
(1) Criminal action with accompanying civil liability; or
(2) Civil obligation arising from quasi-delict.
Strictly speaking, it is not really an exception because
what we have in mind here is an independent civil
action. That independent civil action is not always
deemed a civil obligation or civil liability that arises from
a criminal act.
Would there be an instance where it is civil liability? Yes,
if for instance it is explicitly allowed to be an
independent civil action. The damages that you want to
recover because of the defamation taken against you is
recognized as an Independent Civil Action.
But there are other Independent Civil Actions that may
invoke the same act but not classified as civil obligation
arising from criminal act as for instance the quasi-delict;
i.e. to two separate and distinct actions in law.
Is the civil action accompanying the crime of reckless
imprudence considered to be an independent civil
action? No. It would be suspended or be barred until
there is a final judgment in the criminal action for
reckless imprudence.
Take the same act of negligence, this time it can also be
pursued or prosecuted as civil action for damages
arising from quasi-delict. Does it involve the same act?
Yes. Can it proceed independently of the criminal
action? Yes, because it is considered to be an
Independent Civil Action.
Is it the same civil obligation that arises from a criminal
act of reckless imprudence? No, because it is a civil
action that arises from a quasi-delict even though that
quasi-delict also pertains to the same act of negligence.
Another instance when a civil action can proceed
independently of the criminal action even though it
pertains to the same act - Example: You are a passenger
aboard a bus. Driver is driving recklessly. Driver figured
in an accident, collided with another bus.
Who can be sued? Can you sue the driver of reckless
imprudence? Yes.
Could that have an accompanying civil obligation? Yes.
Can you sue the bus operator? Yes.
(1) Freedom of religion;

(2) Freedom of speech;
(3) Freedom to write for the press or to maintain a periodical
publication;
(4) Freedom from arbitrary or illegal detention;
(5) Freedom of suffrage;
(6) The right against deprivation of property without due
process of law;
(7) The right to a just compensation when private property is
taken for public use;
(8) The right to the equal protection of the laws;
(9) The right to be secure in one's person, house, papers,
and effects against unreasonable searches and seizures;
(10) The liberty of abode and of changing the same;
(11)The privacy of communication and correspondence;
(12) The right to become a member of associations or
societies for purposes not contrary to law;
(13) The right to take part in a peaceable assembly to
petition the Government for redress of grievances;
(14) The right to be free from involuntary servitude in any
form;
(15) The right of the accused against excessive bail;
(16) The right of the accused to be heard by himself and
counsel, to be informed of the nature and cause of the
accusation against him, to have a speedy and public trial, to
meet the witnesses face to face, and to have compulsory
process to secure the attendance of witness in his behalf;
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The responsibility herein set forth is not demandable from a

judge unless his act or omission constitutes a violation of the
Penal Code or other penal statute.
Art. 1171. Responsibility arising from fraud is demandable in

all obligations. Any waiver of an action for future fraud is
void.
Art. 2201, par. 2. In case of fraud, bad faith, malice or
wanton attitude, the obligor shall be responsible for all
damages which may be reasonably attributed to the nonperformance of the obligation.
Art. 1174. Except in cases expressly specified by the law, or
when it is otherwise declared by stipulation, or when the
nature of the obligation requires the assumption of risk, no
person shall be responsible for those events which could not
be foreseen, or which, though foreseen, were inevitable.
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Art. 33. In cases of defamation, fraud, and physical injuries, a

civil action for damages, entirely separate and distinct from
the criminal action, may be brought by the injured party.
Such civil action shall proceed independently of the criminal
prosecution, and shall require only a preponderance of
evidence.
If the law or contract does not state the diligence which is to

be observed in the performance, that which is expected of a
good father of a family shall be required.
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The indemnity shall include moral damages. Exemplary

damages may also be adjudicated.
Art. 1173. The fault or negligence of the obligor consists in

the omission of that diligence which is required by the
nature of the obligation and corresponds with the
circumstances of the persons, of the time and of the place.
When negligence shows bad faith, the provisions of Articles
1171 and 2201, paragraph 2, shall apply.
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In any of the cases referred to in this article, whether or not

the defendant's act or omission constitutes a criminal
offense, the aggrieved party has a right to commence an
entirely separate and distinct civil action for damages, and for
other relief. Such civil action shall proceed independently of
any criminal prosecution (if the latter be instituted), and may
be proved by a preponderance of evidence.
Art. 1172. Responsibility arising from negligence in the

performance of every kind of obligation is also demandable,
but such liability may be regulated by the courts, according
to the circumstances.
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(17) Freedom from being compelled to be a witness against

one's self, or from being forced to confess guilt, or from
being induced by a promise of immunity or reward to make
such confession, except when the person confessing
becomes a State witness;
(18) Freedom from excessive fines, or cruel and unusual
punishment, unless the same is imposed or inflicted in
accordance with a statute which has not been judicially
declared unconstitutional; and
(19) Freedom of access to the courts.
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Art. 34. When a member of a city or municipal police force

refuses or fails to render aid or protection to any person in
case of danger to life or property, such peace officer shall be
primarily liable for damages, and the city or municipality shall
be subsidiarily responsible therefor.
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The civil action herein recognized shall be independent of

any criminal proceedings, and a preponderance of evidence
shall suffice to support such action.
ARTICLE 1162. Obligations derived from quasi-delicts shall be
governed by the provisions of Chapter 2, Title XVII of this
Book, and by special laws.
Art. 2179. When the plaintiff's own negligence was the

immediate and proximate cause of his injury, he cannot
recover damages. But if his negligence was only
contributory, the immediate and proximate cause of the
injury being the defendant's lack of due care, the plaintiff
may recover damages, but the courts shall mitigate the
damages to be awarded.
Art. 2180. The obligation imposed by article 2176 is

demandable not only for one's own acts or omissions, but
also for those of persons for whom one is responsible. The
father and, in case of his death or incapacity, the mother, are
responsible for the damages caused by the minor children
who live in their company.
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Art. 2176. Whoever by act or omission causes damage to

another, there being fault or negligence, is obliged to pay
for the damage done. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is called
a quasi-delict and is governed by the provisions of this
Chapter.
Art. 2177. Responsibility for fault or negligence under the
preceding article is entirely separate and distinct from the
civil liability arising from negligence under the Penal Code.
But the plaintiff cannot recover damages twice for the same
act or omission of the defendant.
Art. 2178. The provisions of articles 1172 to 1174 are also
applicable to a quasi-delict.
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What will be the requisites for quasi-delicts?

(1) There is fault or negligence on the part of the
defendant resulting to a wrongful act or omission,
whether voluntary or not, and whether criminal or
not;
(2) There is damage and injury suffered by another
(plaintiff);
(3) There is a direct causal relation between the fault or
negligence and the resulting damage and injury
(Proximate Cause).
The plaintiff has the burden of proving the cause and
the connection to the damage suffered by him.
On this point, it is relevant to understand the Principle of
Res Ipsa Loquitur. Res Ipsa Loquitur literally means the
thing speaks for itself. This can be applied when an
injury takes place or when an injury was incurred. And
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If it is culpa contractual, there is no need to prove

negligence, we only have to prove the existence of the
contract and the fact that the contract was not
performed in accordance with its terms.
In culpa aquiliana, we need to prove the negligence of
the defendant; the damage caused to the plaintiff; and
the connection between the damage and negligence.
In culpa aquiliana, what happens if the plaintiff is also
guilty of contributory negligence? It will not extinguish
the liability of the defendant but it can justify mitigation
of liability.
Is the liability created by quasi-delicts limited to the
person who committed the negligent act? No, because
of the concept of vicarious liability (Art. 2180, NCC).
CHAPTER 2- Nature and Effect of Obligations
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What are the different kinds of obligations?

(1) Obligation to give;
(2) Obligation to do; and
(3) Obligation not to do.
When it comes to obligations to give, can this be further
classified? Yes. Generic Obligation to give (generic
thing); and Specific Obligation to give (specific thing).
A specific thing is one which is specifically designated
and particularly segregated from others of the same
class; whereas a generic thing is one which is indicated
only by its class or genus.
What will be the obligation of the debtor in a specific
obligation to give? Obligation to give the very thing due
under the obligation.
Can the debtor insist on delivering another thing on the
premise that this thing is more valuable or more
expensive? He cannot insist.
What if the creditor agrees? He can deliver.
If he insists and the creditor agrees, what happens to
the original obligation? The original obligation is
extinguished. In novation the original obligation is
extinguished by simultaneous creation of a new
obligation.
What are the other obligations of the debtor in a
specific obligation to give?
(1) Duty to preserve the thing that is due; and the
(2) Duty to deliver the fruits, accessions, and
accessories.
What is entailed by this obligation to preserve? So that
the obligation will not be rendered nugatory.
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when we take the occurrence of the injury with the

surrounding circumstances, you are allowed by law, by
virtue of this principle to make an inference that
negligence may have been committed by the
defendant.
This inference requires the defendant to come up with
an explanation as to why the injury is committed. Failure
to come up with an acceptable explanation would
dispense with any further proof of negligence.
This principle draws largely on human experience. If the
circumstances based on ordinary human experience
would ordinarily preclude the occurrence of this
damage then it can only be because there was fault or
negligence on the part of the defendant.
Res ipsa loquitur is not a rule of substantive law. Its
elements are as follow:
(1) The occurrence of an injury;
(2) The thing which caused the injury was under the
control and management of the defendant;
(3) The occurrence was such that in the ordinary
course of things, would not have happened if those
who had control or management used proper care;
and
(4) The absence of explanation by the defendant.
Of the foregoing requisites, the most instrumental is the
"control and management of the thing which caused
the injury."
Fault is when a person acts which are contrary to what
should have been done.
Negligence (culpa), on the other hand, is failure to
observe the care, diligence, and vigilance required
under the circumstances.
Another relevant concept is proximate cause. Proximate
cause will only be relevant if there are more than one
possible obligors or possible candidates who shall be
liable for the damage.
Proximate cause is the adequate and efficient cause
which by the natural order of events, unbroken by any
efficient intervening cause would produce the injury
and without which the result thereof would not have
occurred.
Illustration: Accident. The bus turned over, gasoline
spilled. No electricity. People who rescued brought
torches. The bus caught fire killing trapped passengers.
Immediate cause: Fire. Proximate cause: Negligence of
the bus driver.
Negligence is Culpa. Culpa can be culpa contractual or
culpa aquiliana. Culpa contractual is where the fault or
negligence of the debtor as an incident in the fulfillment
of an existing obligation; whereas Culpa aquiliana is
where the fault or negligence constitutes an
independent source of obligation between parties not
previously bound. Culpa aquiliana is a source of
obligation.
It is important to know when an act is culpa aquiliana or
culpa contractual because of the difference in the
matters that will have to be proven.
ARTICLE 1163. Every person obliged to give something is

also obliged to take care of it with the proper diligence of a
good father of a family, unless the law or the stipulation of
the parties requires another standard of care.
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Why is diligence of a good father of a family (ordinary

diligence) required? This is the standard of diligence
required under the law if there is no stipulation as to the
standard of care. This is the diligence which a
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Obligation to deliver the fruits, accessions, and

accessories. What is the basis of this obligation? When
the obligation to deliver the thing due arises, the
creditor has a right to the fruits under the law.
ARTICLE 1165. When what is to be delivered is a

determinate thing, the creditor, in addition to the right
granted him by article 1170, may compel the debtor to
make the delivery.
If the thing is indeterminate or generic, he may ask that the
obligation be complied with at the expense of the debtor.
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This is an instance where there is liability for a fortuitous

event by express stipulation of the law, i.e. when there is
delay and there is a promise to deliver the same thing to
two different people.
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ARTICLE 1166. The obligation to give a determinate thing

includes that of delivering all its accessions and accessories,
even though they may not have been mentioned.
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If the obligor delays, or has promised to deliver the same

thing to two or more persons who do not have the same
interest, he shall be responsible for any fortuitous event until
he has effected the delivery.
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When does the obligation to deliver arise? It depends

on the source of obligation. If the source of the
obligation is the law, quasi-contract, delict, or quasi-delict
we can always consult the provision of the law as to
when his obligation is created.
When it comes to contracts, when does the obligation
to deliver arise? Upon the perfection of the contract.
Why do you say upon perfection of the contract? There
is no specific provision in the chapters on obligation and
contracts which tell us when the obligation to deliver
arises. What we do have is a specific provision in the
chapter on sales Art. 1523 which says that upon the
perfection of the contract of sale then the obligation to
deliver arises.
We can use the rule provided in the Law on Sales to
apply to contracts in general and say that the obligation
to deliver arises from the moment of perfection of the
contract. Since the contract of sale, like most contracts, is
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ARTICLE 1164. The creditor has a right to the fruits of the

thing from the time the obligation to deliver it arises.
However, he shall acquire no real right over it until the same
has been delivered to him.
consensual in nature, it is perfected upon the meeting of

the minds of the parties.
What kind of right is acquired by the creditor over the
fruits of the thing due? Only a personal right (the power
belonging to one person to demand of another, as a
definite passive subject, the fulfillment of the prestation
to give, to do or not to do).
What is a real right? The power belonging to a person
over a specific thing, without a passive subject
individually determined against whom such right may
be personally exercised. It can be enforced against
anyone and everyone.
An example that would illustrate both real rights and
personal rights over the fruits of a specific object due
under an obligation: X sells his dog to Y. The dog is to
be delivered one (1) week after the contract was
entered into. Prior to the delivery of the dog to Y, the
dog gave birth to several puppies. The puppies were
sold and delivered to Z. When the time to deliver the
dog to Y arrived, X refused to deliver the dog together
with the puppies.
Will it matter if there is more than one dog in the
example? Yes, because it would no longer be a specific
obligation to give, and there would no longer be an
obligation to deliver the fruits.
What would be the remedies available to Y? Y can only
run after X, not to Z because there is no privity of
contract between Y and Z. Y has a personal right only
against X.
What is the cause of action of Y against X? Action for
specific performance and damages. In an action for
specific performance, the plaintiff is enforcing his
personal right, the right under the contract.
If Y names Z as a party defendant, what defense can Z
to resist the complaint against him? Lack of cause of
action because Z is not a party to the contract. Only the
parties to the contract are bound by the agreement.
Supposing there has been delivery made to Y, and then
for some reason, X managed to still sell and deliver the
puppies to Z. What will be the remedies of Y? In running
after Z, what would be his objective? The recovery of
the puppies. Y must not be concerned with the contract
between X and Z.
In what capacity should he bring that action? Is it in his
capacity as a creditor? Not anymore, but as owner.
As an owner, does he have a cause of action against Z?
Yes, because as owner he enjoys real right over the
puppies and this can be enforced against anyone in
possession of the puppies.
In obligations to give a generic object, what are the
obligations of the debtor? To deliver a thing that is of
the same quantity, quality, and kind as agreed upon by
the parties.
In a generic obligation to give, the debtor would enjoy
a certain degree of discretion, unlike in specific
obligation to give.
Would there be a limitation on his exercise of his
discretion when it comes to complying with his
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reasonable person would exercise over his own

belongings.
Can the parties stipulate on a different degree of
diligence? Yes, provided ordinary diligence is the limit. It
is the minimum amount of care. The parties cannot
stipulate on another degree of care that is lesser than
ordinary diligence; otherwise the obligation will be
illusory.
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How will this be more practical to you? In the meantime

you can do what you need to do using the object
which should have been delivered to you. For example
cement for the construction of your house. The
construction will not be delayed. Unlike in specific
performance, you go to court; even after five (5) years
you still dont have a writ of execution because you are
still on trial stage. In the meantime your house remains
unfinished and the materials deteriorated even before
the construction.
Any other remedies available to the creditor? Seek
indemnity for damages.
Damages here, is it in conjunction with specific
performance, or in substitute performance or must it
stand alone? It can be in conjunction with either specific
performance or substitute performance. The same holds
true for specific obligations to give, i.e. the damages may
be in conjunction with specific performance.
Can you think of an instance where the creditor would
have to settle for damages alone? When the obligation
could no longer be performed. In the previous example,
where the dogs and the puppies were sold to another
person prior to the delivery to the buyer, his only
recourse there is to ask for damages assuming that the
3rd person acted in good faith.
What is the obligation of the debtor in an obligation to
do? Basically, to do what is asked of him.
What are the remedies of the creditor? Substitute
performance.
What about specific performance? It is not available
because it will amount to involuntary servitude.
Is substitute performance available in all kinds of
obligation to do? No. It is not available when the
personal qualification of the obligor is taken into
consideration.
What is your remedy (in case personal qualification of
the obligor is taken into consideration in an obligation
to do)? Only damages. Damages as a remedy is always
available.
But what would be the basis of our claim for damages?
The basis of a claim for damages can be any of the
following under Art. 1170, NCC:
(1) Fraud,
(2) Delay,
(3) Negligence, and
(4) Contravention of the tenor of the obligation.
What is fraud? There has been a lot of ruling to the
effect that the Supreme Court does not equate fraud
with malice. Fraud does not translate to malice or bad
faith, although admittedly there can be fraud attended
by bad faith or malice.
But, it would be an error for us to think that every case
of fraud is always attended by bad faith or malice
because as defined by law, fraud is simply a deliberate
or intentional evasion of the performance of an
obligation. Not necessarily ill- motivated but it is
intentional.
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obligation to deliver? It should not be of inferior quality

than that intended by the parties, but he cannot be
compelled to deliver something of superior quality.
In the obligation to deliver the dog, X has 3 dogs:
German shepherd, Labrador, and Aspin (Asong Pinoy;
yung Aspin ang pinakapayat, galisin at pilay pa). These
are choices. In the same manner that he cannot be
compelled to deliver the Labrador, he cannot also
compel the creditor to settle for the Aspin. He cannot
also compel his creditor to accept the most inferior of
the choices.
What other obligations are imposed on the debtor in a
generic obligation to give? Is there a duty to preserve as
well? In an obligation to give a limited generic thing, the
obligor must preserve the source. Let us say it is simply a
generic object, pure and simple generic. There is no
obligation to preserve. We do not even speak of taking
care of it with the diligence of good father of a family
because the rationale for requiring this obligation (to
preserve the thing) in specific obligations does not apply
to generic obligations.
In specific obligations, you only have one obligation
which is to deliver the specific thing and it can only be
delivered in one way, which is delivering the very thing
itself. If this specific thing is lost, the obligation will be
useless. Yes, there is the remedy of damages, but
damages will not always be sufficient to correct the
wrong which has been done to you. If it is a family
heirloom which was lost, no matter how much money
is paid to you, the damage will still remain. If you would
not obligate your debtor to take care of the thing, then
the possibility of abuse is very great, in which case that
would defeat the obligatory force of the agreement.
In a generic obligation, the same danger does not exist
because you can always comply with the obligation by
delivering anything of the same kind, quality, and
quantity.
In fruits, accessions, and accessories, do we also have
that kind of obligation (obligation to give a generic
thing)? None. Unless you segregate, you would not
know whether it has produced fruits or it has accessions
and accessories.
Supposing that the debtor does not comply with his
obligation in a specific obligation to give, what are the
remedies of the creditor? Specific performance (an
action to compel the compliance with the obligation).
What about in generic obligation to give?
(1) Specific Performance; and
(2) Substitute performance.
What do you mean by at the expense of the debtor?
The debtor will have to pay.
Which will you opt for, substitute performance or
specific performance? Substitute performance because
you go to court no longer to secure the delivery that
should have been delivered to you because you already
have it by virtue of substitute performance. You only go
the court to acquire reimbursement or indemnification
for your expenses.
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ARTICLE 1167. If a person obliged to do something fails to

do it, the same shall be executed at his cost.
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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.
ARTICLE 1168. When the obligation consists in not doing,
and the obligor does what has been forbidden him, it shall
also be undone at his expense.
ARTICLE 1169. Those obliged to deliver or to do something
incur in delay from the time the obligee judicially or
extrajudicially demands from them the fulfillment of their
obligation.
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However, the demand by the creditor shall not be necessary

in order that delay may exist:
(1) When the obligation or the law expressly so declare; or
(2) When from the nature and the circumstances of the
obligation it appears that the designation of the time when
the thing is to be delivered or the service is to be rendered
was a controlling motive for the establishment of the
contract; or
(3) When demand would be useless, as when the obligor
Another basis for damages is delay. Delay is the failure

to comply with the obligation with respect to time.
Is it enough that there is just delay? No. There should be
a demand.
What role does demand play? It is only from that time
that it is considered that there is legal delay.
How is legal delay different from ordinary delay? In
ordinary delay, demand is not necessary; while in legal
delay, demand is vital to determine that there is already
delay which is a basis for damages. It is independent of
enforcing the obligation itself. You do not have to wait
for the delay to enforce. Unless there is a contrary
stipulation, that should be performed or that should be
enforced. You have to pay. It is your obligation to pay.
There is no need for me to demand for you to pay.
What is the significance of my demand? It will only
determine from what time you will be liable to me for
damages. It is independent of your duty to perform the
obligation. Demand would place the debtor in legal
delay.
What form should demand be made? Judicial or
extrajudicial.
How do you effect judicial demand? Through a
complaint. If you are effecting a judicial demand you
have to comply with the form required in filing a
complaint.
What about extrajudicial demand? Is there a form
required? It can be orally done or it can be in writing,
but it is better to do it in writing because it is easier to
prove.
Do not think that because it is an oral demand there is
no proof. There can still be proof such as when the oral
demand is video recorded.
If it is in writing, then chances are it is properly
documented. When you say properly documented, it is
not enough there is a written copy of demand. It must
further show that the demand was received by the
other debtor. Otherwise, it will be useless.
Since you can make a demand judicially or
extrajudicially, is there a requirement that you must first
make an extrajudicial demand before you make a
judicial demand? There is no requirement. You can
always go directly to court; but just to avoid unnecessary
expenses, file a demand letter first.
Is it always sufficient that demand has been made for
legal delay to arise? When is demand not enough
when in addition to demand there must be something
else which must be present to place the debtor in legal
delay? In case of reciprocal obligation.
Example: Most of the condominium buildings being
built today go through a pre-selling route. That means
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In reciprocal obligations, neither party incurs in delay if the

other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. From the
moment one of the parties fulfills his obligation, delay by the
other begins.
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Dolo can be understood in two (2) senses: Dolo

incidente and Dolo causante.
What is the kind of dolo involved here that will entitle
the creditor to damages? Dolo Incidente.
Dolo incidente is the fraud in the performance of the
obligation.
Dolo causante, on the other hand, is the fraud used to
induce another to enter into a contract. This goes to
consent. When we speak of dolo causante, this would
have the nuance of deceit because you are using fraud
to secure consent to an obligation which the other
party would not otherwise enter into.
Give an example of dolo incidente: A undertook to
deliver a brand new car to B. When the car was
delivered it turned out to be not brand new but one
that is already used. There is a deliberate evasion of the
obligation to deliver a brand new car. Is this attended by
bad faith? Apparently so, because he said he will deliver
a brand new car, but what he delivered was a used car.
But, there can be an instance that there is dolo but
there is good faith. Example: A obliged himself to deliver
a box of imported wine to B. When the box was
delivered, it was opened, it turned out that the box did
not contain imported wine but just a local variety. Is
there dolo here? Yes, because the obligation was not
performed. Was there bad faith here? Not necessarily,
because it could be that A simply delivered what was
delivered to him. He did not know. So he is in good faith
and yet at the same time he is guilty of dolo.
But, if he knew from the start that the box contains local
wine instead of imported wine then he would be in bad
faith and still he will be in dolo.
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ARTICLE 1170. Those who in the performance of their

obligations are guilty of fraud, negligence, or delay, and
those who in any manner contravene the tenor thereof, are
liable for damages.
to pay.
Can he now walk away from his obligations to the
buyer on the premise that the buyer defaulted? NO.
Is the buyer in default notwithstanding the fact that he
has made a demand and there was no payment made?
NO. In reciprocal obligations it is not enough that
demand is made. It must further be shown that the
party making the demand himself is ready to comply
with his obligation; otherwise no amount of demand
would put the other party in delay. In this case, the
contractor cannot say I am free because the buyer is
already in default, because he himself is not ready to
turn over the unit to the buyer. No amount of demand
on his part can put the buyer in default.
Give an example where in the law provides that
demand is not necessary. In both instances where the
law or the stipulation of the parties provides for delay
without need of demand, it must be expressly stated
that after the lapse of the period for payment, delay will
commence.
Example: Payment of taxes. Lets say estate taxes, you are
supposed to pay within six (6) months after the death of
the decedent. If six (6) months had lapsed and you have
not paid, you will automatically be liable for penalties
and surcharges. Liability for penalties and surcharges is
an indication that you are already in delay because you
are paying damages.
When it is stipulated in the obligation, how can the
parties stipulate on this? Is it enough that they specify a
period of time for the payment of the obligation? No. It
is not enough that they specify that payment must be
made on Jan. 12, 2012 at 12 pm. Even if they are
specific down to the time when payment should be
made that will not be sufficient to dispense with the
need to demand.
When from the nature and circumstances of the
obligation it appears that the designation of the time
when the thing is to be delivered or service to be
rendered is a controlling motive for the establishment of
the contract.
Example: Wedding gown. You dont need a demand.
He should already be liable for damages, because this is
one instance that time is obviously a factor or
consideration for the contract.
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Damages may be recovered whenever there is delay,

fraud, negligence, or when an obligation is performed
in contravention with its tenor.
The presence of any of these instances will not
necessarily mean that there can be the recovery for
damages. Particularly, if these instances of this fraud,
negligence, delay, or contravention of the obligation is
attended by a fortuitous event.
What is a fortuitous event? An event which is
unforeseen or though foreseen is inevitable.
Are we limited to acts of God or calamities or disasters
when we speak of fortuitous event? No, it includes both
acts of man and acts of God. Acts of man refer to events
which prevented the performance of the obligation
which are attributable to people other than the obligor.
On a grand scale this can refer to war, rebellion,
kidnapping. On a small scale this can be ordinary as a
simple accident on the road.
If someone bumps you while you are driving on the
road and prevents you from going to your appointment
and performing your obligation then you can invoke
fortuitous event.
Bottom-line is so long as the debtor had no hand in the
occurrence of the event which prevented you from
performing the obligation, then that can be classified as
a fortuitous event.
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purchase price and if they are not able to pay then they
will now be in delay. They will now be in default and
under the contract they forfeit everything they have
paid to me and I in turn will be free from any obligations
to them. He makes a demand the buyer was not able
Lastly, when the demand would be useless if the debtor

made beyond his power to comply with the obligation.
Different kinds of delay:
(1) Mora Solvendi, delay on the part of the debtor;
(2) Mora Accipiendi, delay on the part of the creditor;
and
(3) Compensatio Morae, delay on the part of both.
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that your contractor is building the condominium using

your money. Lets say that there is one particular
contractor at the middle of the construction of the
condominium building his funds run out. He doesnt
want to continue anymore and sell it to somebody else
who will take over the project. But the thing is he is
obligated to his buyers because they have a turn-over
date. He said, I will make a demand for the full
ARTICLE 1171. Responsibility arising from fraud is

demandable in all obligations. Any waiver of an action for
future fraud is void.
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Can you waive a cause of action arising from future

fraud in advance? No, because it would be against
public policy.
If you are going to waive your right of action for future
fraud then there is question, "why enter into a contract
at all? "Why even bind yourself into a contract or
obligation?" That is basically a license for the other party
to disregard the obligation if and when he decides that
he wants to disregard the obligation. In that sense
public policy might be affected, because if everything is
like that, it could undermine our economic structure.
ARTICLE 1172. Responsibility arising from negligence in the

performance of every kind of obligation is also demandable,
but such liability may be regulated by the courts, according
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ARTICLE 1175. Usurious transactions shall be governed by

special laws.
ARTICLE 1176. The receipt of the principal by the creditor,
without reservation with respect to the interest, shall give rise
to the presumption that said interest has been paid.
The receipt of a later installment of a debt without
reservation as to prior installments, shall likewise raise the
presumption that such installments have been paid.
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What are the requisites of a fortuitous event?

