Obligations and Contracts Notes Compiled by: Bernice Joana Pinol, Ateneo Law School Sources: Sta.Maria, De Leon, Pineda and Ateneo Central Bar Ops Reviewer Based on the syllabus of: Prof. Siegfred Mison
General Provisions: (Articles 1156 – 1162, 31 – 34, 2014 - 2015, 2142 – 2175, 2176, 2202 - 2230 of the New Civil Code, and Articles 100 - 113 of the Revised Penal Code.) 1. Concept, Requisites, and Classification: Leung
Ben vs. O’Brien, 8 Phil 102; Bautista vs. F.O. Borromeo, Inc., 30 SCRA 119; Dela Cruz vs. Northern Theatrical, 50 O.G. 4225, Sept 1954
2. Examples Examples and and Distinctio Distinctions ns of Sources Sources of Obligat Obligations ions:: Pichel vs. Alonzo, 111 SCRA 341; Licudan vs. Court of Appeals, Jan 24, 1991; Barredo vs. Garcia, 73 Phil 607; Gutierrez vs. Gutierrez, 56 Phil 177) ARTICLE 1156. An obligation is a juridical necessity to give, to do or not to do. PART I - OBLIGATION - An obligation is a juridical necessity to give, to do or not to do. The term obligation is derived from the Latin word obligatio, which means tying or binding. It is a tie or bond recognized by law by virtue of which one is bound in favor of another to render something. Juridical Necessity —This means that the courts may be called upon by the aggrieved party to enforce its fulfillment or in default thereof, the economic value that it represents. In a proper case, the debtor or obligor may also be made liable for damages, which represents the sum of money given as a compensation for the injury or harm suffered by the creditor or obligee (he who has the right to the performance of the obligation) for the violation of his rights. Civil Obligations —obligations which give to the creditor or obligee a right under the law to enforce their performance in courts of justice. Natural obligations—Based on equity and natural law, not granting a right of action to enforce their performance performance although in case of voluntary fulfillment by the debtor, the latter may not recover what has been delivered or rendered by reason thereof. ELEMENTS of an obligation: Active subject subject (obligee/ (obligee/cred creditor itor ) – the 1. Active the one one in whos whose e favo favorr the the oblig obligat atio ion n is constituted. The person who is entitled to demand the fulfillment of the obligation; he who has a right. 2. Passive subject (obligor/debtor ) – the one who has the duty of giving, doing or not doing 3. Object – prestation; the conduct which has to be observed by the debtor/obligor 4. Vinculum Juris – juridical/legal tie 5. Causa (causa debendi/causa obligationes) - why obligation exists
Example: Under a building contract, X bound himself to build a house for Y for Php 1,000,000.00. Here, X, is the passive subject, Y is the active subject, the building of the house is the object or prestation, and the agreement or contract, which is the source of the obligation,
is the juridical tie. Suppose X had already constructed the house and it was the agreement that Y would pay X after the construction is finished, X then becomes the active subject and Y, the passive subject. Requisites of Object: a. licit - if illicit, it is void b. possible - if impossible, it is void c. determinate or determinable - or else, void d. pecu pecuni niar ary y value value
Obligation, right and wrong distinguished: 1) Obligation is the act or performance, performance, which the law will enforce.
2) Right, Right, on the other other hand is the power power which which a person has under under the law law to demand demand from another any prestation. 3) A wrong wrong (cause of action) action),, according according to its legal legal meaning, meaning, is an act or omission omission of one party in violation of the legal right or rights of another. In law, the term injury is also used to refer to the wrongful violation of the legal right of another. Essential Elements of wrong or injury: a) a legal right right in favor of a person person (credito (creditor/ r/ obligee/ obligee/ plaintiff) plaintiff) b) a correlativ correlative e legal obligation obligation on the part of another another (debtor/ (debtor/ obligor/ obligor/ defendant); defendant); to respect or not to violate said right; and c) an act or omissio omission n by the latter latter in violation violation of said said right with with resulting resulting injury injury or damage to the former. Kinds of obligation according to the subject matter: From the viewpoint of the subject matter, obligation may either be real or personal. 1) Real obligation (obligation to give) is that in which the subject matter is a thing
which the obligor must deliver to the obligee. Example: X binds himself to deliver piano to Y. 2) Personal obligation (obligation to do or not to do) is that in which the subject matter is an act to be done or not to be done. There are two kinds of personal obligation: a) Positive personal obligation or obligation obligation to do or to render render service. service. b) Negative Negative perso personal nal obligatio obligation n is obligation obligation not not to do. Article 1157. Obligations arise from: 1) Law; 2) Cont Contra ract cts; s; 3) QuasiQuasi-co contr ntrac acts; ts; 4) Acts or or omission omissions s punished punished by by law; 5) And And Quasi Quasi-de -delic licts ts
SOURCES OF OBLIGATION: (OBLIGATION EX LEGE ) - Must be expressly 1. LAW (OBLIGATION expressly or or impliedly set forth forth and cannot
be presumed. Imposed by law (paying tax, support one’s family). 2. CONTRACT (OBLIGATION EX CONTRACTU ) – When they arise from the stipulation
of the parties. Must be complied with in good faith because it is the “law” between parties; neither party may unilaterally evade his obligation in the contract, unless:
a) contr contrac actt autho authoriz rizes es it b) other other party party asse assents nts Parties may freely enter into any stipulations, provided they are not contrary to law, morals, good customs, public order or public policy 3. QUASI-CONTRACT ( OBLIGATION EX QUASI-CONTRACTU ) - That juridical relation
resulting from a lawful, voluntary and unilateral act, and which has for its purpose, the payment of indemnity to the end that no one shall be unjustly enriched or benefited at the expense of another. Example: The obligation to return money paid by mistake or which is not due. 2 kinds: a. Negotiorum gestio - unauth unauthor orize ized d manag manageme ement; nt; This This takes takes place place when when a person voluntarily takes charge of another’s abandoned business or property without the owner’s authority b. Solutio indebiti - undue payment; This takes place when something is received when there is no right to demand it, and it was unduly delivered thru mistake 4. DELICTS ( OBLIGATION EX MALEFICIO OR EX DELICTO )
When they arise from civil liability, which is the consequence of a criminal offense. EXAMPLE: The obligation of a thief to return the car stolen by him, the d uty of a killer to indemnify the heirs of his victim. Governing rules: 1. Pertin Pertinent ent provis provision ions s of the RPC and other penal penal laws subject subject to Art 2177 Civil Civil Code Art 100, 100, RPC – Every Every person criminally criminally liable for a felony is also civilly liable 2. Chapter 2, Preliminary title, on Human Relations (Civil Code ) 3. Title 18 of of Book Book IV of the Civil Civil Code Code – on damages damages •
What civil liability arising from a crime includes: a. rest restit itut utio ion n b. repar reparat ation ion of of damag damage e cause caused d c. indemn indemnity ity for for consequ consequen entia tiall damages damages Effect of acquittal in criminal case: when acquittal is due to reasonable doubt – no civil liability when acquittal is due to exempting circumstances – there is civil liability when there is preponderance of evidence – there is civil liability • • •
5. QUASI-DELICT/TORTS
OBLI LIGA GATI TION ON EX QUAS QUASI-DE I-DELI LICT CTO O or EX QUAS QU ASII ( OB MALEFICIO ) - It is a fault or act of negligence ( or omission of care ) which causes damage damage to another, another, there being no pre-existin pre-existing g contract contractual ual relations relations between the parties Example: The obligation of the head of a family that lives in a building or a part thereof to answer for damages caused by things thrown or falling from the same, the obligation of the possessor of an animal to pay for the damages which it may have caused. Elements: a) There must be fault or negligence attributable attributable to to the person charged b) There There must must be be damage damage or or injury injury c) The There re must must be a dire direct ct rela relati tion on of caus cause e and and effe effect ct betw betwee een n the the faul faultt or negl neglig igen ence ce on the the one one hand hand and and the the dama damage ge or injur injury y on the the othe otherr hand hand
(proximate cause ) NOTE: Actually, there are only two sources: law and contracts, because obligations arising from quasi-contracts, quasi-contracts, delicts and quasi-delicts are really imposed by law. ARTIC ARTICLE LE 1158. 1158. Obliga Obligatio tions ns derive derived d from from law are not not presu presumed med.. Only Only those those expressly determined in this Code or in special laws are demandable, and shall be regulated by the precepts of the law which establishes them, and as to what has not been foreseen, by the provisions of this Book.
They are not presumed because they are considered a burden upon the obligor. They are the exception, not the rule. To be demandable, they must be clearly set forth in the law, i.e. the Civil Code or special laws. Example: Employer has not obligation to furnish free legal assistance to his employees, no law requires it. A private school has not legal obligation to provide clothing allowance to its teachers. ARTICLE 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.
