Chapter 1: General Provisions bound in favor of the creditor to perform the

prestation.
Art. 1156. An obligation is a juridical necessity to
give, to do or not to do. It is the legal tie which constitutes the source of
obligation—the coercive force which makes the
The definition of obligations establishes the
obligation demandable.
unilateral act of the debtor either to give, to do or
not to do as a patrimonial obligation. It means that It is the legal tie which constitutes the devise of
the debtor has the obligation while the creditor has obligation… the coercive force which makes the
its rights. obligation demandable.

The obligations referred to is a patrimonial Juridical Tie Debtor To give, to do Creditor Or

obligations that is, those obligations with pecuniary Obligor or not to do or Obligee
value or assessable in terms of money.
Example: Gaya enters into a contract of sale with
Characteristics of patrimonial obligations: Tito who paid the purchase of a GE refrigerator.
Gaya did not deliver the refrigerator.
They represent an exclusively private interest.
Gaya is the passive subject or debtor and Tito is
They create ties that are by nature transitory.
the active subject or creditor. The object or
They exist a power to make effective in case of prestation is the GE refrigerator and the obligation
non- fulfillment, the economic equivalent obtained to deliver is the legal tie or the vinculum juris which
at the patrimony of a debtor. binds Gaya and Tito.

Juridical Necessity – it means the rights and This is also known as a unilateral obligation, that is,
duties arising from obligation are legally the obligation of the debtor to fulfill or comply his
demandable and the courts of justice may be called commitment, in this case, the delivery of the
upon through proper action to order the refrigerator.
performance.
On the other hand, if Gaya, delivered the
Action means an ordinary suit in court of justice by refrigerator and Tito did not pay, then Tito becomes
which one party prosecutes another for the the debtor who is bound to pay while Gaya is the
enforceable or protection for a right or a prevention creditor who has the right to demand the prestation.
or redress of a wrong ( Sec. 1. Rules of court ).
Distinctions between Obligations and Contracts: 
Example – Gaya bought a refrigerator from Tito but Contract is the only one of the sources of
Gaya did not pay the refrigerator. If after demand, obligation, while obligations have other sources like
Gaya still did not pay, Tito can sue Gaya in Court law, quasi-contracts, delicts or quasi-delicts; 
either to demand payment or for recovery of the Contract is a bilateral obligation while obligation is a
refrigerator. unilateral obligation;  All contracts are obligations
while not all obligations are contracts.
Essential requisites of an obligation –
8. 5. Civil obligations as distinguished from Natural
a) An active subject, who has the power to demand
obligations –  Civil obligations derive their binding
the prestation, known as the creditor or oblige;
force from positive law; Natural Obligation derives
b) A passive subject, who is bound to perform the their binding effect from equity and natural justice.
prestation, known as debtor or obligor.  Civil can enforced by court action of the coercive
power of public authority; Natural – the fulfillment
c) An object or the prestation which may consist in
cannot be compelled by court action but depends
the act of giving, doing or not doing something.
on the good conscience of debtor.
d) The vinculum juris or the juridical tie between the
two subjects by reason of which the debtor is 9. ART. 1157. Obligations arise from:  Law; 
Contracts;  Quasi-contracts;  Acts or omissions
punished by law; and  Quasi-delicts. (1089a) On obligation while quasi-contract is a natural
the sources of obligation, the main sources are obligation.
really Law and Contracts. The other sources are
13. 2 Kinds of Quasi-contracts1. Solutio Indebiti
also established by law.
(Payment by mistake) It is the juridical relation
10. Source of Obligations1. LAW as a source of which arises when a person is obliged to return
obligations – The provisions of Art. 1158 refers to something received by him through error or
the legal obligations or obligations imposed by mistake.Example- Arvin owed Ian the sum of P1,
specific provisions of law, which means that 000.00. By mistake, Arvin paid P2, 000.00. Ian has
obligations arising form law are not presumed and the obligation to return the P1, 000.00 excess
that to be demandable must be clearly provided for, because there was payment by mistake.2.
expressly or impliedly in the law. Examples:  It is Negotiorum gestio (management of another’s
the duty of the Spouses to support each other. (Art. property) It is the voluntary management or
291, New Civil Code)  And under the National administration by a person of the abandoned
Internal Revenue Code, it is the duty of every business or property of another without any
person having an income to pay taxes. authority or power from the latter. (Art. 2144,
NCC)Example- Victor, a wealthy landowner
11. 2. CONTRACT as a source of obligations – suddenly left for abroad leaving his livestock farm
Contract as defined in Art. 1305, NCC is the unattended. Ramon, a neighbor of Victor managed
meeting of minds between two person whereby one the farm thereby incurring expenses. When Victor
binds himself with respect to the other, Obligations returns, he has the obligation to reimburse Ramon
arising from contracts have the force of law for the expenses incurred by him and to pay him for
between the contracting parties because that which his services. It is bases on the principle that no one
is agreed upon in the contract by the parties is the shall enrich himself at the expense of another.
law between them, thus, the agreement should be
complied with in good faith. (Art. 1159). For 14. 4. DELICTS or acts or omissions punished by
examples: A contract of lease was executed law as a source of obligations Acts or omission
between Gaya as the lessee and Tito as the lessor punished by law is known as Delict or Felony or
for the rent of an apartment. Although contracts Crime. While an act or omission is felonious
have the force of law, it does not mean that because it is punished by law, the criminal act gives
contract are over and above the law. Contracts are rise to civil liability as it caused damage to another.
with the limitations imposed by law in Art. 1306, Civil liability arising from delicts:  Restitution –
NCC, it states that the contracting parties may which is the restoration of or returning the object of
establish such stipulations, clauses terms and the crime to the injured party.  Reparation – which
conditions as, they may deem convenient, provided is the payment by the offender of the value of the
that are not contrary to law, morals, good custom, object of the crime, when such object cannot be
public order or public policy. returned to the injured party.  Indemnification –
the consequential damages which includes the
12. 3. QUASI-CONTRACTS as a source of
payment of other damages that may have been
obligations The ‘quasi’ literally means ‘as if’.
