Law On Obligations And Contracts boa

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Law On Obligations And Contracts boa

  1. 1. Revised By: Atty. Virginio L. Valle
  2. 2. Course Outline <ul><li>PART I – INTRODUCTION TO LAW AND BUSINESS LAW </li></ul><ul><ul><li>Definition of Law and Business Law </li></ul></ul><ul><ul><li>Sources of Business Law </li></ul></ul><ul><ul><li>Characteristics of Business Law </li></ul></ul><ul><ul><li>PART II – OBLIGATIONS </li></ul></ul><ul><ul><li>In General </li></ul></ul><ul><ul><ul><li>Definition </li></ul></ul></ul><ul><ul><ul><li>Sources of Obligations </li></ul></ul></ul><ul><ul><ul><ul><li>Law; Contracts; Quasi-Contracts; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Delicts or Crimes; Quasi-Delicts </li></ul></ul></ul></ul><ul><ul><ul><li>Essential requisites of obligation </li></ul></ul></ul><ul><ul><ul><ul><li>Parties; object; Juridical tie or vinculum juris </li></ul></ul></ul></ul>
  3. 3. <ul><ul><li>PART II – OBLIGATIONS </li></ul></ul><ul><ul><li>Nature and Effect of Obligation </li></ul></ul><ul><ul><ul><li>According to the Object or Prestation </li></ul></ul></ul><ul><ul><ul><ul><ul><li>Obligations to give; Obligations to do; </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Obligations not to do </li></ul></ul></ul></ul></ul><ul><ul><ul><li>Liability of Damages </li></ul></ul></ul><ul><ul><ul><ul><li>Fraud – Dolo incidente; Dolo causante </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Neglignce – </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Delay – Mora solvendi, accipiendi, compensatio morae </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Contravention of tenor of obligation </li></ul></ul></ul></ul>
  4. 4. <ul><li>PART III – GENERAL PROVISIONS ON CONTRACT </li></ul><ul><ul><ul><li>Contracts Defined </li></ul></ul></ul><ul><ul><ul><li>Elements of Contract: </li></ul></ul></ul><ul><ul><ul><li>Stages of A Contract </li></ul></ul></ul><ul><ul><ul><li>Characteristics of Contracts: </li></ul></ul></ul><ul><ul><ul><li>Classification of A Contract: (FROM) </li></ul></ul></ul><ul><ul><ul><li>Contract Binds by Both Parties </li></ul></ul></ul><ul><ul><ul><li>Cases Where Third person May Be Affected By a Contract </li></ul></ul></ul><ul><ul><ul><li>Forms of Contracts </li></ul></ul></ul><ul><ul><ul><li>Reformation of Instruments </li></ul></ul></ul><ul><ul><ul><li>Interpretation Of Contracts </li></ul></ul></ul><ul><ul><ul><li>Cause of Contracts </li></ul></ul></ul>
  5. 5. <ul><li>PART IV – DEFECTIVE CONTRACTS </li></ul><ul><ul><ul><li>Rescissible Contracts </li></ul></ul></ul><ul><ul><ul><li>Voidable Contracts </li></ul></ul></ul><ul><ul><ul><li>Unenforceable Contracts </li></ul></ul></ul><ul><ul><ul><li>Void or inexistent contracts </li></ul></ul></ul>
  6. 6. PART 1 INTRODUCTION TO LAW AND BUSINESS LAW <ul><ul><ul><li>1. Definition of Law and Business Law </li></ul></ul></ul><ul><ul><ul><li>2. Sources of Business Law </li></ul></ul></ul><ul><ul><ul><li>3. Characteristics of Business Law </li></ul></ul></ul>
  7. 7. Introduction to Law <ul><li>Preliminaries </li></ul><ul><ul><ul><li>In the preliminaries, the sight of a human being in his everyday undertaking has to follow some. </li></ul></ul></ul><ul><ul><ul><li>The instructions that a person will learn, result to that consciousness of following the law. As he learns the law, he can define it, with its characteristics. </li></ul></ul></ul>
  8. 8. <ul><li>In Philosophy, the human mind consists principally of two faculties: </li></ul><ul><ul><ul><li>1. the Intellect – the object of which is the TRUTH. </li></ul></ul></ul><ul><ul><ul><li>2. the Will – the object of which is the GOOD. </li></ul></ul></ul><ul><ul><ul><li>The infinite truth and infinite good is infinite beauty of God. </li></ul></ul></ul><ul><ul><ul><li>The person was created by God and destined for God, the people can attain the final destiny by following the law. </li></ul></ul></ul><ul><ul><ul><li>The laws that contained the instructions of God given to us are the COMMANDMENTS. </li></ul></ul></ul>
  9. 9. Law <ul><li>The most basic, simple and concise definition of law was defined by Sanchez Roman, a Spanish Civilist and he defined Law as: </li></ul><ul><ul><li>“ A RULE OF CONDUCT , JUST AND OBLIGATORY PROMULGATED BY LEGITIMATE AUTHORITY FOR THE COMMON OBSERVANCE AND BENEFIT.” </li></ul></ul><ul><li>Edgardo Paras defined Law as “ an ordinance of reason promulgated for the common good by Him who is in charge.” </li></ul>
  10. 10. Characteristics of Law <ul><li>1. A RULE OF CONDUCT </li></ul><ul><ul><li>Meaning any action, things, dictate of reason if regulated or gathered together could become a conglomeration of rules, regulations that can create an orderly, peaceful, harmonious relations among the people concerned so that in the end justice will prevail. </li></ul></ul>
  11. 11. Characteristics of Law <ul><li>2. PROMULGATED BY LEGITIMATE AUTHORITY </li></ul><ul><ul><li>That is, made known to those who are expected to follow it. In a Republican State like the Philippines, we have three branches of government – legislative body (like Congress, Sanggunian) is the law-making body; the executive body is the implementing body and the judiciary as the enforcing body. </li></ul></ul>
  12. 12. Characteristics of Law <ul><li>3. JUST and OBLIGATORY </li></ul><ul><ul><li>Treatment of Law should be equal, regardless of sex, creed, age and status in life and to follow the law there should be equivalent punishment or penalties to enforce them. The dictum “Justice delayed is Justice denied” is commonly abused term on the relation of a criminally inclined poor person and a moneyed person on the treatment of the application of law. Obligatory means any duty binding parties to perform their agreement. (Black’s dict. P. 1074). </li></ul></ul>
  13. 13. Characteristics of Law <ul><li>4. FOR THE COMMON OBSERVANCE and BENEFIT </li></ul><ul><ul><li>The application of law should not be titled or favoring an individual but by the observance of all and the benefits that may be derived from it. </li></ul></ul>
  14. 14. Sources of Law <ul><li>1. LEGISLATIVE </li></ul><ul><ul><li>It consists of legal rights by a competent authority. In the Philippines, being a democratic form of government, the Legislative is the law-making body. For national government, Congress comprising the House of Representatives and the Senate. For provinces, the Sangguniang Panlalawigan for every province. For a town, the Sangguniang Pambayan or the local Municipal council. For a Barangay level, the Sangguniang Pambarangay. </li></ul></ul>
  15. 15. Sources of Law <ul><li>2. CONSTITUTION </li></ul><ul><ul><li>The fundamental law that governs a nation in its relation to its citizens. All laws must conform and comply with the provisions of the Constitution, otherwise it becomes unconstitutional. </li></ul></ul>
  16. 16. Sources of Law <ul><li>3. ADMINISTRATIVE OR EXECUTIVE ORDERS, REGULATIONS AND RULINGS </li></ul><ul><ul><li>The fundamental law that governs a nation in its relation to its citizens. All laws must conform and comply with the provisions of the Constitution, otherwise it becomes unconstitutional. </li></ul></ul>
  17. 17. Sources of Law <ul><li>4. JUDICIAL DECISIONS OR JURISPRUDENCE </li></ul><ul><ul><li>Judicial decisions or interpreting the laws or the Constitution shall form a part of the legal system of the Philippines. (Art. 8, New Civil Code) Judicial decisions, though, are part of the legal system in the Philippines still are not laws for if this were so, the Courts exists for stating what the law is, but not for giving it. Judicial decisions, though not law, are evidence of what the law means. This is why they are part of the legal system in the Philippines. So, f an interpretation is placed by the Supreme Court upon a law, it constitute in a way, part of the law since the Courts interpretation merely establishes the legislative intent. </li></ul></ul>
  18. 18. Sources of Law <ul><li>4. JUDICIAL DECISIONS OR JURISPRUDENCE </li></ul><ul><ul><li>Thus, our country adhere to the Doctrine of Stare Decisis (Let it Stand), the doctrine which in reality is “adherance to precedents” stated that once a case has been decided, then another case involving the same point at issue, should be decided in the same manner. Therefore, if the Supreme Court being a Court of last resort, has decided that a certain law passed by Congress is constitutional, the law becomes binding and has its full force and effect. </li></ul></ul>
  19. 19. Sources of Law <ul><li>5. CUSTOM </li></ul><ul><ul><li>It consists of those habits and practices which through long and uninterrupted usage have become acknowledged and approved by society as binding rule of conduct. Thus, it has been a custom for a person to enter and exit a door. Once a person uses the window for his entrance and exit, it runs counter to the custom of use of the door. Even our Lord said as a good shepherd, if a person does not pass the gate, he is a thief for a marauder. </li></ul></ul>
  20. 20. Sources of Law <ul><li>6. OTHER SOURCES </li></ul><ul><ul><li>To add, the principle of justice and equity, decisions of foreign tribunals, opinions of text writers and even religion may also be sources of law. </li></ul></ul>
  21. 21. Kinds of Law <ul><li>1. DIVINE LAW </li></ul><ul><ul><ul><li>It is formally promulgated by God, revealed or divulged to mankind by means of direct revelation like the Ten Commandments. </li></ul></ul></ul>
  22. 22. Kinds of Law <ul><li>2. NATURAL LAW </li></ul><ul><ul><ul><li>Promulgated impliedly in our conscience and body. It is the divine interpretation in man in the sense of justice, fairness, right and equity by internal dictate of reason on our mind. Like for instance, it is better to do good than to do evil for being a God-fearing person. </li></ul></ul></ul>
  23. 23. Kinds of Law <ul><li>3. PHYSICAL LAW </li></ul><ul><ul><ul><li>Refers to the act of rules governing the action and movement of things like the law on gravity by Newton. </li></ul></ul></ul><ul><li>4. HUMAN LAW </li></ul><ul><ul><ul><li>Those promulgated by man to regulate human relations. </li></ul></ul></ul><ul><ul><ul><li>THIS CAN BE CLASSIFIED INTO: </li></ul></ul></ul>
  24. 24. Classification of Human Law <ul><li>A. GENERAL or PUBLIC LAW </li></ul><ul><ul><ul><li>Body of rules which regulates the rights and duties arising from the relationship between the State and its inhabitants. </li></ul></ul></ul><ul><ul><ul><li>It includes the following: </li></ul></ul></ul><ul><ul><ul><ul><li>1. International Law – consists of those rules and principles which govern the relations and dealing of nations with each other. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>2. Constitutional Law It simply governs the relations between the State and its citizens. </li></ul></ul></ul></ul>
  25. 25. Classification of Human Law <ul><li>GENERAL or PUBLIC LAW </li></ul><ul><ul><ul><ul><li>3. Administrative Law – it fixes the organization and determines the competence of the authorities that execute the law and indicates to the individual remedies for the violation of his rights. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>4. Political Law – deals with the organization and operation of the governmental organs of the State and defines the relations of the state with the inhabitants of its territory. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>5. Criminal Law – guaranties the coercive power of the law so that it will be obeyed. Governs the methods of trial and punishment of crimes. </li></ul></ul></ul></ul>