(1) The event must be independent of the will of the
debtor;
(2) The event is unforeseen or if foreseen is inevitable;
(3) The event must render it impossible for the debtor
to fulfill the obligation in a normal manner; and
(4) The debtor must be free of participation or the
aggravation of the injury to the creditor.
If you invoke fortuitous event as a defense, it will have
the effect of extinguishing obligation and exempting
you from any liability.
To what kinds of obligations can we apply this defense
of fortuitous event? You apply this to all kinds of
obligations because the words or the tenor of Art. 1174
is broad enough to cover all kinds of obligations - both
obligations to give and obligations to do.
But, we would need to qualify with regard to
obligations to give, i.e. you cannot raise fortuitous event
as defense against any claim of liability involving generic
objects on the premise that genus never perishes.
When will there be liability notwithstanding that there is
a fortuitous event?
(1) By express provision of the law;
(2) By express stipulation between the parties;
(3) Nature of the obligation requires the assumption of
risk; and
(4) When the obligation arises from a criminal offense.
When the nature of the obligation requires the
assumption of risk: An insurance contract would be one
such obligation, but when on the event of Typhoon
Ondoy had shown us, if your car gets flooded or gets
submerged in the water, it shall not be covered by your
policy, unless you have also involved in the Acts of God
policy of the insurance company.
Ordinarily that may be included. That is the reason why
you applied for an insurance God. Perhaps in the
specific insurance policy involved, there was an
exclusion that when it comes to fortuitous events, this
will not be covered by the insurance policy. If you want
to have a coverage even for flooding, you have to pay
additional premium.
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ARTICLE 1174. Except in cases expressly specified by the law,

or when it is otherwise declared by stipulation, or when the
nature of the obligation requires the assumption of risk, no
person shall be responsible for those events which could not
be foreseen, or which, though foreseen, were inevitable.
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If the law or contract does not state the diligence which is to

be observed in the performance, that which is expected of a
good father of a family shall be required.
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ARTICLE 1173. The fault or negligence of the obligor consists

in the omission of that diligence which is required by the
nature of the obligation and corresponds with the
circumstances of the persons, of the time and of the place.
When negligence shows bad faith, the provisions of articles
1171 and 2201, paragraph 2, shall apply.
If an obligation arises from a criminal offense, e.g. crime

of theft. If you are guilty, what would be your civil
liability? The Mona Lisa painting was stolen, what is the
liability an obligation of the thief? The thief must return
it.
Should the Mona Lisa painting be lost due to a
fortuitous event before it is returned, is the liability of the
thief be extinguished? No. This would fall under the
exception.
How can he comply with the obligation if the Mona Lisa
has been destroyed by a fortuitous event? His liability
will be one for damages.
That's why we said that the obligation is not
extinguished because in lieu of giving back what was
stolen, he has to pay for its value.
Exception to the exception is where the creditor, for
unjustified reasons, refuses to accept the thing stolen
and thereafter it is lost due to a fortuitous event. It will
revert to the general rule that civil liability is extinguished.
ARTICLE 1177. The creditors, after having pursued the

property in possession of the debtor to satisfy their claims,
may exercise all the rights and bring all the actions of the
latter for the same purpose, save those which are inherent in
his person; they may also impugn the acts which the debtor
may have done to defraud them.
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Art. 1177 speaks of the extreme remedies of Accion

Subrogatoria and Accion Pauliana. But before we go to
these extreme remedies, we should discuss first the
remedy of rescission under Art. 1191.
Art. 1191. The power to rescind obligations is implied in

reciprocal ones, in case one of the obligors should not
comply with what is incumbent upon him.
The injured party may choose between the fulfillment and
the rescission of the obligation, with the payment of
damages in either case. He may also seek rescission, even
after he has chosen fulfillment, if the latter should become
impossible.
The court shall decree the rescission claimed, unless there be
just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of
third persons who have acquired the thing, in accordance
with articles 1385 and 1388 and the Mortgage Law.
Art. 1385. Rescission creates the obligation to return the
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shall be only to the extent necessary to cover the

damages caused).
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In this case, indemnity for damages may be demanded from

the person causing the loss.
Art. 1388. Whoever acquires in bad faith the things
alienated in fraud of creditors, shall indemnify the latter for
damages suffered by them on account of the alienation,
whenever, due to any cause, it should be impossible for him
to return them.
If there are two or more alienations, the first acquirer shall be

liable first, and so on successively.
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case both parties have committed a breach of the

obligation, the liability of the first infractor shall be
equitably tempered by the courts. If it cannot be
determined which of the parties first violated the
contract, the same shall be deemed extinguished, and
each shall bear his own damages) will apply.
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The choices are as follows: either you ask for

performance, whether specific or substitute, or for
rescission. You cannot ask for both performance and
rescission. Choosing one means foregoing with the
other.
However, if after choosing specific performance and
going to court suing for specific performance, it turns
out that the obligation can no longer be performed, it
will be alright to opt for rescission instead.
You can always ask for damages in conjunction with
either specific performance or rescission, or just
damages by itself if either one of the two are no longer
available.
It is not correct to say the rescission is limited only in
reciprocal obligation. It is implied in reciprocal obligation
which simply means that you do not have to stipulate
on the availability of rescission as a remedy for reciprocal
obligations, because by its nature, a reciprocal
obligation can only allow one party to make a demand
upon the other for the performance of the obligation if
he himself is ready to comply with the obligation. So
necessarily if you are not ready to perform or if you do
not perform your obligation, then that constitutes a
resolutory condition which should extinguish the other
parties obligation as well. That is natural effect of
rescission. That is why we say that in reciprocal
obligations, it is already implied. No need to stipulate on
its existence.
But, when it comes to unilateral obligations, this must be
stipulated upon by the parties.
Rescission simply means that you want the contract to
be set aside and having the contract set aside, the
parties should be reinstated to their former conditions,
i.e. the status quo before the contract was entered into.
There will be mutual restitution.
However, the term rescission in Art. 1191 is not
accurate. The term which should have been used
should be resolution. The term rescission is
understood in a different sense, legally speaking. This is
provided for under Art. 1384, NCC (Art. 1384. Rescission
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The grounds for rescission under Art. 1384 would

include fraud. The ground for rescission under Art. 1191
would include breach of the obligation.
Rescission under Art. 1191 is a primary remedy. This can
be availed of by the aggrieved party without having to
comply with any other requisite, whereas rescission
under Art. 1384, is a subsidiary remedy. You resort to
rescission as accion pauliana if all other remedies have
failed. Otherwise, any resort to accion pauliana would
be premature.
Lastly, rescission under Art. 1191 is available only to
parties to the agreement. If you are not a party to the
agreement you cannot ask for rescission under Art.
1191. Rescission as accion pauliana, on the other hand,
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is available to 3 persons. In fact this is the very essence
of accion pauliana - that you, as a creditor, are allowed
to ask for the setting aside of a contract that you are not
even a party to. That is why it is an extraordinary
remedy, because it is particularly invasive.
If both parties committed the breach, then Art. 1192 (In
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things which were the object of the contract, together with

their fruits, and the price with its interest; consequently, it can
be carried out only when he who demands rescission can
return whatever he may be obliged to restore.
Neither shall rescission take place when the things which are
the object of the contract are legally in the possession of
third persons who did not act in bad faith.
If you want to rescind the obligation, how will you go

about in rescinding the same? Either Judicial or
extrajudicial.
What is the default mode for rescinding? Under the law
the party aggrieved must go to court and ask for
rescission. Until the court rescinds the contract, the
contract stays alive because the contract is valid.
The fact that there is a ground for rescission does not
make the contract invalid. But it is not really an issue
here. The contract has been breached; until it is set aside
it remains to be subsisting and must be complied with.
Lets say you have a management contract and then
your manager has been committing a breach of the
contract. You want out. But the thing is there is no
provision for extrajudicial rescission in your contract.
What is the default mode? It is judicial rescission. You
have to go to court. You understand how long it can
take for the court to say, "Yes, there is ground for
rescission, let us rescind the contract." - years. In the
meantime, this manager can continue to represent you
in transactions. He will continue earning from you. And
you will be bound by whatever contract he enters into
in your behalf. You dont want that.
Whereas, if you have a provision for the extrajudicial
rescission, you can immediately free yourself from the
contract by simply giving a Notice of Rescission. But
the thing is for extrajudicial rescission to be available to
you, this must be expressly stipulated by the parties.
Otherwise, you have no other choice but to go to court
and seek judicial rescission.
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What if your properties involve house and lot? You

would have to enter into transactions, either simulated
or real, but for a much lower price. He may be in
connivance with the 3rd person or he may be in good
faith. He may also give it.
In accion subrogatoria, if you are bequeathed with
something and you do not want to accept, under wills
and successions, creditors can intervene and accept the
inheritance to the extent necessary to satisfy the
obligation to them.
What will be our ground for accion pauliana to
prosper? The ground under Art. 1191 is simply breach
of contract; in accion pauliana, the ground is fraud.
Who must be guilty of fraud? The obligor. The fraud
here consists of his act of entering into other
transactions or fraud aimed to defeat the rights of the
creditor. The fraudulent transaction is the one you want
to be set aside, the transaction that does not involve
yourself.
Is it also required that the other party in the transaction
be also in bad faith or must be in connivance with your
debtor? No. We can be certain that with regard to the
debtor, he has the bad intention of defeating the rights
of his creditor because of the timing.
It is required in accion pauliana that he entered into
transactions after the obligations to the creditor have
become due or demandable or after he brings an
action against you. What is unknown would be the
intention of the other party to the transaction, i.e. is he in
good faith or in bad faith?
Does it matter if the other party is in good faith or in bad
faith? Requiring the other party to be in connivance
with the debtor would mean an added requisite. There
are will be more requisites before your accion pauliana
could prosper.
Is that the intention of the law? We have to qualify as to
the nature of the transaction you are seeking to set
aside.
If the transaction with the 3rd person is onerous in
nature, then we look into the good faith or bad faith of
the other party. If the other party is in good faith then
we have to respect his rights because he has legally
acquired rights in good faith. If he is in bad faith then
accion pauliana will have to prosper and any
transaction will have to be set aside.
However, if the transaction with the 3rd person is
gratuitous in nature, you only have to look at the side of
the debtor as to whether or not he is in good faith or in
bad faith. If he is in bad faith then the accion pauliana
should prosper and in this regard the law has provided
us with a presumption.
What is the presumed intention of the debtor when he
makes dispositions by gratuitous title after his obligation
to the creditor has become due or has probability of
being executed? If you dispose by gratuitous title not
leaving enough properties to answer for your
obligations, the presumption is that you had intention to
defraud your creditors.
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The basic requirement to effect an extrajudicial rescission

is that there should be notice to the other party, firstly, to
inform him so that he will be able to act accordingly;
and secondly, the notice will serve as an opportunity for
the other party to question the rescission.
This is the downside of extrajudicial rescission. It does
not attain any degree of finality because the court can
always review whether or not it is valid. But, in the
meantime, you are free. You can already enter into a
contract without need of this manager; or if we are
talking about a contract of lease, you can lease the
house to another; or if it is a contract of sale, you can sell
it to another.
What kind of breach would justify rescission? It should
be substantial breach. If the breach is not found to be
substantial, the court shall fix the period for the
performance of the obligation.
Why do we say that these are extraordinary remedies?
These are extreme remedies because to avail of these
remedies, the minimum requirement is that you must
have an unsatisfied writ of execution.
It means that you already have a judgment on your
action for specific performance and that judgment has
become final and executory.
A writ of execution has been issued but when you try to
carry out the writ of execution it was returned to you
unsatisfied because you could not obtain properties
belonging to the debtor.
While your writ of execution is unsatisfied and you learn
that there are recoverable debts or there are properties
due to the debtor, but he is not taking any steps to
recover then apply for accion subrogatoria. That means
another round of litigation.
If he does not have recoverable debts or recoverable
properties, but you learned that he has entered into
transactions that appear to have been entered into to
defeat your rights then you avail of accion pauliana.
There is a hierarchy:
(1) Unsatisfied writ of execution;
(2) Accion subrogatoria; and only when accion
subrogatoria is not available will you resort to
(3) Accion pauliana, because accion pauliana is
particularly invasive of the rights of others.
What is the rationale of the law for making these
remedies available to the creditor? The rationale is
because the debtor is liable for the obligation with all of
his properties, present and future.
In the end, it is needed that the obligation has economic
value because eventually it may happen that the only
possible satisfaction that he can get would be monetary
in nature. And the same could only be satisfied from the
properties of your debtor, but he will not willingly give
them. That is why you need a writ of execution. But a
writ of execution is only feasible if the debtor has
properties that can be identified and levied upon.
If you are the debtor and you know that the creditor will
execute the judgment on you. What will you do? You
will hide your properties.
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CHAPTER 3 - Different Kinds of Obligations
SECTION 1 - Pure and Conditional Obligations
ARTICLE 1179. 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.
What are the different kinds of obligations?

(1) Pure and Conditional obligations
(2) Joint and Solidary obligations
(3) Positive and Negative obligations
(4) Alternative obligations
(5) Facultative obligations
(6) Obligations with a penal clause
(7) Divisible and Indivisible obligations
What are pure obligations? These are obligations which
are not subject to a condition or term and are
immediately demandable.
Would it be correct to say that all immediately
demandable obligations are pure obligations? No.
Obligations subject to a resolutory condition or
resolutory period are also immediately demandable.
What is the concept of being immediately demandable?
The creditor can demand the performance of an
obligation at any time.
Example: A obtained a loan from B for P10K. Can A ask
for it back after an hour? No. He must be given a
reasonable period of time to make use of whatever it is
that he derived from the obligation.
What are conditional obligations? Obligations which
are subject to a future and uncertain event.
A condition is something which is in the future and is
uncertain, even though under the law it is erroneously
referred to as a future or uncertain event." That is not
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Every obligation which contains a resolutory condition shall

also be demandable, without prejudice to the effects of the
happening of the event.
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ARTICLE 1178. Subject to the laws, all rights acquired in

virtue of an obligation are transmissible, if there has been no
stipulation to the contrary
correct because uncertainty and the fact it is in the

future must concur.
By way of exception, event that happened in the past
may constitute as a condition. How can this happen? If
the past event is not yet known to the parties.
It is not really the happening of the event, but it is the
acquisition of knowledge by the parties.
Example: A will give B P10K if the reason between the
break-up between this high-profile-couple is the reason
B gave. The obligation is not conditioned on the event
that happened, but the acquisition of knowledge of
what really caused that event to take place.
What are the different kinds of conditions?
(1) Suspensive and Resolutory
(2) Suspensive, Mixed and Casual
(3) Possible and Impossible
(4) Positive and Negative
Potestative Condition, one that is subject to the will of
the either of the parties, i.e. either the creditor or the
debtor.
Casual condition, one which is subject to chance or to
the will of a 3rd person.
Mixed Condition, one that is subject to will of either of
the parties and upon chance or will of a 3rd person.
These conditions are not mutually exclusive. We can
have various permutations involving combinations of
these different kinds. It can potestative and at the same
time negative and at the same time resolutory.
What would be a lethal combination involving
potestative, casual and mixed conditions? What
combination would render the obligation null and void?
Potestative subject to the debtor's will and at the same
time suspensive.
Why is this lethal? This type of condition would bring
about the nullity not only of the condition, but also of
the obligation itself. This is because we have here an
obligation, the creation of which is dependent solely on
the person who will be obligated.
Do you think he would want to be obligated? It
destroys the efficacy of the legal tie. It cannot be said to
be an obligation because he can disregard the same
whenever he wants to. He can suppress it and no one
can force him to give, to do, or not to do.
Example: I will give you money if I want to. This is not an
obligation (Art. 1182, NCC).
If it is potestative but it is dependent upon the will of the
creditor and at the same time suspensive, would it have
the same effect on the validity of the obligation? It will
not bring about the nullity of the obligation, because
the creditor is naturally interested in making the
obligation binding. There is no danger in the efficacy of
the legal tie.
Most important classification of condition: Suspensive
and Resolutory.
What is a suspensive condition? The happening of the
event gives rise to the obligation. Until the happening of
the condition, we do not have the obligation.
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Rescission under Art. 1191 has a prescriptive period of

ten (10) years from the time that the breach was
committed.
What about rescission as accion pauliana, what is the
prescriptive period? The law itself is silent. It simply says
that it must be commenced within a period of four (4)
years but it does not say when we begin counting the
four-year period. Since the law is silent as to when we
start counting the prescriptive period, then the general
rule, which is we count it from the time the cause of
action appears, applies.
When does the cause of action for accion pauliana
appear? Only from the time that you had an unsatisfied
writ of execution.
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What is a resolutory condition? The happening of the

event extinguishes the obligation. This does not suspend
the creation of the obligation. The obligation is
immediately demandable. Implied from this rule is that
the obligation is already existing.
In an obligation subject to a suspensive condition, what
can the creditor do to protect his rights while he is
waiting of the fulfillment of the condition? The law
allows him such appropriate actions to preserve his
rights - Art. 1188. The creditor may, before the fulfillment
of the condition, bring the appropriate actions for the

preservation of his right. The debtor may recover what
during the same time he has paid by mistake in case of
a suspensive condition.
ARTICLE 1182. When the fulfillment of the condition

depends upon the sole will of the debtor, the conditional
obligation shall be void. If it depends upon chance or upon
the will of a third person, the obligation shall take effect in
conformity with the provisions of this Code.
ARTICLE 1183. Impossible conditions, those contrary to good
customs or public policy and those prohibited by law shall
annul the obligation which depends upon them. If the
obligation is divisible, that part thereof which is not affected
by the impossible or unlawful condition shall be valid.
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Art. 1197. If the obligation does not fix a period, but from its
nature and the circumstances it can be inferred that a period
was intended, the courts may fix the duration thereof.
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Supposing the debtor says to creditor that I will pay

when my means permit me to do so. Would this be an
example of a potestative condition? No, by express
provision of Art. 1180.
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ARTICLE 1180. When the debtor binds himself to pay when

his means permit him to do so, the obligation shall be
deemed to be one with a period, subject to the provisions of
article 1197.
The reservatarios. Their rights are conditioned on the

reservista dying before them.
What can they do in the meantime that the reservista is
still alive? They can ask for the annotation of the
reservable character of the property before the Register
of Deeds and this will be sufficient to protect their rights,
so that even if the reservista disposes of the property,
any person who buys it would still be bound by its
reservable character.
Additionally, if payment is made before the condition is
fulfilled, this can be a case for solutio indebiti because
payment is made even though there is no obligation to
make payment. It can be that during the time that the
condition is still pending fulfillment, the property may
have suffered a lost; it may have deteriorated or it may
have undergone an improvement.
What would be the rules regarding the ownership or
the burden for these changes in the meantime the
condition is pending fulfillment? Art. 1189, NCC.
The courts shall also fix the duration of the period when it
depends upon the will of the debtor.
Art. 1180 provides that when the debtor binds himself

to pay when his means permit him to do so, it shall be
deemed to be one with a period, subject to the
provisions of Art. 1197 which in turn provides that the
courts will fix the period if the parties intended the
period. If somehow they fail to state the period then the
courts will step in and fix it for them but bearing in mind
always what the parties would have intended as a
period.
In this case, the law is taking its cue from the promise of
the debtor that he will pay when his means permit him
to do so. The court itself is declaring that this is not an
expression of a condition but a period. There should be
no uncertainty with regard to the obligation to pay.
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In every case, the courts shall determine such period as may

under the circumstances have been probably contemplated
by the parties. Once fixed by the courts, the period cannot
be changed by them.
ARTICLE 1181. In conditional obligations, the acquisition of

rights, as well as the extinguishment or loss of those already
acquired, shall depend upon the happening of the event
which constitutes the condition.
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In wills and succession, when we were tackling reserva

troncal, which party had rights which are conditional?
The condition not to do an impossible thing shall be

considered as not having been agreed upon.
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What about impossible conditions? Those which are

legally impossible or physically impossible.
How will it affect the obligation to which it is attached?
It will nullify the obligation itself which depends upon
such impossible conditions.
This is different from the one we observed when it
comes to impossible conditions attached to
testamentary dispositions and donations. In donations
and testamentary dispositions, we simply consider them
as not written on the theory that the primary
consideration for the donation or disposition is actually
the liberality of the donor or the testator, but not so in
obligations, particularly on contractual obligations,
where the condition, more often than not, is a big part
of the consideration.
To make the condition invalid, when should the
impossibility of the condition exist? It must be impossible
at the inception of the obligation to affect its validity.
Ensuing or supervening impossibility of the condition
will not make the obligation invalid.
What would be the effect of supervening impossibility of
the condition? It will not affect its validity, but its effect on
the obligation itself, as to whether or not it will be
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considered extinguished or perfected, will depend upon

the nature of the event, i.e. if it is positive or negative.
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ARTICLE 1184. The condition that some event happen at a
determinate time shall extinguish the obligation as soon as
the time expires or if it has become indubitable that the
event will not take place.
ARTICLE 1188. The creditor may, before the fulfillment of the

condition, bring the appropriate actions for the preservation
of his right.
The debtor may recover what during the same time he has
paid by mistake in case of a suspensive condition.
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The rule on Arts. 1184 and 1185, that the condition that
some event must take place at a certain time will
extinguish the obligation if it appears that the event can
no longer take place. In that sense it can extinguish the
obligation.
However, if the condition imposed in this manner is that
a certain event must not take place at a certain time,
then it will give rise to the obligation if it appears that it
can no longer take place or has become impossible.
There are two possibilities: either give rise to the
obligation or extinguish the obligation. That will be the
effect of supervening impossibility of the condition. But,
clearly it has no effect on the validity of the obligation.
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If no time has been fixed, the condition shall be deemed

fulfilled at such time as may have probably been
contemplated, bearing in mind the nature of the obligation.
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ARTICLE 1185. The condition that some event will not

happen at a determinate time shall render the obligation
effective from the moment the time indicated has elapsed, or
if it has become evident that the event cannot occur.
effect. It retroacts six (6) months ago when the parties

entered into the transaction.
How do we treat the fruits may have been earned
during the pendency of the fulfillment of the condition?
We qualify as to the nature of the obligation. If the
obligation is reciprocal, the fruits and interest are
deemed to have been mutually compensated. If it is
unilateral, the fruits will be for the benefit of the debtor.
What about obligations to do or not to do, how do we
determine the effect of the happening of the
obligation? It would be determined by the court taking
into consideration nature and circumstances
surrounding the obligation.
Supposing it is a resolutory condition which has become
fulfilled, how will this affect the rights and obligations of
the parties? The obligation will be extinguished and
there will be a need for mutual restitution between the
parties. Because of this mutual restitution, we can say
that there is a reversal of roles between the parties. Our
creditor before will be the debtor so that rules
governing loss, deterioration, and improvement that we
applied previously may also be applicable (Art. 1190,
NCC).
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ARTICLE 1186. The condition shall be deemed fulfilled when

the obligor voluntarily prevents its fulfillment.
ARTICLE 1187. The effects of a conditional obligation to give,
once the condition has been fulfilled, shall retroact to the
day of the constitution of the obligation. Nevertheless, when
the obligation imposes reciprocal prestations upon the
parties, the fruits and interests during the pendency of the
condition shall be deemed to have been mutually
compensated. If the obligation is unilateral, the debtor shall
appropriate the fruits and interests received, unless from the
nature and circumstances of the obligation it should be
inferred that the intention of the person constituting the
same was different.
In obligations to do and not to do, the courts shall
determine, in each case, the retroactive effect of the
condition that has been complied with.
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Upon the happening of the condition, what happens if

the condition is fulfilled? If a suspensive condition is
fulfilled, then it shall give rise to the obligation. You will
now have the obligation.
Would it be correct to say that even though the parties
came to an agreement to have the obligation subject to
a condition six (6) months ago, would it be right to say
that the efficacy can only be counted from today when
the obligation was fulfilled? It is NOT correct to say that
the efficacy of the obligation can be counted only from
today because efficacy of the obligation has retroactive
ARTICLE 1189. When the conditions have been imposed

with the intention of suspending the efficacy of an
obligation to give, the following rules shall be observed in
case of the improvement, loss or deterioration of the thing
during the pendency of the condition:
(1) If the thing is lost without the fault of the debtor, the
obligation shall be extinguished;
(2) If the thing is lost through the fault of the debtor, he shall
be obliged to pay damages; it is understood that the thing is
lost when it perishes, or goes out of commerce, or
disappears in such a way that its existence is unknown or it
cannot be recovered;
(3) When the thing deteriorates without the fault of the
debtor, the impairment is to be borne by the creditor;
(4) If it deteriorates through the fault of the debtor, the
creditor may choose between the rescission of the
obligation and its fulfillment, with indemnity for damages in
either case;
(5) If the thing is improved by its nature, or by time, the
improvement shall inure to the benefit of the creditor;
(6) If it is improved at the expense of the debtor, he shall
have no other right than that granted to the usufructuary.
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ARTICLE 1193. 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, and it shall be regulated by
the rules of the preceding Section.
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ARTICLE 1190. When the conditions have for their purpose

the extinguishment of an obligation to give, the parties,
upon the fulfillment of said conditions, shall return to each
other what they have received.
SECTION 2 - Obligations with a Period
As for obligations to do and not to do, the provisions of the

second paragraph of article 1187 shall be observed as
regards the effect of the extinguishment of the obligation.
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In case of the loss, deterioration or improvement of the

thing, the provisions which, with respect to the debtor, are
laid down in the preceding article shall be applied to the
party who is bound to return.
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ARTICLE 1191. The power to rescind obligations is implied in

reciprocal ones, in case one of the obligors should not
The injured party may choose between the fulfillment and
the rescission of the obligation, with the payment of
damages in either case. He may also seek rescission, even
after he has chosen fulfillment, if the latter should become
impossible.
ARTICLE 1194. In case of loss, deterioration or improvement

of the thing before the arrival of the day certain, the rules in
article 1189 shall be observed.
o
The court shall decree the rescission claimed, unless there be

just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of
third persons who have acquired the thing, in accordance
with articles 1385 and 1388 and the Mortgage Law.
ARTICLE 1192. In case both parties have committed a breach
of the obligation, the liability of the first infractor shall be
equitably tempered by the courts. If it cannot be determined
which of the parties first violated the contract, the same shall
be deemed extinguished, and each shall bear his own
What is a term or a period? A future and certain event.

