Chapter 1 General Provisions Article 1156. An obligation is a juridical necessity to give to do or not to do.

Manresa: legal relation established between one person and another, whereby the latter is bound to the fulfillment of a prestation which the former may demand of him. Requisites: 1. Juridical or legal tie which binds the parties to the obligation, and which may arise from either bilateral or unilateral acts of persons. 2. An active subject known as the oblige or creditor, who can demand the fulfillment of the obligation. 3. A passive subject known as the obligor or debtor, against whom the obligation is juridically demandable. 4. The fact or prestation or service which constitutes the object of the obligation. Types according to juridical quality: 1. Civil when the obligation is in accordance with positive law. 2. Natural when the obligation is in accordance with natural law. 3. Mixed when the obligation is in accordance to both natural and positive law. Differentiation: 1. A civil obligation is based on positive law while a natural obligation is based on equity and natural law. 2. The former is enforceable in a court of law while the former is not. Types according to parties: 1. Unilateral and bilateral unilateral, where only one party is bound, bilateral, where both parties are mutually or reciprocally bound. 2. Individual or collective individual, when there is only one obligor, and collective, when there are several obligors. The latter may be joint, when each obligor is liable only for his proportionate share of the obligation, or solidary, when each obligor may be held liable for the entire obligation. Types according to object:

1. Determinate or generic determinate when the object is specific, generic, when the object is designated by its class or genus. 2. Simple and multiple simple, when there is only one undertaking, multiple, when there are several undertakings. Multiple obligations may be conjunctive, when all the obligations are demandable at the same time, or distributive, when only one undertaking out of several is demandable. Distributive obligations on the other hand, may be alternative, when the obligor is allowed to choose one out of several obligations which may be due and demandable, or facultative, when the obligor is allowed to substitute another obligation for one which is due and demandable. 3. Positive and negative positive when the obligor is obliged to give or do something, negative, when the obligor must refrain from giving or doing something. 4. Real and personal real, when the obligation consists of giving something, personal, when the obligation consist of doing or not doing something. 5. Possible and impossible possible, when the obligation is capable of fulfillment in nature as well as in law, impossible, when it is not capable of fulfillment in nature or in law. 6. Divisible and indivisible divisible, when the obligation is susceptible of partial performance, indivisible, when the obligation is not susceptible of partial performance. 7. Principal and accessory principal, when it is the main undertaking, accessory, when it is merely an undertaking to guarantee the fulfillment of the principal obligation. Types according to its perfection and extinguishment: 1. Pure when the obligation is to subject to any condition or term and is immediately demandable. 2. Conditional when the obligation is subject to condition which may be suspensive, in which case the fulfillment of the condition results in the birth of the obligation, or resolutory, in which case the fulfillment of the condition results in the extinguishment of the obligation.

3. With a term or period when the obligationis subject to a term or period which may suspensive or from a day certain, in which case the obligation is demandable only upon the expiration of the term, or resolutory or to a day certain, in which case the obligation terminates upon the expiration of the term. Article 1157. Obligations arise from: 1. Law 2. Contracts 3. Quasi-contracts 4. Delicts (acts or omissions punished by law) 5. Quasi-delicts Article 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 provision of this book. Manresa: when the law establishes the obligation and the act or condition upon which it is based is nothing more than a factor for determining the moment it becomes demandable, then the law itself is the source of the obligation; however, when the law merely recognizes or acknowledges the existence of the obligation generated by an act which may constitute a contract, quasi-contract, criminal offense or quasi-delict, then the acts itself is the source of the obligation and not the law itself. Article 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. Contract a meeting of the minds between two persons whereby one binds himself with respect to the other, to give something, or to render some service. Types according to perfection: 1. Consensual contracts perfected by mere consent 2. Real contracts perfected upon delivery of the object of the obligation.