The above article speaks of contractual contractual obligations or obligations arising from contracts or volun volunta tary ry agree agreeme ments nts.. It presu presuppo pposes ses that that the contr contract acts s enter entered ed into into are are valid valid and enforceable. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. 1) Binding forceforce- obligations have same same binding effect effect of obligations obligations imposed imposed by laws. laws. 2) Requirem Requirement ent of a valid contractcontract- of it is not contrary contrary to law, morals, morals, good customs, customs, public order, and public policy. In the eyes of the law, a void contract does not exist. Consequently, no obligations will arise. A contract may be valid but cannot be enforced. This is true in the case of unenforceable unenforceable contracts. Complia Compliance nce in good good faith Complia Compliance nce or perfo performa rmance nce in accor accordan dance ce with with the stipulations or terms of the contract or agreement. 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 lawful, voluntary and unilateral acts by virtue of which the parties become bound to each other to the end that no one will be unjustly enriched or benefited at the expense of another. There is no consent but the same is supplied by fiction of law. The law considers the parties as having entered into a contract, although they have not actually did so, and irrespective of their intention, to prevent injustice.
1) negot negotior iorum um gestio gestio—is —is the volunt voluntar ary y mana managem gement ent of the property property or affair affairs s of another without the knowledge or consent of the latter.
Example: Y incurs expenses for saving the house of X during a fire. X has the obligation to reimburse. 2) solutio solutio indebiti indebiti is the juridical relation relation which is created created when somethin something g is received received when there is no right to demand it and it was unduly delivered through mistake. Requisites: **there is no right to receive the thing delivered, **the thing was delivered through mistake Article 1161. Civil obligations arising from criminal offenses shall be governed by the penal laws, subject to the provisions of article 2177, and of the pertinent provisions of Chapter 2, Preliminary Title, on Human Relations, and of Title XVIII of this Book, regulating damages. Civil liability arising from crimes or delicts.
1) Oftentim Oftentimes, es, the commissio commission n of a crime crime causes not only moral moral evil but also materia materiall damag damage. e. From From this this princi principle ple,, the rule rule has been been estab establis lished hed that that every every perso person n criminally liable for an act or omission is also civilly liable for damages. 2) In crimes crimes,, howev however, er, which which cause cause no mater material ial damage damage (like (like conte contempt mpt,, insult insults s to
persons in authority, gambling, violations of traffic regulations, regulations, etc.), there is no civil liability to be enforced. But a person not criminally responsible may still be liable civilly civilly,, such such as failu failure re to pay a contr contract actual ual debt, debt, causi causing ng dama damage ge to anothe another’s r’s property without malicious or criminal intent or negligence, etc. Scope of civil liability: 1) Resti estitu tuti tion on;; 2) Reparat Reparation ion for for the dama damage ge caused, caused, and 3) Indemnif Indemnificati ication on for conse consequent quential ial damages damages Article 1162. Obligations derived from quasi-delicts shall be governed by the provisions of Chapter 2, Title XVII of this Book, and by special laws.
Obligations arising from quasi-delicts Quasi Quasi delict delict An act act or omiss omission ion by a perso person n (tort (tortfea feaso sor) r) which which cause causes s damage damage to anothe anotherr in his perso person, n, proper property, ty, or rights rights,, giving giving rise rise to an obliga obligatio tion n to pay for the damage done, there being fault or negligence but there is no pre-existing contractual relation between the parties.
Requisites: 1) There There must must be an an act or omiss omission ion 2) There There must must be be fault fault or or negligen negligence ce 3) There There must must be be damage damage caus caused ed 4) There There must be a direct relation relation or connectio connection n of cause and effect effect between between the act or omission and the damage and 5) There is no pre-existing contractua contractuall relation between the parties. parties. Crime Quasi-delict 1) Ther There e is crim crimin inal al or malic malicio ious us 1) There is only negligence intent or criminal negligence 2) The purpose Is punishment 2) Indemnification of the offended party 3) Affects public interest 3) Concerns private interest
4) There are generally two liabilities: criminal and civil 5) Can no be compromised or settled by the parties themselves 6) The guilt of the accused must be proved beyond reasonable doubt
4) There is only civil liability li ability 5) Liability can be compromised as any other civil liability 6) The The faul faultt or negl neglig igen ence ce of the the defendant need only be proved by preponderance preponderance of evidence
STUDY GUIDE Definitions 1) 2) 3) 4) 5)
Obli Obliga gati tion ons s Quas Quasi-c i-con ontr trac actt Compl Co mplian iance ce in goo good d faith faith Wrong Solu Soluti tion on Inde Indebi biti ti
Discussions 1) What What are are the essenti essential al requis requisite ites s of an obliga obligatio tion? n? Give Give an example example to illust illustra rate te them. 2) Why are are obligations obligations under the Civil Civil Code a juridical juridical necessity? Explain. 3) What What are are the eleme elements nts or requisit requisites es in order order that that a person person may acquire acquire a right right of action in court agains another to enforce the performance of the latter’s obligation? 4) May a person person incur obligations obligations even even without entering entering into any contract contract or voluntar voluntary y agreement? Explain. CHAPTER 2 NATURE AND EFFECT OF OBLIGATIONS Nature and Effect of Obligations: (Articles 1163-1178 and Article 440 of the New Civil Code)
1. Compliance with Obligations, Obligations, Specific Obligations Obligations to Give, Give, To Do, and Not to Do; Breach of Obligation; Fraud, Negligence, Delay, and in Contravention; Culpa Criminal vs. Culpa Contractual vs. Culpa Aquiliana. Picart vs. Smith, 37 P 809; Cangco vs. Manila Railroad, 38 P 763; Rakes vs. Atlantic Gulf, 7 P 359 2. Fortuitous Event, Essential Conditions, Exceptions: Nakpil
vs. CA, 144 SCRA 596; Sia vs. CA, 222 SCRA 24; RP vs. Luzon Stevedoring, 21 SCRA 279 3. Reme Remedi dies es for for Brea Breach ch of Obli Obliga gati tion ons s (Ext (Extra ra-ju -judi dici cial al and and Judi Judici cial al;; Princ Principa ipall and and Subsidiary) 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 the stipulation of the parties requires another standard of care.
Involves the prestation “to give”.
The word “something” connotes a determinate object which is i s definite, known and has already been distinctly decided and particularly specified as the matter to be given from among the same things belonging to the same kind. i.e. A particular computer with a serial number 7777, the watch I am wearing, the car sold by X, my dog named Terror, this cavan of rice, the money I gave you. DETERMINATE THING Identified by its individuality. The debtor cannot substitute it with another although the latter is of the same kind and quality without the consent of the creditor. GENERIC THING Identified only by its specie. The debtor can give anything of the same class as long as it is of the same kind.
Once the determinate thing becomes the specified object of the prestation, the person has the duty to give must take care of it in order that it can be delivered in good condition.
Duties of debtor in obligation to give a determinate thing: 1) Preserve the thing—In obligations to give (real obligations), the obligor has the incidental duty to take care of the thing due with the diligence of a good father of a family pending delivery.
a) “Father”—will “Father”—will always do everything everything to take take care care of his concerns (if (if no standard standard is stipulated in the law or contract). contract). Equated with pordinary care or that diligence which an average person exercises over his own property. b) Another standard standard of of care—However, care—However, if if the law or the stipulation of of the parties parties provides for another standard standard of care, said law or stipulation or law must prevail. c) Factors to be considered—The considered—The diligence required necessarily depends upon the nature of the obligation and corresponds with the circumstances of the person, of the time, and of the place. As a general rule, the debtor is not liable if his failure to presrve the thing is not due to his fault or negligence but to fortuitous events r force majeure. d) Reason for debtor’s debtor’s obligation—The obligation—The debtor debtor must exercise diligence diligence to insure insure that the thing to be delivered would subsist in the same condition as it was when the obligation was contracted. 3) Deliver Deliver the fruits fruits of the thing—disc thing—discusse ussed d under Article Article 1164 1164 4) Deliver the the accessions accessions and accessories accessories—This —This is discussed discussed under Article Article 1166. 1166. 5) Deliv Deliver er the the thin thing g itse itself lf 6) Answer Answer for damages damages in case case of non-fulfillm non-fulfillment ent or breach breach
The stipulation must not one contemplating a relinquishment or waiver of the most ordinary diligence. Common carriers carriers are bound to observe extraordinary extraordinary diligence in their vigilance
from the nature of their business and for reasons of public policy. Duties of debtor in obligation to deliver a generic thing: 1) To deliver deliver a thing which is of the quality intended by the parties taking into consideration consideration the purpose of the obligation and other circumstances 2) To be liable for damages damages in case of fraud, negligence, negligence, or delay, delay, in the performance performance of his obligation, or contravention of the tenor thereof. Article 1164. 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.
Involves the prestation “to give”.
There is no real right enforceable or binding against again st the whole world over the object and its fruits in favor of the person to whom the same should be given After the right to deliver the object of the prestation has arisen BUT prior to the delivery.
Different kinds of fruits: 1) Natural fruits – are the spontaneous products of the soil, and the young and other products of animals (grass, trees, and plants on lands) 2) Industrial fruits—those produced by lands of any kind through cultivation or l abor. (sugar cane, vegetables, rice) 3) Civil fruits —those derived by virtue of a juridical relation (Rents of buildings, price of leases of lands and other property and the amount of perpetual or life annuities or other similar income. “The acquisition of a real right” That such right can be enforceable against the whole world and will prejudice anybody claiming the same object of the prestation.
