1

UNIVERSITY OF THE CORDILLERAS

COLLEGE OF ACCOUNTANCY
2

Business Law 1 The LAW on

OBLIGATIONS and CONTRACTS

Presented by: Atty. Gene Boado Calonge Associate Professor

PRELUDE
OBLIGATIONS

and CONTRACTS

Mnemonics

OBLIGATIONS AND CONTRACTS Open your hearts and

Boldly profess the real essence of Love. Impeccably uphold the Glowing And flaming Torch of justice and equity. Imbue in your beings that Only through a Never-ending Search for truth and

C
O N T R A C T S

onscientious application f profound and accurate knowledge can a ew and ransformed life be eadily chieved. Be areful with your actions. hrough Divine Aid and Providence, eek the POT OF GOLD AT THE END OF THE RAINBOW.

OBLIGATIONS AND CONTRACTS

OVERVIEW
Scope of

Study

Definition/Etymology/Brief History Elements/Requisites

Nature of Obligations
Sources of Obligations and their

Concepts

LAW ON OBLIGATIONS AND CONTRACTS

Scope of

Study

10

Phase 1

OBLIGATIONS
Sources and their concepts Kinds in general Specific circumstances affecting obligations in general

Fortuitous events Fraud Negligence Delay Breach of Contract

11

Phase 1

OBLIGATIONS

Duties of Obligor in O2D/ON2D Extinguishment of Obligations with special emphasis on

Payment of debts of money Mercantile documents as means of payment Special forms or modes of payment Remission or Condonation, Confusion, Compensation and Novation Effect of Insolvency and Bankruptcy on extinguishment of obligations
12

Phase 2

CONTRACTS
Concepts

and Classification Elements and Stages Freedom from Contract and Litigation Persons bound Consent
Capacitated Requisites Vices

persons

of Consent
13

Phase 2

CONTRACTS
Objects of Contracts Considerations of Contracts Formalities of Contracts Interpretation and reformation of contracts Defective contracts

Rescissible Voidable Unenforceable Void

14

OBLIGATIONS AND CONTRACTS

Nature/Definition/Etymology Brief History

15

Law on Obligations and Contracts

Law set/body of norms of conduct, rules, regulations, policies, principles, protocol, guidelines, instructions, decrees including jurisprudence (via the Doctrine of Stare Decisis Art. 8 CCP) that govern a particular territory and made by competent authority On is a preposition meaning directed toward; concerning; about
16

OBLIGATIONS
Etymology The

word obligation comes from two Latin words

Ligare

to bind Ob preposition used to intensify a verb Obligare to bind securely

17

OBLIGATIONS
(Brief History)

In the early Roman Law, the Law on Obligations contained a literal meaning. It meant being bound in chains. The enforcement of credit was barbaric. If the credit is not paid, the creditor has the right to have the debtor placed in chains and sold to slavery in the market for three days. Proceeds of the sale will be used to pay the debt. If the debtor is not bought, the debtor will either be chopped into pieces and fed to the fishes in the river or sold to slavery across the Tiber. (Tsk! Can you

imagine such treatment?)

18

OBLIGATIONS
(Brief History)
Gradually,

though, the severity of the law was tempered. In Ciceros time, there was no more binding in chains. Rather, obligation was looked upon as binding in law. The law has now been humanized.
19

CONTRACTS
DEFINITION Sanchez Roman, a Spanish Commentator in Civil law defines Contract as 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 a prestation to give, to do, or not to do.
20

Q: What is the Law on

Obligations

The Law on Obligations is the set/body of rules which deals with the nature and sources of obligations as embodied in the Civil Code of the Philippines (Republic Act No. 386-approved on June 18, 1949 and took effect on August 30, 1950)

Contracts

The Law on Contracts is the set/body of rules which deals with the nature of agreements or stipulations and the rights and duties arising therefrom as embodied in the Civil Code of the Philippines (Republic Act No. 386-approved on June 18, 1949 and took effect on August 30, 1950)
21

22

LAW ON OBLIGATIONS
DISSECTING THE With Extra challenge

FROG

Whoever will pass the challenges will earn five (5) points (to be credited in the Midterm Class Standing) and will be called ATTORNEY/S FOR THE DAY (qualified to compete in the BEST IN EXTRA CHALLENGE)

READY?

Let the challenges begin!

23

LAW ON OBLIGATIONS
ARTICLE 1156

Legal Definition of a Civil

Obligation

24

ART. 1156
obligation is a juridical necessity to give, to do or not to do.

An

J/N - 2 G D N2D

Does it include not to give?

25

Art. 1156

(Continued)

Yes, under the DOCTRINE OF IMPLICATION as pronounced by the Supreme Court of the Philippines.

