LAW OF OBLIGATIONS

Obligation is a juridical necessity to give, to do or not to do (Art. 1156)

Essential Requisites of obligation

• A juridical or legal tie, which binds parties to the obligation and which may arise either from bilateral or unilateral acts of persons. (also called vinculum, vinculum juris, efficient tie, efficient cause)
• An active subject known as the creditor or obligee, who can demand the fulfillment of the obligation;
• A passive subject known as the debtor or obligor from whom the obligation is juridically demandable; and
• The fact, prestation or service which constitutes the object or subject matter of the obligation; The act (not the thing or subject matter) to give or to do or not to do.

SOURCES OF OBLIGATION

• Law - (example, the obligation to pay taxes);
• Contracts - When there is an agreement between contracting parties.
• Quasi-contracts - When they arise from lawful, voluntary and unilateral acts and which are enforceable to the end that no shall be unjustly enriched at the expense of another.

1. Negotiorum gestio - voluntary management of priority, business or affairs of another without consent or authority
2. Solutio indebiti - payment by mistake of an obligation which was not due when paid.

• Delicts (Acts or omissions punishable by law) - example., the obligation to pay the medical bills of the mauling victim by the person guilty of physical injuries or the obligation to support the child delivered by a rape victim by the rapist/father.
• Quasi-delicts (tort or culpa aquillana) - When the obligation arises from damages caused to another while in the course of one's performance of an otherwise lawful act if not for his own negligence, although there has been no contractual relationship between parties.

Obligations derived from law are not presumed (Art. 1158).

KINDS OF OBLIGATION

Kinds of obligation according to subject matter

• Real obligation (obligation to give) - in which the subject matter is a thing which the obligor must give/deliver to the obligee; and
• Personal obligation (obligation to do or not to do) - in which the subject matter is an act to be done or not to be done. It may be:

1. Positive personal obligation - obligation to do or render service; and
2. Negative personal obligation - obligation not to do or not to give.

Kinds of Real Obligation

• Specific real obligation - one which involves the delivery of a specific or determinate thing (one which is particularly designated or physically segregated from the rest of the class.
• Generic real obligation - one that involves the delivery of a generic thing.

Rights of the Creditor and Obligation of the Debtor in Obligations to Give

Rights available to the creditor in obligations to give

• Determinate or specific real obligation:

1. To compel specific performance (Art. 1165, par.1);
2. To recover damages in case of breach of the obligation (Art. 1170).

• Indeterminate or generic real:

1. To ask performance of the obligation (Art. 1165, par.2);
2. To ask that the obligation be complied with at the debtor (Art.1165, par.2);
3. To recover damages in case of breach of the obligation (Art.1170).

Duties or obligations imposed upon the debtor in obligations to give

• Determinate/specific real obligation:

1. To deliver the thing which he has obligated himself to deliver.
2. To take care of the thing with the proper diligence of a good father of the family (Art.1163)
3. To deliver all accessions and accessories (Art. 1166).

           Accessions are fruits of a thing or additions to or improvements upon the thing (ex. house or trees on a land, rents of a building, growing crops). Usually associated with real things.

           Accessories are things joined to a principal thing for the latter's embellishment, better use or completion. It is usually associated with personal things.

      4. To pay damages in case of breach of the obligation (Art. 1170).

• Generic real obligation

1. To deliver a thing must be neither of superior nor of inferior quality.
2. To pay damages in case of breach of the obligation (Art. 1170).

Effect of fortuitous event on debtor's obligation

Fortuitous Event is an event which cannot be foreseen, or which though foreseen, is inevitable (Art. 1174).

• If the obligation is determinate, as a general rule, the debtor cannot be held liable for damages except when he is guilty of delay (Art. 1174). [See later discussion on Loss of the Thing Due on other exceptions.]
• If the obligation is generic, the debtor can still is held liable for damages (Art 1263) because only a determinate thing or object can be destroyed by a fortuitous event. An indeterminate or generic thing can never perish. (It can be replaced.)

GROUNDS FOR LIABILITY TO PAY DAMAGES

• Default (Delay, Mora);
• Fraud (Dolo);
• Negligence (Culpa); and
• Contravention of the tenor of the obligation (Art 1170)

1. DEFAULT OR MORA

Kinds of default (or Delay or Mora)

• Mora solvende, or the delay of the obligor to perform his obligation

1. Mora solvende ex re - delay in to give
2. Mora solvende ex persona - delay in to do

• Mora accipiende, or the delay of the creditor to accept the delivery of the thing, which is the object of the obligation.
• Compensatio morae, or the delay of the parties or obligors in the case of a reciprocal obligation.

In obligations to give or to do, when does debtor incur in delay?

The debtor incurs a delay from the time the creditor juridically or extra juridically demands from him the fulfillment of his obligation and in spite of such demand, he is unable to comply with the obligation (Art. 1169).