Real right
Only accrues when the thing or object is delivered to the creditor.
The personal right of the creditor can be defeated by a third person in good faith who has innocently acquired the property prior to the scheduled delivery The aggrieved creditor can go for damages
PERSONAL RIGHT—The power of one person to demand of another the fulfillment of a prestation to give, to do or not to do. ** There is a definite active subject and a definite passive subject **Binding or enforceable only against a particular person REAL RIGHT—The power belonging to a person over a specific thing, without a passive subject individually determined, against whom such right may be personally personally exercised. ** There is only a definite active subject without any definite passive subject ** Directed against the whole world.
When obligation to deliver arises: 1) Obligation to deliver the thing and fruits arises from the time of the perfection of the contract. Perfection, Perfection, in this case, refers to the birth of the contract or to the meeting of the minds between the parties. 2) If the obligation is subject to a suspensive condition or period arises upon the fulfillment of the condition or arrival of the term. The parties may make a stipulation
to the contrary as regards the right of the creditor to the fruits if the thing. 3) In contract of sale, the obligation arises from the perfection of the contract even if the obligation is subject to a suspensive condition or a suspensive period where the price has been paid. 4) In obligations obligations to give arising from from law, quasi-contracts quasi-contracts,, delicts, and and quasi-delicts, the time of performance is determined by the specific provisions of the law applicable. Ownership and other real rights over property are acquired and transmitted in consequence of certain contracts by tradition or delivery. In sale, mere agreement on the terms thereof does not effect transfer transfer of ownership of the thing sold in the absence of delivery, actual or constructive, of the thing.
“He shall acquire no real right over it until the same has been delivered to him”, the creditor does not become the owner until the specific thing has been delivered to him. When there has been no delivery yet, the proper court action of the creditor is not one for recovery of possession possession and ownership but one for specific performance 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 him by Article 1170, may compel the creditor to make the delivery.
If the thing is indeterminate or generic, he may ask that 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 any fortuitous event until he has effected the delivery.
Involves the prestation “to give”.
Generic Object Non-delivery, Non-delivery, creditor may have it accomplished or delivered in any reasonable and legal way charging all expenses to the debtor.
Determinate Determinate Thing Non-delivery, file an action to compel the debtor to make the delivery. This is called “specific performance”. performance”.
May seek damages If guilty of fraud, negligence, delay or contravention
FORTUITOUS EVENT An event which could not be foreseen or which though foreseen foreseen were inevitable. Relieved from obligation, if prestation is lost through this.
Two cases that will not excuse the obligor: 1) if the obligor delays and 2) if i f he has promised to deliver the same thing to two
or more persons who do not have the same interests.
Liable for damages OR bound to replace the lost object of the prestation
REMEDIES OF CREDITOR IN REAL OBLIGATION: 1) Specific real obligation —the creditor may exercise the following remedies or
rights in case the debtor fails to comply with his obligation: a) demand specific specific performance performance or fulfillment of the obligation with a right right to indemnity for damages
b) demand rescission rescission or cancellation of of the obligation obligation also with a right right to recover recover damages c) demand demand payment payment of damages damages only, where where it is the only feasible feasible remedy remedy.. 2) Generic real obligation —can be performed by a third person since the object is expressed expressed only according to its family or genus. It is thus not necessary for the creditor to compel the debtor to make the delivery, although he may ask for performance performance of the obligation. ** An indeterminate thing cannot be the object of destruction by a fortuitous event because genus nunquam perit. Article 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. Includes
prestation “to give”. Principal always includes its accessories accessories and accessions. 1) Accessions are the fruits fruits of a thing or or additions to or improvements improvements upon a thing (the principal). 2) Accessories Accessories are things joined to to or included included with the principal thing for for the latter’s latter’s embellishment, better use, or completion. **While accessions are not necessary necessary to the principal thing, the accessory and the principal thing must go together. Both can exist only in relation to the principal. Accessions is also used in the sense of a right, i.e. right to the fruits and or accessories of a thing. Right of creditor to accessions and accessories The general rule is that all accessions and accessories are considered considered included in the obligation to deliver a determinate thing although they may not have been mentioned. Accessory follows the principal. Article 1167. If the person is 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 contravention of the tenor of the obligations. Furthermore, it may be decreed that what has been poorly done be undone.
Situations contemplated: 1) The debtor debtor fails fails to perfo perform rm an obligat obligation ion to do 2) The debtor performs an an obligation to do but contrary contrary to the terms terms thereof; thereof; or 3) The debtor debtor perfo performs rms an obligat obligation ion to do but in poor poor manner manner Remedies of creditor in positive personal obligation: 1) If the debtor debtor fails fails to comply comply with his obligation to do, the creditor creditor has the right: a. to have the obligation performed by himself, or by another, unless unless personal personal considerations are involved, at the debtor’s expense; and b. to rec recov over er dam damag ages es 2) In case the obligation is done in contravention of the terms of the same or the same or is poorly done, it may be ordered (by the court upon complaint) that it be undone if it is still possible to undo what was done. Article 1168. When the obligation consists in not doing and the obligor does
what has been forbidden, it shall also be undone at his expense.
Involves obligations “to do” and “not to do”. Third person may perform the obligation should the debtor fail to do the same. In an obligation not to do, the duty of the obligor is to abstain from an act. Here, there is no specific performance. The very obligation is fulfilled in not doing what is forbidden. Hence, this kind of obligation the debtor cannot be guilty of delay. Poorly undertook obligation Creditor has the right to have everything be undone at the expense of the debtor. Rationale: to prevent the debtor from taking obligation lightly. li ghtly. Prestation Prestation not to do but does it anyway Be undone at his own expense. Article 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extra-judicially demands from them the fulfillment of their obligations. However, the demand by the creditor shall not be necessary in order that delay may exist: 1) When the the obligation obligation or the the law expressly expressly so so declares; 2) When from from the nature nature and the circumstances 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 establishment of the contract; or 3) When demand demand would would be useless, useless, as when the obligor has 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 ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, obligation, delay by the other begins. Mora Solvendi Delay or default committed by the debtor Mora Accipendi Delay or default committed by the creditor. Compensation morae or the delay of the obligors in reciprocal reciprocal obligations, the delay of the obligor cancels the delay of the obligee, and vice versa. The net result is that there is is no actionable default on the part of both parties.
Delay must be either malicious or negligent. Requisites of delay or default by the debtor: 1) failure of the debtor to perform his positive obligation obligation on the date date agreed upon upon on the date agreed upon 2) demand (not (not mere reminder or notice) made made by the creditor upon the debtor debtor to comply with his obligation which demand may be either judicial (when made outside of court, orally or in writing) 3) failure failure of the the debtor debtor to compl comply y with such such demand demand The creditor has the burden of proving that demand has been made. It is incumbent upon the debtor to prove that the delay was not caused by his fault to relieve himself from liability. Effects of delay:
1) Mora Solvendi a. The debtor is guilty of breach breach or violation violation of the obligation b. He is liable li able to the creditor for interest or damages. In the absence of extra-judicial demand, the interest shall commence from the filing of the complaint; and c. He is liable even for fortuitous event when the obligation is to deliver a determinate thing. However, if the debtor can prove that the loss would have resulted just the same even if he had not been in default, the court may equitably mitigate or reduce the damages. 2) Mora accipiendi
a. b. c. d.
The credit creditor or is guilty guilty of of breach breach of obligat obligation ion He is liable liable for for damages damages suffere suffered, d, if any, any, by the debtor debtor He bear bears s the risk of loss of the the thing thing due due Where the the obligation is to pay pay money, the debtor debtor is not liable for interest from from the time of creditor’s delay e. The debtor debtor may release himself himself from from the obligation obligation by the the consignation consignation or deposit deposit in court of the thing or sum due 3) Compensatio morae The delay of the obligor cancels the delay of the obligee and vice versa. Legally speaking, speaking, there is no default on the part of both parties.
DEMAND Necessary for the obligation to become due. Default begins from the moment the credirot demands the performance performance of the obligation. Without it, judicial or extra judicial, the effects of default will not arise. When demand is not necessary to put debtor in delay: 1) When the obligation so provides—The mere fixing fixing of the period is not enough. The arrival of the period merely makes the obligation demandable. Before Before its arrival, the creditor cannot demand performance. performance. The obligation must expressly so declare that demand is not necessary or must use words to that effect, “debtor will be in default”. 2) When When the the law law so provid provides es 3) When When time time is of of the essenc essence e 4) When When deman demand d would would be usel useless ess 5) When there there is performance performance by a party in reciprocal obligations COMMENCEMENT COMMENCEMENT OF SUIT is sufficient demand. Liable only from the time of extra-judicial or judicial demand. If money Payment of interest agreed upon or in the absence of stipulation, the legal interest, 6% per annum. The interest replaces the damages. EJECTMENT & CONSIGNMENT: Two cases where an extra-judicial demand should be made prior to the filing of a civil suit.