  26. 26. Classification of Human Law <ul><li>B. INDIVIDUAL or PRIVATE LAW </li></ul><ul><ul><ul><li>Those law which govern the private relation person. </li></ul></ul></ul><ul><ul><ul><li>It includes the following: </li></ul></ul></ul><ul><ul><ul><ul><li>1. Civil Law – branch of law which has for its double purpose the organization of the family and the regulation of property. It is defined as the mass of precepts which determines and regulate the relation of assistance, authority and obedience among the members of a society for the protection of private interests. </li></ul></ul></ul></ul>
  27. 27. Classification of Human Law <ul><li>INDIVIDUAL or PRIVATE LAW </li></ul><ul><ul><ul><ul><li>2. Commercial Law – defined as a whole body of substantial jurisprudence applicable to the rights, intercourse and relation of persons engaged in commerce, trade or mercantile pursuits. (Black’s law dict. 338) </li></ul></ul></ul></ul>
  28. 28. Classification of Human Law <ul><li>INDIVIDUAL or PRIVATE LAW </li></ul><ul><ul><ul><ul><li>3. Procedural Law – defined as the branch of law which prescribes the method of enforcing rights or obtaining redress for their invasion, Procedural law otherwise known as Remedial Law, as distinguished from Substantive law which creates, defines and regulate rights. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>(Ballantine Law Dict. P. 36) </li></ul></ul></ul></ul>
  29. 29. Sources of Philippine Civil Code <ul><li>1. The New Civil Code of the Philippines – the collection of laws which regulates the private relations of the members of civil society, determining the defective rights and obligations with reference to persons, things and civil acts. </li></ul><ul><ul><ul><li>A civil code is a compilation of existing Civil Laws, scientifically arranged into books, titles, chapters and subheads and promulgated by legitimate authority. (Black Law Dict. 334). </li></ul></ul></ul>
  30. 30. Sources of Philippine Civil Code <ul><li>2. Special laws or statutes, Presidential decrees and other social legislation. </li></ul><ul><li>3. Jurisprudence – there is need to mention that, jurisprudence in our system of government, cannot be considered as an independent source of law; but the Court’s interpretation of a statute that constitute part of the law as of the date it was originally passed since the Court’s construction merely establishes contemporaneous legislative intent, that the interpreted law could take into effect. </li></ul>
  31. 31. Sources of Philippine Civil Code <ul><li>4. Customs and Traditions – Custom is a judicial rule which results from a constant and continuous uniform practice by the members of a social group. </li></ul><ul><li>5. The Code Commission itself – A Code commission of five members was created by Pres. Manuel Roxas through Exec. Order No. 48 dated Mar. 20,1947 in view of the need of revision in keeping with progressive modern legislation. The Civil Code was finished on Dec. 15, 1947 and Congress approved the draft on June, 1949. </li></ul>
  32. 32. Books of the Civil Code <ul><li>Book I – Person and Family Relations </li></ul><ul><ul><ul><ul><li>This was re-codified as Family Code of the Philippines embodied in Exec. Order No. 209 as amended by Exec. Order No. 227. The Family Code effectuates the long-felt reforms and changes to the Civil Code provisions on Family relations consistent with Filipino values, customs and traditions vis-à-vis recent developments in the social-cultural scene. (Pineda, Family Code). </li></ul></ul></ul></ul>
  33. 33. Books of the Civil Code <ul><li>Book II – Property, Ownership and its modifications. </li></ul><ul><li>Book III – Different Modes of Acquiring Ownership (Succession) </li></ul><ul><li>Book IV – Obligations and Contracts </li></ul><ul><li>Book V – Special contracts </li></ul><ul><ul><ul><li>The Civil Code begins with preliminary titles and ends up with the repealing clause. This module is taken from the Civil Code of the Philippines from Articles 1156 to 1422 inclusive. </li></ul></ul></ul>
  34. 34. Concept of Commercial Law <ul><ul><li>The commercial laws, excepting the Code of Commerce are designated by the legislator by any mark or sign, which determines their nature and their commercial function, but they derive their mercantile character from their subject matter or their contents. In order to determine whether a particular law or provision of law is commercial, it is necessary to first inquire if its purpose is to govern a relation pertaining to commercial matters and in this inquiry, the Code of Commerce should be principally considered, because it defines the acts and the person having a mercantile character. Generally, all laws referring to merchants and to commercial transactions are commercial in nature. (Agbayani, Vol. 1 p 2) </li></ul></ul>
  35. 35. Code of Commerce <ul><li>The Code of Commerce is only one of the remaining laws in relation to business that has been heavily modified and repealed by subsequent laws which originally divided into four books. </li></ul><ul><ul><li>BOOK ONE - Merchants and Commerce in General </li></ul></ul><ul><ul><li>BOOK TWO - Special Commercial Contracts </li></ul></ul><ul><ul><li>BOOK THREE - Maritime Commerce </li></ul></ul><ul><ul><li>BOOK FOUR - Suspension of payments, Bankruptcy and Prescription of Actions. </li></ul></ul>
  36. 36. Subsequent Repealing Legislation <ul><li>The following are among the important special laws which repealed either expressly or impliedly certain portions of the Code of Commerce. </li></ul><ul><li>1. The Corporation Code – which repealed principally the provision on sociedad/anonimas on Book Two and the Corporation law; </li></ul><ul><li>2. The Negotiable Instrument Law which repealed principally the provisions of Promissory; Notes and Bill of Exchange in Book Two </li></ul>
  37. 37. Subsequent Repealing Legislation <ul><li>3. The Insolvency law, which repealed the provisions on Suspension of payments and Bankruptcy in Book four; </li></ul><ul><li>4. Insurance Law, which repealed the provisions on Fire and Marine Insurance on books two and three; </li></ul><ul><li>5. The Securities Act, which repealed the provisions on Commercial Houses in Book Two; </li></ul>
  38. 38. Subsequent Repealing Legislation <ul><li>6. The New Civil Code which repealed the provisions on Partnership, Agency, Sales, Loan, Deposit and Guaranty in Book two. </li></ul><ul><li>7. Other legislation, in addition to the foregoing special laws, there wee other laws and now form part of the Commercial laws of the Philippines: The Warehouse Receipts law; the General Bonded Warehouse Act; the Chattel Mortgage law; the Usury law; the General Banking Act; the Central Bank Act; The Rural Act; The Public Service Act; Carriage of Gods by Sea Act; the Salvage law; the Copyright law; the Patent law; the Trade-mark law; the Law on the Use of Duly Marked Bottles, Boxes, Casks, Kegs, Barrels, and other Similar Containers; the Business Names Law; and the Law on Monopolies and Combinations. </li></ul>
  39. 39. Subsequent Repealing Legislation <ul><li>8. Provisions of the Code of Commerce still in force. </li></ul><ul><ul><ul><li>a. Those contained in Book one governing merchants and commerce in general, commercial registries, books and bookkeeping of commerce and general provisions relating to commercial contracts, except such portions thereof as have been repealed or modified by the New Civil Code and other legislation. </li></ul></ul></ul><ul><ul><ul><li>b. Those contained in Book Two governing joint accounts, transfers, transfers of non-negotiable credits, commercial contracts on transportation overland; and letters of credits but not those relating to partnership, agency, sales, loans, deposit </li></ul></ul></ul>
  40. 40. Subsequent Repealing Legislation <ul><li>8. Provisions of the Code of Commerce still in force. </li></ul><ul><ul><ul><li>c. Those contained in Book Three governing maritime commerce but not those relating to marine insurance which have been repealed. All the provisions in Book four are no longer in force as they have likewise been repealed. (Agbayani, Vol. 1, pp3-4) </li></ul></ul></ul>
  41. 41. Subsequent Repealing Legislation <ul><li>9. Some provision of the code of Commerce which are pertinent in our study in business in general: </li></ul><ul><ul><li>a. MERCHANTS – Merchants may be natural or juridical person: </li></ul></ul><ul><ul><ul><ul><li>In the case of natural person, he is a merchant: </li></ul></ul></ul></ul><ul><ul><ul><ul><li>a. If he has legal capacity to engage in commerce; and </li></ul></ul></ul></ul><ul><ul><ul><ul><li>b. He habitually engage thereto </li></ul></ul></ul></ul>
  42. 42. Subsequent Repealing Legislation <ul><ul><ul><ul><li>A natural person has legal capacity to engage in commerce; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>1. If he has reached the age of twenty – one years; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>2. He is not subject to parental authority; and </li></ul></ul></ul></ul><ul><ul><ul><ul><li>3. He has free disposition of his property. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>In the case of juridical person, it is a merchant: </li></ul></ul></ul></ul><ul><ul><ul><ul><li>a. It is a commercial and industrial company; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>b. It is organized in accordance with existing legislation and </li></ul></ul></ul></ul><ul><ul><ul><ul><li>c. Its engaging in commerce is habitual. </li></ul></ul></ul></ul>
  43. 43. Subsequent Repealing Legislation <ul><ul><li>b. Habituality in engaging in commerce – </li></ul></ul><ul><ul><ul><ul><li>Habituality in engaging in commerce is attained when there exists series of acts of commerce or commercial dealings. There must be continuity of repetition of commercial acts. However, a single act may be deemed habituality in engaging in commerce in the way of the following acts: </li></ul></ul></ul></ul><ul><ul><ul><ul><li>1. Throwing open to the public a business entity or establishment; </li></ul></ul></ul></ul>
  44. 44. Subsequent Repealing Legislation <ul><ul><ul><ul><li>2. Announcement through circulars, newspaper, handbills, posters and similar means of the opening of an establishment for commercial acts or dealings with the public; or </li></ul></ul></ul></ul><ul><ul><ul><ul><li>3. Where a foreign corporation appoints an agent as required by law. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>4. A series of acts consisting of investigating and preparations of project studies implying an intention to engage in commerce and comes to reality. </li></ul></ul></ul></ul>
  45. 45. Subsequent Repealing Legislation <ul><ul><li>c. Absolute Disqualifications – The following may not engage in commerce nor hold office or have any direct administrative or financial intervention in commercial of industrial companies: </li></ul></ul><ul><ul><ul><ul><li>1. Those suffering the penalty of civil interdiction primarily because they are deprived of the right to mange and to dispose of their properties inter-vivos or during their lifetime; </li></ul></ul></ul></ul>
  46. 46. Subsequent Repealing Legislation <ul><ul><ul><ul><li>2. Those judicially declared insolent while they have not obtained their discharge; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>3. Those who in account of special laws or provisions cannot engage in commerce like incapacitated persons or employees covered by the Civil Service law. </li></ul></ul></ul></ul>
  47. 47. Subsequent Repealing Legislation <ul><ul><li>d. Relative Disqualifications – These are persons who cannot engage in commerce in places where they exercise their functions. </li></ul></ul><ul><ul><ul><ul><li>1. Justices, judges, and officials of the Prosecutor’s office in active service, except Municipal Mayors; municipal judge; municipal prosecuting attorney’s and those who temporarily discharge judicial or prosecuting duties; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>2. Administrative, economic or military heads of districts, provinces or post; </li></ul></ul></ul></ul>