General rule: No demand, no delay!

When is demand by the obligee not necessary in order that incur in delay may exist?

• When the obligation or law expressly so declares; or
• 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; (time is of the essence) or
• When demand would be useless, as when the obligor has rendered it beyond his power to perform (Art. 1169)

In reciprocal obligations when does one of the parties incur a delay?

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 is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins (Art.1169).

2. FRAUD OR DOLO consist in the conscious and intentional proposition to evade the normal fulfillment of an obligation.

Distinguish between frauds in the performance of a pre-existing obligation (dolo incidente) from fraud in the perfection of a contract (dolo causante)

Dolo incidente - fraud incident to the performance of obligation

Dolo causante - fraud in the perfection of the contract.

• Dolo incidente present only during the performance of a pre-existing obligation while dolo causante employed only at the time of birth of the obligation.
• Dolo incidente employed for the purpose of evading the normal fulfillment of the obligation while dolo causante employed for the purpose of securing the consent of the other party to enter into the contract.
• Dolo incidente results in the non-fulfillment or breach of the obligation while dolo causante, if it is the reason for the other party upon whom it is employed for entering into the contract, results in the vitiation of his consent;
• Dolo incidente gives rise to the obligee to recover damages from the obligor while dolo causnte gives rise to the right of the innocent party to ask for the annulment of the contract if the fraud is causal or to recover damages if it is incidental.

3. NEGLIGENCE

Kinds of negligence

• Culpa Contractual (Contractual negligence) - negligence in the performance of a contract
• Culpa Aquiliana (Civil Negligence) - acts or omissions that cause damage to another there being no contractual relation between parties
• Culpa Criminal (Criminal Negligence) - negligence that results in the commission of a crime

What is meant by negligence or culpa? (culpa contractual)

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 the place. When negligence shows bad faith, the provisions of Art. 1171 and 2201, par.2, shall apply.

If the law or contract does not state the diligence which is to  be observed in the performance, that which is to be expected of a good father of a family shall be required (Art. 1173).

What is test of negligence?

The test by which we can determine the existence of negligence in a particular case may be stated as follows: Did the obligor in doing the alleged negligent act use the reasonable care and caution which an ordinary prudent person would have been used in the same situation? If not, then he is guilty of negligence. The law here in effect adopts the standard supposed to be observed by the good father of the family or that conduct usually observed by a diligent owner with respect to his own property and/or family.

Presumption where principal was received by the obligee without reservation as to interest?
In the absence of proof to the contrary, the presumption is that said interest has been paid because payment of interest usually comes first before payment of the principal (Art. 1176, 1253).

Presumption where obligee received later installment without reservation as to prior installments
Absence any proof to the contrary, the presumption is that such prior installments have been paid because it is unusual that a later installment will be paid ahead those already in arrears. The determining factor, however, in arriving at this presumption is the indication of the application of the payment to an installment of a later date and not the date of the receipt.

All rights acquired in virtue of an obligation are generally transmissible. Exceptions:

• When prohibited by law
• When prohibited by the stipulation of the parties (Art. 1178)

KINDS OF OBLIGATION UNDER THE CIVIL CODE

• Pure obligation
• Conditional obligation
• Obligation with a period
• Alternative obligation
• Facultative obligation
• Joint obligation
• Solidary obligation
• Divisible obligation
• Indivisible obligation
• Obligation with a penal clause

PURE OBLIGATION AND CONDITIONAL OBLIGATION

Pure obligation is one which is not subject to any condition and no specific date is mentioned for its fulfillment and is, therefore, immediately demandable (Art. 1179).

Conditional obligation is one, which is subject to a condition.

Condition is a future and uncertain (it may or may not happen) event upon the happening of which the effectively or ineffectively of an obligation subject to it depends. It may also refer to a past event, the happening of which is unknown to the parties (Art. 1179) as in obligation that B will give to P1,000.00 if Magellan was killed within Philippines soil. The condition in this obligation is a past event unknown to the parties.

Kinds of Condition

• Suspensive or causal (condition precedent) - the fulfillment of which gives rise to the obligation (ex. I will give you a car if you will pass the board examination).
• Resolutory condition (condition subsequent) - the fulfillment of which will extinguish an obligation (ex. You can use my car until such time that you will graduate from college).
• Potestative - valid if condition will be set by the creditor, void if debtor
• Casual - chance or will of third person and
• Mixed - part chance or will of third person and partly will of creditor or debtor

When obligation demandable at once?

• When it is pure;
• When it is subject to a resolutory condition; and
• When it is subject to a resolutory period. (in diem period)
• When it is subject to negative condition is impossible.

