Obligations and Contracts Law

1. OBLIGATIONS AND
CONTRACTS

2. OBLIGATION – juridical necessity to give, to do or not to do
4 ELEMENTS OF OBLIGATION
1. ACTIVE SUBJECT (creditor/obligee) – whose obligation is constituted
2. PASSIVE SUBJECT (debtor/obligor) – has duty to give, to do or not to do
3. OBJECT/PRESTATION – subject matter
4. JURIDICAL/LEGAL TIE (vinculum/efficient cause) – reason

3. Creditor’s rights if debtor fails to comply w/ the
obligation
1. Determinate
a. Performance
b. Damages
2. Generic
a. Performance
b. Damages
c. Obligation be complied at debtor’s expense

4. Creditor’s rights if debtor does in
contravention
1. Damages
2. Ask it be UNDONE at debtor’s expense

5. •
• FORTUITOUS EVENT – cannot be foreseen, if
foreseen, inevitable
• General Rule: No person liable to fortuitous event.
• Exceptions:
• 1. Law states
• 2. Stipulation/contract states
• 3. Assumption of risk
• 4. Delay
• 5. Debtor promises deliver to 2/more persons who do not
have same interest (bad faith)
•
•

6. • EFFECTS OF FORTUITOUS EVENT to thing to be
delivered
• - extinguish the obligation if determinate; generic does
not extinguish the obligation
•

7. • CONCEPT OF DELAY
• General Rule: No demand, No delay
• Exceptions:
• 1. Law states
• 2. Obligation states
• 3. Time is the essence
• 4. Demand be useless if delay
• 5. Debtor guilty of delay

8. • EFFECTS OF DELAY
• 1. Damages
• 2. When to deliver determinate thing, STILL LIABLE in
fortuitous event.
•

9. • 4 SUCCESSIVE RIGHTS OF CREDITOR to satisfy claim against DEBTOR
• 1. Exact payment
• 2. Attach debtor’s properties
• 3. Accion subrogatoria – exercise rights & actions except inherent in person
• 4. Accion pauliana – cancel acts/contracts by debtor to defraud creditor

10. • CONTRACT – meeting of minds between 2 persons to
give something or to render service.
• 3 ELEMENTS OF CONTRACT
• 1. ESSENTIAL – w/o them, contract cannot exist
• a. CONSENT of contracting parties
• b. OBJECT CERTAIN – subject matter
• c. CAUSE/CONSIDERATION
• In some contracts, ff are also essential:
• d. FORM
• e. DELIVERY
•

11. • 2. NATURAL – found in certain contract, presumed to
exist unless stipulated
•
• 3. ACCIDENTAL – various particular stipulations that
may be agreed upon by contracting parties

12. • CLASSIFICATION OF CONTRACTS
• According to:
• 1. PERFECTION/FORMATION
• a. CONSENSUAL – perfected by mere consent
• b. REAL – perfected by delivery
• c. FORMAL/SOLEMN – special formalities are
essential before perfection of contract
• 2. PARTIES OBLIGATED
• a. UNILATERAL – only 1 has obligation
• b. BILATERAL – both parties require to render
reciprocal prestations

13. • 3. CAUSE
• a. ONEROUS – exchange of considerations
• b. GRATUITOUS – no consideration received in
exchange of what is given
• c. REMUNERATORY – something is given for
benefit/service that had been rendered previously
•
• 4. RISK OF FULFILLMENT
• a. COMMUTATIVE – equivalent values are given by
both parties
• b. ALEATORY – fulfillment of contract depends on
chance (eg. insurance)

14. • 5. IMPORTANCE
• a. PRINCIPAL – contract may stand alone (eg. sale,
partnership)
• b. ACCESSORY – existence depends on another
contract (pledge, guarantee)
• c. PREPARATORY – contract not an end by itself but
a means thru w/c other contracts may be made (eg.
agency)
• 6. NAME
• a. NOMINATE – contract given a particular/special
name (eg. partnership)
• b. INNOMINATE – not given special name (eg. I give
that you may give)

15. •
• 7. SUBJECT MATTER
• a. Contracts involving things
• b. Contracts involving rights/credits
• c. Contracts involving services

16. • 3 STAGES OF CONTRACT
• 1. PREPARATION/CONCEPTION –
preparatory steps to perfect contract
• 2. PERFECTION/BIRTH – meeting of
minds between 2 contracting parties
• 3. CONSUMMATION/TERMINATION –
terms of contract are performed, &
contract is fully executed