caused to the injures party.Illustration: Mario was
Quasi-contract is the juridical relation resulting from
convicted and sentenced to imprisonment by the
a lawful, voluntary and unilateral act which has for
Court for the crime of theft, the gold wrist watch, of
its purpose the payment of indemnity to the end
Rito. In addition to whatever penalty that the Court
that no one shall unjustly enrich or benefited at the
may impose, Mario may also be ordered to return
expense of another. (Art. 2142, NCC) Contracts
(restitution) the gold wrist watch to Rito. If
and quasi-contracts distinguished:  in a contract,
restitution is no longer possible, for Mario to pay the
consent is essential requirement for its validity
value (reparation) of the gold wrist watch. In
while in quasi-contract, there is no consent as the
addition to either restitution or reparation, Mario
same is implied by law;  contract is a civil shall also pay for damages (indemnification)
suffered by Rito.
15. 5. QUASI-DELICTS as a source of obligations ART. 1165. When what is to be delivered is a
Concepts of Quasi-Delict – Quasi-delict is one determinate thing, the creditor, in addition to the
where whoever by act or omission causes damage right granted him by article 1170, may compel the
to another, there being fault of negligence, is debtor to make the delivery.
obliged to pay for the damage done. Such fault of
20.  If the thing is indeterminate or generic, he
negligence, if there is no pre-existing contractual
may ask that the obligation be complied with at the
relation between the parties. (Art. 2176) Example- If
expense of the debtor. If the obligor delays, or has
Pedro drives his car negligently and because of his
promised to deliver the same thing to two or more
negligence hits Jose, who is walking on the
persons who do not have the same interest, he
sidewalk of the street, inflicting upon him physical
shall be responsible for any fortuitous event until he
injuries. Then Pedro becomes liable for damages
based on quasi-delict. has effected the deliver. (1906) ART. 1166. The
obligation to give a determinate thing includes that
16. Requisites of a quasi-delicts There must be of delivering all its accessions and accessories,
fault of negligence attributable to the offended; even though they may not have been mentioned.
There must be damage or injury caused to (1097a)
another; There is no pre-existing contract.
21. Obligations of the Debtor To Give a determinate
17. ART. 1158. Obligations derived from law are thing-1. To preserve or take care of the thing with
not presumed. Only those expressly determined in the proper diligence of a good father of a family. It
this Code or in special laws are demandable, and means the ordinary diligence that a prudent man
shall be regulated by the precepts of the law which would exercise in taking care of his own property
establishes them; and as to what has not been taking into consideration the nature of the
foreseen, by the provisions.(1090) ART. 1159. obligation, of the time and of the place, like a
Obligations arising from contracts have theforce of person who is obliged to deliver a determinate
law between the contracting parties and should horse to another should, pending its delivery,
becomplied with in good faith. (1091a) preserve it by taking care of the same as if the
horse is his own.
18.  ART. 1160. Obligations derived from quasi-
contracts shall be subject to provisions. ART. 22. 2. Accessions and accessories.  Accession –
1161. Civil obligations arising from criminal is the right pertaining to the owner of a thing over
offenses shall be governed by the penal laws, its products and whatever is attached thereto either
subject to the provisions of article 2177, and of the naturally or artificially. Example-  Accretion which
pertinent provisions of Chapter 2, Preliminary Title, refers to the gradual and addition of sediment to the
on Human Relations, and of regulating damages. shore by action of water.  Accessories – are those
(1092a) ART. 1162. Obligations derived from things which are joined attached to the principal
quasi-delicts shall be governed by the provisions of object as ornament or to render it perfect. Example-
Chapter 2, Title XVIII of this Book, and by special  Radio attached to a car; or key to a car.
law. (1093a)
23. 3. To be liable for damages in case of breach of
19. Chapter 2: NATURE AND EFFECT OF obligation (Art. 1170, NCC) When creditor acquire
OBLIGATIONS ART. 1163. Every person obliged a right to the thing to be delivered and its fruits- The
to give something is also obliged to take care of it creditor has a right to the fruits of the thing from the
with the proper diligence of a good father of a time the obligation to deliver it arises. However, he
family, unless the law or the stipulation of the shall acquire no real right over it until the same
parties requires another standard of care. (1904a) have been delivered to him. (Art. 1164, NCC)
ART. 1664. The creditor has a right to the fruits of Example – a binds himself to sell his horse to B for
the thing from the time the obligation to deliver it fro P10, 000. No date nor condition is stipulated for
arises. However, he shall acquire no real right over delivery of the horse. Later, the horse gave birth to
it until the same has been delivered to him. (1905) a colt. A has right to the colt, if B has not paid the
horse. Before delivery, B does not acquire demand by the creditor shall not be necessary in
ownership over it. order that delay may exist: ( 1 ) When the obligation
or the law expressly declares; or ( 2 ) When from
24. Definition of terms:1. Determinate thing – a
the nature and the circumstances of the obligation it
thing is determinate when it is particularly
appears that the destination of the time when the
designated or physically segregated from all others
thing is to be delivered or the service is to rendered
from the same class. (Art. 1460, NCC)2.
was controlling motive for the establishment of the
Indeterminate or generic thing – A thing is generic
contract; or ( 3 ) When demand would be useless,
when it refers to a class or thing or genus and
as when the obligor has rendered it beyond his
cannot be designated with particularity. (Art. 1460,
power to perform. In reciprocal obligations, neither
NCC)3. Fortuitous Events – those events which
party incurs in delay if the other does not comply in
could not be foreseen or which though foreseen
a proper manner with what is incumbent upon him.
were inevitable. (Art. 1174, NCC)
From the moment one of the parties fulfills his
25.  Art. 1167. If a person obliged to do something obligation, delay by the other begins. ( 1100a )
fails to do it, the same shall be executed at his
29. Delay ( Mora ) means a legal delay or default
cost. This same rule shall be observed if he does and it consists of failure discharge a duty resulting
it in contravention of the tenor of the obligation. to one’s own disadvantaged. The debtor incurred
Furthermore, it may be decreed that what has been
delay if:  The debtor fails to perform his obligation
poorly done be undone. ( 1098 )
when it falls due; and  A demand has been made
