Obligations & Contracts

What is an OBLIGATION?

— An obligation is a juridical necessity

to give, to do or not to do.
— (Article 1156, Civil Code of the
Philippines)
What are the sources of
obligations?
— Law
— Contracts
— Quasi-contracts
— Delicts
— Quasi-delicts
— Obligations arising from contracts
have the force of law between the
contracting parties and should be
complied with in good faith. (Article
1159, Civil Code)
What remedies are available
when one party does not comply
with his obligation?

— Specific performance
— Rescission
— Damages
(Article 1165, Civil Code of the
Philippines)
General Rule: There must be demand before
delay may be incurred.
EXCEPTIONS:

1.  When the obligation or the law expressly so declares;

2.  When time is of the essence;

3.  When demand is useless, as when the obligor has

rendered it beyond his power to perform;

4.  When there is acknowledgment of default;

5.  When contract expressly provides that there is delay

notwithstanding absence of demand.
Who may be liable for damages?
—  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. (Article 1170, Civil Code
of the Philippines)
When may a party be exempt from
liability for failure to comply with
an obligation?
—  A party may be exempt from liability for failure to
comply with an obligation in case of force majeure or
fortuitous events.

—  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 have not been foreseen, or which though foreseen
were inevitable.
—  Fortuitous events refer not only to events that are
unforeseeable but also those which are foreseeable but
inevitable.

—  Fortuitous events can either be an ACT OF GOD or natural

occurrences such as floods, typhoons, earthquakes or an ACT
OF MAN such as riots, strikes or wars.

—  Requisites of a fortuitous event:

a.  The cause or breach of the obligation must be independent

of the will of the debtor;
b.  The event must be unforeseeable or unavoidable;

c.  The event must be such as to render it impossible for the

debtor to fulfill his obligation in a normal manner; and

d.  The debtor must be free from any participation in or

aggravation of the injury to the creditor.
Obligations with a Penal Clause
—  In obligations with a penal clause, the penalty shall
substitute the indemnity for damages and the payment
of interests in case of non-compliance, 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 relative provisions
of the Civil Code of the Philippines.
Contracts
—  What is a contract?
—  A contract is a meeting if minds between
two persons whereby one binds himself,
with respect to the other, to give something
or to render some service. (Article 1305,
Civil Code of the Philippines)
Characteristics of a Contract

— Obligatory
— Autonomy
— Mutuality
— Relativity
— Consensuality
DEFECTIVE CONTRACTS

— Rescissible Contracts
— Voidable Contracts
— Unenforceable Contracts
— Void Contracts
Rescissible Contracts
—  Those which are entered into by guardians whenever
the wards whom they represent suffer damage by more
than ¼ of the value of the things which are the object
of the contract;

—  Those agreed upon in representation of absentees if the

latter suffer damage by more than ¼ of the value of the
things which are the object of the contract;

—  Those undertaken in fraud of creditors when the latter

cannot in any manner collect the claims due them;
—  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 the
competent judicial authority.
VOIDABLE CONTRACTS
—  Those where one of the parties is incapable
of giving consent to the contract;
—  Those whose consent is vitiated by mistake,
violence, intimidation, undue influence or
fraud.
UNENFORCEABLE CONTRACTS
—  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;

—  Those which do not comply with the Statute of Frauds.

A contract which does not comply with the Statute of
Frauds shall be unenforceable unless the same, or some
note or memorandum be in writing subscribed by the
party or by his agent. Evidence of the agreement cannot
be received without the writing or the secondary
evidence of its contents;

—  Those where both parties are incapable of giving

consent.
Statute of Frauds
—  An agreement that by its terms is not to be performed within
one (1) year from its making;

—  A special promise to answer for the debt, default or

miscarriage of another;

—  An agreement for the sale of goods at a price not less than
Five Hundred Pesos (PhP 500.00) unless the buyer accept and
receive part of such goods or has paid at the same time some
part of the price;

—  An agreement for the leasing for a longer period than one (1)
year; or for the sale of real property or of an interest therein;

—  A representation as to the credit of a third person.

VOID CONTRACTS
—  Those whose cause, object or purpose is contrary to law,
morals, good customs, public order or public policy;
—  Those which are absolutely simulated or fictitious;
—  Those whose cause or object did not exist at the time of the
transaction;
—  Those whose object is outside the commerce of men;

—  Those which contemplate an impossible service;

—  Those where the intention of the parties relative to the
principal object of the contract cannot be ascertained;
—  Those expressly prohibited or declared void by law.