If there is no extra-judicial demand, the ejectment suit will be dismissed. In consignment, the debtor must first make an extra-judicial demand for the creditor to accept payment of the obligation. If there is no extra-judicial demand, the consisgnment case will be dismissed unless tender of payment prior to consignment need not be made pursuant to law.
In order that the debtor may be in DEFAULT is necessary that the following requisites are present: 1) That That the obligation obligation be demanda demandable ble and already already liquidate liquidated d 2) That That the debtor debtor delays delays perfor performanc mance e 3) That the creditor creditor requires requires the performance performance judicially and extrajudicially. extrajudicially.
When demand is not necessary: 1) When the obligation or the law expressly so declares. declares. I.e. promissory promissory note & taxes 2) When time is of of the essence essence in a particular contract. (Parade (Parade car or stock market) market) i.e. Barzaga vs Court of Appeals (niche of the aggrieved party’s wife). 3) When it would be useless as when the obligor has rendered it beyond his power to perform. perform. i.e. Reciprocal Reciprocal obligations obligations The promise of the borrower to pay is the consideration consideration for the obligation of the bank to furnish the loan. When one of the parties to a contract does not perform the undertaking which he is bound by the terms of the agreement to perform, he is not entitled to insist upon the performance of the other party. i.e. Agcaoili v GSIS It is axiomatic in reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. 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. 1) Fraud (deceit or dolo)—deliberate or intentional evasion of the normal fulfillment
of an obli obliga gati tion on.. As a grou ground nd for for dama damage ges, s, it impl implie ies s some some kind kind of malic malice e or dishonesty and it cannot cover cases of mistake and errors of judgment made in good faith. Refers to incidental fraud (dolo incidente) committed in the performance of an obligation already existing because of contract. It is to be differentiated from causal fraud (dolo causante) or fraud employed in the execution of a contract under Article 1338, which vitiates consent.
2) Negligence (fault or culpa)— It is any voluntary act or omission, there being no
bad faith or malice, which prevents the normal fulfillment of an obligation. 3) Delay (mora)— This has already been discussed under Article 1169. 4) Contravention of the terms of the obligation —this is the violation of the terms and conditions stipulated in the obligation. The contravention must not be due to a fortuitous event or force majeure. Fraud 1) There There is delibe delibera rate te intent intention ion to cause damage or injury 2) Waiver of the liability for future fraud is void 3) Must be clearly proved
Negligence 1) There is no such intention 2) Waiver may be allowed
3) Presumed from the violation of a contractual contractual obligation 4) Liability cannot cannot be mitigated mitigated or 4) Liability Liability may may be reduc reduced ed by the
reduced by the courts
courts according to circumstances circumstances
**NOT **NOTE: E: Neglig Negligenc ence e is gross gross or there there is failur failure e to exerc exercise ise even even slight slight care or entire entire absence of care, showing bad faith, or amounts to malice or wanton attitude on the part of the defendant, the rules on fraud shall apply.
Article 1171. Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void.
Responsibility arising from fraud can be demanded with respect to all kinds of obligation and unlike in the cause of responsibility arising from negligence, the court is not given the power to mitigate or reduce the damages to be awarded. This is so because fraud is deemed serious and evil that its employment to avoid the fulfillment of one’s obligation should be discouraged.
**Waiver for future fraud is void. **Waiv **Waiver er for for past past fraud fraud is valid, valid, because because the waive waiverr can can be consi consider dered ed as an act act of generosity and magnanimity on the part of the party who is the victim of the fraud. 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. circumstances. Kinds of negligence according to source of obligation: Contractual negligence (culpa contractual) or negligence in contracts resulting in 1) Contractual their breach. This kind of negligence is not a source of obligation. It merely makes the debtor liable for damages in view of his negligence in the fulfillment of a preexisting obligation 2) Civil negligence (culpa aquiliana) or negligence which by itself is the source of an obligation between the parties not so related before by any preexisting contract. It is also called tort or quasi-delict. 3) Criminal negligence (culpa criminal) or negligence resulting in the commission of a crime. The same negligent act causing damages may produce civil liability arising from a crime under Article 100 of the RPC or create an action for quasi-delict under Article 2176 of the Civil Code. Article 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature 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 which is to be observed in the performance, performance, that which is expected of a good father of family shall be required. According to our Supreme Court, “negligence is the failure to observe for the protection of the interests of another person, that degree of care, precaution and vigilance which the circumstances circumstances justly demanded, whereby such other person suffers injury”.
Factors to be considered: 1) Nature of the obligation (smoking while carrying materials known to be
inflammable constitutes negligence) 2) Circumstances of the person (a guard, a man in the prime of life, robust and healthy, sleeping while on duty is guilty of negligence) 3) Circumstances of time (driving a car without headlights at night is gross negligence but it does not by itself constitute negligence when driving during the day. 4) Circumstances of the place (driving at 100 kilometers per hour on the superhighway is permissible but driving at the same rate of speed in Ayala Ave, is gross recklessness)
Kinds of diligence required: 1) that agree agreed d upon by the the parites, parites, orally orally or or in writing writing 2) in the absence absence of stipulation, that that required by law in the particular particular case (like the extraordinary extraordinary diligence required of common carriers) and 3) if both the contract contract and law are silent, then then the diligence expected expected of a good father of a family. Article 1174. Except in cases expressly specified by the law, or when it is otherwise declared declared by stipulation or when the the nature of the obligation requires 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 Events - event which could not be foreseen, or which though foreseen, were inevitable REQUIREMENTS (Nakpil & Sons vs. CA): 1. The cause cause of the breach of of the obligation obligation must be be independent of the will of the debtor 2. The event event must must be either either unforesee unforeseeable able or or unavoidable unavoidable 3. The event must be such as to to render it impossible for the debtor to fulfill his obligation in a normal manner 4. The debtor debtor must be be free from from any participation in, or aggravation aggravation of injury to the creditor Rule on Fortuitous Event: 1. General General Rule Rule – no liability liability for for fortuito fortuitous us event event 2. Exempt emptio ion n– a) when when expr expres essl sly y decla declare red d by law ( bad bad fait faith, h, subj subjec ectt matt matter er is gen gener eric ic,, debtor is in delay ) b) when when expr expres essl sly y dec decla lare red d by stip stipul ula ation tion or cont contra ract ct c) when when natu nature re of obl oblig iga atio tion req requi uirres assu assump mpti tion on of risk isk A fortuitous event may either be an act of man or an act of God. 1) Acts of man—Str man—Strictly ictly speaking speaking,, fortuitous fortuitous event event is an event event independent independent of the will of the obligor but not of other human wills 2) Act of God—They God—They refer refer to what is called called majeure majeure or those events events which are totally totally independent will of every human being.
In our law, fortuitous events and force majeure are identical in so far as they exempt an obligor from liability. Both are independent of the will of the obligor. Kinds of fortuitous events: 1) Or Ordi dina nary ry fort fortui uito tous us even events ts—t —tho hose se even events ts which hich are comm common on and and whic which h the the contracting parties could not have reasonably been foreseen. 2) Extra-or Extra-ordinar dinary y fortuitous fortuitous events—thos events—those e events events which are uncommon uncommon and which the contracting parties could not have reasonably foresee. EXCEPTIONS EXCEPTIONS from liability in case of fortuitous event: 1) When expressl expressly y specifi specified ed by by law law a. the debtor debtor is guilty of fraud, fraud, negligenc negligence e or delay, or contra contraventi vention on of the tenor tenor of the obligation b. the debtor debtor has promis promised ed to delive deliverr the same same (specif (specific) ic) thing thing to two or more persons who do not have the same interest. c. the obligat obligation ion to deliver deliver a specif specific ic thing arise arises s from a crim crim d. the thin thing g to be deliv delivere ered d is generi generic c 2) When declare declared d by stipulatio stipulation—The n—The basis basis for this exception exception rests rests upon the freedom freedom of contract. 3) When When the nature nature of the obliga obligatio tion n requir requires es the assum assumpti ption on of risk. risk. Risk or loss loss or damage is an essential element in the obligation. Article 1175. Usurious transactions shall be governed by special laws.
Simple loan or mutuum is a contract whereby one of the parties delivers to another, money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid. It may be gratuitous or with a stipulation to pay interest. USURY Contracting for or receiving interest in excess of the amount allowed by law for the loan or use of money, goods, chattels or credits. Requisites for recovery of interest: 1) The paymen paymentt of interest interest must must be expressly expressly stipula stipulated ted 2) The agreemen agreementt must must be lawful lawful 3) The The inter interest est must must be be lawful lawful A stip stipul ulat atio ion n for for the the paym paymen entt of usur usurio ious us inter interes estt is void void,, that that is, is, as if ther there e is no stipulation as to interest. Circul Circular ar No, No, 905 905 Usur Usury y Law. Law. The The rate rate of inte intere rest st and and othe otherr char charge ges s on a loan loan or forbearance of money, goods, or credit, regardless of maturity and whether secured or unsecured, that may be charged or collected shall not be subject to any ceiling prescribed under the Usury Law. Usury is now legally non-existent. Parties are now free to stipulate any amount of interest. It does not, however, give absolute right to the creditor to charge the debtor interest that is iniquitous or unconscionable. 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, installments, shall likewise raise the presumption that such installments installments have been paid.