  48. 48. Subsequent Repealing Legislation <ul><ul><ul><ul><li>3. Those employed in the collection and administration of funds of the State appointed by the Government except those who administer and collect under contract and their representative. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>4. Stock and commercial brokers of whatever class; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>5. Those who under special laws and provisions cannot trade in specified territory. </li></ul></ul></ul></ul>
  49. 49. Subsequent Repealing Legislation <ul><ul><li>e. Commercial Registry </li></ul></ul><ul><ul><li>A commercial registry is a public office that takes charge of the registration of merchants, business associations, vessels and documents of commercial importance. The purpose of a commercial registry is to furnish necessary information and reliable data to any interested party so as to promote and facilitate trade and commercial transaction. </li></ul></ul>
  50. 50. Subsequent Repealing Legislation <ul><ul><li>f. Books of Merchants </li></ul></ul><ul><ul><ul><li>1. Merchants must keep the following books: </li></ul></ul></ul><ul><ul><ul><ul><ul><li>a. Book of inventories and balances; </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>b. A journal; </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>c. A ledger; </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>d. Book or books for copies of letters or telegrams; and other books that may be required by special laws. </li></ul></ul></ul></ul></ul>
  51. 51. Subsequent Repealing Legislation <ul><ul><li>f. Books of Merchants </li></ul></ul><ul><ul><ul><li>2. Corporation are bound to keep: </li></ul></ul></ul><ul><ul><ul><li> a. Record of all business transactions; </li></ul></ul></ul><ul><ul><ul><li> b. Minutes of all meetings of directors; </li></ul></ul></ul><ul><ul><ul><li> c. Minutes of all meetings of stockholders; and Stock and transfer books. </li></ul></ul></ul>
  52. 52. Registration is compulsory: <ul><li>1. In case of vessel of more than three (3) tons gross in use in Philippine waters; </li></ul><ul><li>2. In case of partnership whose immovable property is contributed by any partner to a common fund. </li></ul><ul><li>3. In case of business names under the Business Names Law. </li></ul>
  53. 53. Registration is compulsory: <ul><li>4. In case of ship agent; </li></ul><ul><li>5. In case of vehicles with the Land Transportation Office. </li></ul><ul><li>6. In all other cases required by law. </li></ul>
  54. 54. Commercial Registries in the Philippines <ul><li>1. Bureau of Domestic Trade – for registration of business names and merchants to avoid duplication of trade names. </li></ul><ul><li>2. Securities and Exchange Commission – for registration of partnership and Corporation. </li></ul><ul><li>3. Local municipalities, cities or province – for local permits and licenses. </li></ul><ul><li>4. Office of Register of deeds – for registration all transaction affecting lands, as well as shattel mortgage. </li></ul>
  55. 55. Commercial Registries in the Philippines <ul><li>5. The MARINA (Marine Industry Authority) – for registration of vessels and other transaction affecting vessels. </li></ul><ul><li>6. Intellectual property Office for registration of patents and design as well as trade names; trademarks and service marks; </li></ul><ul><li>7. Land Transportation Office for registration of patents and designs as well as trade names; trademarks and service marks; </li></ul>
  56. 56. Commercial Registries in the Philippines <ul><li>8. Office of Air Transportation Administration for registration of aircrafts. </li></ul><ul><li>9. Bureau of Public Library – for registration of copyrights; </li></ul><ul><li>10. Board of investment for registration of pioneer and registered enterprises and with corporations having foreign entity participation. </li></ul>
  57. 57. Kinds of Procedural Law <ul><li>1. Public Remedial Law – affords a remedy in favor of the State against the individual, like criminal procedure or in favor of the individual against the State, like Habeas Corpus. </li></ul><ul><li>2. Private Remedial Law – affords a remedy in favor of an individual against another individual, like the civil procedure. </li></ul>
  58. 58. Philippine Remedial Law <ul><li>Principally contained in the Rules of Court, which is a combination of rules promulgated by the Supreme Court for the easy, orderly, adequate and effective compliance with the law. The Rules of Court have the force and effect of law. (Alvero V. dela Rosa, 76 Phil 428). </li></ul>
  59. 59. <ul><li>COURTS DEFINED – </li></ul><ul><ul><li>It is the entity, body or tribunal vested with a portion of the judicial power. (Lontok V. Battung 63 Phil 1054) </li></ul></ul><ul><li>JUDICIAL POWER </li></ul><ul><ul><li>Includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government. (Const. Art. VIII, Sec. 1, par.2) </li></ul></ul>
  60. 60. Different Courts of Justice <ul><li>1. Supreme Court </li></ul><ul><li>2. Sandigan-bayan </li></ul><ul><li>3. Court of Appeals </li></ul><ul><li>4. Regional Trial Court; and </li></ul><ul><li>5. Metropolitan / Municipal Trial Courts </li></ul>
  61. 61.     Lesson 1: General Provisions on Obligation <ul><li>The definition of obligations establishes the unilateral act of the debtor either to give, to do or not to do as a patrimonial obligation. It means that the debtor has the obligation while the creditor has its rights. </li></ul><ul><li>On the sources of obligation, the main sources are really Law and Contracts. The other sources are also established by law. </li></ul>
  62. 62. <ul><li>ART. 1156. An obligation is a juridical necessity to give, to do or not to do. </li></ul><ul><li>OBLIGATIONS as defined by ARIAS RAMOS 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. (Approved by Mr. Justice J. B. L. Reyes) </li></ul>
  63. 63. <ul><li>The obligations referred to in our manual is a patrimonial obligations that is, those obligations with pecuniary value or assessable in terms of money. </li></ul><ul><li>  </li></ul><ul><li>Characteristics of patrimonial obligations: </li></ul><ul><ul><li>They represent an exclusively private interest. </li></ul></ul><ul><ul><li>They create ties that are by nature transitory. </li></ul></ul><ul><ul><li>They exist a power to make effective in case of non-fulfillment, the economic equivalent obtained at the patrimony of a debtor. </li></ul></ul><ul><li>Meaning of Juridical Necessity – it means the rights and duties arising from obligation are legally demandable and the courts of justice may be called upon through proper action to order the performance. </li></ul>
  64. 64. <ul><li>Action means an ordinary suit in court of justice by which one party prosecutes another for the enforceable or protection for a right or a prevention or redress of a wrong ( Sec. 1. Rules of court ). </li></ul><ul><li>Example – </li></ul><ul><li>Gaya bought refrigerator from Tito but Gaya did not pay the refrigerator. If after demand, Gaya still did not pay, Tito can sue Gaya in Court either to demand payment or for recovery of the refrigerator. </li></ul>
  65. 65. <ul><li>Essential requisites of an obligation – </li></ul><ul><ul><li>An active subject, who has the power to demand the prestation, known as the creditor or oblige; </li></ul></ul><ul><ul><li>A passive subject, who is bound to perform the prestation, known as debtor or obligor. </li></ul></ul><ul><ul><li>An object or the prestation which may consist in the act of giving, doing or not doing something. </li></ul></ul><ul><ul><li>The vinculum juris or the juridical tie between the two subjects by reason of which the debtor is bound in favor of the creditor to perform the prestation. It is the legal tie which constitutes the source of obligation—the coercive force which makes the obligation demandable. It is the legal tie which constitutes the devise of obligation… the coercive force which makes the obligation demandable. </li></ul></ul>
  66. 66. Juridical Tie <ul><li>Debtor To give, to do Creditor Or Obligor or not to do or Obligee </li></ul><ul><li>  Illustration: </li></ul><ul><li>Gaya enters into a contract of sale with Tito who paid the purchase of a GE refrigerator. Gaya did not deliver the refrigerator. Gaya is the passive subject or debtor and Tito is the active subject or creditor. The object or prestation is the GE refrigerator and the obligation to deliver is the legal tie or the vinculum juris which binds Gaya and Tito. </li></ul>
  67. 67. <ul><li>This is also known as a unilateral obligation, that is, the obligation of the debtor to fulfill or comply his commitment, in this case, the delivery of the refrigerator. </li></ul><ul><li>On the other hand, if Gaya, delivered the refrigerator and Tito did not pay, then Tito becomes the debtor who is bound to pay while Gaya is the creditor who has the right to demand the prestation. </li></ul><ul><li>Distinctions between Obligations and Contracts: </li></ul><ul><ul><li>Contract is the only one of the sources of obligation, while obligations have other sources like law, quasi-contracts, delicts or quasi-delicts; </li></ul></ul><ul><ul><li>Contract is a bilateral obligation while obligation is a unilateral obligation; </li></ul></ul><ul><ul><li>All contracts are obligations while not all obligations are contracts. </li></ul></ul>
  68. 68. <ul><li>Civil obligations as distinguished from Natural obligations – </li></ul><ul><ul><li>Civil obligations derive their binding force from positive law; Natural Obligation derives their binding effect from equity and natural justice. </li></ul></ul><ul><ul><li>Civil can enforced by court action of the coercive power of public authority; </li></ul></ul><ul><ul><li>Natural – the fulfillment cannot be compelled by court action but depends on the good conscience of debtor. </li></ul></ul>
  69. 69. <ul><li>ART. 1157. Obligations arise from: </li></ul><ul><ul><li>Law; </li></ul></ul><ul><ul><li>Contracts; </li></ul></ul><ul><ul><li>Quasi-contracts; </li></ul></ul><ul><ul><li>Acts or omissions punished by law; and </li></ul></ul><ul><ul><li>Quasi-delicts. (1089a) </li></ul></ul><ul><li>  </li></ul><ul><li>ART. 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. (1090) </li></ul><ul><li>  </li></ul><ul><li>ART. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. (1091a) </li></ul><ul><li>  </li></ul>
  70. 70. <ul><li>ART. 1160. Obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII, of this Book. </li></ul><ul><li>  </li></ul><ul><li>ART. 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. (1092a) </li></ul><ul><li>  </li></ul><ul><li>ART. 1162. Obligations derived from quasi-delicts shall be governed by the provisions of Chapter 2, Title XVIII of this Book, and by special law. (1093a) </li></ul><ul><li>  </li></ul>
  71. 71. Source of Obligations <ul><li>LAW as a source of obligations – </li></ul><ul><li>The provisions of Art. 1158 refers to the legal obligations or obligations imposed by specific provisions of law, which means that obligations arising form law are not presumed and that to be demandable must be clearly provided for, expressly or impliedly in the law. </li></ul><ul><li>Examples: </li></ul><ul><ul><li>It is the duty of the Spouses to support each other. (Art. 291, New Civil Code) </li></ul></ul><ul><ul><li>And under the National Internal Revenue Code, it is the duty of every person having an income to pay taxes. </li></ul></ul>