26. Obligation of the debtor To Do Being a personal by the creditor judicially or extra judicially. Example
positive obligation, The creditor hasthe right to – Gaya obliged herself to deliver a determinate
secure the services of third person to performthe horse to Tito on June 20. this year. Gaya failed to
obligation at the expense of the debtor under delivered on the agreed date, Is Gaya already on
thefollowing instances: When the debtor fails to do delay on June 20, only when Tito makes a judicial
the obligation; When the debtor performs the or extra-judicial demand and from such date of
obligation but contrary to the tenor; or When the demand when Gaya is on default or delay.
obligor poorly performs the obligation. 30.  However, there are instances when the
27.  ART. 1168. When the obligation consists in demand by the Creditor is not necessary to place
not doing, and the obligor does has been forbidden the debtor on delay: 1. When the obligation
him, it shall also be undone at his expense, expressly so provides The mere fixing of the period
(1099a) Obligation of the Debtor NOT To Do – is not sufficient to constitute a delay. An agreement
This is negative personal obligation which is to the effect that fulfillment or performance is not
consisting of an obligation, of not doing something. made when the obligation becomes due, default or
If the debtor does what has been forbidden him to delay by the debtor will automatically arise.
do, the obligee can ask the debtor to have it 31. 2. When the law so provides The express
undone. If it is impossible to undo what was done, provision of law that a debtor is in default. For
the remedy of the injured party is for an action of instance, taxes must be paid on the date prescribed
damages. Example- A bought a land from B. It was by law, and demand is not necessary in order that
stipulated that A would not construct a fence in a the taxpayer is liable for penalties.3. When time is
certain portion of his land adjoining that land sold of the essence Because time is the essential factor
by B. Should A construct a fence in violation of the in the fulfillment of the obligation. Example, Gaya
agreement, B. can bring an action to have the binds herself to sew the wedding gown of Maya to
fence remove at the expense of A. be used by the latter on her wedding date. Gaya
28.  ART. 1169. Those oblige to deliver or to do did not deliver the wedding gown on the date
something incur in delay from the time the obligee agreed upon. Even without demand, Gaya will be in
judicially or extra - judicially demands from theme delay because time of the essence.
the fulfillment of their obligation. However, the
32. 4. When demand would be useless  When the nature of the obligation and corresponds with the
debtor cannot comply his obligation as when it is circumstances of the person, of the time and of the
beyond his power to perform. Like when the object place. (Art. 1173, NCC)
of the obligation is lost or destroyed through the
37. 3. Delay (Mora) – like when there has been
fault of the debtor, demand is not necessary.5. In a
judicial or extra-judicial demand and the debtor
reciprocal obligation, from the moment one of the
does not comply his obligation, delay will occur.4.
parties fulfills his obligation, delay to the other
In contravention of the tenor of the obligation –
begins  For instance, in a contract of sale, if the
refers to the violation of the terms and conditions or
seller delivers the object to the buyer and the buyer
defects in the performance of the obligation, like
does not pay, then delay by the buyer begins and
when a landlord fails to maintain a legal and
vice versa, if the buyer pays and the seller did not
peaceful possession of a tenant being leased by
deliver the object, then the seller is on delay.
the latter because the landlord was not the owner
33. Kinds of delay – Mora solvendi – delay on the and the real owner wants to occupy the land, there
part of the debtor. Mora accipiendi – delay on the is contravention of the tenor of the obligation.
part of the creditor, like when the creditor 38. Other sources of liability for damages Loss of
unjustifiably refused to accept payment at the time
the thing with the fault of debtor. Deterioration with
it was due, is in delay. Compensatio morae – the fault of debtor. (Art. 1189)
delay both parties in a reciprocal obligation.
39. Kinds of Damages1. Moral damages – include
34. ART. 1170. Those who in the performance of physical sufferings, mental anguish, fright, serious
theirobligations are guilty of fraud, negligence, or anxiety, besmirched reputation, wounded feeling,
delay,and those whoin any manner contravene the moral shock, social humiliation and similar injury.2.
tenorthereof, are liable for damages. (1101) ART. Exemplary damages – imposed by way of example
1171. Responsibility arising from fraud
or correction for the public good.  Like in quasi-
isdemandable in all obligations. Any waiver of an
delicts, if the defendant acted with gross
actionfor future fraud is void. (1120a) ART. 1172.
negligence. (Art. 2231, NCC)
Responsibility arising fromnegligence in the
performance of every king ofobligation is also 40. 3. Nominal damages – are adjudicated in order
demandable, but such liability maybe regulated by that a right of the plaintiff, which has been violated
the courts, according to thecircumstances. (1130) by the defendant, may be vindicated or recognized
and not for the purpose of indemnifying the plaintiff
35. ART. 1173. The fault or negligence of the
for any loss suffered by him. (Art. 2221, NCC)4.
obligorconsists in the omission of that diligence
Temperate or moderate damages – are more than
which isrequired by the nature of the obligation
nominal but less than compensatory damages may
andcorresponds with the circumstances of the
be recovered when the courts finds that its amount
persons,of the time and of the place. When
cannot, from the nature of the case, be proved with
negligence showsbad faith, the provisions of
certainty. Pecuniary loss means loss of money, or
articles 1171 and 2201,paragraph 2, shall apply. If
of something by which money or something of
the law or contract does not state the diligenceof
money value may be acquired. (Black Law Dict. P.
which is to be observed in the performance,
1131)
thatwhich is expected of a good father of a family
shall berequired. (1104a) 41. 5. Actual or compensatory damages – except
as provided by law, or a stipulation, one is entitled
36. Sources of liability for damages:1. Fraud (dolo)
to an adequate compensation only for such
– is the intentional deception made by one person
pecuniary loss suffered by him as he has duly
resulting in the injury of another.  The fraud
proved. (Art. 2199, NCC)  Damages may be
referred to is incidental fraud, that is, fraud incident
recovered:  For loss or impairment of earning
to the performance of a pre-existing obligation.2.
capacity in cases of temporary or permanent
Negligence (culpa) – consists in the omission by
the obligor of that diligence which is required by the
personal injury;  For injury, to the plaintiff’s the assumption of risk. An example of this is a
business standing or commercial credit. contract of insurance.