*Presumption Inference of a fact not actually known arising from its usual connection with another which is known or proved.
Two Kinds of Presumption: 1) Conclusiv Conclusive e Presumption— Presumption—one one which cannot cannot be contracdict contracdicted, ed, like the presumptio presumption n that everyone is conclusively presumed to know the law 2) Disputabl Disputable e (or rebuttab rebuttable) le) presumption presumption—one —one which can be contrac contracted ted or rebutted rebutted by presenting proof to the contrary like the presumption established in Article 1176. When presumption in 1176 do not apply: 1) With reserva reservation tion as the inter interest. est. 2) Receipt Receipt without without indicatio indication n of particular particular installme installment nt paid 3) Receipt Receipt for for a part of the the principa principall 4) Paym Paymen entt of of taxe taxes s 5) Non-p Non-pay aymen mentt proven proven Article 1177. The creditors, after having pursued 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 ma have doe to defraud them.
Remedies available to creditors for the satisfaction of their claims: 1) exact fulfillment fulfillment (specific (specific performance) performance) with the right to damages 2) pursue the leviable (not (not exempt from attachment attachment under under the law) law) property property of the debtor 3) after having having pursued the property property in possession possession of the debtor, exercise exercise all the rights rights and bring all the actions of the debtor (like the right to collect from the debtor of his debtor) except those inherent in or personal to the person of the latter (such as the right to vote, to hold office, to receive legal support, to revoke a donation on the ground of ingratitude, etc.) and 4) ask the court to rescind or impugn acts or contracts contracts which the the debtor may have done to defraud him when he cannot in any other manner recover his claim The debtor is liable with all his property, present and future for the fulfillment of his obligations, subject to the exemptions provided by law. 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.
Trans Transmis missib sibilit ility y of rights rights.. All All rights rights acquir acquired ed in virtue virtue of an obliga obligatio tion n are are genera generally lly transmissible. The exceptions to this rule are the following: 1) Prohibited by law—When prohibited by law like the rights in partnership, agency,
and commodatum, which are purely personal in character. a. By the the cont contra ract ct of part partne ners rshi hip, p, two two or more more pers perso ons bind bind them themse selv lves es to contribute money, property or industry to a common fund, with the intention of dividing the profits among themselves. b. By the contract contract of agency, agency, a person person binds himself himself to render render some service service or to do something in representation or on behalf of another, with the consent or authority of the latter c. By the the cont contra ract ct of comm commo odatu datum, m, one one of the the part partie ies s deli delive vers rs to anoth nother er something not consumable so that the latter may use the same for a certain time and return it. Commodatum Commodatum is essentially gratuitous.
2) Prohibited by stipulation of the parties. –When prohibited by stipulation of the
parties, like the stipulation that upon the death of the creditor, the obligation shall be extinguished, or that the creditor cannot assign his credit to another. DIFFERENT KINDS OF OBLIGATIONS Pure and Conditional Obligations: (Articles 1179 – 1192)
1. Kinds and Effects of of Conditions, Conditions, Suspensive vs. Resolutory: Resolutory: (Santiago (Santiago vs. vs. Millar, 68 P 39; Gaite vs. Fonacier, 2 SCRA 831; Coronel vs. Court of Appeals, Oct 7 1996; Javier vs. Court of Appeals, 183 S 171) 2. Effects of of Potestative, Potestative, Casual Casual or Mixed Conditions: (Parks (Parks vs. Province Province of Tarlac, 49 49 P 142; Osmena vs. Rama, 14 P 99; Trillana vs. Quezon Colleges, 93 P 383; Hermosa vs. Longara, 93 P 971; Smith Bell vs Matti, 44 P 875; Lao Lim vs. Court of Appeals, 191 S 150) 3. Effects of Possible Possible or Impossible Impossible Conditions: Conditions: (Luneta Motor vs. vs. Abad, 67 P 32) 32) 4. Construc Constructive tive Fulfillme Fulfillment nt of Condition: Condition: (PLDT (PLDT vs Jeturian Jeturian,, 97 P 981) 5. Rules Rules in Cases of Improv Improvemen ement, t, Deterior Deterioratio ation, n, or Loss: Loss: 6. Power Power to Rescind Rescind in Reciproca Reciprocall Obligations: Obligations: (Tan (Tan vs. Court of Appeals Appeals,, 175 S 656; Ang vs. Court of Appeals, 170 S 286)
DIFFERENT KINDS OF OBLIGATIONS CATEGORIES: a. Demanda Demandability bility - pure, pure, conditio conditional nal or with a term term b. Plurality Plurality of of object object - simple, altern alternativ ative e or facultat facultative ive c. Plurality Plurality of subjec subjectt - simple, simple, joint joint or or solidar solidary y d. Perform Performance ance - divisible divisible or indivisible indivisible e. Sanctions Sanctions for for breach breach - with with or without without a penal penal clause clause
(1)
Pure – demandable at once, no term, no condition
Conditional - A condition condition is a future future and an uncert uncertain ain event event or a past event event unknown to the parties
(2)
Kinds: i. Suspensive – happening of condition gives rise to obligation Effects: 1. effectivity is retroactive 2. no ret retro roac acti tivi vity ty wit with h refe refere renc nce e to frui fruits ts or or inte intere rest st & pres prescr crip iptio tion n 3. creditor may pr preserve rights 4. debt debtor or – rec recov over ery y of of pay payme ment nt by mist mistak ake e or or even even w/o w/o mist mistak ake e Rules on loss, impairment, improvement of the subject matter pending the happening of suspensive condition/ term
Loss/ Impairment
w/ fault or at expense Inde Indemn mnit ity y & dama damage ges s of obligor/ usufructuary
w/o fault ult or not at expense of obligor
Extinguished
Improvement
spec specif ific ic perf perfor orma manc nce e rescission & damages If it improved at the expen expense se of the debto debtor, r, he shal shalll have have no othe otherr righ rightt than than that that gran grante ted d to the the usufructuary. (art 1189) Creditor to bear damages Creditor gets it
REQUISITES FOR THE AFOREMENTIONED RULE: 1. There is a suspensive ive condition 2. Ther There e is is an an obl oblig igat atio ion n to to del deliv iver er a det deter ermi mina nate te thin thing g 3. Ther There e is loss, loss, dete deterriora iorati tion on or impr improv ovem emen entt befo before the the happe happeni ning ng of the the condition 4. The condition happens ii. Resolutory – happening of condition extinguishes obligation Effects: 1. no retro retroac activ tive e effe effect ct 2. obliga obligatio tion n exti extingu nguish ished ed 3. restore restore to each each other what what was received received plus plus interest/f interest/fruits ruits iii. Potestat Potestative ive – depe depend nden entt on sole sole will will of 1 part party; y; if on part part of debt debtor or & suspensive - void iv. Casual – dependent on chance or hazard v. Mixed – chance, or any of parties vi. With term a) Positive – extinguished if time expires or indubitable of condition to happen b) Negative – effective from moment of time elapsed or evident it can't happen vii. Impossible and illegal – (1) To do - both the condition condition and the obligation are void void (2) Not to do –disregard –disregard the condition, the obligation obligation is still valid Impossible condition – physically not feasible Illegal condition – prohibited by law, good custom, public policy and morals Article 1179. Every obligation whose performance does not depend a future or uncertain event, event, or upon a past past event unknow unknown n to the parties parties,, is demand demandabl able e at once. once. Every Every obli obliga gati tion on which which cont contain ain a reso resolut lutor ory y cond condit itio ion n sh shal alll also also be dema demand ndab able, le, witho without ut prejudice to the effects of the happening of the event.
A pure obligation-- One which is not subject to any condition and no specific date is mentioned for its fulfillment and is, therefore, immediately demandable. Conditional obligation—One whose consequences are subject in one way or another to the fulfillment of a condition.
DISTINCTIONS DISTINCTIONS between suspensive and resolutory conditions: Suspensive Condition 1) If fulfilled, the obligation arises
Resolutory Resolutory Condition 1) If fulfilled, obligation is extinguished 2) If it does not take place, the tie of 2) The tie of the law is consolidated the law does not appear 3) Until it takes place, the existence 3) Its effects flow, but over it hovers of the obligation is a mere hope the possibility of termination When obligation is demandable at once: 1) When When it is pure pure 2) When it it is subject subject to to a resolut resolutory ory condit condition ion 3) When it it is subject subject to to a resolut resolutory ory perio period d A past event unknown to the parties:
A condition really refers only to uncertain and future event. A past event cannot be said to be a condition since the demandability of an obligation subject to a condition depends upon whether the event will happen or will not happen. What is really contemplated by the law is the knowledge to be acquired in the future of a past event which at the moment is unknown to the parties interested, for it is only in that sense that the event can be deemed uncertain. This knowledge determines whether the obligation will arise or not.