Would death be a period? Yes. I will give you a pizza if
my neighbors dog dies is an obligation with a term
because everyone dies.
I will give you a pizza if my dog dies because someone
killed it is an obligation with a condition because the
dog must first be killed before I will give you a pizza. That
condition brings in an element of uncertainty.
What is the influence of a term or a period on the
obligation? If the period is suspensive, the demandability
of the obligation is suspended pending the arrival of the
period.
What about the creation of the obligation? The
obligation already exists; it is only the demandability
which is suspended. Example: A will give B a parcel of
land upon Cs death.
What about a resolutory period? The obligation is
immediately demandable. Its effect on the obligation
would be the extinguishment of the obligation upon its
the arrival.
How is a resolutory condition different from a resolutory
period? In terms of effect they are the same. The
difference lies in the nature of the event constituting the
period, constituting the condition. There is certainty in
one, there is uncertainty in the other.
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damages.
e.
The law provides that:

(1) In case of loss without fault of the debtor, the
obligation will be extinguished; and
(2) When the loss is due to the fault of the debtor, he
shall be obliged to pay damages.
When is a thing considered lost? When a thing
perishes, goes out of commerce, or lost in such a way
that it can no longer be located.
What about deterioration? Deterioration without the
fault of the debtor must be borne by creditor; like wear
and tear.
But, if the deterioration is through the fault of the
debtor, the creditor may choose between rescission of
the obligation or its fulfillment plus damages.
What about improvement? If the improvement of the
thing is improved by nature or by time, it should inure to
the benefit of the creditor.
But, if the improvement is at the expense of the debtor,
the debtor shall have same rights of usufructuary.
What are the rights of a usufructuary? Limited right of
removal, and should removal not be feasible because
damages will be inflicted to the property, then he shall
have the right to off-set the cost of the improvement
against whatever damage he may have caused.
liv
We apply the same rules as provided in Art. 1189, in

case of loss, deterioration, or improvement of the thing
due in an obligation subject to a suspensive term.
ARTICLE 1195. Anything paid or delivered before the arrival

of the period, the obligor being unaware of the period or
believing that the obligation has become due and
demandable, may be recovered, with the fruits and interests.
o
Should the debtor pay before the obligation becomes

demandable, can we also recover what he has paid?
Yes, if he has no knowledge of the period or if he
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In an obligation subject to a period, who is intended to

be benefited by the period? The presumption in the law
is that both parties are intended to be benefited.
We only discard this presumption if from the tenor of
the obligation or circumstances surrounding the
obligation, it can be inferred that it was constituted to
favor one of the parties.
If the obligation is worded as follows: A will pay B the
amount of P10k after a period of ten (10) years. A, after
a period of five (5) years decides that he wants to pay
the obligation. Can he compel B to accept the
payment? No. The period is for the benefit of both
parties. The creditor in the meantime would not have
the money. He may be spendthrift so it benefits him that
he does not have ready access to the money. The
debtor on the other hand is benefited because he gets
to keep the money; he gets to use the money for the
entire period. He cannot insist that the creditor accept
payment because the period is for the benefit of the
creditor as well. He can waive the period but he cannot
compel the creditor to make a similar waiver.
Compare this to this obligation: Debtor will pay the
creditor the amount of P1M within a period of ten (10)
years. Analyzing the obligation itself, does it carry any
implication that it is for the benefit of one of the parties
alone? Yes, because it is "within," as though the debtor
has an option. He can pay anytime within the period of
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In every case, the courts shall determine such period as may

under the circumstances have been probably contemplated
by the parties. Once fixed by the courts, the period cannot
be changed by them.
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ARTICLE 1196. Whenever in an obligation a period is

designated, it is presumed to have been established for the
benefit of both the creditor and the debtor, unless from the
tenor of the same or other circumstances it should appear
that the period has been established in favor of one or of the
other.
The courts shall also fix the duration of the period when it
depends upon the will of the debtor.
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ARTICLE 1197. If the obligation does not fix a period, but

from its nature and the circumstances it can be inferred that
a period was intended, the courts may fix the duration
thereof.
e.
ten (10) years. It can be after two (2) years, after six (6)
years, after nine and a half (9) years. If he decides that
he would want to forego the longer period, that is
within his rights to do.
He can compel that the creditor to accept payment,
except if interest is being paid the creditor. The
complexion of the obligation will change again.
Notwithstanding the fact that it is the tenor of the
obligation that he can pay within so many years,
because if interest is being earned by the creditor, it is
arguable that it is not just for the benefit of the debtor
because the creditor is benefiting as well because of the
payment of interest.
liv
believes that the obligation is already due and

demandable.
Basically, this the same right given to the debtor in an
obligation subject to a suspensive condition who pays
ahead or before the fulfillment of the condition; that is
recovery of what has been paid.
Would you know the rights of a debtor in an obligation
subject to a suspensive period be different from the
rights of a debtor in an obligation subject to a
suspensive condition where both of them paid before
the condition is fulfilled or the period has arrived? Both
of them have the right to recover what has been paid,
but it is only with regard to the debtor in an obligation
subject to a suspensive period does the law explicitly
provide that he can recover what he has paid together
with the fruits and interests.
The law is silent with regard to the recovery of the fruits
and interests insofar as the debtor in an obligation
subject to a suspensive condition is concerned.
Although authorities believe that notwithstanding the
silence of the law, debtor who pays ahead in an
obligation subject to a suspensive condition may still
recover fruits and interests on what he has paid under
the principle of solutio indebiti.
If the debtor promises to pay when his means allow him

to do so, then we consider this as an obligation subject
to a period and not one subject to a condition. This is
not the only instance where we have an obligation
subject to a period and yet there is no specific period.
There are other instances where the parties intend to be
bound by a period but somehow failed to provide one.
How can we ascertain this? In an ideal situation, the
parties would be clear that we intend to have a period
but we failed to specify the period. This will not happen
in real life. We have to look at the circumstances.
How do we know that there is such an intention? You
look at the nature of the obligation. Is it something
which could be done within a short period of time? If it
is something that can be done then we should classify
this as immediately demandable.
If you buy in a sari-sari store to buy soft drinks, would it
take years before the soft drinks is given to you? You can
see that it is immediately demandable. It precludes the
possibility of an intention to provide for a period.
If you are having your dream house built. You are
newly-weds. You ordered your contractor to build the
house one (1) week after your return from your
honeymoon. Upon your return there is no house yet.
Can you go to court and say we would like to place the
contractor in delay? It will be premature because the
period has not lapsed yet.
You say, what period, we dont have a period? Yes, you
dont have a specific period but you obviously intended
to subject your obligation to a period.
You ask, how did that happen? By the nature of the
obligation you imposed on your contractor.
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Pay attention to paragraph three (3). There is a

qualification which is important. The law makes a
distinction between impairment and loss.
If it is mere impairment but it is through the act of the
debtor himself, then the period is lost; but if the cause is
a fortuitous event, mere impairment is not sufficient to
give rise to the loss of the period. It must be that the
security itself must be lost.
Example: There is a lightning that struck the car which
was given as a security. The car was only damaged a
little.
Would this give rise to the loss of the period? No,
because this is simply impairment and one which is not
caused by the fault of the debtor, but by a fortuitous
event.
In Gaite vs. Fonacier (G.R. No. L-11827, July 31, 1961),
the question that the Supreme Court was whether
appellants, Fonacier and his sureties, still have the right
to insist that Gaite should wait for the sale or shipment
of the ore before receiving payment; or, in other words,
whether or not they are entitled to take full advantage
of the period granted them for making the payment.
The Supreme Court held that the appellant have
forfeited the right to compel Gaite to wait for the sale of
the ore before receiving payment of the balance of
P65,000.00, because of their failure to renew the bond
of the Far Eastern Surety Company or else replace it
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ARTICLE 1198. The debtor shall lose every right to make use
of the period:
(1) When after the obligation has been contracted, he
becomes insolvent, unless he gives a guaranty or security for
the debt;
(2) When he does not furnish to the creditor the guaranties
or securities which he has promised;
(3) When by his own acts he has impaired said guaranties or
securities after their establishment, and when through a
fortuitous event they disappear, unless he immediately gives
new ones equally satisfactory;
(4) When the debtor violates any undertaking, in
consideration of which the creditor agreed to the period;
(5) When the debtor attempts to abscond.
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with an equivalent guarantee. The expiration of the

bonding company's undertaking on December 8, 1955
substantially reduced the security of the vendor's rights
as creditor for the unpaid P65,000.00, a security that
Gaite considered essential and upon which he had
insisted when he executed the deed of sale of the ore to
Fonacier.
The case squarely comes under paragraphs 2 and 3 of
Art. 1198, NCC. Appellants' failure to renew or extend
the surety company's bond upon its expiration plainly
impaired the securities given to the creditor (appellee
Gaite), unless immediately renewed or replaced. There is
no merit in appellants' argument that Gaite's acceptance
of the surety company's bond with full knowledge that
on its face it would automatically expire within one year
was a waiver of its renewal after the expiration date. No
such waiver could have been intended, for Gaite stood
to lose and had nothing to gain barely; and if there was
any, it could be rationally explained only if the appellants
had agreed to sell the ore and pay Gaite before the
surety company's bond expired on December 8, 1955.
But in the latter case the defendants-appellants'
obligation to pay became absolute after one year from
the transfer of the ore to Fonacier by virtue of the deed
Exhibit "A.".
Gaite acted within his rights in demanding payment
and instituting this action one year from and after the
contract (Exhibit "A") was executed, either because the
appellant debtors had impaired the securities originally
given and thereby forfeited any further time within
which to pay; or because the term of payment was
originally of no more than one year, and the balance of
P65,000.00 became due and payable thereafter.
e.
What will the court do now? The court will fix the
period for you.
Courts cannot make contracts for the parties. So
whatever period the court comes up with, it must be
based on what the parties must have intended. Usually,
industry wise, how long would it take to build a house
from two (2) storeys, three (3) storeys, four (4) storeys?
Maybe eight (8) months to one (1) year. That would be
reasonable. How are the circumstances? How is the
supply of cement in the Philippines, supply of steel these are the factors to be taken by the court.
After the court has fixed the period and the period has
lapsed, then you say that there is delay. You can now
have the right to make a demand to place your debtor
in delay. Until that happens, there is no delay, there is no
default. You dont have any right for damages.
liv
SECTION 3 - Alternative Obligations

ARTICLE 1199. 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.
o
o
o
o
o
How many objects can an obligation have? One or

more.
What do we call an obligation which has only one
object? Pure or simple.
And if it has several objects? Multiple.
Multiple obligations, in turn, may be classified into: (1)
Conjunctive; (2) Alternative; (3) Facultative.
Conjunctive Obligation is one where the debtor has to
perform several prestations; it is extinguished only by the
performance of all of them.
Alternative Obligation is where there are several
prestations, but only one is needed to be performed to
extinguish the obligation.
Facultative Obligation is when only one prestation has
been agreed upon, but the obligor may render another
in substitution.
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ARTICLE 1200. The right of choice belongs to the debtor,

unless it has been expressly granted to the creditor.
The debtor shall have no right to choose those prestations
which are impossible, unlawful or which could not have
been the object of the obligation.
ARTICLE 1201. The choice shall produce no effect except

from the time it has been communicated.
o
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In an alternative obligation, who enjoys the right to

make the choice as to which prestation will be
performed? General Rule: Debtor; Exception: Creditor.
If the choice will be given to the creditor, how should
the choice be given? There must be an express grant in
favor of the creditor of the right to make the choice.
Would there be any limitation on the right of the debtor
to make the choice? Yes. The debtor shall have no right
to choose those prestations which are impossible,
unlawful or which could not have been the object of
the obligation.
Why does the law impose these limitations on the right
of the debtor to choose the prestations? Because, doing
so basically exempts the debtor from performing his
obligation. It calls for the extinguishment of the
obligation although the debtor basically did nothing.
Lets say that if the debtor chooses the impossible
prestation, then he will be exempt from liability although
he did not do anything owing to the impossibility of the
prestation that he chose.
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When will the choice made by the debtor produce its

intended effect? It is the communication of the choice
which will produce the legal effect, either orally, in
writing, or tacitly.
What do we mean by tacit choice? One way of making
a tacit choice is by performing the chosen prestation
right away.
Should there be consent on the part of the creditor? No,
because first, the law simply requires communication, it
did not require consent on the part of the creditor for
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the choice to have any effect. Secondly, the essence of

the alternative obligation is that there is concentration
on choice present. The choice is given to the debtor.
And for him to be required to get the consent of the
creditor before his choice can be made would run
counter to the very essence of this characteristic of the
alternative obligation because we will deprive the
debtor of the right to choose the prestation that he
wants to perform.
We said that the choice will have its effect once it was
communicated to the creditor, what is this effect that
will arise from this making of the choice? The obligation
becomes pure.
So what if it becomes pure obligation? From that
moment the debtor, for some instances the creditor, will
now be bound by his choice. And he cannot say that
he is changing his mind and he is deciding to pursue
the other prestation. The choice becomes irrevocable.
It may happen that all of the prestation due, except for
one, may have already been rendered impossible or
may have been lost due to the fault of the debtor. So he
is left with one option, would he face any liability for the
loss of all this other prestations? No.
We do not even consider the cause for the loss or the
impossibility of the other prestations? No. Because it will
be no different from a situation where he can still
choose the last remaining option. Parang initsapwera
nya lang yung iba. So regardless of the reason for the
loss or impossibility of the other prestations, there would
be no liability on the part of the debtor. He would still be
allowed to discharge the obligation by performing the
last remaining possible prestation.
e.
Do not say that there are several obligations due

because we are just speaking of a single obligation
involving several prestations.
For us to say that there are several prestations due, is it
required that these prestations be entirely different from
one another? That they, for instance involve different
objects? No. The prestations may involve the same
object.
Example: The object is an Apple, but there would be
differences in the terms and conditions for the
performance of the prestations. Like: Prestation A
delivery of the apple cooked in any manner; Prestation B
- delivery of the apple at a certain place; and Prestation C
immediate delivery of the apple as is.
Although we still have the same object involving these
prestations, there are differences in the terms and
conditions in the performance of the prestations.
liv
ARTICLE 1202. The debtor shall lose the right of choice

when among the prestations whereby he is alternatively
bound, only one is practicable.
o
It may happen that all of the prestations are either lost or

rendered impossible, what will happen then? We
consider first upon whom between the parties caused
the impossibility or the loss of all of the prestation.
If the cause for the loss or impossibility of all of the
prestation is due to the fault of the debtor then the
creditor may demand indemnity for damages.
ARTICLE 1203. If through the creditor's acts the debtor

cannot make a choice according to the terms of the
obligation, the latter may rescind the contract with damages.
o
The indemnity for damages should be the value of the

last thing which disappeared or that of the service
which last became impossible plus damages.
Supposing the debtor loses all of his options or as the
law puts it, the debtor cannot make a choice according
to the terms of the obligation due to the fault of the
creditor, what will be the options of the debtor? The
debtor may rescind the contract with damages under
Art. 1203, NCC.
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A or B and since I chose them and they were lost by

fortuitous event, then my obligation should be
considered extinguished? No, he cannot because the
Until then the responsibility of the debtor shall be governed

by the following rules:
(1) If one of the things is lost through a fortuitous event, he
shall perform the obligation by delivering that which the
creditor should choose from among the remainder, or that
which remains if only one subsists;
(2) If the loss of one of the things occurs through the fault of
the debtor, the creditor may claim any of those subsisting, or
the price of that which, through the fault of the former, has
disappeared, with a right to damages;
(3) If all the things are lost through the fault of the debtor,
the choice by the creditor shall fall upon the price of any one
of them, also with indemnity for damages.
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obligation has been transformed into a simple

obligation.
Earlier in the discussion, we said that should any of the
prestations become impossible or lost regardless of the
reason, then there would be no liability on the part of
the debtor because it is as though he made the choice
to perform the last prestation available. The same
scenario is also applicable in this given example. The last
prestation available will constitute a simple obligation.
So, if it cannot be performed because of the fault of the
debtor, then we go by the general rules of obligation
and contracts which would make him liable for the loss
or impossibility of the last available prestation.
Lets say that:
(1) Prestation A lost thru the; fault of the debtor;
(2) Prestation B lost thru the fault of the debtor;
(3) Prestation C impossible thru a fortuitous event.
Would there be any liability on the part of the debtor?
With the same logic, we said that if all the other
prestations have been lost or rendered impossible then
the last remaining prestation will now be the only
choice of the debtor and has the effect of being
transformed into a simple obligation. So, it goes to
reason that if the simple obligation is rendered
impossible by fortuitous event, then the obligation
should be considered extinguished.
According to Senator Tolentino: there should be liability
on the part of the debtor, since it was due to his fault
that the other two (2) prestations were lost.
ARTICLE 1205. When the choice has been expressly given to

the creditor, the obligation shall cease to be alternative from
the day when the selection has been communicated to the
debtor.
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In this case, are we limited to the instance that all of the

prestations are rendered impossible or lost? No, there
may be a situation that all but one have been lost. The
bottom line is the debtor could no longer make the
choice in accordance of what has been agreed upon. It
is not always the case that all of the prestation becomes
impossible or will be lost all at once, the loss may due,
solely, with the fault of the debtor, sometimes it can be a
combination of fortuitous event for some prestation and
fault of the debtor for the others.
How should meet the liability of the debtor if we have
several prestations? Let's say we have:
(1) Prestation A lost thru a fortuitous event;
(2) Prestation B lost thru a fortuitous event;
(3) Prestation C lost thru the fault of the debtor.
Would the debtor have any liability or would the
obligation be simply extinguished? No. The debtor is
liable.
Could the debtor say, I would have chosen prestation
However, according to Justice Caguioa, from the legal

point of view, the obligation is extinguished. We apply
this rule.
The indemnity shall be fixed taking as a basis the value
of the last thing which disappeared, or that of the
service which last became impossible. Damages, other
than the value of the last thing or service, may also be
awarded.
e.
liv
ARTICLE 1204. The creditor shall have a right to indemnity

for damages when, through the fault of the debtor, all the
things which are alternatively the object of the obligation
have been lost, or the compliance of the obligation has
become impossible.
The same rules shall be applied to obligations to do or not to

do in case one, some or all of the prestations should become
impossible.
ARTICLE 1206. When only one prestation has been agreed

upon, but the obligor may render another in substitution,
the obligation is called facultative.
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.
.
o How can this kind of obligation arise? The parties can
stipulate.
o If the parties were to stipulate, must the parties also
stipulate the substitute? They may or may not, for as
long as they agreed that the debtor can give something
or perform some other service in substitution.
o Example: The parties did not stipulate a substitute. Uuwi
ako ng probinsya, dadalhan kita ng bigas pag-uwi ko,

pero pag walang bigas iba na lang dadalhin ko para
sayo.
o
o
The choice of what will be the substitute depends on

the discretion of the debtor in that example.
Another example: The parties stipulated a substitute.
Uuwi ako ng probinsya, dadalhan kita ng bigas paguwi ko, pero pag walang bigas unggoy na lang.
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In this example: the debtor stipulated on what the

substitute would be and that is fine as well, because the
essence of a facultative obligation is that the debtor is
allowed to render a different prestation in substitution of
the first that has been originally agreed upon.
o
SECTION 4 - Joint and Solidary Obligations
Whenever we have plurality of subjects, we need to

consider joint and solidary obligation. If we have more
than one creditor, are we required to have more than
one debtor? No, it suffices that there is plurality on either
sides of the subjects, i.e. plural active subjects, plural
passive subjects; or plural active and passive subjects.
What is the default mode in obligations involving

plurality of subjects? Joint obligation.
What would be the implication of having a joint
obligation? Each one of the debtors would be
proportionately liable for his share of the obligation and
in the same manner, each one of the creditors would
only be entitled to a proportionate share of the
obligation.
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ARTICLE 1208. If from the law, or the nature or the wording

of the obligations to which the preceding article refers the
contrary does not appear, the credit or debt shall be
presumed to be divided into as many shares as there are
creditors or debtors, the credits or debts being considered
distinct from one another, subject to the Rules of Court
governing the multiplicity of suits.
e.
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ARTICLE 1207. The concurrence of two or more creditors or

of two or more debtors in one and the same obligation does
not imply that each one of the former has a right to
demand, or that each one of the latter is bound to render,
entire compliance with the prestation. There is a solidary
liability only when the obligation expressly so states, or when
the law or the nature of the obligation requires solidarity.
When will the default obligation be not applicable?

(1) When the obligation expressly so states;
(2) When the law requires solidarity;
(3) When the nature of the obligation requires
solidarity.
Example of an obligation which because of its nature, it
is treated as solidary: When there are several joint
tortfeasors in quasi-delicts.
Example of an obligation which is solidary because of
an express provision of law: In a contract of
commodatum, if we have more one bailee, then the
bailees will be solidarily liable for the loss of the thing
that is loaned.
Example of an obligation which is solidary that has been
stipulated by the parties: In an instrument, it was written:
I promise to pay, then it was signed by several debtors
together or separately. The words together or
separately are also an indication that it is a solidary
obligation.
What is the difference of a solidary obligation from a

joint obligation? In a solidary obligation, each one of the
debtors may be asked to perform the entire obligation
and each one of the creditors may demand the
performance of the entire obligation.
There are different kinds of solidarity depending on
which part of the obligation exists:
(1) Active Solidarity solidarity among the creditors;
(2) Passive Solidarity solidarity among the debtors;
and
(3) Mixed Solidarity solidarity on both creditors and
debtors.
But it is possible that there is solidarity among the
debtors on one hand and then on the part of the
creditors, we have a joint obligation.
Like the promissory note, that is if the payee is more
than one person and there is no indication that will
justify the application of the exception allowing solidary
bond among the creditors, then we will have to
consider them as jointly entitled to the obligation.
Example: The promissory note is signed by three (3)
debtors for 360K and the payees are three (3) creditors.
If in the promissory note, there was no indication that
they will be active solidary creditors, then the exceptions
do not apply. We shall have to treat the creditors as
jointly entitled.
How much can be demanded by these creditors from
the debtors? We all know that debtor 1, debtor 2 and
debtor 3 are solidarily bound, so each one of them can
be compelled to pay the entire 360k. That is consistent
with the passive solidarity existing among them.
The problem is in the creditors, there is no active
solidarity on their part, so how can they proceed against
anyone of the debtors? They will have to proceed
against the debtors as one. Meaning that creditor 1,
creditor2, and creditor3 will have to make a collective
demand upon debtor 1 if they want to get the entire
360k from debtor 1 or upon debtor 2 or debtor 3.
It is easier if the situation is passive solidarity but how can
we have active solidarity? It appears that we can only
have that by stipulation.
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ARTICLE 1209. If the division is impossible, the right of the

creditors may be prejudiced only by their collective acts, and
the debt can be enforced only by proceeding against all the
debtors. If one of the latter should be insolvent, the others
shall not be liable for his share.
ARTICLE 1210. The indivisibility of an obligation does not
necessarily give rise to solidarity. Nor does solidarity of itself
imply indivisibility.
ARTICLE 1211. Solidarity may exist although the creditors
and the debtors may not be bound in the same manner and
by the same periods and conditions.
o
If there is passive solidarity, does it also follow that all the

debtors will be uniformly bound by the same terms and
conditions? No. It can happen that one of the solidary
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but less my share because of the suspensive period. I will

be only liable to my share once the period arrives
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ARTICLE 1214. The debtor may pay any one of the solidary
creditors; but if any demand, judicial or extrajudicial, has
been made by one of them, payment should be made to
him.
o
(Defense which pertains to the share in the obligation).

Minority of debtor 2 and vitiated consent of debtor 4 will
not cause for the total exemption. It can only be for
partial exemption from liability to the extent of the shares
What does active solidarity mean for the creditor? What

does active solidarity allow them to do? It is said that
there is some kind of mutual agency among the
creditors such that any one of them can demand for the
performance of the entire obligation from anyone of the
debtors.
Should a demand be made from any one of the
creditors, how would that demand affect the others? It
limits the right of the other co-creditors because once a
solidary creditor has made a demand upon a debtor,
then that debtor must pay the obligation to the creditor
who has made the demand. So, in a way, it limits the
right of the other creditors because apparently, any
demand that they make could now be useless because
one of them has already made a demand.
But although it limits their rights, they are not prejudiced
because of the presence of the concept of mutual
agency. That demand made by one of the creditors is
being made on their behalf as well, and not just for the
benefit of the creditor making the demand.
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ARTICLE 1213. A solidary creditor cannot assign his rights

without the consent of the others.
e.
ARTICLE 1212. Each one of the solidary creditors may do

whatever may be useful to the others, but not anything
which may be prejudicial to the latter.
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pertaining to debtor 2 and debtor 4 (Defense which are

personal to his co-debtors).
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debtors may have his obligation subject to a suspensive

term; another may have his obligation subject to
condition. That will not detract from the fact that they
are solidarily bound.
Why is it important to know this? It is important because
this may be relevant when it comes to the defenses
available to a solidary debtor. This is one of the defenses
that may be raised by a solidary debtor in an action
brought by a creditor against him.
What are the defenses that may be raised by a solidary
debtor in an action brought by a creditor?
(1) Defenses which are inherent in the obligation itself;
(2) Defenses which are personal to the debtor;
(3) Defenses which pertain to the share in the
obligation; and
(4) Defenses which are personal to his co-debtors.
If the defense is inherent in the obligation itself, it calls for
total exemption from liability.
If the defense is personal to the debtor, it calls for total
exemption from liability in so far as that debtor is
concerned.
If the defense pertains to the share in the obligation, it
calls for partial exemption from liability.
Why only partial? Because he may still be asked to pay
for entire obligation less the share pertaining to him
subject to his right to ask for reimbursement from the
other debtors who are not entitled to any defenses.
If the defense is personal to his co-debtors, it calls for
partial exemption from liability because the exemption
can only extend to the share of the debtor entitled to
that personal defense.
Lets us say we have passive solidarity, and the contract
is an oral contract of sale of land: We have a Creditor,
with the following debtors:
(1) Debtor 1 (who's obligation is subject to a
suspensive period);
(2) Debtor 2 (minor);
(3) Debtor 3;
(4) Debtor 4 (whose consent was vitiated).
Demand is made by the creditor upon debtor 1, what
defenses may be raised by debtor 1? Note that the
demand must be in the form of a complaint because
the law speaks of "defenses which may be raised in an
action brought by the creditor" so it must be a judicial
demand. The contract is unenforceable and that will
entitle him to total exemption because that will go to
the very obligation (Defense which is inherent in the
obligation itself).
The obligation is due, except with regard to his share as
it is subject to a suspensive period. Since he is the only
one affected by the period, he can raise it as a defense,
but only as to his share. So he can say that "I will pay you
ARTICLE 1215. Novation, compensation, confusion or

remission of the debt, made by any of the solidary creditors
or with any of the solidary debtors, shall extinguish the
obligation, without prejudice to the provisions of article
1219.
The creditor who may have executed any of these acts, as
well as he who collects the debt, shall be liable to the others
for the share in the obligation corresponding to them.
ARTICLE 1216. The creditor may proceed against any one of
the solidary debtors or some or all of them simultaneously.
The demand made against one of them shall not be an
obstacle to those which may subsequently be directed
against the others, so long as the debt has not been fully
collected.
o
o
Upon whom can the creditor make a demand? Anyone

of the debtor.
Supposing that creditor 1 made a demand upon debtor
3, can creditor 1 still make a demand from debtor 1 or
debtor 2? Yes.
Supposing that creditor 1 has instituted a complaint for
collection against debtor 3, can he still send letters of
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What does passive solidarity imply to our debtors? Each

one of the debtors may be asked to perform the entire
obligation.
And should this debtor who may be asked to perform
the whole obligation pays, what happens then? The
obligation between the creditors and debtors will be
extinguished and the debtor making payment may
demand reimbursement from the other debtors.
Will the debtor making payment insist that he should be
now subrogated to the rights of the creditors? He
cannot, because that obligation has already been
extinguished and with its extinguishment there will be
another set of obligation that will arise among the
debtors themselves. This obligation consists of
reimbursing the paying debtor proportionately.
What happens if anyone of the other solidary debtors
happens to be insolvent? Then the other debtors will be
liable for the share of the insolvent debtors. Mutual
Guaranty among the debtors; by allowing themselves to
be bound solidarily, they guaranty the solvency of all of
the other debtors such that should anyone of them be
insolvent, then in addition to their share in the liability,
they will also have to bear proportionately the share
belonging to the insolvent debtor.
General Rule: A joint debtor will not answer for the
insolvency of his co-debtor.
Exception: In case of co-guaranty.
In co-guaranty, we also apply the general rule that the
co-guarantors will only be jointly liable, but despite the
fact that they are only jointly liable, they are answerable
for the insolvency of their co-guarantees.
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demand to debtor 1 and debtor 2? Yes, because the

law says that he can make a demand upon any of the
debtors so long as the obligation remains unpaid (Art.
1216, NCC).
Once a demand is made then, hopefully, it will have its
desired effect, which is to instigate payment. And if
payment is made, what will be the effect of that
payment? It will extinguish the obligation of the debtors
to the creditors.
But what will happen after the extinguishment of the
obligation of the debtors to the creditors? The creditor
who received payment is now obligated to give the
shares of the other creditors.
Is payment is the only means by which the obligation of
the debtors to the creditors may be extinguished? No.
How else can it be extinguished?
(1) Loss of the thing;
(2) Remission;
(3) Confusion or merger;
(4) Compensation;
(5) Novation.
If the obligation is extinguished for any cause other than
payment, we can say that such extinguishment would
be prejudicial to the other creditors, because the
creditor who caused the extinguishment did not receive
anything in return from the debtors for which the other
creditors will get their share. So how can we reconcile
this provision in the law which allows the solidary
creditor to do all of these things with the provision in
the law that none of the creditors can do anything
which is prejudicial to the others (reconciling Art. 1212
with Art. 1215)? Should there be any extinguishment of
the obligation for causes other than payment, then the
creditor who is either remitting, condoning or
undergoing compensation or confusion with any of the
solidary debtors will be similarly liable as though he
received payment. It means that such creditor will still
have to give to the other creditor their share in the
payment supposedly of the obligation. He will not be
excused. In addition, he may even made liable for
damages.
Take note that, on the surface, when it comes to solidary
obligations, it may appear that we have singleness of
prestation (unity of prestation) as though there is only
one relationship existing that is between the creditors
on one hand, and the debtors on the other. But once
the obligation between the creditors and debtors is
extinguished, another set of obligation among the
creditors themselves would arise. And that will be
dictated by the obligation of the creditor receiving
payment to give the others their share. That is mutual
agency, pag natanggap ko, agent mo ako, I need to
remit to you. And the remittance or the giving of the
share will not always be equal. No matter the apparent
singleness of the prestation, the creditors may still be
bound by different proportions of their rights. It is not
always equal.
ARTICLE 1217. Payment made by one of the solidary debtors

extinguishes the obligation. If two or more solidary debtors
offer to pay, the creditor may choose which offer to accept.
He who made the payment may claim from his co-debtors
only the share which corresponds to each, with the interest
for the payment already made. If the payment is made
before the debt is due, no interest for the intervening period
may be demanded.
When one of the solidary debtors cannot, because of his
insolvency, reimburse his share to the debtor paying the
obligation, such share shall be borne by all his co-debtors, in
proportion to the debt of each.
ARTICLE 1218. Payment by a solidary debtor shall not entitle
him to reimbursement from his co-debtors if such payment is
made after the obligation has prescribed or become illegal.
ARTICLE 1219. The remission made by the creditor of the
share which affects one of the solidary debtors does not
release the latter from his responsibility towards the codebtors, in case the debt had been totally paid by anyone of
them before the remission was effected.
ARTICLE 1220. The remission of the whole obligation,
obtained by one of the solidary debtors, does not entitle him
to reimbursement from his co-debtors.
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ARTICLE 1222. A solidary debtor may, in actions filed by the

