CHAPTER 2:

NATURE AND
EFFECT OF
OBLIGATIONS
 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.
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.
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.
 Ifthe thing is indeterminate or generic, he may ask that
the obligation be complied with at the expense of the
debtor.

Ifthe 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.

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.
 Obligations of the Debtor To Give a
determinate thing
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.
 Obligations of the Debtor To Give a
determinate thing
Todeliver the object or thing when the obligation to
deliver arises, including:
Fruits of the thing if any. Kinds of fruits: Natural,
industrial or civil.
Natural - spontaneous product of the soil; the young
and other products of animal. E.g. tress, plants on lands
without he intervention of man.
Industrial - produced by lands of any king through
cultivation and labor. E.g. sugar cane, vegetables, rice.
Civil - derived by virtue of juridical relations. E.g. rents
of a building; prices of leases of lands and other similar
income.
 Obligations of the Debtor To Give a
determinate thing
Accessions and accessories.
Accession is the right pertaining to the owner of a
thing over its products and whatever is attached thereto
either naturally or artificially.
Accretion which refers to the gradual and addition of
sediment to the shore by action of water.
Accessories are those things which are joined
attached to the principal object as ornament or to
render it perfect.
 Obligations of the Debtor To Give a
determinate thing
To be liable for damages in case of breach of
obligation .
(Art. 1170, NCC)
When creditor acquire a right to the thing to be
delivered and its fruits
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)
 Definition of terms:

1. Determinate thing a thing is determinate

when it is particularly designated or physically
segregated from all others from the same class.
(Art. 1460, NCC)
2. 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)
3. Fortuitous Events those events which could
not be foreseen or which though foreseen were
 Art.1167. If a person obliged to do something
fails to do it, the same shall be executed at his
cost.

Thissame 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.
 Obligation of the Debtor To Do

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:

When the debtor fails to do the obligation;

When the debtor performs the obligation but contrary to
the tenor; or
When the obligor poorly performs the obligation.
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.

Obligation of the Debtor NOT To Do

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.
 ART. 1169. Those obliged to deliver or to do something
incur in
delay from the time the obligee judicially or extra -
judicially demands from theme the fulfillment of their
obligation.
However, the demand by the creditor shall not be necessary in order that
delay may exist:

(1) When the obligation or the law expressly declares; or

(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
(3) When 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

 Delay ( Mora )
means a legal delay or default and it consists of
failure discharge a duty resulting to ones own
disadvantage.

The debtor incurred delay if:

I. The debtor fails to perform his obligation when it
falls due; and
II. A demand has been made by the creditor
judicially or extra judicially.
 However, there are instances when the demand
by the Creditor is not necessary to place the
debtor on delay:

1.When the obligation expressly so provides

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.
2.When the law so provides
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.

3.When time is of the essence

Because time is the essential factor in the
fulfillment of the obligation.
4.When demand would be useless
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.

5.In a reciprocal obligation, from the moment

one of the parties fulfills his obligation,
delay to the other begins
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.
 Kinds of delay

Mora solvendi delay on the part of the debtor.

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.

Compensatio morae delay by both parties in a

reciprocal obligation.
ART. 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.

ART. 1171.Responsibility arising from fraud is demandable

in all obligations. Any waiver of an action for future fraud is
void.

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.
 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.

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
 Sources of liability for damages:

1. Fraud (dolo) is the intentional deception

made by one person resulting in the injury of
another.
The fraud referred to is incidental fraud, that is,
fraud incident to the performance of a pre-existing
obligation.

2. 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
 Sources of liability for damages:

3. Delay (Mora) like when there has been

judicial or extra-judicial demand and the
debtor does not comply his obligation, delay
will occur.

4. 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.
 Other sources of liability for damages

Loss of the thing with the fault of debtor.

Deterioration with the fault of debtor.

(Art. 1189)
 Kinds of Damages

1. Moral damages include physical sufferings,

mental anguish, fright, serious anxiety,
besmirched reputation, wounded feeling, moral
shock, social humiliation and similar injury.
2. Exemplary damages imposed by way of
example or correction for the public good.
 Kinds of Damages

3. 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)

4. 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.
 Kinds of Damages

5. 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)

Damages may be recovered:

For loss or impairment of earning capacity in cases of
temporary or permanent personal injury;
For injury, to the plaintiffs business standing or
commercial credit.
 Kinds of Damages

6. Liquidated damages are those agreed

upon by parties to a contract to be paid in case
of breach thereof.
(Art. 2226, NCC)
Distinguish Fraud (Dolo) from Negligence (culpa)

1. Dolo there is deliberate intent to cause damage

or injury.
Culpa there is no deliberate intent to cause
damage.

2. Dolo waiver of liability of future fraud is void.

Culpa waiver may in some cases be allowed.

3. Dolo fraud must be clearly proved.

Culpa presumed from breach of contractual
obligation.
 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)
 Fortuitous event is an event which cannot be
foreseen which though foreseen is inevitable.
Fortuitous event proper are acts of God such as volcanic
eruption, earthquake, lightning, etc. is now similar with
force majeure or acts of man such as conflagration, war,
robbery, etc.

1. Requisites necessary to constitute fortuitous event

The failure of the debtor to comply with the obligation must be
independent from the human will;
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)
2. As a general rule, no person shall be held
responsible for fortuitous events

Example Sara obliged herself to deliver a

determine car to Mark on Dec. 30, 1998. Before
the arrival of the period, the car was struck by
lightning and was totally destroyed. Sara cannot
be held responsible for the destruction of the car,
hence her obligation to deliver is extinguished.
 Exceptions (when the person is responsible despite the
fortuitous event)

a. When the law expressly so provides, such as:

o The debtor is guilty of fraud, negligence or in contravention of
the tenor of the obligation. (Art, 1170, NCC)
o The debtor has proved to deliver the same thing to two or more
persons who do not have the same interest. ( Art. 1165,NCC )
o The thing to delivered is generic.
o The debtor is guilty of default or delay. ( Art. 1169,NCC )

b. When declared by stipulation;

c. When the nature of obligation requires the assumption
of risk.
 ART.1175. Usurious transaction shall be governed
by special laws.
Note: C.B. Circular No. 905 suspends the ceilings in the usury law.
Hence, parties can agree as to the rate of interest.

Kinds of interest
1. Conventional *The rate which is agreed upon by the
parties.
2. Legal Interest *The rate which is prescribed by law.
3. Lawful Interest *The rate which is agreed upon by the
parties but which rate is within the rate authorized by law.
4. Usurious Interest *The rate which is in excess of the
maximum rate of interest allowed by law.
 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.

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)

Presumption means
the inference as to the existence of a certain fact which
if not contradicted is considered as true.
 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.

Presumption under this article:

1. Receipt of the principal, without reservation as to the interest,
shall give rise to the presumption that the said interest has
been paid.
2. 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.
 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)

Rights of Creditors
In order to satisfy their claims against the debtor, creditors have the
following successive rights:
1. to levy by attachment and execution upon all the property of the debtor,
except such as are exempt by law from execution;
2. to exercise all the rights and actions of the debtor, except, such as are
inherently personal to him; and
3. to ask for the rescission of the contracts made by the debtor in fraud of
their rights.
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)

As a rule, all rights acquired in virtue of an obligation are

transmissible, except in the following cases:
1. When the law so provides.
2. When the parties stipulate otherwise by agreement of
parties that the rights acquired by them will not be
transmitted to any other person.
3. When the obligation is purely personal in nature.