  72. 72. Source of Obligations <ul><li>CONTRACT as a source of obligations – </li></ul><ul><li>Contract as defined in Art. 1305, NCC is the meeting of minds between two person whereby one binds himself with respect to the other, </li></ul><ul><li>  </li></ul><ul><li>Obligations arising from contracts have the force of law between the contracting parties because that which is agreed upon in the contract by the parties is the law between them, thus, the agreement should be complied with in good faith. (Art. 1159). </li></ul><ul><li>  </li></ul><ul><li>For examples: </li></ul><ul><li>A contract of lease was executed between Gaya as the lessee and Tito as the lessor for the rent of an apartment. </li></ul><ul><li>Although contracts have the force of law, it does not mean that contract are over and above the law. Contracts are with the limitations imposed by law in Art. 1306, NCC, it states that the contracting parties may establish such stipulations, clauses terms and conditions as, they may deem convenient, provided that are not contrary to law, morals, good custom, public order or public policy. </li></ul>
  73. 73. Sources of Obligations <ul><li>QUASI-CONTRACTS as a source of obligations </li></ul><ul><ul><li>The ‘quasi’ literally means ‘as if’. </li></ul></ul><ul><li>Quasi-contract is the juridical relation resulting from a lawful, voluntary and unilateral act which has for its purpose the payment of indemnity to the end that no one shall unjustly enrich or benefited at the expense of another. (Art. 2142, NCC) </li></ul><ul><ul><li>Contracts and quasi-contracts distinguished: </li></ul></ul><ul><ul><ul><li>in a contract, consent is essential requirement for its validity while in quasi-contract, there is no consent as the same is implied by law; </li></ul></ul></ul><ul><ul><ul><li>contract is a civil obligation while quasi-contract is a natural obligation. </li></ul></ul></ul>
  74. 74. 2 Kinds of Quasi-contracts <ul><li>Solutio Indebiti (Payment by mistake) </li></ul><ul><li>It is the juridical relation which arises when a person is obliged to return something received by him through error or mistake. </li></ul><ul><li>  </li></ul><ul><li>Example- </li></ul><ul><li>Arvin owed Ian the sum of P1, 000.00. By mistake, Arvin paid P2, 000.00. Ian has the obligation to return the P1, 000.00 excess because there was payment by mistake. </li></ul><ul><li>  </li></ul><ul><li>2. Negotiorum gestio (management of another’s property) </li></ul><ul><li>It is the voluntary management or administration by a person of the abandoned business or property of another without any authority or power from the latter. (Art. 2144, NCC) </li></ul><ul><li>  Example- </li></ul><ul><li>Victor, a wealthy landowner suddenly left for abroad leaving his livestock farm unattended. Ramon, a neighbor of Victor managed the farm thereby incurring expenses. When Victor returns, he has the obligation to reimburse Ramon for the expenses incurred by him and to pay him for his services. It is bases on the principle that no one shall enrich himself at the expense of another. </li></ul>
  75. 75. Sources of Obligations <ul><li>DELICTS or acts or omissions punished by law as a source of obligations </li></ul><ul><li>  Acts or omission punished by law is known as Delict or Felony or Crime. </li></ul><ul><li>While an act or omission is felonious because it is punished by law, the criminal act gives rise to civil liability as it caused damage to another. </li></ul><ul><ul><li>Civil liability arising from delicts: </li></ul></ul><ul><ul><ul><li>Restitution – which is the restoration of or returning the object of the crime to the injured party. </li></ul></ul></ul><ul><ul><ul><li>Reparation – which is the payment by the offender of the value of the object of the crime, when such object cannot be returned to the injured party. </li></ul></ul></ul><ul><ul><ul><li>Indemnification – the consequential damages which includes the payment of other damages that may have been caused to the injures party. </li></ul></ul></ul><ul><li>Illustration: </li></ul><ul><li>Mario was convicted and sentenced to imprisonment by the Court for the crime of theft, the gold wrist watch, of Rito. In addition to whatever penalty that the Court may impose, Mario may also be ordered to return (restitution) the gold wrist watch to Rito. If restitution is no longer possible, for Mario to pay the value (reparation) of the gold wrist watch. In addition to either restitution or reparation, Mario shall also pay for damages (indemnification) suffered by Rito. </li></ul>
  76. 76. Sources of Obligations <ul><li>QUASI-DELICTS as a source of obligations </li></ul><ul><li>Concepts of Quasi-Delict – </li></ul><ul><li>Quasi-delict is one where whoever by act or omission causes damage to another, there being fault of negligence, is obliged to pay for the damage done. Such fault of negligence, if there is no pre-existing contractual relation between the parties. (Art. 2176) </li></ul><ul><li>Example- </li></ul><ul><li>If Pedro drives his car negligently and because of his negligence hits Jose, who is walking on the sidewalk of the street, inflicting upon him physical injuries. Then Pedro becomes liable for damages based on quasi-delict. </li></ul>
  77. 77. Sources of Obligations <ul><li>DELICTS or acts or omissions punished by law as a source of obligations </li></ul><ul><ul><li>Acts or omission punished by law is known as Delict or Felony or Crime. </li></ul></ul><ul><ul><ul><li>While an act or omission is felonious because it is punished by law, the criminal act gives rise to civil liability as it caused damage to another. </li></ul></ul></ul><ul><ul><li>Civil liability arising from delicts: </li></ul></ul><ul><ul><ul><li>Restitution – which is the restoration of or returning the object of the crime to the injured party. </li></ul></ul></ul><ul><ul><ul><li>Reparation – which is the payment by the offender of the value of the object of the crime, when such object cannot be returned to the injured party. </li></ul></ul></ul>
  78. 78. Requisites of a quasi-delicts - <ul><li>There must be fault of negligence attributable to the offended; </li></ul><ul><li>There must be damage or injury caused to another; </li></ul><ul><li>There is no pre-existing contract. </li></ul>
  79. 79. <ul><li>Negligence Defined – </li></ul><ul><li>is the failure to observe for the protection of the interests of another person, that degree of care, precaution and vigilance which the circumstances justly demand, whereby such other person suffers injury. (Judge Cooley) </li></ul><ul><li>Test of Negligence – </li></ul><ul><li>For the existence of negligence, the following are necessary: </li></ul><ul><ul><li>a duty on a party of the defendant to protect the plaintiff from the injury of which the letter complains; </li></ul></ul><ul><ul><li>a failure to perform that duty; and </li></ul></ul><ul><ul><li>an injury to the plaintiff through such failure. </li></ul></ul>
  80. 80. Kinds of Negligence <ul><li>Culpa Aquiliana, also known as quasi-delict or negligence as a source of obligation. </li></ul><ul><li>Culpa contractual or negligence in the performance of a contract. </li></ul>
  81. 81. <ul><li>An illustration showing this difference is founding Gutierrez vs. Gutierrez , 56 Phil 177- </li></ul><ul><ul><li>While trying to pass each other on a narrow bridge, a passenger truck and private automobile collided, and the plaintiff, a passenger in the truck, was injured. </li></ul></ul><ul><ul><li>The owner of the passenger truck was made a defendant, although a driver was driving the truck and the owner of the car was also made a defendant, although he was not in the car but which was being driven by his 18 year old son and in which members of his family were then riding. The court found both drivers negligent, basing basing the liability of the owner of the truck to the plaintiff on the contract of carriage; while the liability of the owner of the car was based on Quasi-delict of the Civil Code. As against the owner of the truck, there was Culpa contractual, while as against the owner of the car there was culpa Aquiliana. </li></ul></ul>
  82. 82. LESSON 2: NATURE AND EFFECT OF OBLIGATIONS <ul><li>ART. 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. (1904a) </li></ul><ul><li>ART. 1664. 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. (1905) </li></ul><ul><li>ART. 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. </li></ul>
  83. 83. <ul><li>If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor. </li></ul><ul><li>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 deliver. (1906) </li></ul><ul><li>ART. 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. (1097a) </li></ul>
  84. 84. Obligations of the Debtor To Give a determinate thing- <ul><li>To preserve or take care of the thing with the proper diligence of a good father of a family. It means the ordinary diligence that a prudent man would exercise in taking care of his own property taking into consideration the nature of the obligation, of the time and of the place, like a person who is obliged to deliver a determinate horse to another should, pending its delivery, preserve it by taking care of the same as if the horse is his own. </li></ul>
  85. 85. Obligations of the Debtor To Give a determinate thing- <ul><li>To deliver the object or thing when the obligation to deliver arises, including: </li></ul><ul><li>  Fruits of the thing if any. Kinds of fruits: Natural; industrial or civil. </li></ul><ul><ul><li>Natural - spontaneous product of the soil; the young and other products of animal. E.g. tress, plants on lands without he intervention of man. </li></ul></ul><ul><ul><li>Industrial - produced by lands of any king through cultivation and labor. E.g. sugar cane, vegetables, rice. </li></ul></ul><ul><ul><li>Civil - derived by virtue of juridical relations. E.g. rents of a building; prices of leases of lands and other similar income. </li></ul></ul>
  86. 86. Obligations of the Debtor To Give a determinate thing- <ul><li>Accessions and accessories. </li></ul><ul><ul><li>Accession – is the right pertaining to the owner of a thing over its products and whatever is attached thereto either naturally or artificially. </li></ul></ul><ul><ul><li>Example- </li></ul></ul><ul><ul><li>Accretion which refers to the gradual and addition of sediment to the shore by action of water. </li></ul></ul><ul><ul><li>Accessories – are those things which are joined attached to the principal object as ornament or to render it perfect. </li></ul></ul><ul><li> Example- </li></ul><ul><ul><li>Radio attached to a car; or key to a car. </li></ul></ul>
  87. 87. Obligations of the Debtor To Give a determinate thing- <ul><li>To be liable for damages in case of breach of obligation (Art. 1170, NCC) </li></ul><ul><li>When creditor acquire a right to the thing to be delivered and its fruits- </li></ul><ul><li>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 have been delivered to him. (Art. 1164, NCC) </li></ul><ul><li>Example – a binds himself to sell his horse to B for fro P10, 000. No date nor condition is stipulated for delivery of the horse. Later, the horse gave birth to a colt. A has right to the colt, if B has not paid the horse. Before delivery, B does not acquire ownership over it. </li></ul>
  88. 88. Definition of terms: <ul><li>Determinate thing – a thing is determinate when it is particularly designated or physically segregated from all others from the same class. (Art. 1460, NCC) </li></ul><ul><li>Indeterminate or generic thing – A thing is generic when it refers to a class or thing or genus and cannot be designated with particularity. (Art. 1460, NCC) </li></ul><ul><li>Fortuitous Events – those events which could not be foreseen or which though foreseen were inevitable. (Art. 1174, NCC) </li></ul>
  89. 89. <ul><li>Art. 1167. If a person obliged to do something fails to do it, the same shall be executed at his cost. </li></ul><ul><li>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. ( 1098 ) </li></ul>