Compliance in good faith it is the performance in accordance with the stipulations, clauses, terms and conditions of the contract. Sincerity and honesty must be observed to prevent one party from taking unfair advantage over the other. Non-compliance by a party with his legitimate obligations after receiving the benefits of a contract would constitute unjust enrichment on his part. Article 1160. Obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII of this Book. Quasi-contract that juridical relation resulting from the lawful, voluntary and unilateral acts, by virtue of which parties become bound to each other, based on the principle that no one shall be unjustly enriched or benefited at the expense of another. In a contract, there is a meeting of the minds or consent, in a quasi-contract, there is no consent, but the same is supplied by fiction of law or presumptive consent. Types of quasi-contract: 1. Negotiorum Gestio the voluntary management of the property or the affairs of another without the knowledge or consent of the same. 2. Solutio Indebiti the juridical relation which is created when something id received when there is no right to demand it and/or it was unduly delivered through mistake. Article 1161. Civil obligations arising from 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. Dual aspect of crime- every person liable for a crime is also civilly liable. These two aspects are separate and distinct from one another in the sense that the first affects the social order, and its purpose is to correct or punish the offender, while the second affects private rights, and its purpose is to repair the damage to the aggrieved party. *Note: There are crimes where there is no civil liability, e.g., treason, rebellion, etc. And a person not criminally liable may stil be civilly liable. Scope of civil liability: 1. Restitution the return of something to the owner of it, or to the person entitle to it.

2. Reparation for damages caused. 3. Indemnification for consequential damages. Enforcement: 1. The institution of criminal action also implies the institution for civil action for recovery of civil liability unless the offended party (i) expressly waives the civil action, (ii) reserves the right to institute it separately, or (iii) institutes the civil action prior to the criminal action. 2. In the cases provided I Articles 31, 32, 33, 34, and 2177 of the Civil Code, an independent civil action entirely separate and distinct from the criminal action may be brought b the injured party during the pendency of the criminal action, provided the right is reserved. Such action require only a preponderance of evidence. 3. In all cases not included in the preceding rules: a. Criminal and civil actions arising from the same offense may be instituted separately, but after the criminal action has commenced, the civil action cannot be instituted until final judgment has been rendered in the criminal action. b. If the civil action has been filed before the criminal action, and the criminal action is subsequently commenced, the civil action shall be suspended in whatever stage before final judgment may be found until final judgment in the criminal action is rendered. However, if no final judgment has been rendered by the court in the civil action, the same may be consolidated with the criminal action upon application with the court trying the criminal action. If the application is granted, the evidence presented and admitted in the civil action shall be deemed automatically reproduced in the criminal action, without prejudice to the admission of additional evidence that any party may wish to present. In case of consolidation, both the criminal and civil action shall be tried and decided jointly. c. Extinction of the penal action does not carry the extinction of the civil, unless the extinction proceeds from a declaration in a final judgment that the fact from which the civil action might arise did not exist. In other cases, the person entitled to the civil action may institute it in the jurisdiction and

in the manner provided by law against the person who may be liable for restitution of the thing and reparation or indemnity for the damage suffered. 4. A final judgment rendered in a civil action absolving the defendant from civil liability is no bar to a criminal action. 5. A petition for suspension of the criminal action based upon the pendency of a prejudicial question in a civil action may be filed in the office of the fiscal or the court conducting the preliminary investigation. When the criminal action has been filed in court for trial, the petition to suspend shall be filed in the same criminal action at any time before the prosecution rests. Elements of a prejudicial question(Revised Rules of Criminal Procedure): a. The previously instituted civil action which involves a similar issue or intimately related to the issue raised in the subsequent criminal action. b. The resolution of such issue determines whether or not the criminal action may proceed. Effects of acquittal: 1. If the acquittal of the accused is based on the grounds that his guilt has not been proved beyond reasonable doubt, a civil action to recover damages based on the same act may still be instituted. 2. If the acquittal proceeds from a declaration of final judgment that the fact from which the civil liability might arise did not exist, the subsequent institution of civil action to recover damages is, as a general rule, no longer possible. Instances under the Civil Code where civil action is entirely separate and independent from the criminal action: 1. Where the civil action is based on an obligation not arising from the act or omission complained of as a criminal offense or felony and may proceed independently and regardless of the result of the latter, the basis of which may be an obligation arising from the law, contracts, quasi-contracts and quasi-delicts. 2. Where the law the grants the injured party the right to institute a civil action which is entirely separate and distinct from the criminal action. e.g.