42.  Liquidated damages – are those agreed upon 47.  ART. 1175. Usurious transaction shall be
by parties to a contract to be paid in case of breach governed by special laws.  Note: C.B. Circular No.
thereof. (Art. 2226, NCC) 905 suspends the ceilings in the usury law. Hence,
parties can agree as to the rate of interest. Kinds
43.  ART. 1174. Except in cases expressly
of interest 1. Conventional *The rate which is
specified by the law, or when it is otherwise
agreed upon by the parties. 2. Legal Interest *The
declared by stipulation, or when the nature of the
rate which is prescribed by law. 3. Lawful Interest
obligation requires the assumption of risk, no
*The rate which is agreed upon by the parties but
person shall be responsible for those events which
which rate is within the rate authorized by law. 4.
could not be foreseen, or which, though foreseen,
Usurious Interest *The rate which is in excess of
were inevitable (1105a)
the maximum rate of interest allowed by law.
44.  Fortuitous even – is an event which cannot be
48. ART. 1176.The receipt of the principal by the
foreseen which though foreseen is inevitable.
creditorwithout reservation with respect to the
Fortuitous event proper are acts of God such as
interest, shallgive rise to the presumption that said
volcanic eruption, earthquake, lightning, etc. is now
interest hasbeen paid. The receipt of a later
similar with force majuere or acts of man such as
installment of a debtwithout reservation as to prior
conflagration, war, robbery, etc.1. Requisite
installments, shalllikewise raise the presumption
necessary to constitute fortuitous event  The that such installmentshave been paid. (1110a)
failure of the debtor to comply with the obligation Presumption means “the inference as to
must be independent from the human will;  The theexistence of a certain fact which if not
occurrence makes it impossible for the debtor to contradicted isconsidered as true.”
fulfill the obligation on a normal manner, and the
obligor did not take part as to aggravate the injury 49. The presumption in the above article is a
of the creditor. (Vasquez v.C.A. G.R. 42926) disputable presumption, whereby one which can be
contradicted by presenting proof to the contrary
45. 2. As a general rule, no person shall be held while a conclusive presumption does not admit any
responsible for fortuitous events  Example – Gaya evidence or proof, hence, it is considered as a
obliged herself to deliver a determine car to Tito on fact. Presumption under this article: 1. Receipt of
Dec. 30, 1998. Before the arrival of the period, the the principal, without reservation as to the interest,
car was struck by lightning and was totally shall give rise to the presumption that the said
destroyed. Gaya cannot be held responsible for the interest has been paid. 2. When the creditor issues
destruction of the car, hence her obligation to a receipt of a later installment of a debt without
deliver is extinguished. reservation as to prior installment is presumed to
46.  Exceptions (when the person is responsible have been paid.
despite the fortuitous even).a. When the law 50.  ART. 1177. The creditors, after having
expressly so provides, such as:  The debtor is pursued the property in possession of the debtor to
guilty of fraud, negligence or in contravention of the satisfy their claims, may exercise all the rights and
tenor of the obligation. (Art, 1170, NCC)  The bring all the actions of the latter for the same
debtor has proved to deliver the same thing to two purpose, save those which are inherent in his
or more persons who do not have the same person; they may also impugn the acts which the
interest. ( Art. 1165,NCC )  The thing to delivered debtor may have done to defraud them. (1111)
is generic.  The debtor is guilty of default or delay. Rights of Creditors – In order to satisfy their claims
( Art. 1169,NCC )  The debtor is guilty of against the debtor, creditors have the following
concurrent negligence.b. When declared by successive rights:1. to levy by attachment and
stipulation;c. When the nature of obligation requires 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 55. Characteristics of Contracts 1. Freedom to
the debtor, except, such as are inherently personal contract – they may establish terms and conditions
to him; and3. to ask for the rescission of the as they may deem convenient. 2. Relativity – it is
contracts made by the debtor in fraud of their rights. binding only upon the parties and their
successors. 3. Obligatory force – it constitutes the
51.  ART. 1178. Subject to the laws, all rights
acquired in virtue of an obligation are transmissible, law as between the parties. 4. Mutuality – its
if there has been no stipulation to the contrary. validity and performance cannot be left to the will of
only one of the parties.
(1112)  As a rule, all rights acquired in virtue of an
obligation are transmissible, except in the following 56. Classification of A Contract: (FORM) 1. As to
cases: 1. When the law so provides. 2. When the perfection a. Consensual – one which is perfected
parties stipulate otherwise – by agreement of by mere consent (Art. 1315 b. Real Contract –
parties that the rights acquired by them will not be perfected by mere consent and by the delivery of
transmitted to any other person. 3. When the the object or subject matter. Ex. Deposit, pledge, or
obligation is purely personal in nature. commodatum. 2. As to dependence to other
52. General Provisions on ContractsART. 1305. A contract. a. Principal – one which can stand alone.
contract is a meeting of mindsbetween two persons Ex. A contract of sale, lease. b. Accessory – those
whereby one binds himself,with respect to the which are dependent upon another contract. Ex.
other, to give something or torender service. Contract of mortgage, pledge of guaranty. c.
(1254a) The above article defines the term Preparatory – those which is created in order that a
Contract. In a contract, one or more persons bind future transaction or contract may be entered into
themselves with respect to another or reciprocally, by te parties. Ex. Contract of partnership or agency.
to the fulfillment of a presentation to give, to do or 57.  3. According to name or designation a.
not to do. Nominate – one which has particular name or
53. Elements of Contract 1. Essential elements – designation such as sale, agency, etc. b.
those elements without which there can be no valid Innominate – those without particular name. 4.
contract. This element are consent, object or According to the nature of obligation a. Unilateral –
subject matter and cause or consideration 2. where only one ha an obligation to perform. Ex.
Natural elements – those elements which are found Contract of donation, commodation. b. Bilateral –