And such pronouncement of the Supreme Court is now part of Art. 1156 under the DOCTRINE OF STARE DECISIS as enunciated in Art. 8 of the Civil Code of the Philippines.
26

Elements/Requisites

OBLIGATIONS

Mnemonics FLAP F Fact (subject matter), object (thing), prestation or service

Requisites: It must be licit. (Art. 1459) It must be possible, physically and juridically.(Art. 1348) It must be determinate or determinable. (Art. 1349 & 1460) It must have pecuniary value ( possible equivalent in money)

It may include Form Statute of Frauds (Law on Form)

L Legal or juridical tie vinculum juris (refer to sources of

obligations)

A Active subject (Creditor/Obligee)

One in whose favor the obligation is constituted

One who has the duty of giving, doing, not doing or not giving

P Passive subject (Debtor/Obligor)

27

OBLIGATIONS
Elements/Requisites
Extra Challenge 1

Apply the elements of an obligation in the given case/scenario.

CASE

By virtue of a contract, GOTTO obliged himself to deliver a specific RTWPB of Malu Wang from 69 Condom-inium Towers, Maka-ti City to Cebu-bucol City for Php 2,000.00.
28

Extra Challenge 1
Suggested Answer

THE

DELIVERY OF A SPECIFIC RTWPB TO CEBU-BUCOL CITY IS THE FACT OR PRESTATION THE CONTRACT BETWEEN GOTTO AND MALU WANG IS THE VINCULUM JURIS OR LEGAL TIE MALU WANG IS THE ACTIVE SUBJECT GOTTO IS THE PASSIVE SUBJECT
29

30

NATURE of Obligations
Viewpoint of

Sanction

Subject Matter

Performance

CIVIL NATURAL (MORAL)

REAL PERSONAL

POSITIVE NEGATIVE

31

NATURE OF OBLIGATIONS Viewpoint of sanction

Civil

Natural

Derive their binding effect from positive law Can be enforced by court action or the coercive power of public authority

Example Art. 1/7/68/70/194-196 FC

Derive their binding effect from equity and natural justice Fulfillment can not be compelled by court action but depends exclusively upon the good conscience of the debtor Under Philippine Law, moral obligations are now merged with natural law

Example Arts. 1424 1430 CCP

32

NATURE OF OBLIGATIONS Viewpoint of subject matter

Real

Personal

Obligations to give

Determinate (Art. 1460) Generic

Arts. 1164-66(refer to
Modules 4 & 5)

Extra Challenge 2
Give

Obligations to do or not to do/not to give Arts.1163/1167/1168/1 169/1173/1174/13381346 (refer to Modules 4

& 5) Extra Challenge 3 Give a vivid example of a personal obligation.

a vivid example of a Real Obligation.

33

NATURE OF OBLIGATIONS Viewpoint of performance

Positive

Negative

Obligations to give Obligations to do

Extra Challenge 4

Obligations not to do/not to give

Extra Challenge 5

Give a vivid example of a Positive Obligation.

Give a vivid example of a Negative Obligation.

34

35

LAW ON OBLIGATIONS
ARTICLE 1157

Sources of

Obligations and their concepts

36

Sec. 1157

Sources of Obligations
La Co De Qua2

Law (Obligation ex lege) Co Contract (Obligation ex contractu) De Delict/Delito/Felony

La

(Obligation ex maleficio/ex delicto)

Qua Qua

Quasi-contract

(Obligation ex quasi-contractu)

Quasi-delict
(Obligation ex quasi-delicto/ex quasi-maleficio)
37

(Continued)

Art. 1157

1.

OBLIGATION ex LEGE
LAW

JURIS/LEX/LEY or LEYES/LEGE or LEGIS Set/body of norms of conduct, rules, regulations, policies, principles, protocol, guidelines, instructions, decrees including jurisprudence that govern a particular territory and made by competent authority.

38

Art. 1157
(Continued)

KINDS OF POSITIVE LAWS IN THE PHILIPPINES

Political/Constitutional Law Labor Law

Civil Law

Law on Taxation Commercial Laws

Criminal Law

Administrative Law Election Law

Private International Law Public International Law

Special Laws
REMEDIAL LAW

39

Art. 1157
(Continued)

1.

Obligation ex Lege

Art. 1158

Obligations

derived from law are not presumed. Only those expressly determined in this Code or in special laws are DEMANDABLE.
40

Art. 1157
(Continued)

Obligation ex Lege

ANNOTATION To be demandable and enforceable, the obligation must be stated by the law which created the obligation.

Such being the case, the agreement of the parties under this obligation is no longer necessary because it is the law which governs their obligation. Obligations derived from law shall be governed by the law which establishes them. In case of insufficiency, the same shall be supplemented by the provisions of the Civil Code of the Philippines.