a. Interference by public officers or employees or by private individuals with civil rights and liberties b. Defamation c. Fraud d. Physical injuries e. Refusal or neglect of a city or municipal police officer to render aid or protection in case of danger to life and property. *Note: These instances also constitute the exceptions to the rule that if the accused is acquitted on the ground that he did not commit the offense charged, the subsequent institution of civil actions is no longer possible. Article 1162. Obligations derived from quasi-delicts (torts/culpa auiliana) shall be governed by the provisions of Chapter 2, Title XVII of the book, and by special laws. Quasi-delict refers to all obligations which do not arise from law, contracts, quasicontracts or criminal offenses. It may also be defined as the fault or negligence of a person, who, by his act or omission, connected or unconnected, but independent from, any contractual relation, causes damage to another person. Persons Liable: 1. The father, and incase of his death or incapacity, the mother, with respect to damages caused by the minor children who was in their company. 2. Guardians, with respect to damages caused by minors or incapacitated persons who are under their authority and who live in their company. 3. The owners and managers of an establishment or enterprise, with respect to damages caused by their employees in the service of the branches in which the latter are employed or on the occasion of their function. 4. Employers with respect to damages caused by their employees and household helpers acting within the scope of their assigned tasks, even thought the former are not engaged in any business or industry. 5. The state when it acts through a special agent, but not when the damage has been caused by the official to who the task done properly pertains.

6. Lastly, teachers or heads of establishments of arts and trades, with respect to damages caused by their pupils and students or apprentices, so ong as they remina in their custody. *Note: The above-mentioned liabilities are extinguished of it is proven that due diligence of a good father has been observed to prevent damage. Requisites of liability: 1. The fault or negligence of the defendant 2. The damage suffered or incurred by the plaintiff 3. The relation of cause and effect between the fault or negligence of the defendant and the damage incurred by the plaintiff. Differentiation: 1. Crimes affect public interest, while quasi-delicts are a private concern. 2. The Penal Code punishes or corrects the criminal act, while the Civil Code merel repairs the damages incurred. 3. Acts or omissions are only punishable if there is a law penalizing it, while quasidelicts include all acts in which any ind of fault or negligence intervenes. Jurado: In Elcano vs. Hill, the Supreme Court held that quasi-delicts include acts which are criminal in character or in violation of penal law, whether voluntary or negligent. Chapter 2 Nature and Effects of Obligations Article 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 stipulation of the parties requires another standard of care. *Note: The above provision refers to an obligation specific or determinate thing. Differentiation: 1. A determinate thing is identified by its individuality. The debtor cannot substitute it with another although the latter is the same kind and quality without the consent of the creditor.

2. A generic thing is identified only by its specie. The debtor can give anything of the same class as long as it of the same kind. Rights of the creditor in a determinate obligation: 1. Demand specific performance or fulfillment (if it is still possible) of the obligation with a right to indemnity for damages. 2. Demand rescission ( in certain cases) of the obligation with the right to recover damages. 3. Demand payment for damages only, where it is the only feasible remedy. Duties of the debtor in a determinate obligation: 1. To perform the obligation specifically. 2. To take care of the thing with the proper diligence of a good father of a family or another standard of care if the law or the stipulation so requires. 3. To deliver all accessions and accessories of the thing even though they may not have been mentioned. a. Accessions those things which are produced by the thing which is the object of the obligation as well as all of those which are naturally or artificially attached thereto. b. Accessories those things which have for their object the embellishment, use or preservation of the thing which is more important and to which they are not incorporated or attached. 4. To be liable for damages in case of breach of obligation by reason of delay, fraud, negligence or contravention to the tenor thereof. *Note: As a general rule, this liability does not arise if the breach is due to a fortuitous event. Article 1164. The creditor has the right to the fruits of the thing from the time the obligation to deliver arises. However, he shall acquire no real right over it until the same has been delivered to him. Kinds of fruits: 1. Natural fruits spontaneous products of the soil, the young, and other product of the animals.