in a contract by its nature and presumed by law to where both parties have reciprocal obligation to
exist, such as Warranty of hidden defects or perform. Ex. Sale. 5. According to risk involved a.
eviction in contract of sale. 3. Accidental elements Commutative - where there is an exchange of
- those which exist by virtue of an agreement for values, such as lease. b. Aleatory - one which the
the purpose of expanding, limiting, or modifying a fulfillment of the obligation depends upon chance.
contract. Such accidental elements are condition, Ex. Contract of insurance.
clauses, terms, modes of payment, or penalties. 58.  6. According to cause a. Onerous – one
54. Stages of A Contract 1. Preparatory or which imposes valuable consideration such as sale,
conception – process of formation such as mortgage. b. Gratuitous – one which one of the
bargaining, negotiation to arrive at a define parties does not receive any valuable
consideration, such as commodatum.7. According
contract. 2. Perfection or birth – there is now a
to form a. Oral – by word of mouth of the parties b.
meeting of minds to arrive at a definite agreement
Written – the agreement which is reduced in writing
as to the subject matter, cause or consideration,
which may be public or private or private document
terms and conditions of contract. 3. Consumption
or death – which is the fulfillment or performance of 59. ART. 1306. The contracting parties may
the terms and conditions agreed upon in the establish suchstipulations, clauses, terms and
contract may be said to have been fully conditions as they maydeem convenient, provided
accomplished or executed. they are not contrary to law,morals, good customs,
public order, or public policy.(1255a)Art. 1307 party that the decision isjust and suitable. If the
Innominate contracts shall be regulated bythe decision made by Maya is manifestlyinequitable,
stipulations of the parties, by the provisions the court may be called upon to decide what
ofContracts, by the rules governing the isequitable
mostanalogous nominate contracts, and by the
64.  ART. 1311. Contracts take effect only
customsof the place.
between theparties, their assigns and heirs, except
60. Contract Binds by Both Parties ART. 1308. The in case wherethe rights and obligations arising from
contract must bind bothcontracting parties; its the contract arenot transmissible by their nature, or
validity or compliance cannotbe left to the will of by stipulation, orby provision of law. The heir is not
one of them. (1256a) liable beyond thevalue of the property he perceived
from the decedent. If a contact should contain
61.  Contracts entered by and between the parties
some stipulation infavor of third person, he may
mushbind both parties in order that it can be
demand its fulfillmentprovided he communicated
enforced againsteach other. This is also known as
his acceptance to theobligor before its revocation.
“mutuality of contract”.Hence, its validity or
A mere incidentalbenefit or interest of a person is
compliance cannot be left to the will ofone of them.
not sufficient. Thecontracting parties must have
This principle is based on the essentialequality of
clearly and deliberatelyconferred a favor upon a
the parties. It is elementary rule that no partycan
third person. (1257a)
renounce or violate the law of the contract without
theconsent of the other. (11 Manresa 380) 65.  Art. 1312 In contracts creating real rights,
Example, Gaya and Laura entered into a contract third persons who come into possession of the
tosell whereby Gaya binds herself to sell her only object of the contract are bound thereby, subject to
parcel ofland to Laura if Gaya decides to leave for the provisions of the Mortgage Law and the Land
States. Thecontract is void because the fulfillment Registration Laws. Art. 1313 Creditors are
of the conditiondepends on the will of Gaya. protected in cases of contracts intended to defraud
62.  ART. 1309. The determination of the them. Art. 1314 Any third person who induces
performance may be left to a third person, whose another to violate his contract shall be liable for
decision shall not be binding until it has been made damages to the other contracting party.
known to both contracting parties. ART. 1310. The 66. Cases Where Third person MayBe Affected By
determination shall not be obligatory if it is evidently a Contract 1. In determining the performance of
inequitable. In such case, the courts shall decide both parties (Art. 1309). 2. In contracts containing
what is equitable under the circumstances. a stipulation in favor of a third person (Art.1311).
63. Determination of Performanceby Third Person 3. In contracts creating real rights (Art. 1312). 4. In
As a rule, compliance with a contract cannot be left contracts entered into to defraud creditor (Art.
to thewill of one of the contracting parties. 1313). 5. In contracts which have been violated at
However, thedetermination of its performance may the inducement of the thirdperson (Art. 314).
be left to a third personafter it has been made Example, Gaya mortgaged her parcel of land in
known to both contracting parties.Provided, further, favor of Laura ascollateral for her debt. The
the parties are not bound by thedetermination if it is mortgage is duly registered. Later on, Gaya soldthe
evidently inequitable or unjust when thethird person same land to Tito. In this case, Tito bought the land
acted in bad faith or by mistake, the courts subject to themortgage constituted thereon. Tito,
shalldecide what is equitable under the although a stranger in the mortgage,being a real
circumstances. Example, Gaya sold her parcel of right follows the property on the right of Laura to the
land to Laura. It wasagreed that Maya, a real estate mortgage
appraiser would be the one todetermine the
67.  Art. 1317 No one may contract in the name of
reasonable price of the land. Maya, then, fixedthe
another without being authorized by the latter, or
price after considering the factors affecting the
unless he has by law a right to represent him.  A
value of theland, and informing both contracting
contract entered into in the name of another by one 73. Art. 1327 The following cannot give consent to
who has no authority or legal representation, or a contract:1.) Unemancipated minors;2.) Insane or
who has acted beyond his powers , shall be demented persons, and deaf-mutes who donot
unenforceable, unless it is ratified, expressly or know how to write. (1263a)Art. 1328 Contracts
impliedly, by the person on whose behalf it has entered into during a lucid intervalare valid,
been executed, before it is revoked by the other contracts agreed to in a state of drunkenness
contracting party. (1259a) orduring a hypnotic spell are voidable.