Article 1180. When the debtor binds himself to pay when his means permit him to do so, the obligation shall be deemed to be one with a period, subject to the provisions of article 1197.
A period is a future and certain event upon the arrival of which the obligation subject to it either arises or is extinguished. 1) The The debtor debtor promise promises s to pay when when his means means permit permit him to do so. The obligat obligation ion shall be deemed to be one with a period. In this case, what depends upon the debtor’s will is not whether he should pay or not for indeed he binds himself to pay. What is left only to his will is the duration of the period. If the debtor and the creditor cannot agree as to the specific time for payment, the court shall fix the same on the application of either payment. 2) Other Other cases—as cases—as when when the debtor debtor binds binds himself himself to pay: pay: a. litt little le by litt little le b. as soon soon as as poss possibl ible e c. from from time time to time time d. at any any time time I have have the the mon money ey e. in par partia tiall paym paymen ents ts f. when when I am am in in a pos posit itio ion n to pay pay Article 1181. In conditional obligations, the acquistion of rights, as well as the exti ex ting ngui uish shme ment nt or loss loss of thos those e alre alread ady y acqu acquir ired ed,, shal shalll depe depend nd upon upon the the happening of the event which constitutes the condition.
Effect of happening of condition:
1) Acqu Acquis isit itio ion n of right ights— s—In In obli obliga gati tion ons s subj subjec ectt to a susp suspen ensi sive ve cond condit itio ion, n, the the acquisition of rights by the creditor depends upon the happening of the event which constitutes the condition. 2) Loss Loss of rights already already acquired— acquired—In In obligations obligations subject subject to a resoluto resolutory ry condition, condition, the happ happe ening ning of the the eve event whic hich consti nstittute utes the condit nditio ion n pro produce duces s the the extinguishment or loss of rights already acquired. 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.
Classification Classification of conditions. 1) As to effe effect ct:: a. suspensive suspensive—the —the happeni happening ng of which gies gies rise to the the obligaion obligaion b. resolutor resolutory—th y—the e happening happening of which extinguis extinguishes hes the obligat obligation ion 2) As to form form:: a. Express— Express—the the condit condition ion is clearly clearly state stated d b. Implied—t Implied—the he condit condition ion is is merely merely inferred inferred 3) As to to poss possibi ibilit lity: y: a. Possible— Possible—the the condition condition is capable capable of fulfillment, fulfillment, legally legally and physically physically and b. Impossible—the condition is not capable of fulfillment, fulfillment, legally or or physically physically 4) As to caus cause e or origin origin:: a. Potestative—the Potestative—the condition condition depends upon the will of one f the contracting contracting parites parites b. Casual—the condition depends depends upon upon chance or upon the will of a third person, person, c. Mixed—th Mixed—the e condition condition depends depends partly partly upon chance chance and and partyly partyly upon the will will of a third person 5) As to mode mode:: a. Positive— Positive—the the conditio condition n consists consists in the perfor performanc mance e of an act b. Negative Negative—the —the conditio condition n consists consists in the omissio omission n of an act 6) As to numb number ers: s: a. conjunctiv conjunctive—the e—there re are several several conditio conditions ns and all must be fulfilled fulfilled b. disjunctive disjunctive—the —there re are severa severall conditions conditions and only one or some some of them must be fulfilled 7) As to to divis divisib ibil ilit ity: y: a. Divisible—t Divisible—the he condition condition is susceptib susceptible le of partial partial performa performance nce and b. Indivisible Indivisible—the —the condition condition is not not suscept susceptible ible POTESTATIVE CONDITION A condition suspensive in nature and which dpeneds upon the sole will of one of the contracting parties is known as potestative condition. Where suspensive condition depends upon will of debtor: 1) Conditiona Conditionall obligatio obligation n void—Whe void—Where re the potestat potestative ive condition condition depends solely upon the will of the debtor, the conditional obligation shall be void because its validity and compliance is left to the will of the debtor and it cannot therefore, be easily demanded. In order not to be liable, the debtor will not just fulfill the condition. There is no burden on the debtor and consequently, no juridical tie is created. Examples: I will pay you if I want, I will pay you after I receive a loan from a bank, I will pay you after I receive a loan from a bank, I will pay you after I have harvested fish, I will pay you upon the sale of the house in which I live. I will pay you the price of the forest concession you sold me upon my operation of the same. I will continue to lease your property for as long as I need the premises and pay the rent. In all these cases, both the conditions and obligations are void.
2) Only the condition is void—If the obligation is a pre-existing one and therefore, does not depend for its existence upon the fulfillment by the debtor of the potestative condition, only the condition is void leaving unaffected the obligation itself. Here, the condition is imposed not on the birth of the obligation but on its fulfillment.
(3) With a period – future & certain, past & uncertain, payable when able
When stipulation says “payable when able “ – it is with a period, remedy: a) agreement among parties b) cour courtt sha shall ll fix fix peri period od of paym paymen entt whe when n par parti ties es unab unable le to agre agree e Kinds: a. Resolutory ( in diem ) – takes effect at once but terminate upon arrival of the day certain; Day certain – that which must necessarily come, although it may not be known when b. Suspensive ( ex die ) – takes effect on the day stipulated WHEN COURTS MAY FIX PERIOD: a) art 11 1197 b) art 1197, 2 nd paragraph c) art 1191, 3 rd paragraph d) art 1687, 2 nd, 3rd, 4th sentence e) art 11 1180 WHEN DEBTOR LOSES RIGHT TO PERIOD: a. inso insolv lven ency cy of debt debtor or,, unl unles ess s secu securi rity ty pro provide vided d b. did no not de deliver se security c. impa impair ired ed secu securi rity ty-- thr thru u fau fault lt or fort fortui uito tous us even eventt d. viol violat ate e und under erta taki king ng in cons conside idera rati tion on of exte extens nsio ion n of of per perio iod d e. attempts to abscond (4). Facultative – only one prestation has been agreed upon but another may be given in substitution Effect of loss or deterioration thru negligence, delay or fraud of obligor: a) of thing intended intended as substitute substitute - no no liabili liability ty b) of the substit substitute ute after after substitut substitution ion is made made – with liability liability (5). Alternative – bound by different prestations prestations but only one is i s due
Right of choice: General rule: right of choice belongs to debtor a. the the choice choice is is with with debto debtor r (1) (1) If only 1 is left left either either because because of fortui fortuito tous us events events or due to debtor' debtor's s acts, acts, perform what is left. The effect is that the debtor loses the right of choice (2) if the choice is limited because because of the creditor's acts, acts, the debtor has the right of resolution and damages (3) if all are lost due to debtor, debtor, the creditor is entitled entitled to damages (4) if some are lost, lost, the debtor can choose choose from the remaining remaining b. the choice choice is with with creditor creditor (1) (1) if one one or some some are are lost lost due due to fort fortui uito tous us even event, t, the the cred credit itor or choo choose ses s the the remainder
(2) if one or some some is lost because because of the fault of debtor, the creditor creditor may choose either the remainder or the value of any which disappeared, and damages in either case (3) if all is lost due to the debtor's fault, the creditor creditor may choose the value of any any if some is lost due to debtor's fault, the creditor chooses the remainder (4) if all is lost due to fortuitous fortuitous event, obligation is extinguished extinguished (5) if all is lost due to creditor's creditor's fault, the obligation is extinguished extinguished Requisites for making the choice: a) Made proper properly ly so that credito creditorr or his agent agent will actually actually know know b) Made with with full knowle knowledge dge that that a selection selection is indeed indeed being made made c) Ma Made de volu volunta ntaril rily y and and freel freely y d) Made in due time time – befor before e or upon upon maturit maturity y e) Ma Made de to all all prope properr pers persons ons f) Made w/o condition conditions s unless unless agreed agreed by the creditor creditor g) May be waived waived,, express expressly ly or impliedly impliedly DISTINCTIONS BETWEEN ALTERNATIVE AND FACULTATIVE OBLIGATIONS ALTERNATIVE FACULTATIVE a) Vari Variou ous s thin things gs are due due but but the the a) Only one thing is due but a substitute may givin iving g principally lly of one is be given to render payment/fulfillment payment/fulfillment easy sufficient b) If one one of pres presta tati tion ons s is ille illega gal, l, b) If principal obligations is void and there is others may be valid but no necessity necessity of of giving the substitute; substitute; nullity obligation remains of P carries with it nullity of S