2. Industrial fruits those produced by lands of any kind through cultivation or labor. 3. Civil fruits those derived by virtue of juridical relation. *Note: The creditor is entitled to the fruits of the thing to be delivered from the time the obligation to make deliver arises. The intention of the law is to protect the interest of the obligee should the obligor commit delay, purposely or otherwise, in the fulfillment of the obligation. Personal Right the right or power of the creditor to demand from the debtor, as a definite passive subject, the fulfillment of the latters obligation. Real Right the right or interest of a person over a specific thing, without any specifi passive subject against whom the right may be personally enforced. Differentiation: 1. In a personal right, there is a definite active and passive subject, while in a real right there is a definite active subject without any definite passive subject. 2. A personal right is binding and enforceable against a particular person, while a real right is directed against the whole world. *Note: Ownership and other real rights over property are acquired and transmitted in consequence of certain contracts by tradition or deliver. Hence the creditor does not become the owner until the thing has been delivered to him. When there has been n delivery yet, the proper course of action of the creditor is for specific performance or rescission of the obligation. Article 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the right granted to him by Article 1170, may compel the debtor to make the delivery. If the thing is indeterminate or generic, he may ask the obligation be complied with at the expense of the debtor. 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 fortuitous event until he has effected delivery. Rights of the creditor in a generic obligation: 1. To ask for performance.

2. To ask that the obligation be complied with the expense of the debtor. 3. To recover damages for breach of obligation.

Duties of the debtor in a generic obligation 1. To deliver a thing which is neither of superior nor inferior quality. 2. To pay for the expense of having the obligation done by a third person and to be liable for damages in case of breach of the obligation by reason of delay, fraud, negligence or contravention to the tenor thereof. *Note: Paragraph three gives two instances when a fortuitous event does not exempt the debtor from responsibility. It refers to a determinate thing. An indeterminate thing cannot be the object of destruction by a fortuitous event because genus nunquam perit (genus never perishes). Article 1166. The obligation to deliver a determinate thing include that of delivering all its accessions and accessories, even though they have not been mentioned. Accessions those things which are produced by the thing which is the object of the obligation as well as all of those which are naturally or artificially attached thereto. Accessories those things which have for their object the embellishment, use or preservation of the thing which is more important and to which they are not incorporated or attached. Article 1167. If a person obliged to do something fails to do it, the same shall be executed at his cost. This same rule shall be observed if he does it in contravention to the tenor of the obligation. Furthermore, it may be decreed that what has been poorly done be undone. Situations contemplated: 1. Debtor fails to perform an obligation to do. 2. Debtor performs an obligation to do but contrary to the terms thereof. 3. Debtor performs an obligation to do but in a poor manner.

*Note: Unlike in obligations to give, in obligations to do, the creditor does not possess the power to compel the obligor to comply with his obligation as this constitutes involuntary servitude. Rights of the creditor in positive personal obligations: 1. If the debtor fails to comply with the obligation: a. To have the obligation performed by himself or another, unless personal considerations are involved, at the debtors expense. b. To recover damages. 2. In case the obligation is done in contravention of the terms of the same or is poorly done, it may ordered (by the court upon complaint) undone if it is still possible to undo what has been done. *Note: When the oblige cannot have the prestation executed at the expense of the obligor cannot be availed of when such prestation consists of an act where the personal and special qualification of the obligor is the principal motive to the establishment of the obligation, the oblige has no other remedy except to proceed against the obligor for damages under Article 1170 of this Code. Article 1168. When the obligation consists in not doing, and the obligor does what has been forbidden him, it shall also be undone at his expense. Rights of the creditor in negative personal obligations: 1. To have it undone at the expense of the obligor with the right to indemnity for damages. 2. If it is not possible to undo physically or legally as when a third person acquires a right in good faith, then the only remedy is an action for damages. Article 1169. Those obliged to deliver or do something incur in delay from the time the obligee judicially or extra-judicially demands from them the fulfillment of their obligation. However, the demand by the creditor shall not be necessary in order that delay may exist when:

1. The obligation or the law expressly so declares. 2. From the nature or circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract. 3. Demand would be useless, as when the obligor has rendered it beyond his power to perform. In reciprocal obligations, neither party incurs in delay if the other does not comply or is not read to 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. Breach of Obligation May be voluntary or involuntary. It is voluntary if the debtor or obligor, the performance of his obligation is guilty of default (mora), or fraud (dolo), or negligence (culpa), or in any manner that contravenes the tenor thereof. It is involuntary is he is unable to comply because of an event which cannot be foreseen, or which, thoug foreseen, was inevitable. Ordinary delay merely the failure to perform the obligation on time. Legal delay (default/mora) the failure to perform an obligation on time which failure constitutes a breach of the obligation. Kinds of default (mora): 1. Mora solvendi the delay of the obligor or debtor to perform his obligation. Mora solvendi ex re is the delay in the obligation to give and mora solvendi ex persona is the delay in the obligation to do. 2. Mora accepiendi the delay of the oblige or creditor to accept the delivery of the thing which is the object of the obligation. 3. Compensatio moraei the delay of the parties or obligors in reciprocal obligations. Requisites of delay: 1. The obligation is demandable and already liquidated. 2. The debtor or obligor delays performance. When demand is not necessary: 1. When the obligation or the law expressly s declares.

2. From the nature or circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract. 3. Demand would be useless, as when the obligor has rendered it beyond his power to perform. *Note: There can be no default in negative obligations. In reciprocal obligations, if neither party complies or is ready to comply with what is incumbent upon him, the default of one compensates for the default of the other, Only when one party fulfills his part of the obligation does the other party incur delay. Once the obligor incurs in delay, he can be held liable by the obligee for damages. The liability subsists even if the thing which constitutes the obligation may have been lost or destroyed through a fortuitous event. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, legal interest. Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point. Article 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay and those who in any manner contravene the tenor thereof, are liable for damages. Dolo or Fraud: *Note: This article refers to dole indente Dolo incidente Or incidental fraud is the deliberate or intentional evasion of the normal fulfillment of an obligation and is a ground for damages. Dolo causante Or Causal fraud is fraud employed in the execution of a contract under Article 1338, which vitiates consent and is a ground for the voiding the contract. Differentiation: 1. The first is present in the performance of a pre-existing obligation, while the second is present only at the time of the birth of the obligation.

2. The first is employed for the purpose of evading the normal fulfillment of an obligation, while the second is employed for the purpose of securing the consent of the other party to enter into the contract. 3. The first results in the non-fulfillment or breach of the obligation, while the second, if it is the reason for the other party upon whom it is employed for entering into the contract, results in the vitiation of his consent. 4. The first gives rise to a right of the creditor to recover damages from the debtor, while the second give rise to the right of the innocent party to ask for the annulment of the contract. Negligence (culpa): *Note: There is criminal and civil negligence. Kinds of civil negligence: Culpa contractual (contractual negligence) the fault or negligence of the obligor by virtue of which he is unable to perform the obligation arising from a pre-existing contract because of the omission of the 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. Culpa-aquiliana (quasi-delicts/torts) the fault or negligence of a person who, because of the omission of the diligence which is required by the nature of the obligation and which must corresponds with the circumstances of the persons, of the time, and of the place, causes damage to another. Differentiation: 1. In culpa contractual, the negligence of the defendant is merely an incident in the performance of an obligation; in culpa aquiliana it is substantive and independent. 2. In the first. There is always a pre-exisinting contractual relation; in the second, there may or may not be a pre-existing contractual relationship. 3. In the first, the source of the obligation of the defendant to pay damages to the plaintiff is the breach or non-fulfillment of the contract; in the second, the source is the defendants act or omission itself. 4. In the first, proof of the existence of the contract and of the breach is sufficient prima facie to warrant recovery; in the second negligence of the defendant must be proved.