68. Chapter 2: Essential Requisites 74. Art. 1329 The incapacity declared in article

ofContractsGeneral ProvisionsArt. 1318 There is no 1327 is subjectto the modifications determined by
contract unless the followingrequisites occur:1. law, and isunderstood to be without prejudice to
Consent of the contracting parties;2. Object certain specialdisqualifications established in the laws.Art.
which is the subject matter of the contract;3. Cause 1330 A contract where consent is given
of the obligation which is established. (1261) throughmistake, violence, intimidation, undue
influence orfraud is voidable.
69. Section 1. ConsentArt. 1319 Consent is
manifested by the meeting of theoffer and the 75. Art. 1331 In order that mistake may invalidate
acceptance upon the thing and the causewhich are consent, itshould refer to the substance of the thing
to constitute the contract. The offer must becertain which is theobject of the contract, or to those
and the acceptance absolute. A conditions which haveprincipally moved one or both
qualifiedacceptance constitutes a counter- parties to enter into thecontract.Mistake as to the
offer.Acceptance made by letter or telegram does identity or qualifications of one of theparties will
not bind theofferer except from the time it came to vitiate consent only when such identity
his knowledge.The contract in such a case, is orqualifications have been the principal cause of
presumed to have beenentered into the place contract.A simple mistake of account shall give rise
where the offer was made. (1262a) to itscorrection. (1226a)

70. Art. 1320 An acceptance may be express or 76. Art. 1332 When one of the parties is unable to
implied.Art. 1321 The person making the offer may read, or if thecontract is in a language not
fix the time,place, and manner of acceptance, all of understood by him, and mistakeor fraud is alleged,
which must becomplied with.Art. 1322 An offer the person enforcing the contract mustshow that
made through an agent is acceptedfrom the time the terms thereof have been fully explained to
acceptance is communicated to him. theformer.Art. 1333 There is no mistake if the party
alleging it know thedoubt, contingency, or risk
71. Art. 1323 An offer becomes ineffective upon the
affecting the object of thecontract.Art. 1334. Mutual
death,civil interdiction, insanity, or insolvency of
error as to the legal effect of an agreementwhen
either partybefore acceptance is conveyed.Art.
the real purpose of the parties is frustrated may
1324 When the offerer has allowed the offeree
vitiateconsent.
acertain period to accept, the offer may be
withdrawn atany time before acceptance by 77. Art. 1335. There is violence when in order to
communicating suchwithdrawal, except when the wrest consent,serious or irresistible force is
option is rounded upon aconsideration, as employed. There is intimidation when one of the
something paid or promised. contracting parties is compelled by a reasonable
and well-grounded fear of an imminent and grave
72. Art.1325. Unless it appears otherwise,
peril upon his person or property, or upon the
businessadvertisements of things for sale are not
person or property of his spouse, descendants or
definite offers,but mere invitations to make an
ascendants, to give his consent. To determine the
offer.Art. 1326. Advertisement for bidders are
degree of the intimidation, the age, sex and
simplyinvitations to make proposals, and the
advertiser is notbound to accept the highest or condition of the person shall be borne in mind. A
lowest bidder, unless thecontrary appears. threat to enforce one’s claim through competent
authority, if the claim is just or legal, does not vitiate any purposecontrary to law, morals, good customs,
consent. (1267a) public order orpublic policy binds the parties to their
real agreement.
78. Art. 1336. Violence or intimidation shall annul
theobligation, although it may have been employed 83. Section 2. Object of Contracts1347. All things
by thirdPerson who did not take part in the contract. which are not outside the commerce ofmen,
(1268)Art. 1337. There is undue influence when a including future things, may be the object of
person takesimproper advantage of his power over acontract. All rights which are not intransmissible
the will ofanother, depriving the latter of a mayalso be the object of contracts. No contract
reasonable freedom ofchoice. The following may be entered into upon future inheritance except
circumstances shall be considered:the confidential, in cases expressly authorized by law. All services
family, spiritual, and other relationsbetween the which are not contrary to law, morals, good
parties, or the fact that the person allegedto have customs, public order or public policy may likewise
been unduly influenced was suffering frommental be the object of a contract. (1271a)
weakness, or was ignorant or in financialdistress.
84. Art. 1348. Impossible things or services cannot
79. Art. 1338. There is fraud when, through be theobject of contracts. (1272)Art. 1349. The
insidious wordsor machinations of one of the object of every contract must bedeterminate so as
contracting parties, theother is induced to enter into to its kind. The fact that the quantityis not
contract which, withoutthem, he would not have determinate shall not be an obstacle to
agreed to. (1269)Art. 1339. Failure to disclose theexistence of a contract, provided it is possible
facts, when there is a duty toreveal them, as when todetermine the same, without the need of a new
the parties are bound byconfidential relations, contractbetween the parties. (1273)
constitutes fraud.Art. 1340. The usual
exaggerations in trade, when theother party had an 85. Section 3. Cause of ContractsArt. 1350. In
opportunity to know the facts, are notin themselves onerous contracts the cause is understoodto be, for
fraudulent. each contracting party, the prestation orpromise of
a thing or service by the other; inremuneratory
80. Art. 1341. A mere expression of an opinion ones, the service or benefit which isremunerated;
does notsignify fraud, unless made by an expert and in contrast of pure beneficence, themere
and the otherparty has relied on the former’s liberality of the benefactor. (1274)Art. 1351. The
special knowledge.Art. 1342. Misrepresentation by particular motives of the parties inentering into a
a third person does notvitiate consent, unless such contract are different from the causethereof.
misrepresentation hascreated substantial mistake
and the same is mutualArt. 1343. Misrepresentation 86. Art. 1352. Contracts without cause, or with
made in good faith is notfraudulent but may unlawfulcause, produce no effect whatever. The
constitute error. cause is unlawfulif is contrary to law, morals, good
customs, public orderor public policy. (1275a)Art.
81. Art. 1344. In order that fraud may make a 1353. The statement of a false cause in contracts
contractvoidable, it should be serious and should shallrender them void, if it should not be proved
not have beenemployed by both contracting that theywere rounded upon another cause which is
parties. Incidental fraud only obliges the person true andlawful.
employing it to pay damages.Art. 1335. Simulation
87. Art. 1354. Although the cause is not stated in
of a contract may be absolute orrelative. The
thecontract, it is presumed that it exist and is lawful,
former takes place when the parties do notintend to
unlessthe debtor proves the contrary. (1277)Art.
be bound at all; the latter, when the partiesconceal
1355. Except in cases specified by law, lesion
their true agreement.
orinadequacy of cause shall not invalidate a
82. Art. 1346. An absolutely simulated or fictitious contract,unless there has been fraud, mistake or
contractis void. A relative simulation, when it does undue influence.
not prejudicea third person and is not intended for
88. “Innocence of the law excuses no one” 
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Philippine Laws: Obligations and Contracts

paulthebeloved (52)in #philippines • 3 years ago payment because although the obligation has
prescribed, in equity and moral justice, Romeo still
Obligation: Concepts and Sources owed Juliet the amount of $50, 000.