creditor, avail himself of all defenses which are derived from
the nature of the obligation and of those which are personal
to him, or pertain to his own share. With respect to those
which personally belong to the others, he may avail himself
thereof only as regards that part of the debt for which the
latter are responsible.
o
anymore because of the remission.
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iso
Wala na akong liability because of the remission, you

can no longer claim from me. In this case who can the
paying debtor run after for his share? The creditor who
received the payment because that payment is no
longer due because of the remission.
So if the question is, what will be the effect of a
remission that is made prior to payment? then we have
to qualify: who is demanding payment? Is it the creditor
or a co-debtor?
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The remission only extends to extinguish his share in the

obligation but it did not dissolve the solidary bond
among the debtors. He is still a solidary debtor, so he
may still be asked to pay the obligation by the creditor
making the demand less his share. Then after making
payment, he may go to the other debtors to ask for
reimbursement.
But if the demand is made upon the solidary debtor
benefited by the remission by the other debtor who
paid after the remission, then he can rightfully say,
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ARTICLE 1221. If the thing has been lost or if the prestation

has become impossible without the fault of the solidary
debtors, the obligation shall be extinguished.
If there was fault on the part of any one of them, all shall be
responsible to the creditor, for the price and the payment of
damages and interest, without prejudice to their action
against the guilty or negligent debtor.
If through a fortuitous event, the thing is lost or the
performance has become impossible after one of the
solidary debtors has incurred in delay through the judicial or
extrajudicial demand upon him by the creditor, the
provisions of the preceding paragraph shall apply.
Loss or impossibility of performance will render the

obligation extinguished. Qualify as to the nature of the
obligation, i.e. as to the reason of the loss or impossibility
of performance.
In ordinary obligation, the prestation should be
determinate or specific. Otherwise, it is not susceptible to
loss and the loss to completely absolve the debtor must
be due to a fortuitous event or due to reasons not
attributable to them.
But supposing that due to the fault of any one of the
solidary debtors or due to a fortuitous event, the thing is
lost, how will this affect the rights of the solidary
debtors? If the loss is due to fortuitous event, then the
obligation is extinguished without any liability for
damages. But if there is fault or delay, fortuitous event
does not excuse non-performance. The obligation
remains.
What is the indemnity that must be given to the
creditor? The price of the obligation. If there is fault or
delay, fortuitous event does not excuse nonperformance even if the thing due has been lost due to
fortuitous event, the obligation remains. But this time it is
converted into one for damages.
Actual damage - you have to give the actual value of
the thing that was lost. Apart from the value of the thing
lost, they are also liable for consequential damages or
even interest.
Can this be claimed by the creditor from any one of the
debtors? Yes, they are liable for the entire indemnity
which is the price of the thing due plus damages.
Supposing C (one of the solidary debtors) is an innocent
solidary debtor, he pays A (creditor). C is now entitled to
be reimbursed. What can he ask from B and D by way
of reimbursement? Entire indemnity.
From whom can he claim the demand? From the guilty
debtor. The paying debtor can claim the entire
indemnity from the guilty debtor. Anything that has
been paid by the debtor without deducting such guilty
debtor's share. He will not participate for the payment at
all.
There is loss here of the thing due because of the
fortuitous event and they would have been excused
from performing if it has not been due to the fault of the
guilty debtor. Because of this loss, the other debtors are
no longer required to contribute in the indemnity. They
will not contribute - it makes sense because they are not
guilty. They are also not required to contribute in the
value of the obligation because of the loss that took
place on account of the fortuitous event. The indemnity
must be shouldered by the guilty debtor.
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Of all the modes of extinguishing an obligation, the

more significant mode would be remission. If there is
remission, there is really nothing received by the creditor
who is effecting remission.
The remission may either be total or partial. If it is a total
remission then it has the effect of extinguishing the
obligation in its entirety.
It may happen that the remission was secured by one of
the solidary debtors. Would this scenario give the
debtor any special rights as against his co-debtors? No. It
will not entitle him to any right to be reimbursed.
What if the remission was partial? If there was already
payment made by the other co-debtors before the
remission, it will not excuse the debtor effecting
remission for any liability for reimbursement, because
the payment of the paying debtor preceded the
remission. There was nothing to condone anymore
because the obligation was extinguished.
What if the remission came before payment? We have
to qualify. The solidary debtor benefited by the remission
may still be liable to the other creditors. Na-condone
nga yung share nya but if demand is made upon him
by other creditors, he cannot say, I will not be liable
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ARTICLE 1223. The divisibility or indivisibility of the things that

are the object of obligations in which there is only one
debtor and only one creditor does not alter or modify the
provisions of Chapter 2 of this Title.
ARTICLE 1224. A joint indivisible obligation gives rise to
indemnity for damages from the time anyone of the debtors
does not comply with his undertaking. The debtors who
may have been ready to fulfill their promises shall not
contribute to the indemnity beyond the corresponding
portion of the price of the thing or of the value of the service
in which the obligation consists.
ARTICLE 1225. For the purposes of the preceding articles,
obligations to give definite things and those which are not
susceptible of partial performance shall be deemed to be
indivisible.
ARTICLE 1226. In obligations with a penal clause, the penalty

shall substitute the indemnity for damages and the payment
of interests in case of noncompliance, if there is no
stipulation to the contrary.
Nevertheless, damages shall be paid if the obligor refuses to
pay the penalty or is guilty of fraud in the fulfillment of the
obligation.
The penalty may be enforced only when it is demandable in
accordance with the provisions of this Code.
ARTICLE 1227. The debtor cannot exempt himself from the
performance of the obligation by paying the penalty, save in
the case where this right has been expressly reserved for
him. Neither can the creditor demand the fulfillment of the
obligation and the satisfaction of the penalty at the same
time, unless this right has been clearly granted him.
However, if after the creditor has decided to require the
fulfillment of the obligation, the performance thereof should
become impossible without his fault, the penalty may be
enforced.
ARTICLE 1228. Proof of actual damages suffered by the
creditor is not necessary in order that the penalty may be
demanded.
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When the obligation has for its object the execution of a

certain number of days of work, the accomplishment of
work by metrical units, or analogous things which by their
nature are susceptible of partial performance, it shall be
divisible.
SECTION 6 - Obligations with a Penal Clause
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SECTION 5 - Divisible and Indivisible Obligations
the debt can be enforced only by proceeding against all the

debtors. If one of the latter should be insolvent, the others
shall not be liable for his share.
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It is a different thing if there is no loss, but there is simply

delay or fault. In this case, the other innocent solidary
debtors will also liable but only for their share in the
obligation. The guilty debtor will be answerable for the
damages.
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However, even though the object or service may be

physically divisible, an obligation is indivisible if so provided
by law or intended by the parties.
In obligations not to do, divisibility or indivisibility shall be

determined by the character of the prestation in each
particular case.
What are indivisible and divisible obligations? Indivisible

Obligation (not susceptible of partial performance);
Divisible Obligation (susceptible of partial performance).
Joint Indivisible Obligation: It is indivisible because of the
subject matter. It may also be indivisible because of its
nature or because it is so stipulated by the parties or by
law.
Example: A race horse, if the same is going to be
delivered, then it must be delivered wholly. And just
because it is indivisible, it does not mean that we are
precluded from having plurality of subjects. We can still
have more than one creditor and more than one
debtor. In this scenario, the parties will just have to
perform together. The debtors have to perform together
and the creditors must also make the demand together.
In case there is any breach, then the obligation will be
converted into a divisible obligation because in that
situation, it will just be an obligation to pay damages.
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Art. 1209. If the division is impossible, the right of the

creditors may be prejudiced only by their collective acts, and
ARTICLE 1229. The judge shall equitably reduce the penalty

when the principal obligation has been partly or irregularly
complied with by the debtor. Even if there has been no
performance, the penalty may also be reduced by the courts
if it is iniquitous or unconscionable.
ARTICLE 1230. The nullity of the penal clause does not carry
with it that of the principal obligation.
The nullity of the principal obligation carries with it that of
the penal clause.
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What is a penal clause? An accessory obligation to

assume greater liability in case of breach. By its term,
accessory, it means that it requires a principal
obligation in order to validly exist.
It has a three-fold purpose:
(1) To ensure the performance of the obligation - If the
debtor did not perform the obligation, then he will
be liable for payment of the penalty in the penal
clause;
(2) To provide for liquidated damages - Liquidated
damages does away the need to prove the
damages suffered. If there are liquidated damages,
then there is no need to prove the actual amount
of damages, there is only need to prove breach;
and
(3) To punish the other party in case of breach.
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CHAPTER 4 - Extinguishment of Obligations

General Provisions
ARTICLE 1231. Obligations are extinguished:
(1) By payment or performance;
(2) By the loss of the thing due;
(3) By the condonation or remission of the debt;
(4) By the confusion or merger of the rights of creditor and
debtor;
(5) By compensation;
(6) By novation.
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Would these be exclusive such that if there is a mode

that is not included in the list, it cannot be said that it
also extinguishes an obligation? The list is NOT exclusive.
What can be an example of a cause that is not included
in the list that will cause the extinguishment of an
obligation?
(1) Renunciation by the creditor in favor of the debtor;
(2) Compromise of the parties.
What about death? Only those obligations which are
purely personal to the debtor are extinguished by death.
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ARTICLE 1234. If the obligation has been substantially

performed in good faith, the obligor may recover as though
there had been a strict and complete fulfillment, less
damages suffered by the obligee
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Other causes of extinguishment of obligations, such as

annulment, rescission, fulfillment of a resolutory condition,
and prescription, are governed elsewhere in this Code.
SECTION 1- Payment or Performance

ARTICLE 1232. Payment means not only the delivery of
money but also the performance, in any other manner, of an
obligation.
ARTICLE 1233. A debt shall not be understood to have been

paid unless the thing or service in which the obligation
consists has been completely delivered or rendered, as the
case may be.
o
What is payment? The fulfillment of the prestation due,

a fulfillment that extinguishes the obligation by the
realization of the purposes for which it was constituted.
Payment is commonly perceived as something which
involves delivery of money; would this be an accurate
understanding of payment? No. Payment can refer to
any manner of performance of the obligation. It may
include the delivery of money, but it is not limited to the
delivery of money.
What are the characteristics of payment? Integrity

(Art.1233); Identity (Art.1244); and Indivisibility
(Art.1248). Integrity means that the payment must be
complete.
What are the exceptions to the characteristic of
integrity?
(1) Substantial performance (Art.1234); and
(2) Waiver or estoppel (Art.1235).
What will be the requisites for substantial performance?

(1) Attempt in good faith to perform the obligation;
(2) The obligation must be performed but it was not
performed to meet in accordance with its tenor.
When we say that there is substantial performance, it
indicates that the obligation was performed but it was
not performed to be in accordance with its tenor. So
there is some kind of deviation.
Does it matter what the nature of deviation is? Yes, it is
required that the deviation should not pertain to the
material aspect of the obligation. It must be something
that is incidental or trivial.
Example of a deviation that is not material: The debtor is
supposed to deliver a cake and he is also required to
place the cake in a container. The container must be
color blue so that it will be in accordance with the
partys motif. But at the time of delivery, the debtor
placed the cake in a container a little similar with blue,
like purple or violet. The placing of the cake in a purple
or violet container is immaterial. It does not go to the
very essence of the obligation. In which case, substantial
performance will be acceptable.
The idea is that if there is substantial performance, then
it is to be treated as though there was complete
performance and that should be sufficient to extinguish
the obligation.
The next exception is, despite knowledge of
incompleteness or irregularity of performance. This is
waiver or estoppel.
The law made use of the word irregularity and
incompleteness, are they the same or different? They
are different. Incomplete refers to the amount of the
performance. If the obligation is not fully performed,
then there is incomplete performance. Irregular refers to
the kind of performance. If the whole obligation is fully
performed but not in the manner agreed upon, there is
irregular performance.
We can have an irregular performance that is complete.
The performance is complete only that it is not in
accordance with the tenor of the obligation. If there is
incomplete performance, then there are some portions
which were not performed.
What does identity of payment mean? To be valid, the
payment must consist of the performance of the very
prestation that has been agreed upon. If the obligation
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If there is a penal clause that will take the place of

damages and interest. He can no longer claim such,
except if there is a stipulation to the contrary or if the
debtor is guilty of fraud in the performance of the
obligation or if there is refusal on the part of the debtor
to pay the penalty.
The courts may step in and mitigate the liability if it is
unconscionable or if there has been partial or irregular
performance.
Since it is an accessory obligation, the nullity of the penal
clause will not affect the principal obligation.
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is to give a specific thing, then the very thing that is

promised to be given should be delivered. If it is an
obligation to be a generic thing, then a thing that
belongs to the same kind, quality and quantity should
be delivered.
What are the exceptions to the characteristic of identity?
(1) Dacion en pago (Art.1245);
(2) Facultative obligation.
Why is dacion en pago an exception? The obligation is
payment of sum of money, but the parties agreed that
instead of paying in sum of money, what is delivered is a
property belonging to a debtor. The transaction will be
governed by the law on sales.
o
ARTICLE 1245. Dation in payment, whereby property is
alienated to the creditor in satisfaction of a debt in money,
shall be governed by the law of sales.
What is indivisibility of payment? The creditor cannot be
compelled to receive partial performance. When you
perform, you must perform the obligation in its entirety.
o How can we distinguish integrity of payment from
indivisibility of payment? In both characteristics, the end
result is the same. The debtor must perform the entire
obligation. If we have incomplete performance that
means, it is lacking in some aspects and the debtor has
no intention or no means to complete it anymore;
whereas, if the debtor wants to render partial
performance, there is still an intention or at least a
possibility that there would be subsequent
performances yet to come that will complete the
performance.
o Example: In an obligation to give sum money, if the
debtor is going to pay the downpayment, it is
incomplete but at the same time the debtor is insisting
on partial payment. If the debtor will not pay anymore
aside from the first downpayment, then we have an
incomplete performance, the characteristic of integrity is
violated. But if the debtor has the intention to complete
payment, but not in one instance, we cannot say that
the characteristic of integrity of payment is violated
because the debtor will complete the payment. But this
time around the debtor is insisting divisible performance
or partial performance of the obligation, what we are
violating is the characteristic of indivisibility.
o What are the exceptions to the indivisibility of payment?
(1) If there is stipulation to the contrary;
(2) When the debt is in part liquidated and in part
unliquidated, the creditor may demand and the
debtor may effect the payment of the former
without waiting for the liquidation of the latter;
(3) In solidary obligations, where the debtors are not
bound by the same terms and conditions;
(4) In case of compensation of unequal amounts;
(5) In case there are several guarantors for the same
obligation and they or one of them demands the
benefit of division;
(6) When the work is to be done by parts;
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(7) When the debtor dies and he has several heirs and
the obligation is divisible;
(8) In joint obligations where each debtor is bound to
pay only his proportionate share.
Example of stipulation to the contrary: Delivery of 100
sacks of rice in 10 equal installments, i.e. sale on
installments. In the absence of stipulation, the purchase
price must be paid all at once. But if the parties agreed,
then payment can be made by installments.
What does liquidated mean? The thing or amount is
already determined, ascertained, settled, there is no
dispute as to amount, as to what is due and as to how
much is due.
Example of an obligation which is composed of portions
which are liquidated or parts of which are unliquidated:
The creditor was off-loaded from a passenger plane that
means that the value of the creditors ticket has become
useless to him. Essentially, he suffered a loss
corresponding to the amount of the ticket. But aside
from that, he also suffered emotional pain and
humiliation of being asked to leave the plane and for
that one, he is entitled to moral damages. The thing is
moral damages is something that has to be proven in
court. And until the court says that he is entitled to
moral damages in such amount, it is not yet liquidated.
So the obligations of the airline to the creditor consist of
actual damages (the cost of the ticket) plus moral
damages. The cost of the ticket is liquidated because
that is already a certainty; there is no dispute as to how
much the debtor paid for the ticket. But the other part,
the moral damages, that is still unliquidated. The creditor
can ask for the value of the ticket.
Who can make payment? In its literal sense and if the
obligation does not call for the personal qualification of
the debtor, then essentially, anyone can make payment.
But if we are going to take the question as to who can
compel the creditor to accept payment, then these are
the people who can compel:
(1) Debtor himself;
(2) His heirs and assigns;
(3) His agents and representatives; and
(4) Third person interested in the obligation.
Why is this important? Because in the end, it is the
consent of the creditor to accept payment, which will
extinguish the obligation. The consent of the original
debtor will only determine the rights acquired by the
person making payment on his behalf.
As to the question of who can compel the creditor to
accept payment, they are the persons earlier
enumerated. They cannot be refused by the creditor. If
the creditor refuses, then the creditor will be in mora
accipiendi. And mora accipiendi in turn, will trigger legal
consequences to arise. There will be a shifting of one of
the burdens for the loss of the thing due.
Who is this 3rd person who has an interest in the
obligation? A 3rd person who has material interest in the
obligation.
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ARTICLE 1235. When the obligee accepts the performance,

knowing its incompleteness or irregularity, and without
expressing any protest or objection, the obligation is deemed
fully complied with.
ARTICLE 1236. The creditor is not bound to accept payment
or performance by a third person who has no interest in the
fulfillment of the obligation, unless there is a stipulation to
the contrary.
Whoever pays for another may demand from the debtor
what he has paid, except that if he paid without the
knowledge or against the will of the debtor, he can recover
only insofar as the payment has been beneficial to the
debtor.
ARTICLE 1237. Whoever pays on behalf of the debtor
without the knowledge or against the will of the latter
cannot compel the creditor to subrogate him in his rights,
such as those arising from a mortgage, guaranty, or penalty.
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ARTICLE 1238. Payment made by a third person who does

not intend to be reimbursed by the debtor is deemed to be
a donation, which requires the debtor's consent. But the
payment is in any case valid as to the creditor who has
accepted it.
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ARTICLE 1239. In obligations to give, payment made by one

who does not have the free disposal of the thing due and
capacity to alienate it shall not be valid, without prejudice to
the provisions of article 1427 under the Title on "Natural
Obligations."
e.
Is it possible that a 3rd person paying the obligation of

the debtor may not recover the entire amount that he
gave as payment to the creditor? Yes, it is possible
because if the consent is not given or it is against the will

of the debtor, then the basis of recovery will be the
extent of benefit.
And there are instances when the benefit does not
correspond to the amount paid. When will this happen?
If there is already prescription. There is no obligation to
pay anymore, but the 3rd person pays. It means that
there is no benefit to the debtor. He cannot ask
reimbursement from the debtor, or, if there is partial
payment made earlier, then that is less benefit to the
debtor.
If he cannot recover from the debtor, who can the 3rd
person recover from? From the creditor on the basis of
solutio indebiti.
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Can it be the debtors mother? Can the debtors mother

compel the creditor to accept payment? No.
Does she have an interest in the obligation? She may
have an interest but it is not the interest contemplated
by law. The interest contemplated by law is material
interest.
Example: Third-party Mortgagors, Surety, Guarantors.
What would be his interest in the obligation? That in
case of non-performance of the obligation, there will be
loss in his part.
What loss will he suffer? He will lose his properties.
What will happen to his properties? It will be foreclosed.
So instead of going through the process of foreclosure,
the process to redeem, the third-party mortgagor can
cut it off by paying the obligation and he is allowed by
law because he has a material interest in the obligation.
Supposing that there is a third person who has no
material interest, he pays the obligation, would that be a
valid payment? Will that extinguish the obligation? It will
extinguish the obligation. When we say that payment is
made to the creditor, it presupposes that the creditor
accepted the payment. When he accepts, the obligation
is extinguished.
Does it matter, whether or not the debtor gave his
consent? It matters in determining only the rights
acquired by the 3rd person, but the obligation is still
extinguished.
If the debtor consented, the 3rd person who made
payment acquires:
(1) The right of subrogation;
(2) Entitled to full reimbursement.
If the debtor did not gave his consent, the 3rd person
who made payment acquires:
(1) No right of subrogation;
(2) Entitled to reimbursement only insofar as the
payment has been beneficial to the debtor.
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Should the payor have the capacity to act? Yes.

Why do we distinguish as to the kind of obligation
involved? In obligations to do, it does not matter,
because by performing, he effects payment and the
obligation is extinguished. In obligations to give, the
debtor must deliver the thing but not just physical
delivery; there must be transfer of title. He cannot
transfer title unless he has capacity to act because
capacity to act is the power to do acts with legal effect.
ARTICLE 1427. When a minor between eighteen and

twenty-one years of age, who has entered into a contract
without the consent of the parent or guardian, voluntarily
pays a sum of money or delivers a fungible thing in
fulfillment of the obligation, there shall be no right to recover
the same from the obligee who has spent or consumed it in
good faith.
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The law makes reference to Art. 1427, will this exception

still apply? Not anymore, because the age of majority is
now eighteen (18).
ARTICLE 1240. Payment shall be made to the person in

whose favor the obligation has been constituted, or his
successor in interest, or any person authorized to receive it.
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To whom should payment be made?

(1) Creditor;
(2) Successors-in-interest;
(3) Assigns;
(4) Any person authorized to receive payment by law
or by stipulation.
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Payment made to a third person shall also be valid insofar as

it has redounded to the benefit of the creditor. Such benefit
to the creditor need not be proved in the following cases:
(1) If after the payment, the third person acquires the
creditor's rights;
(2) If the creditor ratifies the payment to the third person;
(3) If by the creditor's conduct, the debtor has been led to
believe that the third person had authority to receive the
payment.
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ARTICLE 1242. Payment made in good faith to any person in

possession of the credit shall release the debtor.
ARTICLE 1243. Payment made to the creditor by the debtor
after the latter has been judicially ordered to retain the debt
shall not be valid.
ARTICLE 1244. The debtor of a thing cannot compel the
creditor to receive a different one, although the latter may
be of the same value as, or more valuable than that which is
due.
In obligations to do or not to do, an act or forbearance
cannot be substituted by another act or forbearance against
the obligee's will.
ARTICLE 1245. Dation in payment, whereby property is
alienated to the creditor in satisfaction of a debt in money,
shall be governed by the law of sales.
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The law tells us the instances when we presume that

the benefit has redounded to the creditor. These are the
instances enumerated in Art. 1241.
Example of number 3: This usually happens in big
corporations. The corporation is engaged in the
manufacture of cement. Lets say thru a telephone
conversation, the corporation agreed that it will deliver
the cement and the corporation asked to whom it
should be delivered, and then the other corporation
said, basta may tao dun. In the delivery receipt, there is
someone who signed but no printed name and
position. So in case, there was no payment made but
there was delivery, there will be a problem if the other
corporation denies payment and the cement
corporation does not know upon who should pay. One
remedy to such a problem would be to say that the
cement corporation was led to believe that such person
has the authority to receive payment (for delivery of
cement).
Payment made in good faith to any person in
possession of the credit. Take note that the law requires
that the person to whom payment is made must be in
possession of the credit not just in possession of the
evidence of credit.
Lets say that Mr. Sison has issued a promissory note in
favor of Ms. De Guia and the promissory note says,
Payable to the order of Ms. De Guia. One day Ms.
Dizon shows up at the doorstep of Mr.Sison and she is
in possession of the promissory note payable to Ms. De
Guia. If Mr. Sison were to pay Ms. Dizon, can we say that
it is a valid payment such that the obligation under the
promissory note will now be extinguished? No. Because
Ms. Dizon was not in possession of the credit. What she
has is only the evidence of the credit.
What can we change in the example given that would

make Ms. Dizon in possession of the credit and not just
evidence of the credit? The promissory note must be
payable to bearer. That will be sufficient to clothe Ms.
Dizon at least an ostensible right to the promissory note
that will serve as basis on the part of Mr. Sison to make
the payment in good faith.
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ARTICLE 1241. Payment to a person who is incapacitated to

administer his property shall be valid if he has kept the thing
delivered, or insofar as the payment has been beneficial to
him.
e.
If the debtor makes payment not to the enumeration

above, then the payment will be invalid. And if the
payment is invalid, then the obligation is not
extinguished and it still subsists.
Exception: Payment to a third person is valid provided
that it redounded to the benefit of the creditor. Payment
made in good faith to any person in possession of the
credit shall release the debtor.
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What are the special forms of payment?

(1) Application of payments;
(2) Dacion en pago;
(3) Payment by cession;
(4) Tender of payment and consignation.
What is dacion en pago? An act by virtue of which the
debtor voluntarily performs in favor of the creditor, by
way of payment, a prestation different from that due,
and which the latter accepts as a valid substitute.
We said before that dacion en pago will be governed
by the law on sales because here, we have a
substitution of the payment of a monetary obligation
with the delivery of property belonging to the debtor.
So, in effect the value of the amount due would now be
treated as the purchase price for the thing to be
delivered.
But looking at it in a legal point of view, what actually
transpires in dation in payment? Novation, there is
novation because we extinguish the first obligation
which is payment of a sum of money thru the creation
of new obligation in which is now consisting of the sale
of a property for the amount originally due from the
debtor.
Would it be correct to say that we only have dation in
payment if the obligation involves a payment of a sum
of money? No, if we would go to that premise that
dation en pago is essentially a novation, then there is no
reason why we should limit it to those instances where
the obligation involved is one pertaining to payment in
sum of money. The only consequence would be that
the resulting new obligation will now be governed by
the law on sales.
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ARTICLE 1248. Unless there is an express stipulation to that

effect, the creditor cannot be compelled partially to receive
the prestations in which the obligation consists. Neither may
the debtor be required to make partial payments.
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However, when the debt is in part liquidated and in part

unliquidated, the creditor may demand and the debtor may
effect the payment of the former without waiting for the
liquidation of the latter.
When should payment be made? At the time stipulated
by the parties.
Is it also dependent at the kind of obligation involved?
Yes.
If the obligation is a pure obligation or subject to a
resolutory condition or period: The payment must be
made upon demand.
If the obligation is subject to a suspensive condition or
period: The payment must be made upon the
happening of the condition or arrival of the period.
How should payment be made? It depends on what
kind of obligation.
In obligation to do or not to do, the debtor performs the
obligation by doing the specified task or prestation or
refraining from the prohibited prestation or act.
In obligation to give a specific thing, he must deliver the
very thing that has been agreed upon as well as its
accessions, accessories, fruits and income.
In obligation to give a generic thing, he must deliver the
thing that belongs to the same genus or kind as that
agreed upon. As to quality, the debtor is not required to
deliver something of superior quality but he cannot also
delivery a thing of inferior quality.
e.
ARTICLE 1247. Unless it is otherwise stipulated, the

extrajudicial expenses required by the payment shall be for
the account of the debtor. With regard to judicial costs, the
Rules of Court shall govern.
liv
ARTICLE 1246. When the obligation consists in the delivery

of an indeterminate or generic thing, whose quality and
circumstances have not been stated, the creditor cannot
demand a thing of superior quality. Neither can the debtor
deliver a thing of inferior quality. The purpose of the
obligation and other circumstances shall be taken into
consideration.
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To what extent will the obligation be extinguished?