5. In the first, proof of diligence in the selection and supervision of employees is not available as a defense; in the second, it is.

*Note: The distinguishing element between fraud and negligence is intent. If there is intent to cause damage or injury there is fraud, if there is merely abandonment, inattention, carelessness, or lack of diligence, there is negligence. Waiver for future negligence is valid. Contravention to the tenor thereof: *Note: The phrase in any manner contravene the tenor of the obligation includes not only illicit acts which impairs the strict and faithful fulfillment of the obligation but also every kind of defective performance. Article 1171. Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void. *Note: Refers to incidental fraud. Waiver for future fraud is contrary to law and public policy, but waiver for past fraud is valid because such waver can be deemed as an act of generosity and the effect is the renunciation of the right to indemnity of the aggrieved party. Also, unlike in the case of negligence, the court is not given the power to mitigate or reduce the damages to be awarded because fraud is deemed serious and evil that its employment to avoid the fulfillment of ones obligation should be discouraged. Article 1172. Responsibility arising from negligence in the performance of every kind of obligation is also demandable, but such liability may be regulated by the courts according to the circumstances. *Note: Liability arising from negligence in the performance of every kind of obligation may be regulated by the courts. Consequently, the court may increase or decrease the liability of the party at fault depending upon the circumstances of each case. Thus, the court may take into consideration the good or bad faith of the obligor or the conduct of the obligee when the damage was incurred.

If the debtor acted in good faith, he shall be liable only for the natural and probable consequences of the breach of the obligation and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted. Where negligence shows bad faith, it is considered equivalent to fraud and the provisions in Article 1171, 1173, and 2201 par. 2 shall apply. If there was contributory negligence on the part of the obligee, the effect is to reduce or mitigate the damages he can recover from the obligor as a result from the breach of the obligation. However, if the negligent act or omission of the obligee concurred with the negligent act of the obligor, and the negligent act or omission of the obligee is a proximate cause of the event which led to the damage or injury complained of, the oblige cannot recover. Article 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 person, of the time, and of the place. When negligence shows bad faith, the provisions of articles 1171, 2201 par. 2, shall apply. If the law or contract does not state the diligence which is to be observed in the performance, that which is expected of a good father shall be required. *Note: Negligence is a question of fact. Factors: 1. Nature of the obligation 2. Circumstances of the person 3. Circumstances of time 4. Circumstances of the place. *Note: If the debtor acted in good faith, he shall be liable only for the natural and probable consequences of the breach of the obligation and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted. Where negligence shows bad faith, it is considered equivalent to fraud and the provisions in Article 1171, 1173, and 2201 par. 2 shall apply, and the party at fault shall be responsible for all damages which may reasonably attributed to the non-performance of the obligation.

Kinds of diligence required: 1. That agreed upon by both parties. 2. In the absence of stipulation, that which is required by law (like the extraordinary diligence required of common carriers). 3. if both contract and law are silent, then the diligence expected of a good father of a family. Article 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. Fortuitous event any event which cannot be foreseen, or which, though foreseen is inevitable. Types: 1. Fortuitous event proper or acts of god refers to what is called majeure or those events which are totally independent of the will of every human being. 2. Force majeure or acts of man refers to events independent of the will of the obligor but not of other human beings. Kinds according to foreseeability: 1. Ordinary fortuitous event refers to those which could have reasonably foreseen. 2. Extraordinary fortuitous event refers to those which do not usually happen and which could have been reasonably foreseen. *Note: The general rule is that if the obligor cannot comply with his obligation by reason of a fortuitous event, he is exempted from any liability whatsoever. Requisites of a fortuitous event: 1. The event must be independent of the human will or at least of the debtors will. 2. The event could not have been foreseen, or if foreseen, inevitable. 3. The event must be such character to render it impossible for the debtor to comply with his obligation in a normal manner. 4. The debtor must be free from any participation in or the aggravation of, the injury to the creditor, that is, there is no concurrent negligent on his part.