Conditions that will annul or invalidate an obligation dependent upon them

• Potestative condition - a suspensive condition that the fulfillment of which is dependent upon the sole will of the debtor (Art. 1182). (except if resolutory condition - valid)
• Impossible condition - one which in the nature of things cannot exist or be done;
• Those are contrary to law, goods customs, public order or public policy (Art. 1183).

Effect of a condition not to do an impossible thing

The same will be considered as not having been written or agreed and the obligation will be considered as a pure obligation.

Rights of the parties before fulfillment of a suspensive condition

• Obligee - may take or bring appropriate actions for the preservation of his right.
• Obligor - may recover what he has paid by mistake prior to the happening of the condition (Art. 1188).

Effect of the loss, deterioration, or improvement upon the thing which occurred or done prior to the fulfillment of the condition when the condition is actually fulfilled

When the conditions have been imposed with the intention of suspending the efficacy of the obligation to give, the following rules shall be observe in the case of improvement, loss or deterioration of the thing during the dependency of the condition:

• If the thing is lost without the fault of the obligor, the obligation shall be extinguished;
• If the thing is lost through the fault of the obligor, 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;
• When the thing deteriorates without the fault of the obligor, the impairment is to be borne by the obligee;
• If it deteriorates through the fault of the obligor, the obligee may choose between the rescission of the obligation and its fulfillment, with indemnity for damages in either case;
• If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the obligee;
• If it is improved at the expense of the obligor, he shall have no other right that granted to a usufructuary (Art. 1189).

Are the above rules applicable also if the condition is resolutory?

Yes ( Art 1190). However, in applying the rules, the obligor is the person obliged to return the object of the obligation in case of fulfillment of the condition, while the obligee is the person to whom the thing or object is to be returned.

Reciprocal obligations are those, which are created or established at the same time, out of the same cause, and obligation in case of fulfillment of the condition, while the obligee is the person to whom the thing or object is to be returned.

Effect if one of the obligations in a reciprocal obligation should not comply with what is incumbent upon him
The power to rescind obligations 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 if after he has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission, unless there be just 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 Art. 1385 and 1388 and the Mortgage Law (Art. 1191).

Suppose that both parties in a reciprocal obligation have committed a breach thereof, who shall be liable?
The first infractor shall be liable, but the courts shall equitably reduce his liability. However, if it cannot be determined which of the parties violated the contract first, the same shall be deemed extinguished and each shall bear damages (Art. 1192).

OBLIGATION WITH A PERIOD

Obligation with a term or period are those whose demandability or extinguishments are subject to the expiration of a term or period.

Period or term means is an interval of time, which, exerting an influence on an obligation as a consequence of a juridical act, either suspends its demandability or produces its extinguishments. Its requisites are futurity and certainty.

Distinguish between a condition and a term or period

• In general, a condition refers to an event. A term or period refers to an interval of time.
• As to requisites, a condition has for its requisites futurity and uncertainty. A period requires futurity and certainty.
• As to fulfillment, a condition may or may not happen. A period will surely come to pass, although it may not be know when.
• As to influence upon obligation, a condition exerts an influence upon the very existence of the obligation itself. A period exerts influence only upon its demandability.
• As to retroactivity of effects, a condition has retroactive effects. A period does not have any retroactive effects unless there is an agreement to the contrary.
• As to effect of will of debtor, when a condition is exclusively to the will of the debtor, the very validity of the obligation is affected. When the duration of a period is left exclusively to the will of the debtor, the obligation is still valid.

Different kinds of terms or periods

• As to effect:

1. Suspensive (ex die) - A day certain in the arrival of which  makes the obligation demandable. Example: A binds himself to give B a car 5 days from today. (From a day certain)
2. Resolutory (in diem) - A day certain the arrival of which terminates the obligation. Ex. I will give you a sack of rice every month until the close of the current school year.

• As to source

1. Legal - when law provides for the period.
2. Conventional or voluntary - when the period is agreed by the parties.
3. Judicial - When the court fixes the period.

• As to definiteness

1. Definite - When it is fixed or known when the period will come.
2. Indefinite - When it is not fixed or it is not known when the period will come.

If the happening of the future events is fixed by the parties for the fulfillment or extinguishments of the obligation, what is the nature of the obligation - is it with a term or is it conditional?

• If the event will necessary come, although the date or tie when it will come may be uncertain, the event constitutes a day certain, hence the obligation is one with a period (Art. 1193)
• If the uncertainty consists in whether the day will come or not, the event constitutes a condition hence the obligation is conditional (Art. 1193).

In obligation with a term, for whose benefit is the term or period?

When a term is designed in the performance of an obligation, it is presumed to be for the benefit of the both the obligee and the obligor. If it can proved from the tenor of the obligation or from other circumstances that the term is has been established for the benefit or either the obligor or the obligee, the general rule is no longer applicable (Art 1196).

What are the different instances where the courts are empowered to fix the duration of a period?

CONTINUATION TOMORROW :)