Absolute extinguishment, because it is novation.
Requisites of dacion en pago:
(1) There must be performance of the prestation in lieu
of payment (animo solvendi) which may consist in
the delivery of a corporeal thing or a real right or a
credit against the 3rd person;
(2) There must be some difference between the
prestation due and that which is given in
substitution; and
(3) There must be an agreement between the creditor
and debtor that the obligation is immediately
extinguished by reason of the performance of a
prestation different from that due.
Example: A is the creditor of B for 200k. He likewise
delivered his parcel of land as a security. Upon failure to
pay, can B (debtor) sell the collateral to A (creditor) for
200k? Is this valid? No, this is pactum commissorium.
How can we say that it is dacion en pago and not
pactum commissorium? Dacion en pago applies to all
kinds of obligations, while pactum commissorium
applies only to those obligations which are secured
either by mortgage or pledge. Further, in dacion en
pago, there is a separate agreement between the
parties, whereas in pactum commissorium, it is included
in the document or agreement.
By virtue of the fact that dation in payment involves
ceding property belonging to the debtor for the
creditor, we can say that there is some kind of similarity
between dation in payment and payment by cession.
But the circumstances in payment by cession are
different from the circumstances in dation in payment.
In dation in payment, there is only one creditor; whereas
in payment by cession, there is more than one creditor.
In dation in payment, there is transfer of property
belonging to the debtor; whereas in payment by
cession, there is transfer of patrimony, i.e. all properties.
Dation in payment does not presuppose insolvency or
illiquidity; whereas payment by cession implies that the
debtor has difficulty in paying the obligation, essentially,
insolvent. If not insolvent, illiquid, that the debtor is
suffering from liquidity problems.
In dation in payment, there is transfer of ownership over
the property that the debtor is giving in lieu of money;
whereas in payment by cession, there is no transfer of
ownership but the debtor gives the authority to sell the
properties.
Dation in payment gives the debtor total
extinguishment of the obligation; whereas payment by
cession gives the debtor extinguishment of the
obligation to the extent of what may be covered by the
proceeds of the sale.
In payment by cession, the purpose of giving the
authority to sell the properties is so that the creditor may
use the proceeds of the sale to satisfy the obligation of
the debtor.
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ARTICLE 1249. The payment of debts in money shall be

made in the currency stipulated, and if it is not possible to
deliver such currency, then in the currency which is legal
tender in the Philippines.
The delivery of promissory notes payable to order, or bills of
exchange or other mercantile documents shall produce the
effect of payment only when they have been cashed, or
when through the fault of the creditor they have been
impaired.
In the meantime, the action derived from the original
obligation shall be held in abeyance.
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In any other case the place of payment shall be the domicile

of the debtor.
If the debtor changes his domicile in bad faith or after he has
incurred in delay, the additional expenses shall be borne by
him.
These provisions are without prejudice to venue under the
Rules of Court.
If the debtor accepts from the creditor a receipt in which an

application of the payment is made, the former cannot
complain of the same, unless there is a cause for invalidating
the contract.
ARTICLE 1253. If the debt produces interest, payment of the
principal shall not be deemed to have been made until the
interests have been covered.
ARTICLE 1254. When the payment cannot be applied in
accordance with the preceding rules, or if application
cannot be inferred from other circumstances, the debt
which is most onerous to the debtor, among those due,
shall be deemed to have been satisfied.
If the debts due are of the same nature and burden, the
payment shall be applied to all of them proportionately.
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ARTICLE 1252.He who has various debts of the same kind in

favor of one and the same creditor, may declare at the time
of making the payment, to which of them the same must be
applied. Unless the parties so stipulate, or when the
application of payment is made by the party for whose
benefit the term has been constituted, application shall not
be made as to debts which are not yet due.
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There was a time when we had this Uniform Currency

Act (RA No. 529). That law actually prohibited the
parties from stipulating on the payment of monetary
obligation in currencies other than the Philippine Peso.
In other words, that law suppressed Art.1249. Such law
was repealed by RA No. 8183 and the effect of the
repeal is to revert the rule to that provided in Art.1249,
meaning to say that the parties are now again allowed
to stipulate on the currency which payment of
monetary obligation may be made.
What is considered legal tender in the Philippines?
Coins, bills, notes issued by the Bangko Sentral ng
Pilipinas, and which cannot be refused by the creditor.
What about promissory notes, bills of exchange or
checks? They are not considered as legal tender unless it
is encashed. For a while, there were various rulings by
the Court to the effect that cashiers checks and
managers checks issued by banks are as good as cash,
such that payment made in these checks would be
tantamount to payment by money. Do we still adhere to
these rulings? Not anymore.
What is the value of receipt when it comes to payment?
It is the best evidence of payment.
Is it the only evidence of payment that can be used? No,
parole evidence, that the declaration of the debtor that
he has paid and his witnesses is admissible as evidence
of payment.
As an evidence of payment, is a receipt presumptive or
conclusive? Presumptive, meaning to say that the fact of
payment as proved by the receipt may still be rebutted.
If a receipt is issued to acknowledge payment made by
check, it does not mean that the presence of the receipt
will already be conclusive proof of payment because the
debtor must still show, if the proof is rebutted, that the
check was actually encashed.
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SUBSECTION 1 - Application of Payments
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There being no express stipulation and if the undertaking is

to deliver a determinate thing, the payment shall be made
wherever the thing might be at the moment the obligation
was constituted.
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How will they determine that there is inflation? There

must be a competent authority declaring extraordinary
inflation.
e.
ARTICLE 1251. Payment shall be made in the place

designated in the obligation.
liv
ARTICLE 1250. In case an extraordinary inflation or deflation

of the currency stipulated should supervene, the value of the
currency at the time of the establishment of the obligation
shall be the basis of payment, unless there is an agreement
to the contrary.
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What is application of payments? The designation of the

debt to which should be applied the payment made by
a debtor who owes several debt to the same creditor.
Its requisites are as follow:
(1) Several debts are due;
(2) The same debt or and the same creditor;
(3) The debts are all of the same kind;
(4) The payment made is not sufficient to cover all
debts.
(5) The parties have not agreed previously on the
application.
In payment by cession, we have several creditors; in
application of payment, we have several debts or
obligations but in favor of one and the same creditor.
Also in application of payments, the debtor is making
payment and the payment that he is making should not
be sufficient to cover all of the obligations, why not?
What happens if it is sufficient? There is no need to
designate which obligation will be satisfied first because
the essence of application of payment is that the debtor
gets to choose which obligations will be satisfied ahead
of the others.
Who is given this option of choosing which obligation
will be paid first? The debtor.
How can the creditor exercise this option of applying
payments? By designating the obligation which the
payment is applied in the receipts; and if the debtor
simply accepts the receipt of the creditor where he
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made application of payment, then he is already

estopped.
SUBSECTION 2 - Payment by Cession
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What is Tender of Payment? Declaration of intention by

the debtor manifesting his firm decision to immediately
pay the obligation. It is not correct to say that it is simply
an offer to pay, it must be coupled with the readiness to
perform the obligation.
Why is tender of payment important? When validly
made, a tender of payment that is refused by the
creditor without justifiable reason will put the creditor in
mora accipiendi.
In a sense, this is a counterpart on the debtor. If the
creditor has demand on his side, then the debtor has
tender on his part.
When is tender validly made? It must pertain to an
obligation that is already due. It must be paid by the
debtor or any other person who can compel payment
on the part of the creditor. The payment offered must
comply with all the characteristics of payment, meaning
to say, it cannot be partial, it must be complete. And if it
is for a sum of money, it must be payment in legal
tender.
Requisites of tender of payment:
(1) The tender must be made to the creditor, and not
to a third person, although the latter is interested in
the obligation;
(2) The tender must be of the very thing due or if the
obligation is monetary, it must be made in legal
tender;
(3) The tender must be of the whole amount due
including interest;
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ARTICLE 1258. Consignation shall be made by depositing

the things due at the disposal of judicial authority, before
whom the tender of payment shall be proved, in a proper
case, and the announcement of the consignation in other
cases.
The consignation having been made, the interested parties
shall also be notified thereof.
ARTICLE 1259. The expenses of consignation, when properly
made, shall be charged against the creditor.
ARTICLE 1260. Once the consignation has been duly made,
the debtor may ask the judge to order the cancellation of
the obligation.
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Consignation alone shall produce the same effect in the

following cases:
(1) When the creditor is absent or unknown, or does not
appear at the place of payment;
(2) When he is incapacitated to receive the payment at the
time it is due;
(3) When, without just cause, he refuses to give a receipt;
(4) When two or more persons claim the same right to
collect;
(5) When the title of the obligation has been lost.
The consignation shall be ineffectual if it is not made strictly

in consonance with the provisions which regulate payment.
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ARTICLE 1256. If the creditor to whom tender of payment

has been made refuses without just cause to accept it, the
debtor shall be released from responsibility by the
consignation of the thing or sum due.
ARTICLE 1257. In order that the consignation of the thing

due may release the obligor, it must first be announced to
the persons interested in the fulfillment of the obligation.
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SUBSECTION 3 - Tender of Payment and Consignation
liv
ARTICLE 1255. The debtor may cede or assign his property

to his creditors in payment of his debts. This cession, unless
there is stipulation to the contrary, shall only release the
debtor from responsibility for the net proceeds of the thing
assigned. The agreements which, on the effect of the
cession, are made between the debtor and his creditors shall
be governed by special laws.
(4) The tender must be made at the time the obligation

is due; and
(5) The tender must be unconditional.
Aside from triggering delay on the part of the creditor,
tender can also pave the way for consignation which in
turn, if found by the court to have been properly made
may result in the extinguishment of the obligation.
Art. 1256 enumerates the instances where we do NOT
make a tender of payment prior to making consignation.
Before the creditor has accepted the consignation, or before

a judicial declaration that the consignation has been
properly made, the debtor may withdraw the thing or the
sum deposited, allowing the obligation to remain in force.
ARTICLE 1261. If, the consignation having been made, the
creditor should authorize the debtor to withdraw the same,
he shall lose every preference which he may have over the
thing. The co-debtors, guarantors and sureties shall be
released.
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Why is it better to consign instead of tendering to an

incapacitated creditor? Why allow the debtor to effect
consignation right away instead of making a tender of
payment to an incapacitated creditor? Because making
a tender of payment to an incapacitated creditor will not
necessarily result in the extinguishment of the obligation
should he receive the payment. The law makes a
qualification. The obligation will only be extinguished to
the extent that there has been benefit to the
incapacitated payee or should he retain the thing that
has been delivered.
In the instance that there are two or more persons
taking the same claim, the action for consignation
should be coupled with an action for interpleader.
When the debtor consigns, it presupposes that he
knows who the creditor is, but in the case that there are
two or more people fighting over the same thing, the
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ARTICLE 1262. An obligation which consists in the delivery of

a determinate thing shall be extinguished if it should be lost
or destroyed without the fault of the debtor, and before he
has incurred in delay.
When by law or stipulation, the obligor is liable even for
fortuitous events, the loss of the thing does not extinguish
the obligation, and he shall be responsible for damages. The
same rule applies when the nature of the obligation requires
the assumption of risk.
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A thing is considered lost, when it perishes, it goes out

of commerce, or disappears in such a way that its
existence is unknown or it cannot be recovered.
Requisites:
(1) The thing must be determinate;
(2) The debtor must not be at fault;
(3) The debtor is not in default;
(4) The loss occurs after the perfection of the
obligation.
General Rule: Loss of the thing, if all requisites concur,
will extinguish the obligation and will relieve the debtor
from liability.
Exceptions:
(1) When the law expressly so provides;
(2) When the parties expressly so stipulate;
(3) When the nature of the obligation requires the
assumption of risk;
(4) When the debtor is guilty of concurrent negligence;
(5) When the debtor is in mora;
(6) When the debtor has promised to deliver the same
thing to two or more different parties;
(7) Where the obligation to deliver a determinate
object arises from a criminal act, unless the creditor
unjustly refuses; and
(8) In obligations to deliver generic things.
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SECTION 2 - Loss of the Thing Due
liv
debtor is not certain who is entitled. To be safe, file an

action for interpleader and at the same time consign the
thing with the court.
Requisites for a valid consignation:
(1) A debt must be due;
(2) Tender of payment and unjustified refusal to accept
by the creditor;
(3) Notice of consignation to all the parties interested;
(4) Filing of the complaint against the creditor coupled
with judicial deposit of the thing due with proof of
tender and notice;
(5) Notice after consignation to all the parties
interested.
Process of consignation:
(1) There must be tender of payment, unless it is
exempted;
(2) There must be notice of the intention to consign to
the creditor. The notice must already indicate where
the debtor intends to make the consignation (First
Notice);
(3) Filing of the complaint against the creditor coupled
with judicial deposit of the thing due with proof of
tender and notice;
(4) Notice to the creditor (Second Notice), and Notice
to all persons interested; and
(5) There will be a proceeding, where the debtor must
establish that consignation is proper, that the
obligation is existing; obligation is due; the debtor
made a tender; and such tender was refused
without justified reason.
(6) After presentation of the evidence of the debtor
and creditor, the debtor may call upon the court to
make a declaration regarding the validity of the
consignation.
What is the purpose of the first notice? To give the
creditor an opportunity to reconsider his unjustified
refusal for him to accept the payment in order to avoid
litigation because should the consignation become
properly made, then the expenses incurred by the
debtor in making consignation would be for the
account of the creditor.
What is the purpose of the second notice? To give the
creditor the opportunity to protest the consignation. He
may question the validity of the consignation.
Prior to the judicial declaration of the validity of the
consignation or prior to the creditor accepting the
consignation, the debtor may still change his mind and
take back the thing that he has consigned and allow the
obligation to subsist.
If the court finds that the consignation was properly
made, then it will have the effect of extinguishing the
obligation.
Do not think that the obligation will be extinguished the
moment the debtor filed a complaint in court. There
must be a finding on the part of the court that the
debtor has properly made a consignation.
ARTICLE 1263. In an obligation to deliver a generic thing, the

loss or destruction of anything of the same kind does not
extinguish the obligation.
o
Exception: In case the generic object is to be taken from

a specific mass or source.
ARTICLE 1264. The courts shall determine whether, under

the circumstances, the partial loss of the object of the
obligation is so important as to extinguish the obligation.
ARTICLE 1265. Whenever the thing is lost in the possession
of the debtor, it shall be presumed that the loss was due to
his fault, unless there is proof to the contrary, and without
prejudice to the provisions of article 1165. This presumption
does not apply in case of earthquake, flood, storm or other
natural calamity.
ARTICLE 1266. The debtor in obligations to do shall also be
released when the prestation becomes legally or physically
impossible without the fault of the obligor.
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SECTION 3 - Condonation or Remission of the Debt
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Loss, in obligations to do, translate to impossibility of

performance.
If the impossibility of performance occurs at the time of
the constitution of the obligation, it prevents the birth of
the obligation since the object of the obligation is
missing.
If the impossibility of performance occurs at the time of
execution or performance, then it will either extinguish
the obligation or not depending on whether the same
is imputable to the debtor or not.
There is a presumption in the law when it comes to loss
of the thing due while in the possession of the debtor.
What is that presumption? If the thing is lost, it was due
to the fault of the debtor. This presumption is rebuttable.
Art.1267 is supposed to be an application of the
Doctrine of Rebus Sic Stantibus. What does it mean? It
means that when the parties entered into a contract
they are presumed to have taken into consideration the
circumstances prevailing at the time, so that in case later
on the circumstances so materially change, making it
difficult, but not impossible for the debtor to perform,
the debtor may rescind the same.
Art.1267 speaks of only of difficulty, not impossibility.
What is involved in Art.1267 is that there is a change of
circumstances of the parties as to make the service
difficult in such a way that is manifestly beyond what
was earlier contemplated by the parties. This is an
embodiment of the Doctrine of Unforeseen Events, on
the theory that, when a debtor enters into a transaction,
he entered into the transaction based on the prevailing
circumstances, so that if the circumstances drastically
change as to make it so difficult as to be manifestly
beyond what was earlier contemplated, then the
obligation should be considered extinguished and the
debtor is freed from the obligation either in full or in
part. This is an extreme exceptional circumstance. We
are not to apply Art.1267 liberally. Applying it liberally
would impair the security of contracts.
If in order to nullify this waiver it should be claimed to be

inofficious, the debtor and his heirs may uphold it by proving
that the delivery of the document was made in virtue of
payment of the debt.
ARTICLE 1272. Whenever the private document in which
the debt appears is found in the possession of the debtor, it
shall be presumed that the creditor delivered it voluntarily,
unless the contrary is proved.
ARTICLE 1273. The renunciation of the principal debt shall
extinguish the accessory obligations; but the waiver of the
latter shall leave the former in force.
ARTICLE 1274. It is presumed that the accessory obligation of
pledge has been remitted when the thing pledged, after its
delivery to the creditor, is found in the possession of the
debtor, or of a third person who owns the thing.
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ARTICLE 1271. The delivery of a private document

evidencing a credit, made voluntarily by the creditor to the
debtor, implies the renunciation of the action which the
former had against the latter.
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ARTICLE 1269. The obligation having been extinguished by

the loss of the thing, the creditor shall have all the rights of
action which the debtor may have against third persons by
reason of the loss.
One and the other kinds shall be subject to the rules which
govern inofficious donations. Express condonation shall,
furthermore, comply with the forms of donation.
e.
ARTICLE 1268. When the debt of a thing certain and

determinate proceeds from a criminal offense, the debtor
shall not be exempted from the payment of its price,
whatever may be the cause for the loss, unless the thing
having been offered by him to the person who should
receive it, the latter refused without justification to accept it.
ARTICLE 1270. Condonation or remission is essentially

gratuitous, and requires the acceptance by the obligor. It
may be made expressly or impliedly.
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ARTICLE 1267. When the service has become so difficult as

to be manifestly beyond the contemplation of the parties,
the obligor may also be released therefrom, in whole or in
part.
Condonation is an act of liberality whereby the creditor

waives the enforcement of the obligation contracted in
his favor.
Is this similar to donation? Yes, it is essentially a donation,
but a donation of credit. It is subject to the same rules of
inofficious donations. And if we make an express
donation, it is required that it must follow the form for
donations.
Requisites:
(1) Capacities of the parties, i.e., creditor and debtor
must have the capacity to make and accept
donations;
(2) Consent of the parties since remission is an
agreement and requires acceptance by the
obligors.
The acceptance of the remission of the debt all kinds
of debts may be condoned whether pure or conditional
or with a term.
The remission must be gratuitous. In case of express
remission, the formalities required by law for ordinary
donation must be complied with.
SECTION 4 - Confusion or Merger of Rights
ARTICLE 1275. The obligation is extinguished from the time

the characters of creditor and debtor are merged in the
same person.
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ARTICLE 1276. Merger which takes place in the person of
the principal debtor or creditor benefits the guarantors.
Confusion which takes place in the person of any of the
latter does not extinguish the obligation.
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ARTICLE 1279. In order that compensation may be proper, it

is necessary:
(1) That each one of the obligors be bound principally, and
that he be at the same time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the
things due are consumable, they be of the same kind, and
also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or
controversy, commenced by third persons and
communicated in due time to the debtor.
On the 5th requisite, there must be no writ of
garnishment or levy that has been issued against any
one of the parties which will prevent them from
effecting payment.
Once all of these requisites concur, compensation will
take place as a matter of law. The parties need not even
be aware that compensation has taken place. If they
only become aware of it after the compensation has
taken place, then either one of them can invoke it and
the same will be recognized as having occurred as of
the time the requisites concurred.
e.
ARTICLE 1278. Compensation shall take place when two

persons, in their own right, are creditors and debtors of each
other.
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What is Confusion or Merger? Meeting in one person of

the qualities of creditor and debtor of the same
obligation.
Requisites:
(1) It must take place between the creditor and the
principal debtor;
(2) It must be complete and definite.
How many obligations are involved in confusion? One
obligation. Only this time the creditor and debtor are
the same person.
Does it always start that there is only one obligation?
No.
How can we have confusion or merger? Example: Mr.
Sison issued a promissory note to Ms. De Guia who in
turn issued the same to Ms. Dizon who then issued the
same promissory note to Mr. Sison. And now Mr. Sison is
the holder of the promissory note which he also issued.
On that strength, he is now the debtor and the creditor
under the promissory note, so the obligation should be
considered extinguished.
If the obligation has an accessory obligation and the
principal obligation is extinguished by virtue of the
confusion or merger, what happens to the accessory
obligation? It will be extinguished because the accessory
cannot exist without the principal obligation.
If the obligation is secured by a guaranty and the
obligation is extinguished by remission, the guarantor
would be benefitted because he would have to be
released.
But supposing that the confusion does not take place in
the person of the creditor and debtor, but it takes place
in the person of the guarantor, what would be the
effect of his acquisition of credit on the principal
obligation and on the contract of guaranty? There is no
confusion affecting the principal obligation. What we
have is assignment of credit, such that the guarantor is
now replacing the creditor.
Given that the guarantor becomes the creditor, what
happens in the contract of guaranty? Extinguished. The
creditor cannot be his own guarantor. It will be absurd.
The idea of guaranty is that it requires that it should be
given by a person other than the debtor, and mostly
other than the creditor.
Can confusion be revoked? Yes, because it takes place
by agreement of the parties. It does not always take
place by operation of law.
Confusion on joint obligations will not extinguish the
obligation, only the part of the debtor whose personality
the creditor and debtor merged.
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SECTION 5 - Compensation
liv
ARTICLE 1277. Confusion does not extinguish a joint

obligation except as regards the share corresponding to the
creditor or debtor in whom the two characters concur.
If the obligation is solidary, the confusion will extinguish

the entire obligation, However, the solidary debtors will
have to reimburse the person to whom such confusion
happened.
ARTICLE 1280. Notwithstanding the provisions of the

preceding article, the guarantor may set up compensation
as regards what the creditor may owe the principal debtor.
ARTICLE 1281. Compensation may be total or partial. When
the two debts are of the same amount, there is a total
compensation.
ARTICLE 1282. The parties may agree
compensation of debts which are not yet due.
upon
the
ARTICLE 1283. If one of the parties to a suit over an

obligation has a claim for damages against the other, the
former may set it off by proving his right to said damages
and the amount thereof.
ARTICLE 1284. When one or both debts are rescissible or
voidable, they may be compensated against each other
before they are judicially rescinded or avoided.
ARTICLE 1285. The debtor who has consented to the
assignment of rights made by a creditor in favor of a third
person, cannot set up against the assignee the
compensation which would pertain to him against the
assignor, unless the assignor was notified by the debtor at
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ARTICLE 1288. Neither shall there be compensation if one of

the debts consists in civil liability arising from a penal offense.
ARTICLE 1289. If a person should have against him several
debts which are susceptible of compensation, the rules on
the application of payments shall apply to the order of the
compensation.
ARTICLE 1290. When all the requisites mentioned in article
1279 are present, compensation takes effect by operation of
law, and extinguishes both debts to the concurrent amount,
even though the creditors and debtors are not aware of the
compensation
.
o How is confusion or merger different from
compensation? Confusion or merger involves only one
obligation, whereas compensation involves two
obligations.
o Compensation is the extinction in the concurrent
amounts of the obligations of those persons who are
mutually debtors and creditors of each other. Example:
A obligated himself to deliver 5k to B. B obligated
himself to deliver 10k to A. There is compensation up to
the concurrent amount.
o Different kinds of compensation:
(1) Legal it takes place by operation of law;
(2) Conventional when the parties agree to the
compensation of the mutual obligations even
though all the requisites required by law for
compensation are not present;
(3) Judicial when compensation is decreed by the
court when there is a counterclaim or set-off
interposed by a party; and
(4) Facultative when the compensation can be
claimed by the party who can oppose it and who is
the only party prejudiced by the compensation.
o Judicial Compensation happens when there is a
counterclaim filed by the plaintiff. At the end of the trial,
while the court may find for the plaintiff that he is
entitled to recover something from the defendant, the
court might as well find that the defendant is entitled to
some of his counterclaim. Instead of asking the plaintiff
to pay so much to the defendant, the defendant being
also allowed to recover so much from the plaintiff, the
court may, by virtue of judicial compensation, deduct
the amounts due to the defendant from the amount he
has to pay to the plaintiff.
o In Conventional Compensation, why would the parties
have to come into agreement? Conventional
compensation may be relevant if anyone of the
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What can happen if there is any assignment of credit

that has been made? How will this affect the capacity of
either one of the parties to invoke compensation? Art.
1285. The thing with assignment is that, unlike
subrogation, assignment does not require the consent
of the debtor. The creditor can assign his credit as
against the debtor to an assignee without need of
getting the debtor's consent. In lieu of consent, only
notice has to be given by the creditor to the debtor. The
purpose of the notice is not to make the assignment
valid but to bind the debtor.
We said that compensation takes place by operation of
law. The turning point there is the giving of notice.
Because once notice is given or once knowledge of the
assignment is made, that will be the cut-off point,
beyond which no compensation may be invoked.
If B made an assignment to E, after both obligations
became due, then there is legal compensation. Since no
notice of assignment was made to A, then A can still
invoke the compensation that has taken place because
he still has every right to treat the credit as still belonging
to B. But once notice is given to him, he is already
bound by the assignment and he can no longer treat
the credit as belonging to B but already belonging to E.
The important thing to look out is when notice is given
and the notice in relation to when the compensation
takes place. If the compensation takes place ahead of
notice, A can invoke compensation after learning of the
assignment because the compensation preceded the
assignment. If there is no notice given, we abide by the
same rule. Once there is knowledge of the assignment,
he can no longer invoke any compensation that may
take place after the knowledge of the assignment.
As we have said, there is no need to get the consent of
the debtor, but if the creditor gets the consent, the
debtor should grab the opportunity to make reservation
with regard to his right to invoke compensation. Why is
it important to preserve the right to compensation?
Because compensation is a sure thing in terms of
payment. If the debtor will let go of the compensation,
he has to wait for payment, on which there is no
certainty.
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Neither can compensation be set up against a creditor who

has a claim for support due by gratuitous title, without
prejudice to the provisions of paragraph 2 of article 301.
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If the assignment is made without the knowledge of the

debtor, he may set up the compensation of all credits prior
to the same and also later ones until he had knowledge of
the assignment.
ARTICLE 1287. Compensation shall not be proper when one

of the debts arises from a depositum or from the obligations
of a depositary or of a bailee in commodatum.
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If the creditor communicated the cession to him but the

debtor did not consent thereto, the latter may set up the
compensation of debts previous to the cession, but not of
subsequent ones.
exchange or transportation to the place of payment.
liv
the time he gave his consent, that he reserved his right to

the compensation.
ARTICLE 1286. Compensation takes place by operation of

law, even though the debts may be payable at different
places, but there shall be an indemnity for expenses of
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SECTION 6 - Novation
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ARTICLE 1291. Obligations may be modified by:

(1) Changing their object or principal conditions;
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights of the creditor
.
o What is novation? The substitution or alteration of an
obligation by a subsequent one that cancels or modifies
the preceding one.
o It is a juridical act with a dual function of extinguishing
an old obligation and the creation of a new obligation
that will replace the old obligation.
o Novation is a peculiar means of extinguishing an
obligation, because, we extinguish an old obligation by
creating a new one.
o The purpose of novation is extinguishment. However,
the wording in our law does not appear to limit the
effects of novation to extinguishment. If we pay
attention to the wording of Art.1291, the law says,
Obligations may be modified. This itself is an
acknowledgment that we can have a novation
although the purpose is not really extinguishment but
mere modification.
o Kinds of novation:
(1) Real or objective, where there is a change in the
obligation itself as to its cause, object or principal
conditions;
(2) Personal or subjective, where the change is in the
parties;
(3) Mixed, where there is a change of both the object
and the parties in the obligation.
o Personal or subjective, there is a change in the person of
either the creditor or debtor. If there is a change in the
person of the creditor (active), we call it subrogation. If
there is a change in the person of the debtor (passive), it
is either expromission or delegacion.
o Requisites:
(1) An old valid obligation;
(2) A new valid obligation;
(3) Substantial difference between the old and new
obligation;
(4) Capacity of the parties; and
(5) Animus novandi.