DURA LEX SED LEX

The law maybe harsh but it is the law

41

Art. 1157
(Continued)

Obligation ex Lege

Examples

Art. 3. Ignorantia legis non excusat. Ignorance of the law excuses no one from compliance therewith. Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith.

Art. 26. Locus Regit Actum. Every person shall respect the
dignity, personality, privacy and peace of mind of his neighbors and other persons.
Art. 783. A will is an act whereby a person is permitted, with the formalities prescribed by law, to control to a certain degree the disposition of his estate, to take effect after his death.
42

Art. 1157(Continued) 2.
A

Obligation ex Contractu

Art. 1305

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. STORY TELLING TIME

The Genie and the Woman

43

Art. 1157(Continued) Obligation ex Contractu

EXTRA CHALLENGE 6

Answer the following questions based on the storytelling. Questions

1. Do obligations exist in the story? Legally explain. 2. Was there a contract between the genie and the woman? Legally explain. 3. What were the obligations of the genie to the woman? 4. What were the obligations of the woman to the genie?
44

Art. 1157(Continued)

Obligation ex Contractu

A contract may be nominate (contract with a name designated by law) or innominate (no designated name)-Art. 1307

Art. 1159

Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.

45

Art. 1157(Continued) Obligation ex Contractu

Three

doctrines affecting contracts doctrines of Liberty of Contracts (Art. 1306), Mutuality of Contracts (Art. 1308) and Relativity of Contracts (Art. 1311)
A

contract is by nature SINALAGMATICO

Million Dollar Question- What is SINALAGMATICO?

Note: to be extensively discussed further in the Midterms Phase

46

Art. 1157
(Continued)

3.

OBLIGATION EX DELICTO
Art.

3 RPC

Acts and omissions punishable by law are called felonies (delitos).

DELICT/DELITO/FELONY
47

Art. 1157
(Continued)
OBLIGATION
Example The

EX DELICTO

of delict ACT

act of taking the property of another without the latters consent is a delict. It is a felony called THEFT as defined in the Revised Penal Code.
48

Art. 1157
(Continued)

OBLIGATION EX DELICTO

Example of delict OMISSION

The omission of the required diligence while driving a motor vehicle and in violation of the Motor Vehicle Law is an omission punishable as RECKLESS IMPRUDENCE under Art. 365 of the Revised Penal Code.
49

Art. 1157
(Continued)

OBLIGATION EX DELICTO ANNOTATION

As

a rule, when a person commits a felony, he can be held criminally liable and if found guilty beyond reasonable doubt with moral certainty after trial, he will be meted with the corresponding penalty of imprisonment.
50

Art. 1157
(Continued)

OBLIGATION EX DELICTO ANNOTATION

And in addition, he can also be held civilly liable (he shall answer and/or pay for damages) because most often the commission of a felony causes not only moral evil but also material damage. Such civil obligation is a necessary consequence of criminal liability, and is to be declared and enforced in the same criminal proceeding except when the injured party reserved the right to file the civil action independently from the criminal action. (Sec. 1, Rule

III, Revised Rules of Court)

51

Art. 1157
(Continued)

OBLIGATION EX DELICTO

ANNOTATION

However, not all felonies cause material injury. Therefore, if there is no material damage to be compensated or to be indemnified, there is no civil liability to be indemnified.
Footnote: In my practice of law, I have not filed a case in court without the corresponding civil liability.
52

Art. 1157
(Continued)

OBLIGATION EX DELICTO

ANNOTATION

Proof or evidence required 1. When civil liability for damage is made in the criminal case, proof or evidence beyond reasonable doubt is required. 2. When claim for damage is filed separately with the criminal action, mere preponderance of evidence is enough.

53

Art. 1157
(Continued)

OBLIGATION EX DELICTO

ANNOTATION

Effect if the guilty party died pending trial

The civil obligation IS NOT EXTINGUISHED. The injured party may file his claim against the estate of the offended, but the heirs are not liable beyond the value of the property they received from the decedent (Arts. 1178 and 1311 CCP)
54

Art. 1157
(Continued)

OBLIGATION EX DELICTO

ANNOTATION

Effect if the guilty party is acquitted of the criminal case

The acquittal of the guilty party in the criminal case filed DOES NOT EXTINGUISH the civil liability unless it is stated in the judgment that the fact from which the civil action might arise did not exist. (Sec. 3, Rule III, Revised Rules of Court)
55

Art. 1157 (Continued)

RAPE under the NEW ANTIRAPE LAW (RA 8353- A SPECIAL LAW)

1. Rape under the Old AntiRape Law with the same attendant circumstances
2. Rape by SEXUAL ASSAULT With any of the attendant circumstances force/intimidation/violence/ undue influence/of tender age/victim is unconscious or is demented A. P sexually attacking the AO/OO B. I/O sexually attacking the V/AO C. Finger considered an 56 object

RAPE under the OLD ANTIRAPE LAW

Attendant circumstances force/violence/intimidation/undue influence/of tender age/woman is unconscious or is demented Rape through penetration of the MALE GENITALIA(PENIS) to the FEMALE GENITALIA(VAGINA) Mere knocking at the doors of the pudenda constitutes the felony called rape

Thus, only a man can rape a woman; victim is always FEMALE

Art. 1157 (Continued)

4.