17. • CONSENT
• - meeting of offer (certain) & acceptance (absolute) upon a thing
•
• 5 REQUISITES OF CONSENT
• 1. Must be given by 2 or more parties
• 2. Parties are capacitate to enter in contract
• 3. No vitiation of consent
• 4. No conflict between declared & intended
• 5. Legal formalities must be complied

18. • 3 persons who CANNOT GIVE CONSENT to a
contract (if entered into, contract is voidable)
• 1. UNEMANCIPATED MINORS
• 2. INSANE/DEMENTED PERSONS (unless they acted
DURING LUCID INTERVAL)
• 3. DEAF-MUTES who DO NOT know how to write
• DEMENTED PERSON – NOT exactly insane; difficult to
distin-guish right from wrong
• LUCID INTERVAL – period when an INSANE has
acquired SANITY temporarily, therefore, capacitated to
enter into a valid contract

19. FRAUD/DOLO
- when through insidious words/machinations of one of the
parties, INDUCED the other to enter into a contract, &
w/o them, he will not agree.
DOLO
CAUSANTE
DOLO
INCIDENTE
Serious Not serious
cause induces
party to ENTER
into contract
NOT the cause
to enter into
contract
make contract
voidable
contract is valid;
liable for
damages

20. • 7 RULES OF FRAUD
• 1. Failure to disclose facts when these needs to be revealed, is a fraud.
• 2. Fraud should be SERIOUS (dolo causante) & SHOULD NOT be done by
BOTH parties to make contract voidable.
• 3. Incidental fraud (dolo incidente) ONLY obliges person to PAY
DAMAGES.
• 4. Usual exaggerations in trade, when other party know the “real” facts, is
NOT FRAUD.
• 5. A mere expression of opinion is NOT FRAUD UNLESS made by an
expert & the other party relies on his special knowledge.
• 6. Misrepresentation made in good faith is NOT FRAUD but may constitute
an error.
• 7. Misrepresentation by 3rd person DOES NOT vitiate consent UNLESS it
created substantial mistake.

21. • 4 KINDS OF DEFECTIVE CONTRACTS
• 1. RESCISSIBLE – valid until rescinded; has ALL
essential requisites but because of injury/damage to
one of the parties, the contract may be rescinded.
• 2. VOIDABLE – valid until annulled; has ALL essential
requisites but because of defect in consent, contract
may be annulled.
• 3. UNENFORCEABLE – cannot be sued/enforced
unless ratified; no effect NOW but may take effect upon
ratification.
• 4. VOID – NO effect at all; cannot be ratified/validated.

22. • 3 VOIDABLE CONTRACTS
• 1. One of the parties INCAPABLE of giving consent to a
contract.
• 2. Those where consent vitiates by vices of consent.
(MFVIU)
• 3. Those agreed in the state of drunkenness/hypnotic
spell.

23. • 3 UNENFORCEABLE CONTRACTS
• 1. Those entered in name of other person, or who acted
BEYOND his powers.
• 2. Those who do not comply w/ the Statute of Frauds.
• 3. Both parties are incapable of giving consent to a
contract.

24. • 7 VOID/INEXISTENT CONTRACTS
• 1. Those w/c are ABSOLUTELY simulated/fictitious.
• 2. Those w/c contemplate an impossible service.
• 3. Those whose OBJECT is outside the commerce of
man.
• 4. Those whose CAUSE/OBJECT did not exist at time of
tran-saction.
• 5. Those whose CAUSE/OBJECT/PURPOSE is contrary
to law, morals, good customs, public order, or public
policy.
• 6. Those where INTENTION of parties to principal object
CANNOT be ascertained.
• 7. Those expressly prohibited/declared VOID by law.

25. • 5 RESCISSIBLE CONTRACTS
• 1. Those entered by guardians & suffered LESION by
more than ¼ of value of the value that is the OBJECT.
• 2. Those agreed upon in representation of absentees, if
the absentees suffered LESION.
• 3. Those undertaken in FRAUD of creditors when the
creditors cannot further claim.
• 4. If entered into contract w/o knowledge/approval of
litigants under litigation.
• 5. Contracts subjected to rescission declared by law.
•

26. • LESION
• - inadequacy of cause (eg. insufficient price for thing
sold)
•
• RULES ON LESION
• - Lesion DOES NOT invalidate contract, except there is:
• a. Fraud
• b. Mistake
• c. Undue influence