  90. 90. Obligation of the debtor To Do <ul><li>Being a personal positive obligation, The creditor has the right to secure the services of third person to perform the obligation at the expense of the debtor under the following instances: </li></ul><ul><ul><li>When the debtor fails to do the obligation; </li></ul></ul><ul><ul><li>When the debtor performs the obligation but contrary to the tenor; or </li></ul></ul><ul><ul><li>When the obligor poorly performs the obligation. </li></ul></ul>
  91. 91. <ul><li>ART. 1168. When the obligation consists in not doing, and the obligor does has been forbidden him, it shall also be undone at his expense, (1099a) </li></ul><ul><li>Obligation of the Debtor NOT To Do – </li></ul><ul><li>This is negative personal obligation which is consisting of an obligation, of not doing something. If the debtor does what has been forbidden him to do, the obligee can ask the debtor to have it undone. If it is impossible to undo what was done, the remedy of the injured party is for an action of damages. </li></ul><ul><li>Example- </li></ul><ul><li>A bought a land from B. It was stipulated that A would not construct a fence in a certain portion of his land adjoining that land sold by B. Should A construct a fence in violation of the agreement, B. can bring an action to have the fence remove at the expense of A. </li></ul>
  92. 92. <ul><li>ART. 1169. Those oblige to deliver or to do something incur in </li></ul><ul><li>delay from the time the obligee judicially or extra - judicially demands from theme the fulfillment of their obligation. </li></ul><ul><li> However, the demand by the creditor shall not be necessary in order that delay may exist: </li></ul><ul><li>( 1 ) When the obligation or the law expressly declares; or </li></ul><ul><li>( 2 ) When from the nature and the circumstances of the obligation it appears that the destination of the time when the thing is to be delivered or the service is to rendered was controlling motive for the establishment of the contract; or </li></ul><ul><li>( 3 ) When demand would be useless, as when the obligor has rendered it beyond his power to perform. </li></ul><ul><li>In reciprocal obligations, neither party incurs in delay if the other does not 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. ( 1100a ) </li></ul>
  93. 93. Delay ( Mora ) <ul><li> means a legal delay or default and it consists of failure discharge a duty resulting to one’s own disadvantaged. </li></ul><ul><li>The debtor incurred delay if: </li></ul><ul><ul><li>The debtor fails to perform his obligation when it falls due; and </li></ul></ul><ul><ul><li>A demand has been made by the creditor judicially or extra judicially. </li></ul></ul><ul><li>Example – </li></ul><ul><li>Gaya obliged herself to deliver a determinate horse to Tito on June 20. this year. Gaya failed to delivered on the agreed date, Is Gaya already on delay on June 20, only when Tito makes a judicial or extra-judicial demand and from such date of demand when Gaya is on default or delay. </li></ul>
  94. 94. <ul><li>However, there are instances when the demand by the Creditor is not necessary to place the debtor on delay: </li></ul><ul><ul><li>When the obligation expressly so provides </li></ul></ul><ul><li>The mere fixing of the period is not sufficient to constitute a delay. An agreement to the effect that fulfillment or performance is not made when the obligation becomes due, default or delay by the debtor will automatically arise. </li></ul>
  95. 95. <ul><ul><li>When the law so provides </li></ul></ul><ul><ul><li>The express provision of law that a debtor is in default. For instance, taxes must be paid on the date prescribed by law, and demand is not necessary in order that the taxpayer is liable for penalties. </li></ul></ul><ul><ul><li>When time is of the essence </li></ul></ul><ul><ul><li>Because time is the essential factor in the fulfillment of the obligation. Example, Gaya binds herself to sew the wedding gown of Maya to be used by the latter on her wedding date. Gaya did not deliver the wedding gown on the date agreed upon. Even without demand, Gaya will be in delay because time of the essence. </li></ul></ul>
  96. 96. <ul><ul><li>When demand would be useless </li></ul></ul><ul><ul><ul><li>When the debtor cannot comply his obligation as when it is beyond his power to perform. Like when the object of the obligation is lost or destroyed through the fault of the debtor, demand is not necessary. </li></ul></ul></ul><ul><ul><li>In a reciprocal obligation, from the moment one of the parties fulfills his obligation, delay to the other begins </li></ul></ul><ul><ul><ul><li>For instance, in a contract of sale, if the seller delivers the object to the buyer and the buyer does not pay, then delay by the buyer begins and vice versa, if the buyer pays and the seller did not deliver the object, then the seller is on delay. </li></ul></ul></ul>
  97. 97. Kinds of delay – <ul><li>Mora solvendi – delay on the part of the debtor. </li></ul><ul><li>Mora accipiendi – delay on the part of the creditor, like when the creditor unjustifiably refused to accept payment at the time it was due, is in delay. </li></ul><ul><li>Compensatio morae – delay both parties in a reciprocal obligation. </li></ul>
  98. 98. <ul><li>ART. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those whoin any manner contravene the tenor thereof, are liable for damages. (1101) </li></ul><ul><li>ART. 1171. Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void. (1120a) </li></ul><ul><li>ART. 1172. Responsibility arising from negligence in the performance of every king of obligation is also demandable, but such liability may be regulated by the courts, according to the circumstances. (1130) </li></ul>
  99. 99. <ul><li>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. </li></ul><ul><li>If the law or contract does not state the diligence of which is to be observed in the performance, that which is expected of a good father of a family shall be required. (1104a) </li></ul>
  100. 100. Sources of liability for damages: <ul><li>Fraud (dolo) – is the intentional deception made by one person resulting in the injury of another. </li></ul><ul><ul><li>The fraud referred to is incidental fraud , that is, fraud incident to the performance of a pre-existing obligation. </li></ul></ul><ul><li>  </li></ul><ul><li>Negligence (culpa) – consists in the omission by the obligor of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the person, of the time and of the place. (Art. 1173, NCC) </li></ul>
  101. 101. Sources of liability for damages: <ul><li>Delay (Mora) – like when there has been judicial or extra-judicial demand and the debtor does not comply his obligation, delay will occur. </li></ul><ul><li>In contravention of the tenor of the obligation – refers to the violation of the terms and conditions or defects in the performance of the obligation, like when a landlord fails to maintain a legal and peaceful possession of a tenant being leased by the latter because the landlord was not the owner and the real owner wants to occupy the land, there is contravention of the tenor of the obligation. </li></ul>
  102. 102. Sources of liability for damages: <ul><li>Delay (Mora) – like when there has been judicial or extra-judicial demand and the debtor does not comply his obligation, delay will occur. </li></ul><ul><li>In contravention of the tenor of the obligation – refers to the violation of the terms and conditions or defects in the performance of the obligation, like when a landlord fails to maintain a legal and peaceful possession of a tenant being leased by the latter because the landlord was not the owner and the real owner wants to occupy the land, there is contravention of the tenor of the obligation. </li></ul>
  103. 103. Other sources of liability for damages – <ul><li>Loss of the thing with the fault of debtor. </li></ul><ul><li>Deterioration with the fault of debtor. (Art. 1189) </li></ul>
  104. 104. Kinds of Damages <ul><li>Moral damages – include physical sufferings, mental anguish, fright, serious anxiety, besmirched reputation, wounded feeling, moral shock, social humiliation and similar injury. </li></ul><ul><li>Exemplary damages – imposed by way of example or correction for the public good. </li></ul><ul><ul><li>Like in quasi-delicts, if the defendant acted with gross negligence. (Art. 2231, NCC) </li></ul></ul>
  105. 105. Kinds of Damages <ul><li>Nominal damages – are adjudicated in order that a right of the plaintiff, which has been violated by the defendant, may be vindicated or recognized and not for the purpose of indemnifying the plaintiff for any loss suffered by him. (Art. 2221, NCC) </li></ul><ul><li>  </li></ul><ul><li>Temperate or moderate damages – are more than nominal but less than compensatory damages may be recovered when the courts finds that its amount cannot, from the nature of the case, be proved with certainty. Pecuniary loss means loss of money, or of something by which money or something of money value may be acquired. (Black Law Dict. P. 1131) </li></ul>
  106. 106. Kinds of Damages <ul><li>Actual or compensatory damages – except as provided by law, or a stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. (Art. 2199, NCC) </li></ul><ul><ul><li>Damages may be recovered: </li></ul></ul><ul><ul><ul><li>For loss or impairment of earning capacity in cases of temporary or permanent personal injury; </li></ul></ul></ul><ul><ul><ul><li>For injury, to the plaintiff’s business standing or commercial credit. </li></ul></ul></ul>
  107. 107. Kinds of Damages <ul><li>Liquidated damages – are those agreed upon by parties to a contract to be paid in case of breach thereof. (Art. 2226, NCC) </li></ul>
  108. 108. Distinguish Fraud (Dolo) from Negligence (culpa) <ul><li>Dolo – there is deliberate intent to cause damage or injury. </li></ul><ul><li> Culpa – ther is no deliberate intent to cause damage. </li></ul><ul><li>Dolo – waiver of liability of future fraud is void. </li></ul><ul><li> Culpa – waiver may in some cases be allowed. </li></ul><ul><li>Dolo – fraud must be clearly proved. </li></ul><ul><li> Culpa – presumed from breach of contractual obligation. </li></ul><ul><li>Dolo – liability cannot mitigated by the courts. </li></ul><ul><li> Culpa – may be reduced according to circumstances. </li></ul>
  109. 109. <ul><li>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 (1105a) </li></ul>
  110. 110. <ul><li>Fortuitous even – is an event which cannot be foreseen which though foreseen is inevitable. </li></ul><ul><li>Fortuitous event proper are acts of God such as volcanic eruption, earthquake, lightning, etc. is now similar with force majuere or acts of man such as conflagration, war, robbery, etc. </li></ul><ul><li>Requisite necessary to constitute fortuitous event </li></ul><ul><ul><li>The failure of the debtor to comply with the obligation must be independent from the human will; </li></ul></ul><ul><ul><li>The occurrence makes it impossible for the debtor to fulfill the obligation on a normal manner, and the obligor did not take part as to aggravate the injury of the creditor. (Vasquez v.C.A. G.R. 42926) </li></ul></ul>
  111. 111. <ul><li>As a general rule, no person shall be held responsible for fortuitous events </li></ul><ul><ul><li>Example – Gaya obliged herself to deliver a determine car to Tito on Dec. 30, 1998. Before the arrival of the period, the car was struck by lightning and was totally destroyed. Gaya cannot be held responsible for the destruction of the car, hence her obligation to deliver is extinguished. </li></ul></ul>