The first requisite is that there must be a prior obligation
which must not be invalid. It may be voidable,
rescissible, natural obligation, what we cannot have is
an invalid or void obligation as a subject of novation,
why not? If there is no valid prior obligation, then there
is nothing to extinguish or more specifically to novate
because an old obligation is an inexistent obligation.
Real or Objective Novation: This change in the principal
condition of the object of the obligation is more relevant
if our novation is implied.
For lawyers, they will just make the novation expressly.
The problem would be when there is no such express
stipulation. When we need to infer from the
circumstances that there was an intention to novate.
That's why in this case, we need to look at the changes
in the principal condition of the contract. The only thing
we need to know is that the essence of the contract
must change so that the new contract should be
essentially incompatible with the old contract. This
should be our standard.
Example: In a construction of a house, this will take
months before it is completed. In the course of the
construction, the owner will come up with ideas that
will be deviating from the original design. At first, the
owner wants one car garage. After two months, the
owner wants a two-car garage. At first, the owner does
not want a balcony. After several months, he wants a
balcony. Would these changes amount to the
extinguishment of the original contract? Such that the
contractor can now charge the owner, no longer based
on the original agreement but on quantum meruit,
which would be higher than what was agreed upon.
Will the contractor be justified? In a decided case, the
Supreme Court said, No, because essentially, it is the
same contract. In making those additions and deletions,
the owner is simply modifying/amending the contract.
Is the owner entitled to do that (amend/modify)? Yes.
But in introducing those modifications, did the owner
intend to extinguish the original contract? No, so it goes
to the intention as reflected by the circumstances.
If we could still recognize our contract (the one
originally agreed upon), then there is no novation that is
effected.
In obligations involving sums of money, the Supreme
Court said that any extension of the period or any
restructuring of the loan or any change in the rate of
interest, does NOT amount to a novation.
In one case, there was a loan that was secured by a
chattel mortgage. The bank and the company entered
into a subsequent agreement, where the company
provided for an additional security, a real estate
mortgage. The bank tried to foreclose the chattel
mortgage. The company objected saying that the
obligation has been extinguished because of the
execution of the real estate mortgage. The Supreme
Court said, "No, there is no incompatibility between
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requisites for legal compensation may not be present. To

correct the absence of such requisites, we may have the
parties agreeing to effect a conventional compensation.
Facultative compensation is a specie of conventional
compensation. Why is it a specie? Because it is also by
agreement of the parties only this time that we
recognize that the option to call the compensation
applies to only one party.
Which party is this? The party entitled to resist the
compensation. It may happen that one obligation is
already due and demandable while the other is still
subject to a period. But the period is for the benefit of
the debtor. If that person so chooses, he can simply
waive the period to make way for the compensation to
take place.
o
o
having a chattel mortgage to secure the obligation and
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If we have a judgment of credit that has been affirmed

by the court and instead of asking for a writ of
execution, the creditor entered into an agreement with
the debtor, where the debtor acknowledged the
indebtedness and provides for a mortgage to secure the
same, the creditor will not be stopped from asking for
that writ of execution because that old obligation
(judgment credit) has not been extinguished by
novation. There is only an added security.
Such principle also applies to novation through
substitution of debtors. If we get another debtor but we
did not free the old debtor, then that means no
novation is effected. For novation to take place, in the
substitution of the old debtor, the old debtor must be
freed from liability by the creditor. It all boils down to
intention.
In the absence of express stipulation, we need to look at
the circumstances surrounding the obligations. What
will be our standard? There should be incompatibility
between the old and the new obligation, they must not
be able to stand up together.
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ARTICLE 1292. In order that an obligation may be
extinguished by another which substitutes the same, it is
imperative that it be so declared in unequivocal terms, or
that the old and the new obligations be on every point
incompatible with each other.
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ARTICLE 1293. Novation which consists in substituting a

new debtor in the place of the original one, may be made
even without the knowledge or against the will of the latter,
but not without the consent of the creditor. Payment by the
new debtor gives him the rights mentioned in articles 1236
and 1237.
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ARTICLE 1294. If the substitution is without the knowledge

or against the will of the debtor, the new debtor's insolvency
or non-fulfillment of the obligation shall not give rise to any
liability on the part of the original debtor.
ARTICLE 1295. The insolvency of the new debtor, who has
been proposed by the original debtor and accepted by the
creditor, shall not revive the action of the latter against the
original obligor, except when said insolvency was already
existing and of public knowledge, or known to the debtor,
when he delegated his debt.
ARTICLE 1296. When the principal obligation is extinguished

in consequence of a novation, accessory obligations may
subsist only insofar as they may benefit third persons who
did not give their consent.
ARTICLE 1297. If the new obligation is void, the original one
shall subsist, unless the parties intended that the former
relation should be extinguished in any event.
ARTICLE 1298. The novation is void if the original obligation
was void, except when annulment may be claimed only by
the debtor, or when ratification validates acts which are
voidable.
o
Another significance of the mode of substitution of the

debtor would be on the point of liability of the
insolvency of the new debtor. If we would read
Arts.1294 and 1295, we will get the impression that
Art.1294 pertains to all instances of expromission just
because Art.1295 appears to be pertaining to
delegacion.
The problem with Art.1294 is that it equates
expromision, apparently, with all instances whether its
tacit approval or consent on the part of the debtor,
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which we said earlier that it is not always the case. There

would be no problem, except if we would imply in
Art.1295 that the debtor who actually volunteers a third
person has less liability for that third persons insolvency.
Compared to a debtor who did not volunteer the third
person but may have merely tacitly given his approval to
the assumption by the third person of his indebtedness.
Why do we say this? Because in Art.1295, the law says
that there would be no revival of the obligation of the
original debtor in case of the insolvency of the new
debtor except if when said insolvency was already
existing and of public knowledge, or known to the
debtor when he delegated his debt.
General Rule: No liability anymore.
Exceptions:
(1) When said insolvency was already existing and of
public knowledge;
(2) When said insolvency was known to the debtor,
when he delegated his debt.
Compare this to Art.1294 which says that if it is by
expromission, then the old debtor will be liable for his
own obligation, but what did the old debtor do in
expromission? He was not the one who chose the new
debtor.
Why should he be more liable as compared to the
debtor who volunteered, who had presented the new
debtor to the creditor? The better interpretation here
according to prominent authorities would be to exempt
an old debtor for any liability in case of non-payment by
the new debtor in all cases of expromision regardless of
whether or not he gave his tacit approval to the
substitution. In expromission, the old debtor will not be
liable at all for the insolvency of the new debtor.
e.
at the same time having an additional real estate

mortgage to secure the same obligation. What we have
is simply an additional security.
If the law requires that the old obligation be valid, how

do we explain the tenor of Art.1298 which seems to
imply that you can actually have an old obligation that is
void so long as it falls under the two exceptions
provided in Art.1298? Art.1298 speaks about an
obligation which is voidable, not void. And a voidable
obligation is a valid obligation. It is valid until it is
annulled.
Until when can you ask for the novation of a voidable
old obligation? Before it is annulled, because once it is
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If the only difference between the old and the new

obligation is the suppression of the condition, then we
do not have a novation, we simply have a modification.
The parties can do that (suppress the condition).
Agreements are subject to amendments or modification.
However, there is one instance where the law goes out
of its way to specifically require that the new obligation
should be subject to the same condition. And this is
when the old obligation is subject to a suspensive
condition. The law says that the new obligation should
be subject to the same condition. And this rule is made
to apply not just in the case of an obligation subject to a
suspensive condition but also to one subject to a
resolutory condition. If we are going to novate this, then
the law says, that the new obligation must be subject to
a resolutory condition as well.
Why does the law make such requirement? Novation is
premised on the efficacy of the prior obligation. That is
why it is one of the requirements that we must have a
prior valid obligation. Otherwise, logic tells us that there
is nothing to extinguish by novation.
If our prior obligation is subject to a suspensive
condition, we all know that the obligation does not exist
until the condition is fulfilled. And if we will have a new
obligation that is not subject to the same condition, it
may happen that we already have the new obligation
but our prior obligation has not yet come to life so to
speak, pending the fulfillment of the condition.
Does it make it invalid or wrong if we subject them to
different conditions? No, do not be misled into thinking
that novation will become impossible or the novation in
this case will be invalid. But it will be inconvenient.
It is much more convenient if we subject them to the
same condition because the moment the condition is
fulfilled, that is the same moment that our prior
obligation will come to life. Simultaneous to its birth, is
also its extinguishment because of the concurrent work
of the new obligation. Instantaneous, the prior
obligation will be created upon the happening of the
condition and at the same time it will be extinguished.
No need for us to reckon the period or the term when
the prior obligation existed. No need for us to account
to any intervening gaps of time between the creation of
the prior obligation and its extinguishment.
Same principle if the prior obligation is subject to a
resolutory condition. If it is resolutory in character that
means it will only exist to a certain period of time, then it
may be extinguished in some point by the fulfillment of
the resolutory condition. And if that happens, we no
longer have any obligation. It has been extinguished.
Again for convenience, it is easier for us to reckon the
effects of the novation if we subject it to the same
condition.
But as we know, life is not simple. We may encounter
clients who do not want things to be done simply. They
may insist on different conditions. Is that invalid? No.
Does that prevent novation? No, because the law itself
provides for a qualification, unless the parties stipulate
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annulled, it is set aside and there is no obligation that

can be the subject of novation.
When do we apply the exceptions provided for in
Art.1298? The law had to provide for these exceptions
because we have a voidable obligation and there is a
period to ask for an annulment. Basically, its four years.
Within that four-year period, a lot of things can happen.
If we ask for novation, what will be our assurance that
there would be no annulment that will take place after
we ask for novation? We have to place some kind of
cut-off period. Some kind of assurance that the
obligation will no longer be allowed and therefore there
will be no cloud of doubt on the novation that we have
effected. And this will take place if the obligation has
been ratified because the effect of ratification on a
voidable obligation is that it cleanses the obligation from
all of its defects. Ratification is a bar to annulment.
Another instance in Art. 1298 is if the ground for
annulment is one which can only be invoked by the
debtor and the novation is effected with the consent of
the debtor. So by consenting, he is in effect ratifying the
voidable obligation; which again clears the way for a
valid novation of the obligation.
So the exceptions are:
(1) When annulment may be claimed only by the
debtor; and
(2) When ratification validates acts which are voidable.
It is also required that the second obligation be valid. It
should not be void. What happens if the new obligation
is void? Do we have a novation? There will be no
novation and the old obligation will subsist unless the
parties intended that the former relation should be
extinguished in any event.
How do we determine if there is animus novandi or
intention to novate? It may be express or implied.
Express, when the parties so state in the new obligation;
and Implied if it can be implied from the fact that the old
and new obligations are on every point incompatible
with each other.
Still on the relationship between the old obligation and
new obligation, is it a requirement that the new
obligation take on the same nature as the old
obligation? So if the old obligation was pure and we
want to novate it, are we required to make the new
obligation pure as well? No requirement. However, the
law specifies if the original obligation was subject to a
suspensive or resolutory condition, the new obligation
shall be under the same condition, unless it is otherwise
stipulated.
The law says that the new obligation does not have to
take the nature or character of the old obligation. So it is
possible that we have an old obligation that is pure and
the new obligation will be subject to a condition or
period. However, if our old obligation is once subject to
a condition and the new obligation is the same
obligation, only this time, without a condition, we do
not have a novation.
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Expromission is when a third person, distinct from the

creditor and debtor spontaneously assumes the
obligation of the debtor, relieving him of the same, with
the creditor accepting the change without any
intervention on the part of the original debtor.
The act of the third person in volunteering to substitute
for the debtor may either be with or without the
consent or approval of the debtor. Do not make the
mistake of equating expromision with lack of consent on
the part of the debtor. It is possible that there is tacit
consent or approval even in expromission.
Delegacion is that which takes place when the old
debtor presents a third person who will assume the
obligation, relieving the debtor of the same, and with
the change being accepted by the creditor. In
delegacion, this is obviously with the consent and with
the knowledge of the debtor because after all he is the
one who presents the third person to the creditor as his
substitute.
Is it significant that the substitution of the debtor is thru
expromission or delegacion? Yes. It becomes significant
in so far as the rights of the third person are concerned.
Depending on whether or not, it is with the consent or
without the consent of the debtor. This comes back to
the rule on payment made by a third person.
If the third person pays and the payment is accepted by
the creditor, then his right against the debtor will all
depend on whether or not there was consent on the
part of the debtor regarding the payment that he made.
If there was consent, then he is not just entitled to a
reimbursement of what he has paid but he is further
entitled to be subrogated to the rights of the creditor.
If it is without the consent, then only right is to be
reimbursed not for what has been paid but only to the
extent that his payment may have benefited the debtor.
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otherwise." So the parties are allowed to stipulate

otherwise.
Example: The first condition is passing the bar exams.
The new obligation was made subject to a different
condition: birds falling down from the sky. For those
who are cynical, the probability of birds falling down
from the sky will be greater than the probability of
passing the bar. What do we do now? How will we
determine when novation takes place? We look into the
conditions, are they incompatible? No, there is no
incompatibility between passing the bar and having
birds falling down from the sky.
What this implies is that, we need both conditions to be
fulfilled before we can say that novation has been
effected. We have to wait. That is the downside because
passing the bar is to take place next year. But when
there will be another instance of birds falling down the
sky? Another ten (10), twenty (20) years? So in the
meantime, we have this period of time, where the
obligation is in limbo, because we are awaiting for the
effectivity or for the birth of the new obligation that will
extinguish the prior obligation.
What if the conditions are not just different but
downright incompatible: Lets say the first condition is
passing the bar. The new obligations condition is failing
the bar. Obviously, these are incompatible. In this case,
authorities believe that it becomes very clear that there is
an intention to suppress the prior obligation. Such that
we will only wait for the fulfillment of the condition
attaching the second obligation.
Recap: For convenience, it is better that both obligations
(prior and new) are subject with the same condition.
But if we want to complicate our lives, we can have
different conditions. It is inconvenient, but the same is
legally possible. In this instance, we need to look at the
incompatibility of the conditions:
(1) If both conditions are compatible (they can stand
together), then the requirement is that both must
be fulfilled;
(2) If the conditions are incompatible, then we take
that as a clear intention to suppress the prior
obligation and we just have to await for the
fulfillment of the condition attaching to the new
obligation.
Kinds of novation:
(1) Real or objective, where there is a change in the
obligation itself as to its cause, object or principal
conditions;
(2) Personal or subjective, where the change is in the
parties;
(3) Mixed, where there is a change of both the object
and the parties in the obligation.
Personal or subjective novation may either be passive or
active:
(1) Passive for the debtor, which in turn may be
classified into expromision, and delegacion;
(2) Active for the creditor.
ARTICLE 1299. If the original obligation was subject to a

suspensive or resolutory condition, the new obligation shall
be under the same condition, unless it is otherwise
stipulated.
ARTICLE 1300. Subrogation of a third person in the rights of
the creditor is either legal or conventional. The former is not
presumed, except in cases expressly mentioned in this Code;
the latter must be clearly established in order that it may take
effect.
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Subrogation is very similar to assignment of credit. It has

the same effect which is the substitution of a third for
the old creditor.
So where do we draw the line? When is a substitution a
mere assignment and when is it an actual subrogation?
Subrogation is much more complicated to carry out.
After all, it brings about the extinguishment, supposedly,
of an old obligation and then the creation of a new
obligation.
Subrogation requires the consent of all the parties (third
person, creditor, and debtor); whereas in Assignment,
we do not need the consent of the debtor but the
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Legal subrogation cannot be presumed, but in Art.1302,

we are given exceptions to this rule. Art.1302
enumerates the instances where legal subrogation may
be presumed to exist.
ARTICLE 1308. The contract must bind both contracting

parties; its validity or compliance cannot be left to the will of
one of them.
ARTICLE 1309. The determination of the performance may
be left to a third person, whose decision shall not be binding
until it has been made known to both contracting parties.
ARTICLE 1310. The determination shall not be obligatory if it
is evidently inequitable. In such case, the courts shall decide
what is equitable under the circumstances.
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ARTICLE 1307. Innominate contracts shall be regulated by

the stipulations of the parties, by the provisions of Titles I and
II of this Book, by the rules governing the most analogous
nominate contracts, and by the customs of the place.
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ARTICLE 1302. It is presumed that there is legal subrogation:

(1) When a creditor pays another creditor who is preferred,
even without the debtor's knowledge;
(2) When a third person, not interested in the obligation,
pays with the express or tacit approval of the debtor;
(3) When, even without the knowledge of the debtor, a
person interested in the fulfillment of the obligation pays,
without prejudice to the effects of confusion as to the latter's
share.
ARTICLE 1306. 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, or public policy.
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ARTICLE 1301. Conventional subrogation of a third person

requires the consent of the original parties and of the third
person.
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ARTICLE 1303. Subrogation transfers to the person

subrogated the credit with all the rights thereto
appertaining, either against the debtor or against third
persons, be they guarantors or possessors of mortgages,
subject to stipulation in a conventional subrogation.
ARTICLE 1304. A creditor, to whom partial payment has

been made, may exercise his right for the remainder, and he
shall be preferred to the person who has been subrogated
in his place in virtue of the partial payment of the same
credit.
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ARTICLE 1305. 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.
The definition in the law has been criticized for being

limited in its focus. It emphasizes the role of the obligor
and not much in the role of the obligee. The definition is
also limited to only one kind of contract-consensual.
A juridical convention manifested in legal form, by virtue
of which, one or more persons bind themselves in favor
of another, or others, or reciprocally to the fulfillment of
If a contract is entered into by the parties whereby one

of them is given the power to terminate the contract by
simply giving notice to the other contracting party,
would this be violative of the characteristic of mutuality
of contracts? No. It has been defined that mutuality of
contracts will be limited only to matters pertaining to
creation as well as the performance of the obligation
under the contract. By having agreed to let the other
party have the power to terminate the contract
presupposes that there is already mutuality. Kaya lang
naman tayo nagkaroon ng ganung stipulation because

the parties came to an agreement. So that in enforcing
TITLE II: Contracts

CHAPTER 1: General Provisions
a prestation to give, to do, or not to do. (Sanchez

Roman).
What are the characteristics of contracts?
(1) Autonomy of the will of the parties;
(2) Obligatory force;
(3) Mutuality of contracts;
(4) Relativity of contracts.
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debtor must be given a notice. The assignment takes

effect only upon notification. But consent is not required
for the validity of the assignment. The notice to him is
only for the purpose of giving effect to the assignment.
Subrogation would cleanse the old obligation of
whatever defects it may have because it is extinguished
and replaced by a new obligation. In assignment, it does
not have that effect (as provided above) because
essentially we are just transferring the same bundle of
rights and obligations under the contract to a third
person. So the third person takes it as is. Same defenses,
vices, all these will still be present. And any vice or defect
may still be invoked against the creditor by the debtor.
that stipulation allowing one of the parties to terminate

the contract is giving effect to what has been agreed
upon.
Relate the rule on mutuality to the potestative condition.
How can potestative condition be violative of the rule
on mutuality of contracts? Potestative condition is
dependent upon the will of one of the parties. If the
condition is purely potestative and suspensive, it is void,
because the determination of the effectivity is on the
debtor who is less interested in the fulfillment of the
obligation.
Would there be exceptions to this characteristic of
mutuality of contracts? Yes. The law recognizes that a
third person may be given a power to determine the
performance of the contract. It is likewise provided that
such determination will not be given effect in case it is
inequitable or unjust.
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The law itself provides for an exception or for those

instances when the contract will only bind the parties
and not bind their heirs or assigns. These exceptions
pertain to the exclusion of heirs and assigns from being
bound by the contract. When these exceptions apply,
then only the parties will be bound by the contract that
they entered into.
But relativity of contract, as a concept, means that the
parties, their heirs and assigns are bound by the
contract. So when we speak of exceptions to the
principle of relativity of contracts, we do not refer to
those instances involving intransmissible rights.
What are the exceptions to the principle of relativity of
contracts?
(1) Stipulation pour atrui;
(2) Contracts creating real rights;
(3) Contractual interference;
(4) Whenever a contract is entered into to defraud a
creditor or accion pauliana.
Requisites of Stipulation Pour Atrui:
(1) That the contracting parties must have clearly and
deliberately conferred a favor upon the third
person;
(2) That there should be no compensation for the
stipulation in favor of the third person;
(3) That the stipulation in favor of the 3rd person should
not be the entire contract but merely a part thereof;
(4) That neither of the contracting parties bear the legal
representation or authorization of the 3rd person,
that is, there is no agency;
(5) That the 3rd person communicated his acceptance
to the obligor before its revocation by the original
parties.
There must be a contract between the parties. The
contract must confer a direct benefit in favor of a 3rd
person. The benefit must NOT be incidental only; it must
be a direct benefit. There must be acceptance that must
be communicated before the stipulation is revoked by
the parties.
When we say that the acceptance must be
communicated, how should be the acceptance be
made? It can be express or implied.
How can we have an implied acceptance of a favorable
stipulation? It can be implied from the fact that the party-
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If a contract should contain some stipulation in favor of a

third person, he may demand its fulfillment provided he
communicated his acceptance to the obligor before its
revocation. A mere incidental benefit or interest of a person
is not sufficient. The contracting parties must have clearly
and deliberately conferred a favor upon a third person.
beneficiary brings a suit to enforce the right made in his

favor.
Example of Stipulation Pour Atrui: Insurance contract.
The insured named someone else as his beneficiary. The
contract is between the insured and the insurance
company, but the benefit is for a 3rd person.
Real rights are rights which follow the property affected
by them wherever they go. Any possessor of a property
affected by real rights would also be bound by these
real rights even though they were not parties to the
transaction giving to the real rights.
Example: Mortgage. If the property is mortgaged and
such property is sold from one person to another, the
present possessor cannot complain if the mortgaged
property is foreclosed and was deprived of its
possession. He cannot invoke relativity of contracts to
defeat the mortgage because this is an exception. It is an
exception because a contract of mortgage creates real
rights.
Take note on how the law qualifies the rule by referring
to the applicability of the mortgage law and the land
registration law. To put it simply, it only means that to
bind 3rd persons, we also have to observe the rules
pertaining to the Torrrens system. And what is that rule?
The 3rd person can rely on what appears and what does
not appear on the Torrens title. So to be bound on a
real right affecting registered property, the real right
must also be recorded in the title of the property;
otherwise, it will not bind 3rd persons.
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ARTICLE 1311. Contracts take effect only between the

parties, their assigns and heirs, except in case where the
rights and obligations arising from the contract are not
transmissible by their nature, or by stipulation or by provision
of law. The heir is not liable beyond the value of the property
he received from the decedent.
ARTICLE 1312. In contracts creating real rights, third persons

who come into possession of the object of the contract are
bound thereby, subject to the provisions of the Mortgage
Law and the Land Registration Laws.
ARTICLE 1313. Creditors are protected in cases of contracts
intended to defraud them.
ARTICLE 1314. Any third person who induces another to
violate his contract shall be liable for damages to the other
contracting party.
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What are the requisites of contractual interference?

(1) The existence of a valid contract;
(2) Knowledge by the 3rd person of the existence of the
said contract;
(3) Interference by the person in the contractual
relation without legal justification.
Example: Kapamilya vs. Kapatid - exclusive artist of which
studio. Lets say, Sharon Cuneta. She made a switch
from Channel 2 to Channel 5. Assuming that Sharon
Cuneta has a contract with Channel 2, if Channel 5
went out of its way to induce Sharon Cuneta to
disregard her contract with Channel 2 and enter into a
contract with them, then that will be contractual
interference because Channel 5 persuaded this party
(Sharon Cuneta) to the contract to disregard her existing
contract with the other party. The elements are all
present. The element of knowledge of the other party is
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Mr. Ang as her talent.

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ARTICLE 1317. No one may contract in the name of another

without being authorized by the latter, or unless he has by
law a right to represent him.
A contract entered into in the name of another by one who
has no authority or legal representation, or who has acted
beyond his powers, shall be unenforceable, unless it is
ratified, expressly or impliedly, by the person on whose
behalf it has been executed, before it is revoked by the other
contracting party.
CHAPTER 2: Essential Requisites of Contracts

General Provisions
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Is there a contractual interference? Yes.

Would there be liability for damages? Yes, because in
this case, Ms. Velasco is motivated not by the
"furtherance of her own business interest, but to get
back at her former talent, Mr. Ang."
Stages in the life of a contract:
(1) Preparation, conception or generation the period
from the start of negotiations till the moment just
before the agreement of the parties;
(2) Perfection or Birth of the contract the precise
moment when the parties come into agreement on
the terms of the contract; and
(3) Consummation or death the date when the
contract is fully executed, that is, when the terms
agreed upon in the contract are completely fulfilled
or formed.
When does the perfection take place? Basically, there is
a meeting of the minds those contracts are
consensual. There is acceptance. There is a meeting of
the offer and acceptance.
What are Real Contracts? Those which, in addition to

the consent, require the delivery of a thing by one of the
parties to the other.
What are Formal Contracts? Those contracts which
must comply with the certain formalities prescribed by
law, for its enforceability. Example: Contract of Donation
of Real Property.
Innominate Contracts contracts which have no
designated name.
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ARTICLE 1316. Real contracts, such as deposit, pledge and

commodatum, are not perfected until the delivery of the
object of the obligation.
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essential because if there is no knowledge, then there is

no interference to speak of. The 3rd element is what we
need to determine whether it exists that there be no
legal justification for the interference.
What will be the motive of Channel 5 in pirating Sharon
Cuneta? To further their business interest. The Court has
already ruled that if that is the motivation for effecting
the contractual interference to further the business
interest, then the party is guilty of contractual
interference, but he may NOT be liable for damages
because furthering your own interest is considered as a
legally-justified reason.
When will there be liability for damages? If the interferer
is motivated by bad faith.
Example: Ms. Velasco was the manager of Mr. Ang. Mr.
Ang left Ms. Velasco, he did not renew his contract with
Ms. Velasco. Then Mr. Ang and Ms. Reyes-Vega entered
into a management contract with her. What Ms.
Velasco did is, sinulsulan nya si Ms. Reyes-Vega, to drop
ARTICLE 1315. Contracts are perfected by mere consent,

and from that moment the parties are bound not only to the
fulfillment of what has been expressly stipulated but also to
all the consequences which, according to their nature, may
be in keeping with good faith, usage and law.
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Obligatory Force the parties are bound not only to the

fulfillment of what has been expressly stipulated but also
to all the consequences which, according to their
nature may be in keeping with good faith, usage and
law.
This is usually expressed with a statement, that the
contract constitutes the law between the parties. They
are bound on what they have stipulated and they
cannot renege on what they have agreed to simply
because they have changed their minds.
ARTICLE 1318. There is no contract unless the following

requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
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Elements of a Contract:
(1) Essential Elements those without which there can
be no contract;
(2) Natural elements those which are part of the
contract without need for the parties to stipulate
upon them; and
(3) Accidental Elements those elements which the
parties must stipulate upon. If they fail to stipulate
upon them, then it will not exist in the contract.
Example: conditions, periods.
SECTION 1: Consent
ARTICLE 1319. Consent is 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 counter-offer.
Acceptance made by letter or telegram does not bind the
offerer except from the time it came to his knowledge. The
contract, in such a case, is presumed to have been entered
into in the place where the offer was made.
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This refers to the meeting of the minds between the

parties. The meeting of offer and acceptance. We are
supposed to be adhering to Cognition Theory when it
comes to consent.
What is cognition theory? Cognition means that the
acceptance only becomes binding upon knowledge of
the person who has made the offer. So that means, if
the acceptance is made by a letter, then the acceptance
will not bind the offeror until the letter reaches him.
What is the significance? Until he is bound by the
acceptance, he can still withdraw the offer.
What happens if consent is accepted by with
qualification? It means that the negotiations are still
ongoing. Only when there is absolute and unqualified
acceptance of the offer, then we can say that there is
consent.
ARTICLE 1320. An acceptance may be express or implied.