( Article 1144 (3), Civil Code of the Philippines.

Upon a written contract; actions must be brought
withing 10 years from the time the right of action
accrues. )

There are 4 essential requisites of an obligation in

order to exist. All of these must be present:

1. Active subject - It is the party (creditor or

obligee) who has the right to demand the
performance of an obligation.
image source

2. Passive subject - It is the one (debtor or obligor)

An obligation is a juridical necessity to give, to do
who is obliged to perform the obligation.
or not to do.1 An obligation needs to be juridical in
nature in order for it to have the force of law.
3. Prestation - It is the object of the obligation. It is
Through this, a court may be asked to order the
what the obligation is all about either to give, to do,
performance of an obligation.
not to do, or a combination.

4. Efficient Cause - The juridical tie that binds the

An obligation are civil or natural. 
parties to an obligation. It is what binds the parties
Civil Obligation  (e.g. contracts, quasi contracts).
is based on a positive law and gives right of action to
compel their performance, while 
Example: Romeo executed a contract of loan to
Natural Obligation  borrow money from Juliet whom he wishes to
is based on natural law, but on equity and moral justice. spend in courting Juliet. Juliet in turn agreed and
Hence, it is not enforceable by court action, but after lend money to Romeo.
voluntary performance of the debtor, he can no longer
recover what he has given. In the preceding example, Romeo is the passive
subject while Juliet is the active subject. Their
Example: Romeo executed a promissory note in prestation is the money being borrowed while their
favor of Juliet for $50, 000. Romeo is the debtor efficient cause is the contract of loan. All of the
(payor) while Juliet is the creditor (payee). If Romeo essential requisites of an obligation is present,
does not pay on due date, Juliet can enforce the hence such contract creates an obligation.
fulfillment of the obligation by court action. If Juliet
does not file a court action against Juliet within 10
years from due date which is the prescriptive period The law clearly defines what the different sources
for an action against a written contract. Juliet of an Obligation are.
looses the right to exact performance by court
action. However, if Romeo, out of his love for Juliet, Obligations arise from:2
voluntarily makes the payment to Juliet thought
such obligation has prescribed, Romeo will no (1) Law;
longer be allowed to recover what he has given as
(2) Contracts;

(3) Quasi-contracts;

(4) Acts or omissions punishable by law; and

(5) Quasi-delicts. (1089a)

Law image source

Obligations derived from law are not presumed. A contract is a meeting of minds between two
Only those expressly determined in this Code or in persons whereby one binds himself, with respect to
special laws are demandable, and shall be the other, to give something or to render some
regulated by the precepts of the law which service.(125a).6 A contract, according to article
establishes them; and as to what has not been 1159 and 1305, bind two persons to perform an
foreseen, by the provisions of this Book. (1090)3 obligation that are incumbent upon them based on
their agreement having in them the force of law and
should be complied in good faith. The two persons
are the active and passive subject while their
agreement and what they have agreed upon are
the prestation and efficient cause.

An example of this is a contract of loan, wherein the

active subject is the creditor; the passive subject is
the debtor. The prestation is money to be borrowed
and the efficient cause is the contract.
image source

Example: Romeo executed a contract of loan to borrow

A law is a binding custom or practice of a
money from Juliet whom he wishes to spend in courting
community : a rule of conduct or action prescribed
Juliet. Juliet in turn agreed and lend money to Romeo.
or formally recognized as binding or enforced by a
The meeting of the minds of Romeo and Juliet created
controlling authority.4 Obligation derived from law
the contract of loan and to enforce what they have
must not be presumed. If the law does not include,
agreed upon they put it in writing (contract of loan)
therefore it excludes. Only those which the law
which is what the statute of fraud demand.
clearly stipulate or express are demandable.

Example of this is the obligation to pay Taxes.

Those which are clearly stipulated in the National
Internal Revenue Code (R.A. 8424) are
demandable and those which are not clearly
expressed are not presumed.

Contracts

Obligations arising from contracts have the force of

law between the contracting parties and should be
complied with in good faith. (1091a)5
Quasi-contracts all what a farmer should do. Romeo spent
necessary expenses which needs to be reimbursed
Obligations derived from quasi-contracts shall be in order for Juliet not to unjustly enrich herself at
subject to the provisions of Chapter 1, Title XVII, of the expense of Romeo.
this Book. (n)7
b. Solutio indebiti
Is the juridical relation resulting from a lawful,
voluntary and unilateral act which has for its It is the juridical relation which arises when a
purpose the payment of indemnity to the end that person is obliged to return something received by
no one shall be unjustly enriched or benefited at him through error or mistake (1895)10
the expense of another (n).8 
Solutio indebiti refers to payment by mistake. It is
Quasi-contract arises because of these acts which receiving payment by mistake that is not due or
might result to an unjust enrichment. There is does not have such right to demand such payment.
unjust enrichment when a person unjustly retains a It creates an obligation to return such payment.
benefit at the loss of another that is against the
fundamental principles of justice, equity and good Example: Romeo bought goods from Juliet Store.
conscience. The goods cost $1500. Romeo gave $2000 to the
store cashier and receive a change of $700.
Examples of these acts that give rise to quasi- Romeo is duty bound to return the excess of $200
contract are Negotiorum gestio and Solutio indebiti. to the store. Otherwise, he will be unjustly enriching
himself at the expense of Juliet Store.
a. Negotiorum gestio