Exceptions to the general rule: 1. When expressly specified by law. a. The debtor is guilty of fraud, negligence, delay, or contravention to the tenor thereof. b. The debtor has promised to deliver the specific same thing to two or more persons who do not have the same interest. c. The obligation to deliver a specific thing arises from a crime. d. The thing to be delivered is generic. 2. When declared by stipulation. 3. When the nature of the obligation requires the assumption of risk. Article 1175. Usurious transactions shall be governed by special laws. Usury may be defined as contracting for or receiving something in excess of the amount allowed by law for the loan or forbearance of money, goods, or chattels. It is the taking of more interest for the use of money, goods, or chattels or credit than the law allows. Requisites for recovery of interest: 1. The payment of interest must be expressly stipulated. 2. The agreement must be in writing. 3. The interest must be lawful. *Note: The special laws referred to in this article are the Usury Law (Act No. 2655) and the different laws amending it. Prior Jan. 1, 1983, and under these laws, no person shall receive a rate of interest, including commissions, premiums, fines, and penalties, higher than 12% per annum or the maximum rate prescribed by the monetary board for loan secured by a mortgage upon real estate the title to which is duly registered. But, this law has been suspended by the Central Bank Circular No. 905 which abolished the authority of the monetary board to fix interest and ceiling rates under the usury law.

Article 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. 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. Presumption an inference of fact not actually known arising from its usual connection with another which is known or proved. Kinds: 1. Conclusive presumption one which cannot be contradicted. 2. Disputable (or rebuttable) presumption one which can be disputed or rebutted by presenting proof to the contrary. Article 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. Remedies to the creditor to protect credit: 1. To exhaust all the property in possession of the debtor. This is in conformity with Article 2236 which states that the debtor is liable with all of his property, present and future, for the fulfillment of his obligation subject to the exemptions provided by law. 2. To be subrogated to all of the rights and actions of the debtor save those which are inherent in his person. Subrogation or accion subragatoria is the assumption of the creditor of the rights of the debtor to collect from those indebted to the latter. 3. Accion pauliana or to impugn all of the acts which the debtor may have done to defraud him. *Note: The second and third options are subsidiary to the first.

Article 1178. Subject to the laws, all rights acquired in virtue of an obligation are transmissible, if there has been no stipulation to the contrary. *Note: As a general rule those rights acquired by virtue of an obligation are transmissible. Exceptions: 1. When it is prohibited by law. a. By contract of partnership b. By contract of agency. c. By contract of commodatum. 2. Prohibited by stipulation of parties. Chapter 3 Different Kinds of Obligations Section 1 Pure and Conditional Obligations Article 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. Every obligation which contains a resolutory condition shall also be demandable, without prejudice to the effects of the happening of the event. Pure obligation one whose effectivity or extinguishement does not depend upon the fulfillment or non-fulfillment of a condition or upon the expiration of a term or period, and which, as a consequence, is characterized by the quality of immediate demandability. Conditional obligation one whose effectivity or extinguishment is subordinated to the fulfillment or non-fulfillment of a future and uncertain fact or event. Classification of conditions: 1. Suspensive when the fulfillment of the condition results in the acquisition of rights arising out of the obligation. 2. Resolutory when the fulfillmen of the condition results in the extinguishment of rights arising out of the obligation. 3. Potestative when the fulfillment of the obligation depends upon the will of a party to the obligation