  112. 112. <ul><li>Exceptions (when the person is responsible despite the fortuitous even). </li></ul><ul><li>When the law expressly so provides, such as: </li></ul><ul><ul><li>The debtor is guilty of fraud, negligence or in contravention of the tenor of the obligation. (Art, 1170, NCC) </li></ul></ul><ul><ul><li>The debtor has proved to deliver the same thing to two or more persons who do not have the same interest. ( Art. 1165,NCC ) </li></ul></ul><ul><ul><li>The thing to delivered is generic. </li></ul></ul><ul><ul><li>The debtor is guilty of default or delay. ( Art. 1169,NCC ) </li></ul></ul><ul><ul><li>The debtor is guilty of concurrent negligence. </li></ul></ul><ul><li>When declared by stipulation; </li></ul><ul><li>When the nature of obligation requires the assumption of risk. An example of this is a contract of insurance. </li></ul>
  113. 113. <ul><li>ART. 1175. Usurious transaction shall be governed by special laws. </li></ul><ul><ul><li>Note: C.B. Circular No. 905 suspends the ceilings in the usury law. Hence, parties can agree as to the rate of interest. </li></ul></ul><ul><li>Kinds of interest </li></ul><ul><li>1. Conventional *The rate which is agreed upon by the parties. </li></ul><ul><li>2. Legal Interest *The rate which is prescribed by law. </li></ul><ul><li>3. Lawful Interest *The rate which is agreed upon by the parties but which rate is within the rate authorized by law. </li></ul><ul><li>4. Usurious Interest *The rate which is in excess of the maximum rate of interest allowed by law. </li></ul>
  114. 114. <ul><li> ART. 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. </li></ul><ul><li>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. (1110a) </li></ul><ul><li>Presumption means “the inference as to the existence of a certain fact which if not contradicted is considered as true.” </li></ul>
  115. 115. <ul><li>The presumption in the above article is a disputable presumption, whereby one which can be contradicted by presenting proof to the contrary while a conclusive presumption does not admit any evidence or proof, hence, it is considered as a fact. </li></ul><ul><li>Presumption under this article: </li></ul><ul><ul><li>Receipt of the principal, without reservation as to the interest, shall give rise to the presumption that the said interest has been paid. </li></ul></ul><ul><ul><li>When the creditor issues a receipt of a later installment of a debt without reservation as to prior installment is presumed to have been paid. </li></ul></ul>
  116. 116. <ul><li>ART. 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. (1111) </li></ul><ul><li>Rights of Creditors – </li></ul><ul><li>In order to satisfy their claims against the debtor, creditors have the following successive rights: </li></ul><ul><li>to levy by attachment and execution upon all the property of the debtor, except such as are exempt by law from execution; </li></ul><ul><li>to exercise all the rights and actions of the debtor, except, such as are inherently personal to him; and </li></ul><ul><li>to ask for the rescission of the contracts made by the debtor in fraud of their rights. </li></ul>
  117. 117. <ul><li>ART. 1178. Subject to the laws, all rights acquired in virtue of an obligation are transmissible, if there has been no stipulation to the contrary. (1112) </li></ul><ul><ul><li>As a rule, all rights acquired in virtue of an obligation are transmissible, except in the following cases: </li></ul></ul><ul><ul><li>When the law so provides. </li></ul></ul><ul><ul><li>When the parties stipulate otherwise – by agreement of parties that the rights acquired by them will not be transmitted to any other person. </li></ul></ul><ul><ul><li>When the obligation is purely personal in nature. </li></ul></ul>
  118. 118. LESSON 3: Kinds of Obligations <ul><li>Classification of Obligations: </li></ul><ul><li>The Civil Code classifies obligations primarily into: (PU CO PE ALFA JOS DIP) </li></ul><ul><li>Pure; </li></ul><ul><li>Conditional; </li></ul><ul><li>With a period; </li></ul><ul><li>Alternative; </li></ul><ul><li>Facultative; </li></ul><ul><li>Joint; </li></ul><ul><li>Solidary or several or in solidum; </li></ul><ul><li>Divisible; </li></ul><ul><li>Indivisible; </li></ul><ul><li>With a penal clause. </li></ul>
  119. 119. <ul><li>Other provisions of the Civil Code, however, impliedly admit other classes of obligations, to wit: </li></ul><ul><li>a.) Unilateral and bilateral; </li></ul><ul><li>b.) determinate and generic; </li></ul><ul><li>c.) legal, conventional and penal; </li></ul><ul><li>d.) real and personal </li></ul>
  120. 120. <ul><li>Section I. – Pure and Conditional Obligations </li></ul><ul><li>ART. 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. </li></ul><ul><li>Every obligation which contains a resolutory condition shall also be demandable, without prejudice to the effects of the happening of the event. (1113) </li></ul>
  121. 121. <ul><li>Pure Obligation – when the obligation contain no term or condition whatever upon which depends the fulfillment of the obligation contracted by the debtor. </li></ul><ul><ul><li>It is immediately demandable and there is nothing to exempt the debtor from compliance therewith. </li></ul></ul><ul><ul><ul><li>Example – Gaya obliged herself to pay her loan of P1,000 to Tito on demand. </li></ul></ul></ul><ul><ul><li>Instances when obligations immediately demandable: </li></ul></ul><ul><ul><li>It is a pure obligation; </li></ul></ul><ul><ul><li>It is subject to a resolutory condition; </li></ul></ul><ul><ul><li>It is subject to resolutory period. </li></ul></ul>
  122. 122. <ul><li>Conditional Obligations – one which is subject to a condition of one whose performance depends upon a future or uncertain events or upon past event unknown to the parties. </li></ul><ul><li>ART. 1180. When the debtor binds himself to pay when his means permits him to do so, the obligation shall be deemed to be one with the period, subject to the provisions of article 1197.(n) </li></ul><ul><li>Example – </li></ul><ul><li>A promissory note states that “This is to acknowledge receipt of sum of One thousand Six Hundred pesos (P1, 600.00) and I am to pay my debt to Arvin as soon as possible or as soon as I have the money.” It was held that the conditional obligation is void, because the collection would be impossible, the remedy of the creditor is to ask the Court to fix the period of payment, thus, it becomes an obligation with a period. </li></ul>
  123. 123. <ul><li>ART. 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. (1114) </li></ul><ul><li>ART. 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. (1115) </li></ul><ul><li>ART. 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, </li></ul><ul><li>The condition not to do an impossible thing shall be considered as not having been agreed upon. (1116a) </li></ul>
  124. 124. <ul><li>ART. 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. (1117) </li></ul><ul><li>ART. 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. </li></ul><ul><li>  </li></ul><ul><li>I f not 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. (1118) </li></ul><ul><li>A R T. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. (1119) </li></ul>
  125. 125. Kinds or classifications of condition: <ul><li>Suspensive and Resolutory </li></ul><ul><ul><li>Suspensive – the happening of the condition gives rise to an obligation. </li></ul></ul><ul><li>Example: </li></ul><ul><li>Maya binds herself to deliver a determinate car to Tito if he marries Gaya. The obligation is only demandable upon the happening of the condition that is, if Tito marries Gaya. The obligation is suspended and not yet demandable. </li></ul><ul><ul><li>Resolutory – the happening of the condition extinguishes the obligation already existing. </li></ul></ul><ul><li>  </li></ul><ul><li>Example: </li></ul><ul><li>Arvin binds himself to lend his only car to Ian until the latter passes the CPA Board. The obligation to lend is immediately demandable. Ian’s right over the car is extinguished upon his passing the CPA board. Ian is now obliged to return the car. </li></ul>
  126. 126. Kinds or classifications of condition: <ul><li>Potestative, Casual and Mixed </li></ul><ul><ul><li>Potestative – is one the fulfillment of which depends upon the sole will of the debtor. This kind of condition is void. </li></ul></ul><ul><li>Example: </li></ul><ul><li>Arvin Promise to give his only parcel of land to Maya if he decides to leave for the United States. </li></ul><ul><li>  </li></ul><ul><ul><li>Casual – is one the fulfillment of which depends upon chance. </li></ul></ul><ul><li>Example: </li></ul><ul><li>Mario agrees to give Maria a determinate car if Maria’s only racing horse will win the sweepstake race. </li></ul><ul><ul><li>Mixed – is one which depends partly upon the will of third person and partly upon chance </li></ul></ul><ul><li>Example: </li></ul><ul><li>Vincent promise to give Victor a new Toyota Car if Victor will be able to play with and beat Karpov in a game of chess. This is mixed condition, that is Karpov willingness to play chess with Victor and the latter’s winning over Karpov. </li></ul>
  127. 127. Kinds or classifications of condition: <ul><li>Possible and Impossible </li></ul><ul><li>Impossible condition is divided into 2: </li></ul><ul><ul><li>Physical Impossibility – the condition imposed is not capable of being performed physically. </li></ul></ul><ul><ul><li>Example: </li></ul></ul><ul><li>Grace will give Christine a gold necklace if she swims across the Pacific Ocean. </li></ul><ul><ul><li>Illegal Impossibility – when the condition imposed is contrary to law, good custom or public policy. </li></ul></ul><ul><li>Example: </li></ul><ul><ul><ul><li>Contrary to law – Pedro agrees to give Ernesto P100,000 if Ernesto will kill Mario. </li></ul></ul></ul><ul><ul><ul><li>Contrary to good custom – Santos binds himself to give Maria a gold wrist watch if she will cohabit with Mr. Reyes without benefit of marriage. </li></ul></ul></ul><ul><ul><ul><li>Contrary to public policy – Maria agrees to employ Grace in her company if Grace will not join a labor union. </li></ul></ul></ul>
  128. 128. Kinds or classifications of condition: <ul><li>Positive and Negative: </li></ul><ul><li>A Negative condition is one where some event will not happen at a determinate time, either </li></ul><ul><li>a.) the time indicated has elapsed; or </li></ul><ul><li>b.) it has become evident that the event cannot occur (Art. 1185, NCC) </li></ul><ul><li>Example: </li></ul><ul><li>Victor will give Jason a car if he will not marry Helen until Dec. 19, 2001, if Jason has not married Helen until Dec. 19, 2001 or if Helen has died within the prescribed time without having married to Jason, the obligation becomes demandable. If Jason married Helen within the prescribed time, the obligation of Victor is extinguished. </li></ul>
  129. 129. Kinds or classifications of condition: <ul><li>Divisible and Indivisible </li></ul><ul><li>Divisible – that part of obligation which is not affected by impossible or unlawful condition shall be valid (Art. 1183, NCC) </li></ul><ul><li>Example- </li></ul><ul><li>X promise to pay Y the sum of P1, 000.00 if Y furnishes X with information as to the whereabouts of Z and another sum of P2, 000.00 if Y kills Z. in the obligation, the first part (to pay P1, 000.00) is valid while the second part (P2, 000.00) is void because only the latter is affected by the condition. </li></ul><ul><li>Express and Implied </li></ul>
  130. 130. <ul><li>ART. 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. </li></ul><ul><li>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. (1120) </li></ul>
  131. 131. Effects of conditional obligation to give: <ul><li>Once the condition is fulfilled, the effects of the conditional obligations shall retroact to the day of the constitution of the obligation and not on the date when the condition was fulfilled. </li></ul><ul><li>  </li></ul><ul><ul><li>Example – </li></ul></ul><ul><ul><li>On Jan. 1, 1999 A agreed to give B a parcel of land if he passes the May, 1999 CPA exams. If B passes the CPA exams in May, 1999, he is entitled to the land effective Jan. 1, 1999 because B’s right over the land retroacts to the date when the obligation was constituted. </li></ul></ul>