c) If it is impo impos ssibl sible e to giv give all c) If it is imposs impossible ible to to give the princi principal, pal, the the except one, the last one must still substitute does not have to be given; if it be given is impossible to give the substitute, the principal must still be given d) Right Right to choo choose se may may be given given d) The right of choice is given only to the either to debtor or creditor debtor Joint – presumption when 2 or more creditors or 2 or more debtors concur in one and the same obligation
(6)
Effects: a. Demand Demand on one one produces produces delay delay only only with with respect respect to the the debt b. Interrup Interruption tion in payment payment by one one does not not benefit benefit or prejudice prejudice the the other c. Vices Vices of one one debtor debtor to credito creditorr has no effec effectt on the other others s d. Insolvenc Insolvency y of one debtor debtor does does not affect affect other other debtor debtors s Solidary – must be expressed in stipulation or provided by law or by nature of obligation (7)
a. Active – on the part of creditor or obligee
Effects: 1. Death of 1 solidary creditor transmits transmits share to heirs (but collectively) collectively) 2. Each creditor creditor repres represents ents the other other in the act of rec recover overy y of payment payment 3. Cre Credit dit is divided equally equally betwee between n creditors creditors as among among themselve themselves s 4. Debtor Debtor may may pay any any of the the solidar solidary y creditor creditors s b. Passive – on the part of debtors or obligors
Effects: 1. Each debtor debtor may be requeste requested d to pay whole obligation obligation with right right to recover recover from co-debtors 2. Interrupt Interruption ion of prescri prescription ption to one one creditor creditor affect affects s all 3. Interest Interest from from delay delay on 1 debtor debtor is borne borne by all all c. Mixed – on the part of the obligors and obligees, or the part of the debtors and the
creditors d. Conventional – agreed upon by the parties e. Legal – imposed by law Instances where law imposes solidary obligation: 1. obliga obligatio tions ns arisi arising ng from from tort tort 2. obligatio obligations ns arising arising from from quasi-co quasi-contra ntracts cts 3. legal legal provisions provisions regrad regrading ing obligation obligation of devisee devisees s and legatees legatees 4. liability liability of principals principals,, accomplice accomplices, s, and accessor accessories ies of a felony 5. baile bailees es in comm commoda odatum tum Effects: a. payment payment made made before before debt is due, no interest interest can can be charged, charged, otherwise otherwise – interest interest can be charged b. insolvenc insolvency y of one – others others are are liable for for share share pro-rata pro-rata c. if different different terms & conditions – collect only only what is due, later on collect from any d. no reimbursement reimbursement if payment is made after after prescription prescription or became illegal d. remission made after after payment payment is made – co-debtor still entitled entitled to reimbursement reimbursement e. effect of insolvency insolvency or death of of co-debtor co-debtor – still still liable for whole whole amount f. fault fault of any debto debtorr – every every one is respo responsible nsible – price, price, dama damage ge & interest interest g. compl complete ete// persona personall defens defense e – total total or partial partial ( up to amount amount of share share only ) if not personal personal to him hi m
Effect of loss or impossibility of the prestation: a. if with without out fault fault – no liab liabili ility ty b. if with fault fault – there there is liability liability (also (also for damage damage and and interest) interest) c. loss due to fortuitous fortuitous event event after after default default – there there is liability (because (because of default) (8)
Divisible – obligation that is capable of partial performance a. execution execution of certa certain in no of days days work work b. expre express ssed ed by metric metrical al units units c. nature nature of obligat obligation ion – suscept susceptible ible of partia partiall fulfillment fulfillment
(9)
a. b. c. d.
Indivisible – one not capable of partial performance to giv give e defi definit nite e thing things s not susceptibl susceptible e of partial partial perfo performa rmance nce prov provid ided ed by law law inte intent ntio ion n of par parti ties es
With penal clause - an accessory undertaking to assume greater liability in case of breach; (10)
CHARACTERISTICS OF PENAL CLAUSES 1. Subsidiary Subsidiary - As a general general rule, only only penalty penalty can be demanded, demanded, principa principall cannot be demanded, except: Penalty is joint or cumulative 2. Exclus Exclusive ive - take takes s place place of damage damage,, damage damage can only be demande demanded d in the ff. cases: a. Stipulation – granting right b. refusal to pay penalty
c.
with dolo ( not of creditor )
Causes for reduction of penalty: a. parti partial/ al/irr irreg egula ularr perfo performa rmance nce b. penalty penalty provide provided d is iniquitou iniquitous/unc s/unconsc onsciona ionable ble
Obligations with a Period: (Articles 1193 – 1198)
1. Classific Classificatio ation, n, In diem vs. Ex die, Legal, Convent Conventiona ional, l, Judicial, Judicial, (PNB vs. Lopez Vito, Vito, 52 P 41; Victorias Planters vs. Victorias Milling, 97 P 318) 2. Benefit Benefit of of the Period: Period: (Ponc (Ponce e de Leon Leon vs. Syjuco, Syjuco, 90 90 P 311) 311) 3. When Courts Courts May May Fix a Period: (Barr (Barretto etto vs. City City of Manila, Manila, 7 P 416; People’s People’s Bank Bank vs. Odom, 64 P 126; Gonzales vs. Jose, 66 P 369; Eleizegui vs. Manila Lawn Tennis Club, 2 P 309; Araneta vs. Phil Sugar, 20 SCRA 330) 4. Loss Loss of Bene Benefi fitt of the the Peri Period od:: (Gai (Gaite te vs. vs. Fo Fona naci cier er,, 2 SCRA SCRA 831; 831; Abes Abesam amis is vs. vs. Woodcraft, 166 SCRA 577; Song Fo vs. Oria, 33 P 3)
Alternative and Facultative Obligations: (Articles 1199 – 1206)
1. Concept and Features, Features, Limitations Limitations of the the Right of Choice: Choice: (Reyes vs. Martinez, Martinez, 55 P 492) 492) 2. Purpose of Choice: Choice: (Ong Guan Chan Chan vs. Century Insurance, 46 P 592) 3. Differen Difference ce between between Alternativ Alternative e and Facultative Facultative Obligations Obligations:: Joint and Solidary Obligations: (Articles 1207 – 1222, 1822-1823; 2088, 2137, 2226 of the New Civil Code, Articles 94 and 121 of the Family Code)
1. Comp Compar arat ativ ive e Juri Jurisp spru rude denc nce: e: (Jau (Jauci cian an vs. vs. Quer Querol ol,, 38 P 707; 707; Borr Borrom omeo eo vs. vs. Co Cour urtt of Appeals, 47 S 65; PNB vs. Sta Maria, 29 S 303; Ronquillo vs. Court of Appeals, 132 S 274) 2. Joint Divisib Divisible le Obligations Obligations:: (Agoncillo (Agoncillo vs. Javier, Javier, 38 P 424) 424) 3. Indivisibil Indivisibility ity vs. Solidari Solidarity, ty, Passive Passive vs. Active Active Solidari Solidarity: ty:
4. Cons Conseq eque uenc nces es of Soli Solida dari rity ty:: (Inc (Incha haus usti ti vs. vs. Yulo Yulo,, 34 P 978; 978; Quio Quiomb mbin ing g vs. vs. Co Cour urtt of Appeals, 189 S 325; Imperial Insurance vs. David, 133 S 317) Arti Articl cle e 1199 1199.. A pers person on alte altern rnat ativ ivel ely y boun bound d by diff differ eren entt pres presta tati tion ons s shal shalll completely perform one of them. The creditor cannot be compelled to receive part of one and part of the other undertaking.
When the code speaks of different prestations, it refers only to the three prestations. A person who is bound to give either a house, a car or a truck has only one prestation, which is “to give”. Partial performance of the different prestations cannot be considered fulfillment of the obli obliga gati tion on and and ther theref efor ore e cann cannot ot be done done unle unless ss the the cred credit itor or acce accept pts s such such part partia iall performance as complete performance. The The cred credito itorr cann cannot ot be comp compel elle led d to acce accept pt such such kind kind of sati satisf sfac acti tion on.. It will will be considered an incomplete satisfaction, which is not acceptable. The obligation will not be satisfied through partial fulfillment of several prestations. If all but one of the alternative become legally impossible to fulfill, the obligation will cease to be alternative. (i.e., Philippine peso or US dollar).
Articl Article e 1200. 1200. The right of choice choice belongs belongs to the debtor, debtor, unless unless it has has been been expressly granted to the creditor. The The
debtor debtor shall shall have have no right right to choos choose e those those presta prestatio tions ns which which are are impos impossib sible, le, unlawful or which could not have been the object of the obligation. Any doubt as to whom the choice is given must always be interpreted in favor of the debtor. Only by an express grant of choice can a creditor have the right to choose which prestation is to be performed. If the alternatives are: to give opium, to sing a song or not to join the navy, the first alter alternat native ive is clear clearly ly unlaw unlawful ful and there therefo fore re the debto debtorr has no right right to choos choose e this this prestation. ARTICLE 1201. The choice shall produce no effect except from the time it has been communicated.
The creditor is always entitled to be notified of the choice. COMMUNICATION COMMUNICATION gives effect to the choice. Manner may vary, must clearly convey choice of debtor The credito creditorr has no right right to oppos oppose e if the alternat alternative ives s are are all possib possible, le, lawful lawful or consistent with the object of the obligation. He must accept the chosen alternative.
ARTI ARTICL CLE E 1202 1202.. The The debt debtor or shal shalll lose lose the the righ rightt of choi choice ce when when amon among g the the prestations whereby he is alternatively alternatively bound, only one is practicable.