OBLIGATION ex QUASICONTRACTU

Concept It is an obligation from a juridical relation which arises from certain lawful, voluntary, and unilateral acts, to the end that no one may be unjustly enriched or benefited at the expense of another.
57

Art. 1157 (Continued)

OBLIGATION

ex QUASICONTRACTU

Legal Basis

Art.

2142. Certain lawful, voluntary and unilateral act gives rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another.
58

Art. 1157 (Continued)

QUASI-CONTRACT

Elements

LUV
Lawful Unilateral Voluntary
59

Art. 1157 (Continued)

QUASI-CONTRACT

Forms of Quasi Contract

1.

Art. 2144 Negotiorum Gestio

2.

Art. 2154 Solutio Indebiti

3.

Other forms
60

Art. 1157 (Continued)

OBLIGATION ex QUASI-CONTRACTU

Example 1

Makunat, a merchant-farmer, and owner of a tenhectare agricultural land left for USA on a pleasure trip. While enroute to USA, typhoon Ligaya devastated the entire Philippines, including the land owned by Makunat. Before the typhoon reached the Philippine area of responsibility, Masigasig, a neighbor of Makunat, employed six farmers to harvest the palay planted on the land of Makunat. The expenses incurred is Php 6,000.00.
61

Art. 1157 (Continued)

OBLIGATION ex QUASI-CONTRACTU

Example 2

Engot owes Switik P100,000 payable on December 25, 2010. On December 25, 2007, Engot, thinking that the obligation was already due, paid Switik the full amount of the obligation.
62

Art. 1157 (Continued)

OBLIGATION ex

QUASICONTRACTU

EXTRA CHALLENGES 7 & 8

1. Which of the examples mentioned is Negotiorum Gestio? What are the obligations of the parties involved? Legally explain. 2. Which of the examples cited is Solutio Indebiti? What are the obligations of the parties involved? Legally explain.
63

Art. 1157 (Continued)

5. OBLIGATION ex QUASIDELICTO
Arts.

2176 2194

64

Art. 1157 (Continued)

QUASI-DELICT/TORT/CULPA

AQUILIANA

CONCEPT

Quasi-delict,

or tort, or Culpa Aquiliana, is the wrong committed against a person independent of contract and without criminal intent.

65

Art. 1157 (Continued)

QUASI-DELICT/TORT/CULPA

AQUILIANA

LEGAL BASIS 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.

66

Art. 1157 (Continued)

QUASI-DELICT/TORCULPA AQUILIANA

BASIS OF LIABILITY

Manresa, a Spanish Commentator in Civil Law states that the liability for quasi-delict is founded upon an indisputable principle of equity; namely, the fault or negligence cannot prejudice anyone else besides its author, and in no case should its consequences be borne by him who, without will or fault on his part, becomes the victim of the result or suffers the harm produced by such fault or negligence. He goes further and opined that a man is responsible not only for his voluntary willful act executed consciously and intentionally, but also for those acts performed without lack of foresight, care and diligence, which caused material harm to society or to other individuals.

67

Art. 1157 (Continued)

QUASI-DELICT/TORT/CULPA

AQUILIANA

Act

Elements

or Omission Fault or Negligence (Art. 1173) Damage or Injury (Art. 2197) No PECR

68

Art. 1157 (Continued)

QUASI-DELICT/TORT/CULPA AQUILIANA

Kinds of Culpa Culpa Aquiliana or Civil Negligence/tort-negligence INDEPENDENT of contract Culpa Contractual or Contractual Negligence- negligence in the performance of an obligation and/or arising from contract Culpa Criminal or Criminal Negligence- negligence penalized by the Revised Penal Code STORY TELLING TIME

Heaven versus Hell

69

Art. 1157 (Continued)

QUASI-DELICT/TORT/CULPA

AQUILIANA

EXTRA CHALLENGES 9 & 10 1. Was there tort in the story of Heaven? Legally explain.
2.

Was there tort in the story of Hell? Legally explain.

70

Art. 1157 (Continued)

QUASI-DELICT/TORT/CULPA

AQUILIANA
2180/2189/2190/2191/2193 Doctrine of Vicarious Liability Art. 2187 Product Liability Suit
Arts.

71

72

73