  132. 132. <ul><li>As to the fruits and interest – The effect of conditional obligation to give, as a rule, do not retroact to the date of the constitution of the obligation. The following rules shall govern: </li></ul><ul><ul><li>In reciprocal obligation (like a contract of sale) - the fruits and interest during the pendency of the condition shall be deemed to have been mutually compensated. </li></ul></ul><ul><li>Example: </li></ul><ul><li>A agrees to sell and B agrees to buy A’s parcel of land if B passes the May, 1999 CPA exams. If B passes the May, 1999 CPA Board, the obligation becomes demandable. B is entitled to all the interests that his money (with which to pay A) may earn while A is entitled to the fruits which the parcel of land may have produced during the pendency of the condition. </li></ul>
  133. 133. <ul><ul><li>In unilateral obligation – the debtor shall appropriate the fruits and interests received during the pendency of the condition unless a contrary intention appears. </li></ul></ul><ul><li>Example – </li></ul><ul><li>X agreed to give Y a parcel of land if Y passes the CPA Board in May, 1999 exams. Pending the happening of the condition, A is entitled to the fruits which the land may produce, A will deliver only the parcel of land if the condition is fulfilled, unless a contrary intention appears. </li></ul>
  134. 134. <ul><ul><li>ART. 1188. The creditor may, before the fulfillment of the condition, bring the appropriate actions for the preservation of his right. </li></ul></ul><ul><li>The debtor may recover what during the same time he has paid by mistake in case of a suspensive condition (1121a) </li></ul><ul><li>Preservation of Creditor’s Right – </li></ul><ul><li>The action for the preservation of the creditor’s right may have for their objectives: </li></ul><ul><ul><li>To prevent the loss or deterioration of the things which are the objects of the obligation by enjoining or restraining acts of alienation or destruction by the debtor himself or by third person; </li></ul></ul>
  135. 135. Preservation of Creditor’s Right – <ul><ul><li>To prevent concealment of the debtor’s properties which constitute the guaranty in case of non-performance of the obligation; </li></ul></ul><ul><li>  </li></ul><ul><ul><li>To demand security if the debtor becomes insolvent; </li></ul></ul><ul><ul><li>To compel the acknowledgement of the debtor’s signature on a private document or the execution of proper public document for registration so as to affect third person. </li></ul></ul>
  136. 136. Preservation of Creditor’s Right – <ul><ul><li>To register the deeds of sale or mortgages; </li></ul></ul><ul><ul><li>To set aside fraudulent alienation made by the debtor; </li></ul></ul><ul><ul><li>To interrupt the period of prescription by actions against adverse possessors of the things which are objects of the obligation. (Lawyer’s journal, 1951, p. 47) </li></ul></ul>
  137. 137. <ul><li>  </li></ul><ul><li>Paragraph I of the above article authorizes the creditor to take any appropriate actions for the preservation of creditor’s right during the pendency of the condition: </li></ul><ul><ul><li>Example: </li></ul></ul><ul><ul><li>On Jan. 1, 1999, Raul obliged himself to sell a parcel of land to Dennis if he passes the CPA exams in October, 1999. From the time the obligation was constituted and pending the happening of the condition (passing the CPA Exams) Dennis may cause the annotation of the condition in the certificate of title in the Register of Deeds where the land is located, to preserve his right over the parcel of land. </li></ul></ul>
  138. 138. <ul><li>Paragraph II in order that debtor may recover what he has paid by mistake, during the pendency of the condition, the following requisites may be present: </li></ul><ul><li>  </li></ul><ul><ul><li>The debtor paid the creditor before the fulfillment of the condition; </li></ul></ul><ul><ul><li>Payment made by debtor was through mistake and error; </li></ul></ul><ul><li>  </li></ul><ul><ul><li>The action to recover what was paid by mistake should be made before the fulfillment of the condition. </li></ul></ul><ul><li>  </li></ul><ul><ul><li>Example – </li></ul></ul><ul><ul><li>Pedro obliged himself to pay Santos P20, 000 if a PAL plane crashes at Cebu before Dec. 30, 1998. After the obligation was constituted and before Dec. 30, 1998, a plane crushed in Cebu. Pedro honestly and believing that the condition was fulfilled paid the P20, 000 to Santos. It turned out however that it was a Cebu airline that crushed. Thus, Pedro may recover the amount paid to Santos by mistake for the reason that the condition has not yet been fulfilled. </li></ul></ul>
  139. 139. <ul><li>ART. 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: </li></ul><ul><ul><ul><li>If the thing is lost without the fault of the debtor, the obligation shall be extinguished. </li></ul></ul></ul><ul><ul><ul><li>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; </li></ul></ul></ul><ul><ul><ul><li>When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor; </li></ul></ul></ul><ul><ul><ul><li>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; </li></ul></ul></ul><ul><ul><ul><li>If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor; </li></ul></ul></ul><ul><ul><ul><li>If it is improved at the expense of the debtor, he shall have no other right than that granted to the usufructuary. </li></ul></ul></ul>
  140. 140. <ul><li>These rules apply only to obligation to give a determinate or specific thing subject to a suspensive condition in case of loss, deterioration or improvement of the thing. </li></ul><ul><ul><li>In case of loss of the thing </li></ul></ul><ul><ul><ul><li>If the thing is lost without the fault of the debtor, the obligation shall be extinguished. </li></ul></ul></ul><ul><ul><ul><li>Example – </li></ul></ul></ul><ul><ul><ul><li>Reyes obliged himself to give Santos a determinate car if he passes the CPA Exams in Oct. the current year. If during the pendency of the condition the car was lost through fortuitous event without the fault of Reyes, the obligation to deliver the car is extinguished even if the condition is fulfilled later. </li></ul></ul></ul><ul><ul><ul><li>If the thing is lost through the fault of the debtor, he shall be obliged to pay damages. If in the example above, the specific car was lost through the fault of Reyes, he shall be liable for damages upon the fulfillment of the condition. </li></ul></ul></ul>
  141. 141. <ul><li>It is understood that the thing is lost: </li></ul><ul><ul><li>When it perishes (as when a house is burnt to ashes) </li></ul></ul><ul><li>  </li></ul><ul><ul><li>When it goes out of commerce (as when the object before is unprohibited becomes prohibited) </li></ul></ul><ul><ul><li>When disappears in such a way that its existence is unknown (as when a particular car has been missing for some time) </li></ul></ul><ul><ul><li>When it disappears in such a way that it cannot be recovered (as when a particular diamond ring is dropped in the middle of the Atlantic Ocean). </li></ul></ul>
  142. 142. <ul><ul><li>When the thing deteriorates - </li></ul></ul><ul><ul><ul><li>When the thing deteriorates during the pendency of the condition, without the fault of the debtor, the impairment is to be borne by the creditor. </li></ul></ul></ul><ul><ul><ul><li>Example – </li></ul></ul></ul><ul><ul><ul><li>Arvin obliged himself to give Ian a determinate Toyota car if Ian passes the October CPA Exams. During the pendency of the condition, the car was partially damaged by flood, without the fault on the part of Arvin. If the condition is fulfilled, Ian will bear the impairment. </li></ul></ul></ul><ul><ul><ul><li>If the thing deteriorates, during the pendency of the condition, through the fault of the debtor, the creditor may choose, after the fulfillment of the condition, between the rescission of the obligation or its fulfillment, with indemnity for damages in either case. </li></ul></ul></ul>
  143. 143. <ul><ul><li>When the thing improved – </li></ul></ul><ul><ul><ul><li>If the thing improved during the pendency of the condition, by its nature, or by time, the improvement shall inure to the benefit of the creditor. The reason for this is to compensate the creditor who would suffer in case, instead of improvement, there would be deterioration without the fault of the debtor. </li></ul></ul></ul><ul><ul><ul><li>If the thing is improved at the expense of the debtor, he have no other right than that granted to the usufructuary. By us usufruct is meant the right to enjoy the property of another which includes the right to enjoy and use the fruits of the property. </li></ul></ul></ul>
  144. 144. <ul><li>ART. 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. </li></ul><ul><li>In case of the loss, deterioration or improvement of the thing, the provisions which, with respect to the debtor , are laid down to the preceding article shall be applied to the party who is bound to return. </li></ul><ul><li>As for obligations to do or 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. (1123) </li></ul>
  145. 145. Effects When Resolutory Condition is fulfilled <ul><li>The obligation is extinguished. (Art. 1181, NCC) </li></ul><ul><li>Because the obligation is extinguished and considered to have had no effect, the parties should restore to each other what they have received. </li></ul><ul><li>The fruits and interests thereon should also be returned after deducting of course the expenses made for the production, gathering and preservation, if any. </li></ul><ul><li>The rules given in Art. 1189, N CC will apply to whoever has the duty to return in case of loss, deterioration or improvement of the thing. </li></ul><ul><li>The courts are given power to determine the retroactivity of the fulfillment of a resolutory conditions. </li></ul><ul><ul><ul><li>Example : </li></ul></ul></ul><ul><li>A gave B a parcel of land on condition that B will pass the CPA Exams on May, this year. B did not pass the CPA Exams. The obligation is extinguished and therefore, it is as if there was never an obligation at all. B will therefore have to return both the land and the fruits he had received there from the moment A has given him the land. </li></ul>
  146. 146. <ul><li>ART. 1191. The power to rescind obligatios is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. </li></ul><ul><li>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 later should become impossible. </li></ul><ul><li>The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. </li></ul><ul><li>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. </li></ul>
  147. 147. Right to Rescind <ul><li>The right to rescind means the right to cancel or to resolve in case of reciprocal obligation in case of non-fulfillment on the part of one. </li></ul><ul><ul><li>Example: </li></ul></ul><ul><ul><li>In a contract of sale, the buyer can rescind if the seller does not deliver or te seller can rescind if the buyer does not pay. </li></ul></ul><ul><li>The power to rescind is given to the injured party and the injured party has the following alternative remedies: </li></ul><ul><ul><li>Demand fulfillment of the obligation plus damages; or </li></ul></ul><ul><ul><li>Demand rescission of the obligation plus damages. </li></ul></ul>
  148. 148. <ul><li>ART. 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 damages. </li></ul><ul><ul><li>Rules if Both Parties Have Committed a Breach </li></ul></ul><ul><li>The above rules are deemed just. The first one is fair to both parties because the second infract or, though they would derive some advantage by his own act or neglect. The second rule is likewise just, because it is presumed that both parties at about the same time tried to reap some benefits. (Report of the Code Commission) </li></ul>