Negotiorum gestio is the voluntary administration of

the property, business or affairs of another, without
his consent or authority, that creates an obligation
for reimbursement for the necessary expenses the
gestor had spent.9

image source

Another example, Romeo commutes via jeepney

on his way to school. Juliet, a jeepney driver,
receives Php 10 from Romeo. Because of the
handsomeness and cuteness of Romeo, Juliet
image source
thought that Romeo is a student. So, she gave
Romeo a change of Php 4 rather than Php 2 if no
Example: Juliet left her farm unattended for 1 week discount given. By solutio indebiti, Romeo has no
because she is having a vacation. Romeo, a right to receive the excess Php 2. Therefore,
concerned lover in secrecy, noticed that Juliet has Romeo is bound to return the excess Php 2 or else
not been around and the plants are slowly dying. he will be unjustly enriching himself at the expense
Out of affection, Romeo cultivated the land, of Juliet.
watered the plants, buy fertilizers and placed
fertilizers to the plants, removed the weeds and do Acts or omissions punishable by law
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)11

Every person criminally liable for a felony is also

civilly liable.12 Commission of a crime makes the
offender civilly liable. Such civil liability includes:13

image source
1. Restitution;
2. Reparation of the damage caused;
Example: Romeo, a handsome try hard baseball
3. Indemnification for consequential
player, was playing baseball outside Juliet's house.
damages.
Upon seeing Juliet, Romeo suddenly got excited
and hit the ball so hard that it fly straight to Juliet's
window shattering it into pieces and bounce right
into Juliet's face injuring her beloved nose. Though
Romeo and Juliet has no contractual relation at all.
They are now bound to each other because of
quasi-delict. Because of Romeo's negligence, he
will be liable for the damages to Juliet.

image source

Example: Romeo, a horse racing enthusiast, steals

the horse of Juliet. Romeo commits the crime of
stealing Juliet's beloved horse. Romeo is criminally
liable. In addition, Romeo is also civilly liable. He is
liable to return the horse, paying for its value if he
cannot return the horse and indemnifying Juliet of
Sources
the consequential damages she had suffered.
1
Article 1156, Civil Code of the Philippines
Quasi-delict 2
Article 1157, Civil Code of the Philippines
3
Article 1158, Civil Code of the Philippines
Obligations derived from quasi-delicts shall be 4
Merriam-Webster Dictionary
governed by the provisions of Chapter 2, Title XVII 5
Article 1159, Civil Code of the Philippines
of this Book, and by special laws. (1093a)14 6
Article 1305, Civil Code of the Philippines
7
Article 1160, Civil Code of the Philippines
Quasi-delict (also known as tort or culpa aquiliana ) 8
Article 2142, Civil Code of the Philippines
are acts or omissions that cause damage to 9
Article 2144, Civil Code of the Philippines
another, there being fault or negligence, is obliged 10
Article 2154, Civil Code of the Philippines
to pay for the damage done but without any pre- 11
Article 1161, Civil Code of the Philippines
existing contractual relations between the 12
Article 100, Revised Penal Code of the
party.15 There is quasi-delict if there is damages
Philippines
sustained, negligence by act or omission, and the 13
Article 104, Revised Penal Code of the
connection of the cause and effect between such
Philippines
negligence and damages. 14
Article 1162, Civil Code of the Philippines
15
Article 2176, Civil Code of the Philippines 
Civil Code of the Philippines 


The topic on contracts will soon to be discussed. It

is a broad topic. What is in this post is just a
nutshell of what contract is. Additional topics will
soon be posted. Keep in touch.
For any queries or topics you want to be discussed
feel free to comment.
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[-]
bayanihan (54) 3 years ago 
#law #steemiteducation#education#steemph
Nosebleed man kuya. Pwede un taxation with
3 years ago in #philippines by paulthebeloved (52)
gains/tradings sa digital currencies? Yan,
$30.65
applicable sa lahat. Yayamanin tayo once in a while
 ☺

 $0.00
35 votes 1 vote
 
 Reply
 [-]
 paulthebeloved (52) 3 years ago (edited)

 hahaha eto ata yun pero not discussing but only
 arguing that earnings from crypto from the point of
 view of the law is taxable. Masyado kasing madugu
 at broad ang taxation maraming pasikot sikot kaya
 sinimplify ng Pangulo.
 mhttps://steemit.com/philippines/@paulthebeloved/
 philippines-steem-and-steemdollars-sbd-taxable-or-
 non-taxable

 As of the moment, wala pa kasi yun sa current
 situation ng taxation natin. Parang nakatengga pa
 ang BIR di pa naglalabas ng pamamaraan paano
 katasan ang crypto hahaha.

 May susunod pa sa topic na to. Introduction at
 concepts pa to. pero nagagamit din naman natin sa
Reply 5 pang-araw araw kasi this is what governs our civil
 society hahaha
$0.00
Reply
[-]
minnowsupport (70) 3 years ago 

Congratulations! This post has been upvoted from

the communal account, @minnowsupport, by
paulthebeloved from the Minnow Support Project.
It's a witness project run by aggroed, ausbitbank,
teamsteem, theprophet0, someguy123, neoxian,
followbtcnews, and netuoso. The goal is to help
Steemit grow by supporting Minnows. Please find
us at the Peace, Abundance, and Liberty Network
(PALnet) Discord Channel. It's a completely public
and open space to all members of the Steemit
community who voluntarily choose to be there.

If you would like to delegate to the Minnow Support

Project you can do so by clicking on the following
links: 50SP, 100SP, 250SP, 500SP, 1000SP, 5000
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Be sure to leave at least 50SP undelegated on
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[-]
sndbox (77) 3 years ago 

Hello, your post was nominated for an upvote by a

fellow within the Sndbox incubator. Thank you for
sharing your law experience and
understanding @paulthebeloved! Steem on.

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[-]
paulthebeloved (52) 3 years ago 

I am deeply honored for such nomination. I will

continue to steem on giving my best for a high
quality post. Thank you.

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