4. Casual when the fulfillment of the obligation depends upon chance and/or upon the will of third person. 5. Mixed when the fulfillment of the obligation depends partly upon the will of a party to the obligation and partly upon chance and/or the will of a third person. 6. Possible when the condition is capable of realization according to nature, law, public policy, or good customs. 7. Impossible when the condition is not capable of realization according to nature, law, public policy, or good customs. 8. Positive when the condition involves the performance of an act. 9. Negative when the condition involves the omission of an act. 10. Divisible when the condition is susceptible of partial performance. 11. Indivisible when the condition is not susceptible of partial performance. 12. Conjunctive when there are several conditions, all of which must be realized. 13. Alternative when there are several conditions, but only one must be realized. 14. Express when the condition is expressly stated. 15. Implied when the condition is tacit. Article 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. Suspensive condition (condition precedent) a future and uncertain event uon the happening of which rights arising out of the obligation are acquired. Resolutory a future or uncertain event the happening of which rights already acquired by virtue of the obligation are extinguished.

Article 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. Potestative when the fulfillment of the obligation depends upon the will of a party to the obligation Casual when the fulfillment of the obligation depends upon chance and/or upon the will of third person. Mixed when the fulfillment of the obligation depends partly upon the will of a party to the obligation and partly upon chance and/or the will of a third person. *Note: As a general rule, conditions dependent upon the will of the debtor and the resulting obligation shall be void, but this only applies to condition suspensive in character. Resolutory conditions dependent upon the will of the debtor are valid. Also, a void suspensive condition does not affect the validity of an already pre-existing obligation. Article 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. The condition not to do an impossible thing shall be considered as not having been agreed upon. *Note: This article refers to suspensive conditions. It applies only t cases where the impossibility already existed at the time the obligation was already constituted. If the impossibility arises after the creation of the obiligation, Article 1266 governs. Two kinds of impossible obligations: 1. Physically impossible conditions those whose nature cannot exist or cannot be done. 2. Legally impossible obligations those which are contrary to law, good customs, public order and public policy. Effects of impossible conditions:

1. Impossible conditions annul the obligation which depends upon them. Both the condition and obligation are void. 2. If the condition is negative, it is disregarded and the obligation is rendered pure and valid. 3. If the obligation is divisible, the part thereof not affected by the impossible condition shall be valid. 4. If the obligation is a pre-existing one, and, therefore, does not depend upon the fulfillment of the condition which is impossible, the obligation remains valid while the condition is void. Article 1184. The condition that some event happen at a determinate time shall extinguish the obligation as soon as the time expires or it has become indubitable that the event will not take place. *Note: This article refers to positive (suspensive) condition. The obligation is extinguished if: 1. 2. The time elapses without the event taking place. It has become indubitable that the event will not take place although the time

specified has not expired. Positive when the condition involves the performance of an act. Negative when the condition involves the omission of an act. Article 1185. The condition that some event will not happen at a determinate time shall render the obligation effective the moment the time indicated has elapsed, or it has become evident that the event cannot occur. If no time has been fixed , the condition shall be deemed fulfilled at such time as may probably have been contemplated, bearing in mind the nature of the obligation. Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. Requisites: 1. The condition is suspensive.

2. The obligor prevents the fulfillment of the obligation. 3. He acts voluntarily. Article 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 the nature and circumstances of the obligation it should be inferred that the intention of the person constituting the obligation was different. 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. Article 1188. The creditor may, before the fulfillment of the obligation, bring the appropriate action for the preservation of his rights. The debtor may recover what during the same time he has paid by mistake in case of a suspensive condition. Article 1189. When the conditions have been imposed with the intention of suspending the efficacy of n 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: 1. If the thing is lost without the fault of the debtor, the obligation shall be extinguished. 2. If the thing is lost through the fault of the debtor, he shal 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. 3. When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor.

4. 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. 5. If the thing is improved at the expense of the debtor, he shall have no other right than that granted to the usufructuary. Usufruct the right to enjoy the use and fruits of a thing belonging to another.