  149. 149. <ul><li>Section 2 - Obligations with a period </li></ul><ul><li>` </li></ul><ul><li>ART. 1193. Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that day comes. </li></ul><ul><li>Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain. </li></ul><ul><li>A day certain is understood to be that which must necessarily come, although it may not be known when. </li></ul><ul><li>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. </li></ul>
  150. 150. Period Defined – <ul><li>A period is a future and certain length of time which determines the effectivity or the extinguished of obligation. </li></ul><ul><li>  </li></ul><ul><li>Obligation with a period is one whose consequences are subject in one way or another to the expiration of said period or term. (8Manresal58) </li></ul><ul><li>A day certain is understood to be that which must necessarily come, although it may not be known when. </li></ul>
  151. 151. Period and Condition Distinguished: <ul><ul><ul><ul><li>As to fulfillment - A period is a certain event which must happen sooner or later while a condition is an uncertain event. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>As to time – a period refers only to the future while a condition may refer to a past unknown event. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>As to influence or effect on the obligation – the period fixes the time of the effectivity of the obligation while a condition may cause the demandability of the obligation to arise or to terminate. </li></ul></ul></ul></ul>
  152. 152. <ul><li>ART. 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. (n) </li></ul><ul><ul><li>Effect of loss, deterioration, or improvement before the arrival of period. </li></ul></ul><ul><ul><ul><li>Note the cross reference to Art. 1189, NCC. </li></ul></ul></ul><ul><ul><ul><li>Example: </li></ul></ul></ul><ul><li>If A is suppose to deliver to B a particular car on Dec. 19, 1999 by the car was destroyed by fortuitous event in July 1, 1999, the obligation is extinguished. </li></ul>
  153. 153. <ul><li>  </li></ul><ul><li>ART. 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 de and demandable, may be recovered, with the fruits and interests. (1126a) </li></ul><ul><ul><li>Effect Of Payment Before Arrival of Period </li></ul></ul><ul><ul><li>This article which is similar to Article 1188, NCC, in an obligation to give, allows the recovery of what has been paid by mistake before the fulfillment of a suspensive condition. </li></ul></ul><ul><ul><ul><li>Example - </li></ul></ul></ul><ul><ul><ul><li>E owes G P20, 000.00, which was supposed to be paid on December 25 this year. By mistake, E paid his obligation on December 25 last year. Assuming that today is only June 30, E can recover the amount plus interest therein. But E cannot recover, except he interest, if the debt had already matured or if E had knowledge of the period. </li></ul></ul></ul>
  154. 154. <ul><li>ART. 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. (1127) </li></ul><ul><ul><li>Presumption As to Benefit Of A Period </li></ul></ul><ul><ul><li>The general rule is that when a period is fixed by the parties , the period is presumed to be for the benefit of both creditor and debtor. </li></ul></ul><ul><ul><li>Which means that before the expiration of the period, the debtor may not fulfill the obligation and neither the creditor demand its fulfillment. </li></ul></ul>
  155. 155. <ul><li>By way of exceptions, however, if the tenor of the obligation or other circumstances may indicate that a period is have been established for the benefit of either the creditor or debtor: </li></ul><ul><ul><li>For the benefit of both creditor and debtor </li></ul></ul><ul><ul><ul><li>Example – </li></ul></ul></ul><ul><ul><ul><li>Gaya obtained a loan of P10, 000 at 12% interest per annum from Tito for one year. Gaya has a period of one year within which to use the money, while Tito will benefit from the interest which the money will earn. </li></ul></ul></ul><ul><ul><li>For the benefit of the creditor </li></ul></ul><ul><ul><ul><li>Example - </li></ul></ul></ul><ul><ul><ul><li>Gaya executes a promissory note in favor of Tito which reads: “I promise to pay Tito or order the amount of P10, 000 on demand. Thus, Tito can demand payment from Gaya anytime. </li></ul></ul></ul><ul><li>  </li></ul><ul><ul><li>For the benefit of debtor </li></ul></ul><ul><ul><ul><li>Example – </li></ul></ul></ul><ul><ul><ul><li>Gaya executes a promissory note which reads: “I promise to pay Tito r order the amount of P 10,000 or before December 31, 2001. Gaya can pay her obligation on or before Dec. 31, 2001. </li></ul></ul></ul>
  156. 156. <ul><li>ART. 1197. If the obligation does not fix a period, but from its nature and circumstances it can be inferred that a period was intended, the courts may fix the duration thereof. </li></ul><ul><ul><li>The courts shall also fix the duration of the period when it depends upon the will of the debtor. </li></ul></ul><ul><ul><li>In every case, the courts shall determine such period as may under the circumstance have been probably contemplated by the parties. Once by the courts, the period cannot be changed by them. (1128 a) </li></ul></ul><ul><li>Court Generally is Without Power to Fix a Period </li></ul><ul><ul><li>If an obligation does not state a judicial period and no period is intended, the court is not authorized to fix a period. The courts have no right to make contracts for the parties. </li></ul></ul>
  157. 157. Exceptions to the general rule <ul><ul><ul><ul><li>If the obligation does not fix a period but it can be inferred from its nature and circumstances that a period is intended. </li></ul></ul></ul></ul><ul><ul><ul><li>Example: </li></ul></ul></ul><ul><ul><ul><li>S sold a parcel of land to B with a right of repurchase. No term is specified in the contract for the exercise of the right. Then, the court is authorized to fix the period to repurchase. </li></ul></ul></ul><ul><li>If the duration of the period depends upon the sole will of the debtor </li></ul><ul><ul><ul><li>Example: </li></ul></ul></ul><ul><ul><ul><li>I will pay you as soon as possible. Here , the period is not fixed, so the court may fix the same because if this is not so the obligation may never be complied with by the debtor. </li></ul></ul></ul>
  158. 158. <ul><li>ART. 1198. The debtor shall lose every right to make use of the period: </li></ul><ul><ul><li>When after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for the debt; </li></ul></ul><ul><ul><li>When he does not furnish to the creditor the guaranties or securities which he has promised ; </li></ul></ul><ul><ul><li>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; </li></ul></ul><ul><ul><li>When the debtor violates any undertaking, in consideration of which the creditor agreed to the period; </li></ul></ul><ul><ul><li>When the debtor attempts to abscond. (1129a) </li></ul></ul>
  159. 159.   When Debtor Loses The Right to Make Use Of A Period <ul><li>The general rule is that the obligation is not demandable before the lapse of the period. The exceptions are based on the fact that the debtor might not be able to comply with his obligation: </li></ul><ul><li>  </li></ul><ul><ul><li>When debtor becomes insolvent: </li></ul></ul><ul><ul><ul><li>The insolvency need not be judicially declared. It is sufficient that the debtor has less assets than his liabilities or if debtor is unable to pay his debts as they mature. It is noted that the insolvency of the debtor must occur after the obligation has been contracted. </li></ul></ul></ul>
  160. 160. When Debtor Loses The Right to Make Use Of A Period <ul><ul><li>When debtor does not furnish guaranties or securities promised: </li></ul></ul><ul><ul><li>Example: </li></ul></ul><ul><ul><li>Gaya borrowed loan from Tito which loan was secured by a chattel mortgage of Gaya’s car as a guaranty. After obtaining the loan, Gaya fails or does not execute a chattel mortgage, the loan becomes demandable or the debtor loses her right to make use of the period. </li></ul></ul><ul><li>  </li></ul><ul><ul><li>When by his own acts he has impaired said guaranties or securities: </li></ul></ul><ul><ul><li>Example: </li></ul></ul><ul><ul><li>Gaya borrowed P50, 000 from Tito which loan was secured by a chattel mortgage on Gaya ‘s car. Later, Gaya’s fault, the car was damaged or she causes the impairment of the car, Gaya loses her right to make use of the period, unless she gives another one equally satisfactory. </li></ul></ul>
  161. 161. When Debtor Loses The Right to Make Use Of A Period <ul><ul><li>When by fortuitous event, the guaranty or security was lost. </li></ul></ul><ul><ul><li>Example: </li></ul></ul><ul><ul><li>Gaya borrowed P50, 000 from Tito which loan was secured by a chattel mortgage on Gaya’s car. After obtaining the loan, the car was lost by fortuitous event. Gaya loss her right to male use of the period unless she gives another guaranty or security equally satisfactory. </li></ul></ul><ul><li>  </li></ul><ul><ul><li>When debtor violates an undertaking – </li></ul></ul><ul><ul><li>Example: </li></ul></ul><ul><ul><li>Art secured a loan from Arnold on condition that Art will paint the house of Arnold. If after the proceeds of the loan was given to Art, he did not pant the house of Arnold, Art loses his right to make use of the period. </li></ul></ul><ul><ul><li>When the debtor attempts to abscond. </li></ul></ul><ul><ul><li>Abscond means a depart or escape from creditor’s knowledge to avoid payment of his debt. Mere attempt on the part of debtor will entitle the creditor to demand payment of the obligation without waiting for the period to expire. </li></ul></ul>
  162. 162. <ul><li>Section 3. Alternative and Facultative obligations </li></ul><ul><li>ART. 1199. A person alternatively bound by different prestations shall completely perform one of them. </li></ul><ul><ul><li>The creditor cannot be compelled to receive part of one and part of the other undertaking. (1131) </li></ul></ul><ul><li>  </li></ul><ul><li>Meaning of Alternative Obligation </li></ul><ul><ul><li>It means an obligation where two or more prestations are due but the delivery of one is sufficient to extinguish the obligation. </li></ul></ul><ul><ul><ul><li>Example: </li></ul></ul></ul><ul><ul><ul><li>Gaya binds herself to give Tito either a determinate refrigerator or a TV set. If Gaya chooses and delivers the TV set, the obligation is extinguished. Thus, Gaya cannot compel Tito to accept part of one and the part of the other prestations. </li></ul></ul></ul>
  163. 163. <ul><li>ART. 1200. The right of choice belongs to the debtor, unless it has been expressly granted to the creditor. </li></ul><ul><li>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. </li></ul>
  164. 164. Rule on Who Makes the Choice – <ul><li>As a general rule, the right of choice or to select the prestation belongs to the debtor, unless the right to choose is expressly granted to the creditor. But the right of the debtor is subject to the following: </li></ul><ul><li>The debtor cannot choose those prestations which are: </li></ul><ul><ul><li>Impossible – E.g.- Gaya promised to deliver to Tito 100 sacks of rice or a stone from Mars. Gaya cannot chose to deliver the stone coming from Mars as it is physically impossible. </li></ul></ul><ul><ul><li>Unlawful – E.g. Gaya obliged herself to deliver to Tito a kilo of dangerous drug or a parcel of land. Gaya can choose only the delivery of parcel of land. </li></ul></ul><ul><ul><li>Could not have been the object of the obligation - E.g. Gaya borrowed from Tito P50, 000. It was agreed that Gaya would give Tito her horse or her German Piano. Now, Gaya has two horses, a race horse worth P50,

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