ARTICLE 1321. The person making the offer may fix the time,
place, and manner of acceptance, all of which must be
complied with.
(1) It should be intelligent, that is, the same is not

vitiated by error or mistake;
(2) It should be free and voluntary, that is, not vitiated
by violence, intimidation or undue influence;
(3) It should be spontaneous, that is, not vitiated by
fraud; and
(4) It should be real, that is, the consent is not simulated
or given as a joke.
ARTICLE 1328. Contracts entered into during a lucid interval
are valid. Contracts agreed to in a state of drunkenness or
during a hypnotic spell are voidable.
ARTICLE 1329. The incapacity declared in article 1327 is
subject to the modifications determined by law, and is
understood to be without prejudice to special
disqualifications established in the laws.
ARTICLE 1330. A contract where consent is given through
mistake, violence, intimidation, undue influence, or fraud is
voidable.
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ARTICLE 1323. An offer becomes ineffective upon the death,

civil interdiction, insanity, or insolvency of either party before
acceptance is conveyed.
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ARTICLE 1324. When the offerer has allowed the offeree a

certain period to accept, the offer may be withdrawn at any
time before acceptance by communicating such
withdrawal, except when the option is founded upon a
consideration, as something paid or promised.
ARTICLE 1325. Unless it appears otherwise, business
advertisements of things for sale are not definite offers, but
mere invitations to make an offer.
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ARTICLE 1326. Advertisements for bidders are simply

invitations to make proposals, and the advertiser is not
bound to accept the highest or lowest bidder, unless the
contrary appears.
ARTICLE 1327.The following cannot give consent to a
contract:
(1) Unemancipated minors;
(2) Insane or demented persons, and deaf-mutes who do
not know how to write.
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Would it still be correct to use the term unemancipated

minor? Not anymore, right now emancipation equals
capacity to act. Being emancipated means that you
already have capacity to act. And being emancipated
means that you are no longer a minor.
What will be the effect of the status of the contract if
one of the parties happens to be incapacitated?
Voidable.
Characteristics of consent:
It may also happen that there is capacity to act but a

vice of consent affects the contract reducing it to a
voidable status. What are these vices of consent? What
is the difference between reluctant consent and vitiated
consent?
(1) Reluctant Consent consent against your better
judgment. But it is still consent nonetheless. It will
still be valid consent.
(2) Vitiated Consent defective consent for lack of
voluntariness. You would not have given your
consent were it not for the vices of consent present.
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ARTICLE 1322. An offer made through an agent is accepted

from the time acceptance is communicated to him.
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ARTICLE 1331. In order that mistake may invalidate consent,

it should refer to the substance of the thing which is the
object of the contract, or to those conditions which have
principally moved one or both parties to enter into the
contract.
Mistake as to the identity or qualifications of one of the
parties will vitiate consent only when such identity or
qualifications have been the principal cause of the contract.
A simple mistake of account shall give rise to its correction.
ARTICLE 1332. When one of the parties is unable to read, or
if the contract is in a language not understood by him, and
mistake or fraud is alleged, the person enforcing the contract
must show that the terms thereof have been fully explained
to the former.
ARTICLE 1333. There is no mistake if the party alleging it
knew the doubt, contingency or risk affecting the object of
the contract.
ARTICLE 1334. Mutual error as to the legal effect of an
agreement when the real purpose of the parties is frustrated,
may vitiate consent.
ARTICLE 1335. There is violence when in order to wrest
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A threat to enforce one's claim through competent

authority, if the claim is just or legal, does not vitiate consent.
ARTICLE 1336. Violence or intimidation shall annul the
obligation, although it may have been employed by a third
person who did not take part in the contract.
ARTICLE 1337. There is undue influence when a person
takes improper advantage of his power over the will of
another, depriving the latter of a reasonable freedom of
choice. The following circumstances shall be considered: the
confidential, family, spiritual and other relations between the
parties, or the fact that the person alleged to have been
unduly influenced was suffering from mental weakness, or
was ignorant or in financial distress.
No contract may be entered into upon future inheritance

except in cases expressly authorized by law.
All services which are not contrary to law, morals, good
customs, public order or public policy may likewise be the
object of a contract.
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ARTICLE 1339. Failure to disclose facts, when there is a duty

to reveal them, as when the parties are bound by
confidential relations, constitutes fraud.
ARTICLE 1349. The object of every contract must be

determinate as to its kind. The fact that the quantity is not
determinate shall not be an obstacle to the existence of the
contract, provided it is possible to determine the same,
without the need of a new contract between the parties.
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ARTICLE 1340. The usual exaggerations in trade, when the

other party had an opportunity to know the facts, are not in
themselves fraudulent.
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ARTICLE 1341. A mere expression of an opinion does not

signify fraud, unless made by an expert and the other party
has relied on the former's special knowledge.
ARTICLE 1342. Misrepresentation by a third person does not
vitiate consent, unless such misrepresentation has created
substantial mistake and the same is mutual.
ARTICLE 1343. Misrepresentation made in good faith is not
fraudulent but may constitute error.
ARTICLE 1344.In order that fraud may make a contract
voidable, it should be serious and should not have been
employed by both contracting parties.
Incidental fraud only obliges the person employing it to pay
damages.
ARTICLE 1345. Simulation of a contract may be absolute or
relative. The former takes place when the parties do not
intend to be bound at all; the latter, when the parties
conceal their true agreement.
ARTICLE 1346. An absolutely simulated or fictitious contract
What can be used as Object of the contract? Any object

that is within the commerce of man, must not be
impossible and it must be determinate as to its kind, if
not determinate then at least determinable
ARTICLE 1348.Impossible things or services cannot be the

object of contracts.
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ARTICLE 1338. There is fraud when, through insidious words

or machinations of one of the contracting parties, the other
is induced to enter into a contract which, without them, he
would not have agreed to.
ARTICLE 1347. All things which are not outside the

commerce of men, including future things, may be the
object of a contract. All rights which are not intransmissible
may also be the object of contracts.
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To determine the degree of intimidation, the age, sex and

condition of the person shall be borne in mind
SECTION 2: Object of Contracts
e.
There is intimidation 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, or
upon the person or property of his spouse, descendants or
ascendants, to give his consent.
is void. A relative simulation, when it does not prejudice a

third person and is not intended for any purpose contrary to
law, morals, good customs, public order or public policy
binds the parties to their real agreement.
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consent, serious or irresistible force is employed.
Why is it required that the object should be determinate

or at least be determinable? The heart of every contract
whether it is consensual, real or formal would be the
meeting of the minds between the parties.
How can the parties have this meeting of the minds if
they have no idea what the object is? That is why the
object is determinate or at least determinable, meaning
to say that it can be determine without a need for a
new contract.
SECTION 3: Cause of Contracts
ARTICLE 1350. In onerous contracts the cause is understood

to be, for each contracting party, the prestation or promise
of a thing or service by the other; in remuneratory ones, the
service or benefit which is remunerated; and in contracts of
pure beneficence, the mere liberality of the benefactor.
o
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Cause or consideration. Would cause be the same as

motive? No.
If the party is impelled by an evil or ill-motive, would that
invalidate the contract? No, usually, it has no bearing on
the validity of the contract for as long as there is a
legitimate consideration supporting the contract.
Example: Mr. Ang is a real estate agent, he fancies Ms.
Albania. Ms. Albania, in turn, does not fancy Mr. Ang.
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ARTICLE 1351. The particular motives of the parties in

entering into a contract are different from the cause thereof.
ARTICLE 1354. Although the cause is not stated in the

contract, it is presumed that it exists and is lawful, unless the
debtor proves the contrary.
CHAPTER 3: Form of Contracts
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ARTICLE 1355. Except in cases specified by law, lesion or

inadequacy of cause shall not invalidate a contract, unless
there has been fraud, mistake or undue influence.
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ARTICLE 1356. Contracts shall be obligatory, in whatever

form they may have been entered into, provided all the
essential requisites for their validity are present. However,
when the law requires that a contract be in some form in
order that it may be valid or enforceable, or that a contract
be proved in a certain way, that requirement is absolute and
indispensable. In such cases, the right of the parties stated in
the following article cannot be exercised
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Example of a contract that is required to be in writing to

be valid: Pre- nuptial agreement.
ARTICLE 1357. If the law requires a document or other

special form, as in the acts and contracts enumerated in the
following article, the contracting parties may compel each
other to observe that form, once the contract has been
perfected. This right may be exercised simultaneously with
the action upon the contract.
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e.
ARTICLE 1353. The statement of a false cause in contracts

shall render them void, if it should not be proved that they
were founded upon another cause which is true and lawful.
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ARTICLE 1352. Contracts without cause, or with unlawful

cause, produce no effect whatever. The cause is unlawful if it
is contrary to law, morals, good customs, public order or
public policy.
In what form a contract should be to be valid? General

rule: contracts are valid in any form. Exception: If the law
prescribes a specific form either for validity or
enforceability or manner of proof. In these cases, the
proper form must be observed.
If the form is required for validity, enforceability or as a
manner of proof, we cannot avail of the right under Art.
1357 and bring an action to compel the other party to

reduce the contract in the required form.
Pre-nuptial agreements must be in writing, under the
Family Code to be valid but under the civil code to be
enforceable. If we have a husband and wife and who
had, prior to their marriage, entered to an agreement
whereby they agreed that they will be governed by
separation of property regime; and they have observed
the rules on separation of property regime throughout
their marriage.
Can the husband, later on, insist that the wife execute
an agreement with him embodying the separation of
property regime in writing by invoking Art. 1357? He
cannot because the requirement that it should be in
writing is essential to make the agreement valid. That
right under Art. 1357 will not be available to the
husband.
If we have an oral contract of sale involving real
property, this we said, unenforceable. Can we also bring
an action to compel the other party to reduce the
agreement into writing? No, because the form is
required to make the contract enforceable.
But if the contract of sale is already in writing, but only in
a private instrument, and we need it to have it in a
public instrument to be able to register it to the Registry
of Deeds, can we now compel the other party to
reduce the contract in a public instrument under Art.
1357? Yes, because we have already a valid and
enforceable contract. There is compliance with the
required form. Having it reduced in a public instrument
is only required for convenience, so that we may be
able to register it to the Registry of Deeds. The right to
Art 1357 would be available.
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Mr. Ang is married. Lets say that Mr. Ang is really

determined to make Ms. Albania fall for him, so what he
did is he agreed to sell a condo unit to Ms. Albania at a
reduced price. The discount is so big that he is suffering
a loss to the transaction. But he wants to push thru to
the transaction because it is a part of his plan to make
Ms. Albania his mistress. There is no question that the
motive is evil or illicit. But we cannot deny the fact that
what we have here is a valid contract of sale that is
supported by a legitimate consideration which is the
reduced price for the condominium unit.
ARTICLE 1358.The following must appear in a public

document:
(1) Acts and contracts which have for their object the
creation, transmission, modification or extinguishment of real
rights over immovable property; sales of real property or of
an interest therein are governed by articles 1403, No. 2, and
1405;
(2) The cession, repudiation or renunciation of hereditary
rights or of those of the conjugal partnership of gains;
(3) The power to administer property, or any other power
which has for its object an act appearing or which should
appear in a public document, or should prejudice a third
person;
(4) The cession of actions or rights proceeding from an act
appearing in a public document.
All other contracts where the amount involved exceeds five
hundred pesos must appear in writing, even a private one.
But sales of goods, chattels or things in action are governed
by articles 1403, No. 2 and 1405.
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In addition, Art. 1358 also enumerates other contracts

which are required to be in a public instrument, not for
validity, enforceability or even for proof but simply for
convenience. So the right given under Art. 1357 would
be applicable to all these contracts under Art. 1358.
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ARTICLE 1359. When, there having 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.
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ARTICLE 1364. When through the ignorance, lack of skill,

negligence or bad faith on the part of the person drafting
the instrument or of the clerk or typist, the instrument does
not express the true intention of the parties, the courts may
order that the instrument be reformed.
ARTICLE 1360. The principles of the general law on the

reformation of instruments are hereby adopted insofar as
they are not in conflict with the provisions of this Code.
ARTICLE 1361. When a mutual mistake of the parties causes
the failure of the instrument to disclose their real agreement,
said instrument may be reformed.
ARTICLE 1362. If one party was mistaken and the other
acted fraudulently or inequitably in such a way that the
instrument does not show their true intention, the former
may ask for the reformation of the instrument.
ARTICLE 1363. When one party was mistaken and the other
knew or believed that the instrument did not state their real
agreement, but concealed that fact from the former, the
instrument may be reformed.
What about accident? How do we picture in the

accident as giving rise to an action for reformation of
instrument? It can be when the instrument is drafted by
a third person, that mechanical act of drafting that was
delegated to the secretary or assistant. And such
secretary was not able to follow instructions correctly,
instead of writing a contract of lease, she types a
contract of sale and then the parties did not bother to
read the contract they signed. So here, we can see that
reformation of instrument was caused by an accident or
due to the negligence or ignorance of the party who
actually drafted the instrument.
What is peculiar is that the law singles out an instance
where the parties instead of executing a contract of
loan with right of mortgage, executed a contract of sale
with right of repurchase. And the law declared that
here, the reformation would instrument would be
proper.
Why is reformation of instrument proper? Because
essentially, by saying that reformation of instrument is
proper here, the law is recognizing that this is not the
true intention of the parties. It was not the agreement of
the parties to have a contract of sale with right of
repurchase that instead their true intention was to have
a contract of loan with right of mortgage.
Why does the creditor prefer a contract of sale over a
contract of loan? Because in a contract of sale with right
of repurchase, he immediately acquires ownership over
the security without going to the process of foreclosure,
observing the redemption period, asking for
consolidation of title. So, if the debtor was able to pay,
then the creditor will just transfer it again.
e.
What is reformation of instrument? It is a remedy in

equity by means of which a written instrument is made
or construed so as to express or conform to the real
intention of the parties when some error or mistake has
been committed. It simply means that we are correcting
the instrument or document to reflect the true intention
between the parties.
Requisites:
(1) There must be a meeting of the minds between the
parties;
(2) The instrument does not express the true intention
of the parties;
(3) The failure to express the true intention is due to
mistake, fraud, inequitable conduct, accident or
relative simulation; and
(4) There must be clear and convincing proof of the
causes of the failure to express the true intention of
the parties.
There must be meeting of the minds between the
parties, because if the mistake, fraud, inequitable
conduct, or accident prevented a meeting of the minds
to take place between the parties, then we have no
cause action for reformation of instrument. Because
reformation of the instrument presupposes the existence
of an agreement. There is an agreement but they only
failed to reflect what the agreement is.
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If mistake, fraud, inequitable conduct, or accident has

prevented a meeting of the minds of the parties, the proper
remedy is not reformation of the instrument but annulment
of the contract.
When can mistake be a ground for reformation of

instrument? Is it required that the mistake always be
mutual? Supposing that there is mistake, but the mistake
is only on the part of one of the contracting parties?
Reformation is still available even if the mistake is not
mutual for as long as the mistake of one of the
contracting parties is coupled with and brought about
by fraud on the part of the other party or inequitable
conduct. It may happen that the contracting party
knows that the other contracting party is mistaken with
regard to the nature of the agreement. And yet he does
not do anything, he even conceals the mistake.
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CHAPTER 4: Reformation of Instruments
ARTICLE 1365. If two parties agree upon the mortgage or

pledge of real or personal property, but the instrument states
that the property is sold absolutely or with a right of
repurchase, reformation of the instrument is proper.
ARTICLE 1366.There shall be no reformation in the following
cases:
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(1) Simple donations inter vivos wherein no condition is

imposed;
(2) Wills;
(3) When the real agreement is void.
ARTICLE 1367. When one of the parties has brought an
action to enforce the instrument, he cannot subsequently
ask for its reformation.
contract, the least transmission of rights and interests shall

prevail. If the contract is onerous, the doubt shall be settled
in favor of the greatest reciprocity of interests.
If the doubts are cast upon the principal object of the
contract in such a way that it cannot be known what may
have been the intention or will of the parties, the contract
shall be null and void.
ARTICLE 1368. Reformation may be ordered at the instance

of either party or his successors in interest, if the mistake was
mutual; otherwise, upon petition of the injured party, or his
heirs and assigns.
ARTICLE 1379. The principles of interpretation stated in Rule

123 of the Rules of Court shall likewise be observed in the
construction of contracts.
ARTICLE 1369. The procedure for the reformation of

instrument shall be governed by rules of court to be
promulgated by the Supreme Court.
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ARTICLE 1371. In order to judge the intention of the

contracting parties, their contemporaneous and subsequent
acts shall be principally considered.
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ARTICLE 1372. 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.
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ARTICLE 1373. If some stipulation of any contract should

admit of several meanings, it shall be understood as bearing
that import which is most adequate to render it effectual.
ARTICLE 1374. The various stipulations of a contract shall be
interpreted together, attributing to the doubtful ones that
sense which may result from all of them taken jointly.
ARTICLE 1375. Words which may have different
significations shall be understood in that which is most in
keeping with the nature and object of the contract.
ARTICLE 1376. The usage or custom of the place shall be
borne in mind in the interpretation of the ambiguities of a
contract, and shall fill the omission of stipulations which are
ordinarily established.
ARTICLE 1377. The interpretation of obscure words or
stipulations in a contract shall not favor the party who
caused the obscurity.
ARTICLE 1378. When it is absolutely impossible to settle
doubts by the rules established in the preceding articles, and
the doubts refer to incidental circumstances of a gratuitous
Different classes of defective contracts:

(1) Rescissible contracts
(2) Voidable contracts
(3) Unenforceable contracts
(4) Void Contracts
Rescissible Contracts are valid contracts. It can be
enforced and we can sue on this contract until they are
rescinded. The grounds for rescission do not really have
any bearing on their validity because the grounds for
rescission usually stem from the presence of damage
either to the contracting parties or to a third person
who is interested in the obligation or the object of the
contract.
e.
If the words appear to be contrary to the evident intention

of the parties, the latter shall prevail over the former.
CHAPTER 6: Rescissible Contracts
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ARTICLE 1370. 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.
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CHAPTER 5: Interpretation of Contracts
No need to discuss these because these are almost the

same in the rules of statutory construction or even the
rules in interpretation of wills. The overriding
consideration is to give effect to the intention of the
parties.
ARTICLE 1380. Contracts validly agreed upon may be

rescinded in the cases established by law.
ARTICLE 1381.The following contracts are rescissible:
(1) Those which are entered into by guardians whenever
the wards whom they represent suffer lesion by more than
one-fourth of the value of the things which are the object
thereof;
(2) Those agreed upon in representation of absentees, if the
latter suffer the lesion stated in the preceding number;
(3) Those undertaken in fraud of creditors when the latter
cannot in any other manner collect the claims due them;
(4) Those which refer to things under litigation if they have
been entered into by the defendant without the knowledge
and approval of the litigants or of competent judicial
authority;
(5) All other contracts specially declared by law to be subject
to rescission
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In the first two (2) grounds for rescission, is there any

absolute defense that may be used to defeat an action
for rescission? If there is court approval then it cannot be
set aside on the ground of lesion or damage.
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Item no. 3 of Art. 1381 refers to accion pauliana.

Art. 1191 states the period when a contract can be
rescinded. Is this an instance where rescission as
contemplated in Art. 1381 is made applicable? Art. 1191
is not an instance where rescission as contemplated in
Art. 1381 is applicable because rescission under Art.
1191 is based on breach of contract.
In this case, indemnity for damages may be demanded from

the person causing the loss.
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ARTICLE 1382. Payments made in a state of insolvency for

obligations to whose fulfillment the debtor could not be
compelled at the time they were effected, are also rescissible.
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ARTICLE 1384.Rescission shall be only to the extent necessary

to cover the damages caused.
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ARTICLE 1386.Rescission referred to in Nos. 1 and 2 of article

1381 shall not take place with respect to contracts approved
by the courts.
ARTICLE 1387. All contracts by virtue of which the debtor
alienates property by gratuitous title are presumed to have
been entered into in fraud of creditors, when the donor did
not reserve sufficient property to pay all debts contracted
before the donation.
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When we ask for rescission, is it always to the full extent

of the obligation? No. Only to the extent of the damage
incurred.
What does the phrase only to the extent of the
damage incurred mean? It means that rescission shall
be done only to the extent that is allowed for the
aggrieved party to recover the damage to him. Only to
the extent required to effect recovery of damage on the
part of the aggrieved party.
Insofar as the first two (2) grounds are concerned, we
did mention of an absolute defense against an action
for rescission. But as a general rule or generally
speaking, there are other defenses that may be availed
of against an action for rescission. What are these
defenses?
(1) Ratification;
(2) Prescription;
(3) If the party asking for rescission is no longer in the
position to give back what he received under the
contract by reason of loss or when the thing subject
of the contract is in the hands of a third person
acting in good faith.
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ARTICLE 1383. The action for rescission is subsidiary; it

cannot be instituted except when the party suffering
damage has no other legal means to obtain reparation for
the same.
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When we say payments made in a state of insolvency

are subject to rescission, how do we understand the
term insolvency? Insolvency-in-fact. We do not need a
judicial declaration that a person is insolvent.
When is there insolvency as a matter of fact? If the
persons liability is more than his assets.
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Why would the loss of the thing subject of the contract

to be rescinded on account of the fault of the plaintiff
prevent rescission? Art. 1385, par. 1.
Why would the law say that? Because the law requires
that there be mutual restitution; so that if the party
asking for rescission is no longer in the position to give
back what he received under the contract, then he
cannot ask for rescission.
Aside from losing of the thing, another instance when
the thing subject of the contract can longer be returned
is when it is in the hands of a third person who did not
act in bad faith.
Example: A, in order to defraud his creditors, transferred
his land to another. The transferee is not aware of the
debt in favor of B. the transferee acquired the property
in good faith.
ARTICLE 1385.Rescission creates the obligation to return the

things which were the object of the contract, together with
their fruits, and the price with its interest; consequently, it can
be carried out only when he who demands rescission can
return whatever he may be obliged to restore.
Neither shall rescission take place when the things which are
the object of the contract are legally in the possession of
third persons who did not act in bad faith.
Alienations by onerous title are also presumed fraudulent

when made by persons against whom some judgment has
been rendered in any instance or some writ of attachment
has been issued. The decision or attachment need not refer
to the property alienated, and need not have been obtained
by the party seeking the rescission.
In addition to these presumptions, the design to defraud
creditors may be proved in any other manner recognized by
the law of evidence.
ARTICLE 1388. Whoever acquires in bad faith the things

alienated in fraud of creditors, shall indemnify the latter for
damages suffered by them on account of the alienation,
whenever, due to any cause, it should be impossible for him
to return them.
If there are two or more alienations, the first acquirer shall be
liable first, and so on successively.
ARTICLE 1389.The action to claim rescission must be
commenced within four years.
For persons under guardianship and for absentees, the
period of four years shall not begin until the termination of
the former's incapacity, or until the domicile of the latter is
known.
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In all other cases, when do we say that the action has

accrued? The four-year period shall be reckoned from
the time of the execution of the contract.
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A rescissible contract can only be assailed in a direct

action. It cannot be collaterally attacked.
ARTICLE 1390.The following contracts are voidable or

annullable, even though there may have been no damage
to the contracting parties:
(1) Those where one of the parties is incapable of giving
consent to a contract;
(2) Those where the consent is vitiated by mistake, violence,
intimidation, undue influence or fraud.
ARTICLE 1393.Ratification may be effected expressly or tacitly.

It is understood that there is a tacit ratification if, with
knowledge of the reason which renders the contract
voidable and such reason having ceased, the person who
has a right to invoke it should execute an act which
necessarily implies an intention to waive his right.
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These contracts are binding, unless they are annulled by a

proper action in court. They are susceptible of ratification.
And when the action refers to contracts entered into by

minors or other incapacitated persons, from the time the
guardianship ceases.
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What is a voidable contract? A defective contract that is

valid until annulled. And the significance of that
statement valid until annulled is that it produces legal
effects until it is annulled.
Are their defenses for an action of annulment?
(1) Ratification; and
(2) Prescription.
Is ratification the same with confirmation? Under the
NCC, there is no more difference between ratification
and confirmation.
But is there any technical difference between ratification
and confirmation? Confirmation is the act of purging
the voidable contract of its defect through the
renunciation of the action of nullity made by the person
who can invoke the vice or defect of said contract;
whereas Ratification is the act of curing the defect of
contracts celebrated in the name and for the account of
another without authority or in excess of authority by
the approval thereof.
Technically, which should be applied to voidable
contracts? Confirmation, but now our law no longer
makes distinction between confirmation and ratification.
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ARTICLE 1391.The action for annulment shall be brought

within four years. This period shall begin:
(1) In cases of intimidation, violence or undue influence,
from the time the defect of the consent ceases.
(2) In case of mistake or fraud, from the time of the discovery
of the same.
ARTICLE 1392.Ratification extinguishes the action to annul a

voidable contract.
o
Even when there is a remainder of the prescriptive

period, the annulment may not be available anymore if
there has been ratification.
The right to ask for annulment prescribes in four (4)
years. But even before the period lapses, the right to ask
When is there tacit ratification? There is a tacit ratification

if, with knowledge of the reason which renders the
contract voidable and such reason having ceased, the
person who has a right to invoke it should execute an
act which necessarily implies an intention to waive his
right.
What will be the nature of this act which will give this
necessary implication that he is no longer pursuing the
annulment of the action of the contract? Should it be
akin to the party giving his consent to the contract?
Should it be indicative that he is consenting to the
contract? That he is accepting the contract? Yes.
Minors can enter into a contract provided that they are
represented by their parents or legal guardians.
Example of an act of ratification: The minors, on their
own, entered into a contract of loan. Upon reaching the
age of majority and without asking for annulment, they
still paid of the loan. Even though that there is still some
balance in the prescriptive period, they can no longer
ask for annulment because they have already ratified
the contract.
In a contract of marriage, where the husband is afflicted
with AIDS, the wife knew about it before marrying the
Husband. Can she still ask for the annulment of the
marriage? No, there is no ratification but prescription.
Why not ratification? Because the ground is affliction of
sexually-transmitted disease, and not concealment
thereof; and the action for annulment on such ground
is only subject to the defense of prescription. The
prescriptive period is five (5) years. For as long as the 5year period has not lapsed, the action for annulment
cannot be barred by any act that may be akin to
ratification because it is not subject to ratification.
Who can ratify? Who may effect for ratification? Only
the party whose consent is vitiated or only the party
who is suffering from incapacity. The action for
annulment cannot be availed of by the capacitated
party or by the party whose consent was not vitiated.
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CHAPTER 7: Voidable Contracts
for annulment can longer be available if there has been

ratification.
e.
ARTICLE 1394.Ratification may be effected by the guardian

of the incapacitated person.
ARTICLE 1395.Ratification does not require the conformity of
the contracting party who has no right to bring the action
for annulment.
ARTICLE 1396.Ratification cleanses the contract from all its
defects from the moment it was constituted.
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ARTICLE 1398. An obligation having been annulled, the

contracting parties shall restore to each other the things
which have been the subject matter of the contract, with
their fruits, and the price with its interest, except in cases
provided by law.
In obligations to render service, the value thereof shall be the
basis for damages.
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Basically, only parties to the contract may ask for

annulment. Would there be any exception to this rule?
Would there be an instance when an exception may be
made such that a 3rd person who is not a party to the
contract may seek its annulment? Jurisprudence
provided an exception: If a person is prejudiced in his
rights with respect to one of the contracting parties and
he can positively show that the detriment that will result
to him from the contract in which he had no
intervention, then he can seek the annulment of the
contract. (Teves vs. Peoples Homesite and Housing
Corp. G.R. No. L-21498. June 27, 1968).
In the abovementioned case, there was this woman
who has been occupying a parcel of land for the
longest time with her husband. Her husband is some
kind of government official who perished with President
Magsaysay in the plane crash. After her husbands
demise, she applied to be awarded for this parcel of
land that they have been occupying with Peoples
Homesite and Housing Corporation. Her application has
rd
been pending. But there was this 3 person (Santos)
who was able to scratch the application. It was alleged
that there was connivance between Santos and the
corporation as it was not made known to the woman
that there was an application that was also filed by
Santos. When this woman found out that the award
was made in favor of Santos, she sought to have the
contract set aside. She filed an action for annulment.
Santos invoked as a defense of no cause of action for
annulment because she was not a party to the contract
between Santos and the corporation. Probably, the
Supreme Court acted in equity. This is an exceptional
instance. Had she been a creditor, her remedy is accion
pauliana.
Going back to the general rule, the question is who
between the parties is given the right to ask for
annulment? If the ground is incapacity, then the right to
ask for annulment belongs to the person who is
incapacitated. If the ground is intimidation, violence, or
undue influence, fraud, or mistake, then the person who
employs the vices affecting consent cannot ask for
annulment.
In line with the provision of Art. 1397, the law clearly
excludes the party who employed vices of consent from
having the right to ask for annulment.
But is it still possible for both of the contracting parties to
have the right to ask for annulment if the ground is any
of the vices of consent? There are instances that consent
may be vitiated without the fault of either parties. When
it comes to fraud, it should be employed by the other
party; but when it comes to force force may be
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employed by a third person. And this person may or

may not be acting under the directive of anyone of the
parties.
If he is acting under any directive by one of the parties,
then that is the same as that party employing the force
or violence himself. But if the 3rd person is acting
independently, then we can say that the parties are
innocent of the employment of the vice of consent. In
which case, if we would adhere to Art. 1397, both of
them should be allowed to ask for annulment. Art. 1397
says that it is only the person who employs the vice of
consent who is not allowed from asking for annulment.
Another instance: if there is mutual mistake that arises
from the misrepresentation of another person or on
account of a question of law.
Example: Supposing that A and B entered into a

contract of lease for one (1) year. It was paid for one (1)
year. The contract is voidable. And then after six (6)
months that B is occupying the apartment, A sought
annulment. The annulment is granted. Can A still give
back the rentals from the time that B is occupying the
apartment? No, the lessor has the right to retain the
amount of rentals for six (6) months that the lessee was
occupying the apartment because of the principle of
unjust enrichment.
Can voidable contracts be collaterally attacked? If we are
going to attack it by way of defense, we cannot. If we
want to attack it collaterally, then we must allege it as a
counterclaim in the action. Just like in rescission, if we
ask for annulment there should be a readiness to effect
mutual restitution. However, unlike rescission,
annulment can only be availed of by a party in the
contract; it cannot be availed of by a 3rd person.
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ARTICLE 1397. The action for the annulment of contracts

may be instituted by all who are thereby obliged principally
or subsidiarily. However, persons who are capable cannot
allege the incapacity of those with whom they contracted;
nor can those who exerted intimidation, violence, or undue
influence, or employed fraud, or caused mistake base their
action upon these flaws of the contract.
ARTICLE 1399. When the defect of the contract consists in

the incapacity of one of the parties, the incapacitated person
is not obliged to make any restitution except insofar as he
has been benefited by the thing or price received by him.
ARTICLE 1400. Whenever the person obliged by the decree
of annulment to return the thing cannot do so because it
has been lost through his fault, he shall return the fruits
received and the value of the thing at the time of the loss,
with interest from the same date.
ARTICLE 1401. The action for annulment of contracts shall
be extinguished when the thing which is the object thereof
is lost through the fraud or fault of the person who has a
right to institute the proceedings.
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If the right of action is based upon the incapacity of any one

of the contracting parties, the loss of the thing shall not be
an obstacle to the success of the action, unless said loss took
place through the fraud or fault of the plaintiff.
ARTICLE 1402. As long as one of the contracting parties

does not restore what in virtue of the decree of annulment
he is bound to return, the other cannot be compelled to
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CHAPTER 8: Unenforceable Contracts
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What are unenforceable contracts? Those contracts by

reason of defects provided for by law do not give rise to
any action to enforce the same until and after they are
ratified according to law.
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(1) Those entered into in the name of another person by

one who has been given no authority or legal
representation, or who has acted beyond his powers;
(2) Those that do not comply with the Statute of Frauds as
set forth in this number. In the following cases an agreement
hereafter made shall be unenforceable by action, unless the
same, or some note or memorandum, thereof, be in writing,
and subscribed by the party charged, or by his agent;
evidence, therefore, of the agreement cannot be received
without the writing, or a secondary evidence of its contents:
a) An agreement that by its terms is not to be performed
within a year from the making thereof;
b) A special promise to answer for the debt, default, or
miscarriage of another;
c) An agreement made in consideration of marriage, other
than a mutual promise to marry;
d) An agreement for the sale of goods, chattels or things in
action, at a price not less than five hundred pesos, unless the
buyer accepts and receives part of such goods and chattels,
or the evidence, or some of them, of such things in action, or
pay at the time some part of the purchase money; but when
a sale is made by auction and entry is made by the
auctioneer in his sales book, at the time of the sale, of the
amount and kind of property sold, terms of sale, price, names
of the purchasers and person on whose account the sale is
made, it is a sufficient memorandum;
e) An agreement for the leasing for a longer period than
one year, or for the sale of real property or of an interest
therein;
f) A representation as to the credit of a third person.
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ARTICLE 1403.The following contracts are unenforceable,

unless they are ratified:
(3) Those where both parties are incapable of giving

consent to a contract.
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Three (3) kinds or classes of Unenforceable Contracts:

(1) Contracts where both parties are incapacitated;
(2) Contracts entered into in the name of another
without authority or in excess of authority;
(3) Contracts embodied in the Statute of Frauds.
What is the status of an unenforceable contract? Valid

but because of the defect affecting the contract, it is a
contract which cannot be enforced in court.
Unauthorized contracts (Art. 1403, par. 1) - Can you
enter into a contract in the name of another person in
your own instance? No. And should you enter into a
contract in the name of A and without A knowing
about it; and the contract which was entered into is a
contract to sell on behalf of A to C; and then C went to
A to demand the object of sale. When we speak of
unenforceability in this case (unauthorized contract), we
refer to unenforceability as against the party supposed
to be represented.
Example: Mr. Villanueva is the representative of the
students of UST because he was once the president of
the student council. He entered into a contract with a
contractor to make uniforms for the entire student
population and he represented himself as acting under
the authority of all the students. The fact is there is no
such authority because the students did not authorize
him to do that. The contractor cannot run after the
students for the payment of the uniforms because the
contract will be unenforceable as against the students.
However, as against Mr. Villanueva, the contract will be
enforceable because he will be treated as the principal
party in the contract. The thing is, if the students decide
to ratify and confirm the actions of Mr. Villanueva as
having authorized by them, then the contract would
now be cured of its defect and it will now be enforced
as against the students because of the ratification.
Statue of Frauds (Art. 1403, par. 2) - Statute of Frauds is
descriptive of a law which requires certain classes of
contracts to be in writing. It is a list of contracts which
must be undertaken in accordance with the provision or
requirements imposed by law, failing which, it cannot
be enforced. The purpose for this requirement is to
prevent fraud, it is not meant to perpetuate fraud.
If a contract falls under the statute of frauds, then the
contract must comply with certain forms. What is this
form required by the Statute of Frauds? It should be in
writing.
When we say that it should be in writing, must be it in a
formal written document? Is that what the statute of
frauds requires? No.
What do we understand by the term written
instrument? The law says that it must be in writing, but
not necessarily in a formal document or instrument, on
the contract itself or some note or memorandum
thereof be in writing.
It would be ideal if we would have it in a formal
instrument. But then again the law does not impose
that requirement. It can be in a simple letter sent by one
of the parties to the other and the same letter being
given back, but this time around with the approval or
consent of the other party. That can be a written
testament of the transaction and that is sufficient. It does
not have to be contained in one instrument or in one
writing, it can be in a series of letters or series of notes.
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unenforceable, so that if you decide to suddenly quit,

can you be forced by the company to pay damages?
Can the company go to court to sue you for breach of
contract? They can, but they will not able to prove their
claims because you will object to the introduction of
parole evidence.
Supposing that you have been fully paid by the
production company for your services for shooting the
trilogy, would that change things? Yes, because
complete performance on the part of either party within
the one-year period will take the agreement out of the
coverage of Statute of Frauds; and therefore, it is now
enforceable. Parole evidence may now be presented to
prove existence of the contract.
No less than complete performance on the part of the
other party within the one year period is required.
A special promise to answer for the debt, default, or
miscarriage of another; (Art. 1403, par. 2 b): - For this
special promise to fall under the Statute of Frauds, how
should it be characterized? Should it be an independent
promise or should it be a collateral promise? It should be
a collateral promise.
How is a collateral promise different from an
independent promise? To determine whether the
promise is collateral or independent, we go by the
words used.
Example: Independent promise: I will pay for any
damage that A may cause you.
Collateral promise: I will pay for any damage that A may
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Example: In a class room, there is negotiation for a sale

of a real property. One classmate will put in a note that
he wants to buy a property, and then he will crumple
the note and give it to the other. The other classmate
will write on the note asking for how much, and then
he will pass it again. The process goes on, there are
exchanges of notes. They dont have the entire
document of a Deed of Sale but if we would make use
of those notes, we can see that the parties were able to
put down their agreement in writing. And this will be
sufficient to take the contract out of the coverage of the
Statute of Frauds.
In the absence of compliance that there should be a
written testament of the contract, does it mean that the
contract is invalid? The contract is still valid but we are
not allowed to enforce it in court.
Does it mean that there is a bar against us in court that
in the first instance, we cannot file an action to enforce
the contract? No, the problem will arise at the time
when we present evidence, when we try to prove the
contract by parole evidence.
Will all be lost if nothing is in writing to evidence the
contract? The effect of non-compliance with the Statute
of Frauds is that we are not supposed to be able to
prove the contract thru Parole evidence. Parole
evidence means oral testimony. Not being allowed to
prove it by oral testimony is tantamount to not being
able to pursue our claim at all.
Contracts that are covered by the Statute of Frauds:
An agreement that by its terms is not to be performed
within a year from the making thereof; (Art. 1403, par.
2a): We reckon the one-year period from the making of
the agreement; from the perfection of the agreement.
What does the law mean when it says that it should be
one wherein performance is not supposed to take place
within one year from the making of the agreement?
What does the law mean that performance should not
be in one year? Does it speak of the beginning of the
performance such that the performance is deferred and
the deferment exceeds one year? Yes.
Supposing that there will be performance within one
year but it will not be completed until after one year, i.e.
the performance of the contract itself exceeds one year.
Is it covered by the Statute of Frauds? Yes. It covers all
contracts where the obligation cannot be completely
performed within one-year from the time of the making
of the contract.
How do we know that it cannot be performed within
one year? This can be stipulated upon by the parties, in
which case, there would be no problem. But in the
absence of stipulation, it is possible for us to determine
whether or not there will be performance within the
one year period, we do this by assessing the nature of
the obligation.
Example: Your services were engaged to direct the Lord
of the Rings Trilogy. It is an obligation that cannot be
fulfilled within a period of one (1) year. You agreed; but
then the agreement is not in writing. This is
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cause you, if she fails to pay you.

In the example of collateral promise, it shows that the
promise is simply subsidiary or collateral in nature
because it is conditioned on the failure of A to pay the
other. In the example of independent promise, the
promissory is disregarding whether or not A will pay
because you are taking on the responsibility in all.
What is the effect of making this collateral promise? If
you would assign a specific contract to this collateral,
what would be that contract? Contract of
Guaranty/Surety.
An agreement made in consideration of marriage, other
than a mutual promise to marry; (Art. 1403, par. 2 c):
When you promise to give something out of liberality to
people who intend to marry in consideration of their
impending marriage, what are you doing exactly? Are
making already a donation propter nuptias? Not yet.
What are you doing? You are making a promise that
you will make a donation propter nuptias in their favor
should they get married in the future. This will be an
example of an agreement in consideration of marriage.
The main consideration should be the marriage; it
should not be an incident.
What about ante-nuptial agreement, is it covered by the
statute of frauds? Yes. Ante-nuptial agreements are
required to be in writing to be valid under the Family
Code. Before the Family Code (New Civil Code), antenuptial agreements would be valid even if they are not
in writing. They are simply unenforceable. But in the
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payment and it is taken out of the coverage of the

Statute of Frauds.
In the above example, the reason why it is taken out of
the coverage of Statute of Frauds is because it involves
the sale of realty. That is why partial performance will be
sufficient.
However, if their ground as to why the sale or contract
is covered by the Statute of Frauds is because, it is a
contract which requires performance to be completed
for more than or within a period of one year, we modify
the rule a bit. We do NOT simply accept partial
performance on either side; there must be complete
performance within a period of one year on the part of
either party.
In the same way, when we discussed the rule that there
should be some kind of a note or memorandum in
writing of the contract, in all other cases covered by the
Statute of Frauds, a simple note or memorandum
evidencing the transaction of the parties would be
acceptable.
However, by jurisprudence, if you are dealing or trying
to prove a sale or lease of real property for more than
one year, it comes with the coverage by the Statute of
Frauds; then if that is the reason why it is covered by the
Statute of Fraud, then your note or memorandum, aside
from being subscribed by the parties, must also contain
a description of the property plus the price for which it is
being sold.
How can we get out of this defect (means of curing the
defect brought about by non-compliance with the
Statute of Frauds)? Prove that there is Partial
Performance. If there is partial performance then we can
allege that the contract of sale that was entered into
involving chattels, goods or choses in actions at a price
not less than five hundred pesos would no longer be
governed by the Statute of Frauds and would now be
enforceable; also by Ratification for failure to object to
the oral evidence of the sale.
Those where both parties are incapable of giving
consent to a contract. (Art. 1403, par. 3): - If only one of
the parties is incapacitated, the contract is considered
voidable. Voidable contracts, just like unenforceable
contracts, are subject to ratification.
What happens if one of the parties is able to ratify the
contract or if the contract is ratified by the legal
guardian of one of these parties, what happens to the
contract? It becomes voidable.
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advent of the Family Code (Art. 77), it is not enough that

there should an agreement in whatever form; to be
valid, the ante-nuptial agreement must now be in
writing; otherwise, it will be void.
Let us compare the effects. We have an ante-nuptial
agreement for separation of property. The parties have
abided by what they have agreed upon. Everything has
been separate, separate income, separate expenses etc.
Lets say the husband has died, the settlement of his
estate is now in question. When there is now a
supposed division of his estate, can the wife claim the
half as her share of the supposed conjugal partnership
that has been created between them?
Under the Civil Code the Wife cannot say that is
automatically hers as her share in the conjugal
partnership because the ante-nuptial agreement,
though valid, is unenforceable. And being merely
unenforceable, it is subject to ratification. And the same
was ratified by abiding by the agreement, i.e. they
received benefits under the agreement. She benefited
because she also got to keep whatever she own as her
own. There is ratification. The entire estate of the
husband has to be treated as his separate property.
Under the Family Code although the parties have
complied with their agreement, the agreement is void.
The wife can claim the as her share because the
contract is void and therefore by default they are
governed by the absolute community of property and
she is entitled to just as her share in the community
property; and on top of her share in the community
property, she still gets to inherit from the husbands
share in the community property.
What is the effect of non-compliance with the Statute of
Frauds? It cannot be enforced in court.
When we say it cannot be enforced in court, what
exactly does it mean? In reality, it does not really
preclude the parties from going to court. There is really
a contract between the parties. It is a valid contract. So
there being a contract, the parties are bound. But it is
unenforceable in a sense because since they do not
have any written documentation of the contract, they
only have to rely on parole evidence.
Neither of the parties can introduce parole evidence,
but this must be objected to other party. If he fails to
object to the introduction of parole evidence, the party
is now allowed in a sense to enforce. In a sense
because you are able to prove the existence of the
contract on the basis of parole evidence which is
previously inadmissible parole evidence.
But failure on the part of the opposing counsel to object
on the introduction of parole evidence is not the only
way by which you can get around the effect of noncompliance with the Statute of Frauds. Another way to
get the contract out of the coverage of the Statute of
Frauds is if there has been partial execution.
Example: A sold a parcel of land to B for PhP 1M. B has
already paid half of the amount. B, in this case, has
already partially performed his obligation by the partial
ARTICLE 1404. Unauthorized contracts are governed by

article 1317 and the principles of agency in Title X of this
Book.
ARTICLE 1405. Contracts infringing the Statute of Frauds,
referred to in No. 2 of article 1403, are ratified by the failure
to object to the presentation of oral evidence to prove the
same, or by the acceptance of benefits under them.
ARTICLE 1406. When a contract is enforceable under the
Statute of Frauds, and a public document is necessary for its
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registration in the Registry of Deeds, the parties may avail

themselves of the right under Article 1357.
ARTICLE 1407. In a contract where both parties are
incapable of giving consent, express or implied ratification by
the parent, or guardian, as the case may be, of one of the
contracting parties shall give the contract the same effect as
if only one of them were incapacitated.
If ratification is made by the parents or guardians, as the case
may be, of both contracting parties, the contract shall be
validated from the inception.
(5) Those which contemplate an impossible service;

(6) Those where the intention of the parties relative to the
principal object of the contract cannot be ascertained;
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to
set up the defense of illegality be waived.
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ARTICLE 1408.Unenforceable contracts cannot be assailed

by third persons.
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CHAPTER 9: Void or Inexistent Contracts
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Is there a difference between a void and an inexistent

contract? Void contracts: when we have a void
contract, we have a contract where all the essential
requisites are present, only the purpose or the cause is
something which is prohibited by law, morals, or public
policy. Or in some cases, the contract itself is declared to
be null and void by the law. Inexistent Contract is one
where one of the essential requisites of a contract is
lacking.
Example: Judge who entered into a contract with a law
office while he is actively serving as a judge. In that case,
it can be declared by law as void because it is contrary
to public policy. An incumbent judge must not enter
into private practice.
Example: Sale of illegal drugs, there is consent,
consideration and cause, but the cause is illegal, so the
contract is void.
Example: Contract which involves future inheritance
because the law itself declared the contract null and
void.
Example: Under the Family Code, if there is a sale of
conjugal or community property without the consent of
the other spouse, then the sale is considered to be null
and void.
Example: A and B entered in a contract of sale. It is
indicated in the Deed of Sale that a purchase price was
paid when in truth and in fact, there was no
consideration paid. This is an absolutely simulated
contract; an inexistent contract. If a contract is a
relatively-simulated contract, then there may still have
some cause or consideration; only that it is not declared
out in the open.
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ARTICLE 1409.The following contracts are inexistent and

void from the beginning:
(1) Those whose cause, object or purpose is contrary to law,
morals, good customs, public order or public policy;
(2) Those which are absolutely simulated or fictitious;
(3) Those whose cause or object did not exist at the time of
the transaction;
(4) Those whose object is outside the commerce of men;
Those which are absolutely simulated or fictitious (Art.

1409, par. 2):
Absolute Simulation - the parties do not intend to be
bound at all.
Relative Simulation - not automatically void unless it
causes prejudice to a third person or it is contrary to law,
morals or public policy.
Why would two (2) people enter into a simulated
contract if they do not intend to be bound? In order to
defeat the rights of another person.
Example: If you are the lawyer and you are approached
by the debtor who is facing a number of creditors.
What will you advise him if you are NOT a Thomasian
lawyer? Enter into simulated contracts. Make it appear
that you have disposed of this property where in fact,
the other party into the agreement is in connivance
with you. You will make it appear that you have sold this
property to him but in truth and in fact, the debtor is still
the owner. You are not bound by this contract of sale.
But the same will help the debtor to insulate this
property from his creditors.
What is the status of that contract? It is absolutely
simulated, therefore it is void.
Compare this to a situation where in order to defeat the
rights of the creditor, the debtor will enter into a
contract with another. It is an honest to goodness
contract but the other person knew that the debtor is
disposing his property because he wanted to defeat the
right of his creditor. And he also knows that he is selling
the property at a much lower price. There is really a
contract.
Is it a relatively simulated contract? No. It is a valid
contract. But since it is affected by fraud, that contract
may be set aside because it is rescissible thru accion
pauliana.
Compare the two (2) situations: The remedy of the 3rd
person in the second situation is rescission thru accion
pauliana because there is really a contract between the
debtor and the third person. On the first situation, there
is no contract at all. The creditor can also attack that
contract, but NOT on the ground that it is rescissible
because of fraud; but on the ground that it is void
because it is absolutely simulated.
What about relative simulation? There is really a contract
but the true nature of the contract is hidden by another
contract which is the one made public.
Why would the parties enter into a relative simulated
contract? They hide it because either what they are
doing is bad or it may not be bad, but it can hurt people
who are close to them.
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ARTICLE 1410.The action or defense for the declaration of

the inexistence of a contract does not prescribe.
ARTICLE 1411. When the nullity proceeds from the illegality
of the cause or object of the contract, and the act constitutes
a criminal offense, both parties being in pari delicto, they
shall have no action against each other, and both shall be
prosecuted. Moreover, the provisions of the Penal Code
relative to the disposal of effects or instruments of a crime
shall be applicable to the things or the price of the contract.
This rule shall be applicable when only one of the parties is
guilty; but the innocent one may claim what he has given,
and shall not be bound to comply with his promise.
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What is the rule of pari delicto? If the contract is void,

then the parties cannot go to court and enforce upon
the contract against each other. That presupposes that
the contract has NOT yet been executed.
What if the contract has been executed either on both
parties or one of the parties? Can there be recovery?
We only make a distinction or qualification as to who
cannot recover from whom if fault is only on the part of
one of the parties.
To what kind of contract does the pari delicto rule
apply? Void contracts, NOT to inexistent contracts.
Why do we say that it only applies to void contracts?
Because Art. 1411 specifically says, When the nullity
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Example: If a person is in already in the twilight of his

years and he has a mistress who is still young and who
is not known to his family or wife, and he is worried
about his mistress. Can he give her something in his last
will? No. So what he may want to do is to execute some
kind of a Deed of Sale in her favor, but she does not
have any money of her own. So he will not be receiving
material consideration. What he is really intending to do
is to make a donation to the mistress. What is this
contract? A relatively simulated contract because it is
made to appear that there is a Deed of Sale, but in
reality what he is effecting is a donation in favor of the
mistress. The law says that the contract would be valid
provided that the contract is not contrary to law. In this
case, the Contract of Sale must be set aside as it was
entered into without consideration. Now, the issue is
whether or not the parties are bound by the real
contract, which in this case is a donation that is
prohibited by law. In this case, the real transaction
would also be null and void.
Compare this into a situation where we have a mother
who feels sorry for one (1) of her three (3) children. But
of course, she does not want her two (2) children to
think that the 3rd one is more special. What she will do is
to execute a Deed of Sale giving the 3rd child most of
her properties but in reality there is really no
consideration for the sale. What she really intends to do
is donate her properties. Is donating a property to her
child wrong? No, but she only has to answer to possible
inofficiousness of the donation. In this case, unlike the
first one where the real contract was also declared null
and void, we can possibly give effect to the donation
subject only to consideration of inofficiousness.
If we would look at the list in Art. 1409, we can pin-point
which contract is void or which contract is inexistent.
Article 1409, items (2), (3) and (6) are inexistent
contracts:
(2) Those which are absolutely simulated or fictitious;
(3) Those whose cause or object did not exist at the time
of the transaction;
(6) Those where the intention of the parties relative to
the principal object of the contract cannot be
ascertained;
While Article 1409, items (1), (4), (5) and (7) are void
contracts:
(1) Those whose cause, object or purpose is contrary to
law, morals, good customs, public order or public policy;
(4) Those whose object is outside the commerce of
men;
(5) Those which contemplate an impossible service;
(7) Those expressly prohibited or declared void by law.
Why is it important for us to know when a contract is
simply void or when a contract is simply inexistent? The
remedy would still be the same whether the contract is
void or inexistent, either we invoke the nullity as a
defense or go to court and ask for a declaration of
nullity of the contract. The distinctions become material
in action in relation to the rule on pari delicto.
liv
proceeds from the illegality of the cause or object of the

contract and the act constitutes a criminal offense, both
parties being in pari delicto, they shall have no action
against each other, and both shall be prosecuted.
What is the rule if there is fault on the part of both
parties? They may NOT recover what they have given
and they cannot compel each other to perform. The law
will leave them where they are. If it so happens that the
illegality of the cause or object amounts to a criminal
offense, then the parties would furthermore be subject
to a criminal prosecution and the proceeds of the
contract will be confiscated in accordance with our law
on the crime involved.
Example: A agrees to pay B if the latter will kill C. If A fails
to pay B and the latter has already killed C, B cannot ask
assistance from the court. If C was not yet killed by B, but
A has already paid B, the same rule applies. The pari
delicto rule will prevent them from being able to sue
each other on the contract, what is more that they will
be liable criminally because in this case the illegality of
the cause amounts to a criminal offense.
It is possible that only one of the parties is at fault. What
is the rule? If only one of the parties is at fault, we make
a distinction as to what stage the contract is in. If it is
executed already, or if it is still in the executory stage.
Example: Pari delicto where only one of the parties is at
fault: In case the buyer did not know that the object
subject of the sale is stolen. The sale is void. The Antifencing law is violated, but the buyer may recover from
the seller the amount that the former paid to the latter
because the buyer did not know that the object of sale
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ARTICLE 1412. If the act in which the unlawful or forbidden

cause consists does not constitute a criminal offense, the
following rules shall be observed:
(1) When the fault is on the part of both contracting parties,
neither may recover what he has given by virtue of the
contract, or demand the performance of the other's
undertaking;
(2) When only one of the contracting parties is at fault, he
cannot recover what he has given by reason of the contract,
or ask for the fulfillment of what has been promised him. The
other, who is not at fault, may demand the return of what
he has given without any obligation to comply with his
promise.
ARTICLE 1419. When the law sets, or authorizes the setting

of a minimum wage for laborers, and a contract is agreed
upon by which a laborer accepts a lower wage, he shall be
entitled to recover the deficiency.
.
o The law itself also provides for clear examples where the
exceptions to the pari delicto rule are observed. Articles
1413-1419 are instances where the other party, the one
usually the intended to be protected by the law which
declares the contract void, is allowed to recover
whatever he has given.
o Take note that in cases where one of the parties is
incapacitated when he enters into a void contract, the
law also extends him special protection by allowing him
to recover what he has paid.
o A void contract would arise from:
(1) Absence of any of the essential requisites. Take
note, ABSENCE not mere defect;
(2) If there is no observance of the proper formalities;
(3) If there is impossibility in the object or in the
prestation that have been agreed upon; and
(4) If there is any violation of the characteristics of a
contract like there is no mutuality.
o A void contract, just like in a void marriage, is legally
inexistent. It is never susceptible of ratification.
o The right to question a null and void contract either by
action by direct attack or by way of defense by collateral
attack, never prescribes. If you are a party to a null and
void contract, you can actually just opt to not do
anything, just wait for the other party to enforce the
contract and then raise the nullity of the contract as a
defense.
o The nullity of a contract may also be assailed by a third
person who happens to be damaged by the contract.
o Example: Oral pre-nuptial agreement, no amount of
ratification will cure the defect.
o Pari Delicto Rule: Parties to a void contract will have no
remedy in the law. The law will leave them where they
are; but take note that this is specifically limited to
contracts which are null and void on account of the
illegality of its cause or object.
o If the fault lies with both of the parties, then both of
them will not be afforded relief. If fault lies with only one
of them, then he will be afforded relief, in that he can
recover whatever that has been given and he will not
even be compelled to comply with what he has
promised. There will be complication if the nullity makes
the prestation a criminal act.
e.
compensation for service rendered beyond the time limit.
liv
is a stolen item. The buyer, in this case, is not at fault. He

may recover because the contract was already
executed.
But if the contract is still in the executory stage, the rule is
simply that they will not have any action against each
other. The seller cannot compel the buyer to deliver the
money to him in exchange of the delivery of the stolen
goods. At the same way, the buyer cannot compel the
seller who is at fault to deliver that property stolen, in
exchange for payment.
But if it happens that the buyer has already paid, the
pari delicto rule will not operate to protect the seller
because the buyer, since he is not at fault will be
allowed to recover what he has paid. The pari delicto
rule will NOT operate against him (buyer).
ARTICLE 1413. Interest paid in excess of the interest allowed

by the usury laws may be recovered by the debtor, with
interest thereon from the date of the payment.
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ARTICLE 1414. When money is paid or property delivered

for an illegal purpose, the contract may be repudiated by
one of the parties before the purpose has been
accomplished, or before any damage has been caused to a
third person. In such case, the courts may, if the public
interest will thus be subserved, allow the party repudiating
the contract to recover the money or property.
ARTICLE 1415. Where one of the parties to an illegal

contract is incapable of giving consent, the courts may, if the
interest of justice so demands allow recovery of money or
property delivered by the incapacitated person.
ARTICLE 1416. When the agreement is not illegal per se but
is merely prohibited, and the prohibition by the law is
designed for the protection of the plaintiff, he may, if public
policy is thereby enhanced, recover what he has paid or
delivered.
ARTICLE 1417. When the price of any article or commodity is
determined by statute, or by authority of law, any person
paying any amount in excess of the maximum price allowed
may recover such excess.
ARTICLE 1418. When the law fixes, or authorizes the fixing of
the maximum number of hours of labor, and a contract is
entered into whereby a laborer undertakes to work longer
than the maximum thus fixed, he may demand additional
ARTICLE 1420. In case of a divisible contract, if the illegal

terms can be separated from the legal ones, the latter may
be enforced.
ARTICLE 1421. The defense of illegality of contract is not
available to third persons whose interests are not directly
affected.
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ARTICLE 1422. A contract which is the direct result of a

previous illegal contract, is also void and inexistent.
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Incomplete definition because it focuses on the passive

ARTICLE 1156. An obligation is a juridical necessity to give, to

purchase price. We can quantify it. Or, if the property is

BOOK IV - Obligations and Contracts

ARTICLE 1157. Obligations arise from:

Civil Law Review II | Obligations and Contracts | UST Law

contract between the doctor and in-laws. Based on the

In the first case, the provisions of Articles 1317, 1403, No. 1,

ARTICLE 1159. Obligations arising from contracts have the

A contract entered into in the name of another by one who

Art. 1317. No one may contract in the name of another

A juridical relation which arises from certain lawful,

ARTICLE 1160. Obligations derived from quasi-contracts shall

Principle of Autonomy of Will states that the will of the

It is a juridical relation which takes place when

Art. 2144. Whoever voluntarily takes charge of the agency

The status of contracts that the officious manager

Art. 2149. The ratification of the management by the owner

Civil Law Review II | Obligations and Contracts | UST Law

If there are benefits that had been accrued to him, the

Art. 2150. Although the officious management may not

Art. 2154. If something is received when there is no right to

The same obligation shall be incumbent upon him when

At the very least, to be entitled to reimbursement, the

Art. 2155. Payment by reason of a mistake in the

The payment must have been made by mistake and

Art. 2152. The officious manager is personally liable for

Art. 2153. The management is extinguished:

SOLUTIO INDEBITI: Juridical relation received something

Art. 2158. When the property delivered or money paid

The obligation of the payee was to give back what he

Civil Law Review II | Obligations and Contracts | UST Law

Art. 2160. He who in good faith accepts an undue payment

It is a totally different scenario if the payee is in bad faith.

Art. 2168. When during a fire, flood, storm, or other calamity,

Art. 2167. When through an accident or other cause a

He shall furthermore be answerable for any loss or

Art. 2159. Whoever in bad faith accepts an undue payment,

Art. 2166. When the person obliged to support an orphan,

deliver the price or assign his right to recover the thing

Art. 2162. He shall be exempt from the obligation to restore

Art. 2174. When in a small community a nationality of the

Delicts or crimes are source of obligations because of

Civil Law Review II | Obligations and Contracts | UST Law

Art. 31. When the civil action is based on an obligation N

Would Art. 31 constitute an independent civil action?

Would your suit against the bus operator involve the

Art. 32. Any public officer or employee, or any private

commenced until the final judgment of the criminal

(1) Freedom of religion;

Civil Law Review II | Obligations and Contracts | UST Law

The responsibility herein set forth is not demandable from a

Art. 1171. Responsibility arising from fraud is demandable in

Art. 33. In cases of defamation, fraud, and physical injuries, a

If the law or contract does not state the diligence which is to

The indemnity shall include moral damages. Exemplary

Art. 1173. The fault or negligence of the obligor consists in

In any of the cases referred to in this article, whether or not

Art. 1172. Responsibility arising from negligence in the

(17) Freedom from being compelled to be a witness against

Art. 34. When a member of a city or municipal police force