The creditor has no choice but to accept the single practicable choice provided that it is not unlawful or inconsistent with the object of the obligation. “Not practicable” may also include lawful and possible prestations that but because of some special attendant circumstances, which do not necessarily make them unlawful or impossible, they cannot be done.
ARTICLE 1203. If through the creditor’s acts the debtor cannot make a choice according to the terms of the obligation, the latter may rescind the contract
with damage.
A debtor cannot perpetually be held liable for obligations the satisfaction or compliance of which the creditor himself prevents the debtor from fulfilling. In this case, the debtor can ask for the rescission of the contract with damages. If, despite of the act of the creditor, the debtor still wants to maintain the contract, said debtor can make his selection from the remaining choices.
ARTICLE 1204. The creditor shall have a right to indemnity for damages when, through the fault of the debtor, all the things which are alternatively the object of the obligation have been lost, or the compliance compliance of the obligation has become impossible. The indemnity shall be fixed taking as a basis the value of the last thing which disappeared, or that of the service which last became impossible. Damages other than the value of the last thing or service may also be awarded. The
debtor may: 1) reduce the alternatives from three to two alternatives, alternatives, provided that what what rema remain ins s are are lawf lawful ul,, prac practi tica cabl ble, e, poss possib ible le or cons consis iste tent nt with with the the obje object ct of the the obligation, 2) convert his alternative obligation to a simple one where there is only one lawful and possible prestation 3) may even cause the loss of the thing, or render the service impossible. When debtor is responsible, the creditor is entitled to damages. The indemnity shall be fixed, taking as a basis the value of the last thing which disappeared, or that of the service which last become impossible. Also damages other than the value of the last thing or service may also be awarded. ARTICLE 1205. When the choice has been expressly given to the creditor, the obligation shall cease to be alternative from the day when the selection has been communicated to the debtor. Until then the responsibility of the debtor shall be governed by the following rules: 1) If one of the the things is lost through a fortuitous fortuitous event, he he shall perform perform the obli obliga gati tion on by deli delive veri ring ng that that whic which h the the cred credit itor or shou should ld choo choose se from from among the remainder, or that which remains if only one subsists; 2) If the loss of one of the things things occurs occurs through through the fault of the debtor, debtor, the creditor may claim any of those subsisting, or the price of that which, through the fault of the former, has disappeared, with a right to damages; 3) If all things things are lost lost through through the fault fault of the debtor, debtor, the choice choice by the creditor shall fall upon the price of any one of them, also with indemnity for damages. The same rules shall be applied to obligations to do or not to do in case on, some or all of the t he prestations should become impossible. impossible. Article 1206. When only one prestation has been agreed upon, but the obligor may render another in substitution, the obligation is called facultative.
The loss or deterioration of the thing intended as a subsistute, through the negligence of the obligor does not render him liable. But once the substitution has been made, the obligor is liable for the loss of the substitute on account of his delay, negligence or fraud.
If the debtor is obliged to give a car, such prestation is the principal obligation. It becomes facultive if, in lieu of the car, he can undertake another prestation like the painting of a mural. Undertaking the substitute prestation however is not mandatory in the event that the principal prestation is not performed as the creditor only agrees that it may be given as a substitute.
SECTION 4—Joint and Solidary Obligations Article 1207. The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of t he former has a righ rightt to dema demand nd,, or that that each each one one of the the latt latter er is boun bound d to rend render er,, entu enture re comp compli lian ance ce with with the the pres presta tati tion on.. Ther There e is so soli lida dary ry liab liabil ilit ity y only only when when the the obligation expressly so states, or when the law or the nature of the obligation requires solidarity.
A solidary obligation refers to a sitation where there are debts or obligations incurred by two or more debtors in favor of two or more creditors, and giving anyone, some or all of the creditors he right to demand from anyone, some or all of the debtors the satisfaction of the total obligation and not merely the share of each debtor.
Only exists when the obligation expressly so states or when the law or the nature of the obligation requires solidarity.
SURETY: an insurer of debt, binds himself to pay the obligation of the debtor when it becomes due.
A surety is different from a guarantor who can be required o pay the indebtedness of the principal debtor only after the creditor has unsuccessfully exhausted all means to collect from the debtor.
Guarantor- susbidiarily liable for the debt of the debtor. He is not even jointly liable. A guarantor guarantor insures the solvency of the debtor. d ebtor. He can insure the solvency of the debtor.
“Jointly and severally guaranteed” indicates a solidary obligation. “We promise to pay” or a signature at the back
Name must be mentioned in “I__”. Because 1) the law does not make such presumption. 2) there is no fact in the wording of which document from where such a presumption could arise. 3) the names of the oly debtor and the only creditor were exactly identified in the body of the document. 4) It would have been so easy to expressly identify and indicate in writing Mr. M and Mr. N as either debtor or creditor also, whether joint or solidary, in the body of the promissory note if that were the intention of the parties. 5) The nature of the obligation which is a simple load does not give rise to a solidary obligaton. 6) In affixing their signatures, must have clear and express written content of the contract that Mr. X is liable as debtor and only Mr. J is the creditor and therefore they are now estopped from claiming any other debtor or creditor.
Family code: if the absolute community or conjugal property or the conjugal partnership of gains is liable, the spouses shall generally be solidarily liable for the unpaid balance with their separate properties. If the property arrangement of the spouses is the separation of property regime the
liabil liability ity of the spouse spouses s to credit creditor ors s for for famil family y expen expenses ses shall shall be solida solidary. ry. Also Also with with inheritance, non-fulfillment of agency, bailee commodatum, commodatum, neotiorium gestio, Solidary obligations shall likewise exist if the nature of the obligation requies it. It has been opined that some provisions in the Preliminary Title, Chapter 2 on Human Relations of the Civil Code, particularly Articles 19 to 22, though no expressly providing for solidary liability, nevertheless should give rise to solidary obligations if violated by two or more persons.
Article 1208. If from the law, or the nature or the wording of the obligations to which the preceding article refers the contrary does not appear; the creditor or debt shall be presumed to be divided into as many equal shares as there are creditors or debtors, the credits or debts being considered distinct from one another; subject to the Rules of Court governing the multiplicity of suits.
The presumption of the law is that an obligation is always joint. The joint debtors are obliged to pay only their share in the indebtedness while the creditors can only claim their share in the credit. Unless there is no specificiation as to their proportionate share in the credit or in the debt, the creditors and the debtors in a joint obligation shall be entititled or shall make payment in equal proportions. A joint indivisible obligation gives rise to indeminuty or damages from the time anyone of the debtors does not comply with the undertaking. Considering that the obligation is joint and each debtor is responsible to pay only such amount corresponding to his share, the debtors shall not be responsible for the share of a debtor who is insolvent.
Article 1209. If the division is impossible, the right of the creditors may be prejudiced only by their collective acts, and the debt can be enforced only by proceeding against all the debtors. If one of the latter should be insolvent, the others shall not be liable for his share.
Refers to a JOINT INDIVISIBLE OBLIGATION, solidaryity is not provided and the prestation or object is not susceptible of division. DEBTOR: Its fulfillment requires the concurrence concurrence of all the debtors, each for his part. CREDITOR: A collective action for acts, which are prejudicial to the rights of the creditors. Solidary obligation: the nature of the obligation attaching to the obligor and obligee Indivisibility: nature of the object of the prestation PLURALITY PLURALITY OF DEBTORS, if one of them failed in his undertaking, the obligation could no longer be fulfilled because the prestation or object is an indivisible one. Obligation is conve converte rted d into into one of indem indemnit nity y for for damage damages. s. The The DEBT DEBTOR OR who refus refused, ed, should shoulder er damages.
PLURALITY OF CREDITORS but one debtor, the obligation can be performed only by the delivery of the thing to all the creditors jointly.
INSOLVENCY OF DEBTOR: His co-debtors shall not be liable for his share. Otherwise the joint character of the obligation will be disregarded.
As long as the obligation is joint, the act of one creditor cannot have any effect as to the other creditors because the credit of each is separate from the creditors of the others. The
indivisibility requires collective action to be effective. If a written demand is made by one creditor only, the debtor cannot pay him alone. Payment must be made to all. Hence, the act of one alone is ineffective. Article 1210. The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does solidarity of itself imply indivisibility.
Indivisible Obligation—one where the prestation or object cannot be performed by parts without altering its essence or substance. Kinds of Indivisibility: 1) Legal Legal Indivi Indivisib sibilit ility y 2) Conventio Conventional nal (made (made indivisible indivisible by nature nature of of the will) 3) Solida Solidary ry Obliga Obligatio tion n Kinds of Solidary Obligatios: (Parties bound) Active and Passive Solidarity (Creation) Legal Solidarity, Conventional solidarity, and Real solidarity. Article 1211. Solidarity may exisit although the creditors and the debtors may not be bound in the same manner and by the t he same periods and conditions. Enforcement of the terms and conditions may be made at different times. Enforcement can be made against any one of the solidary debtors although it can happen that a particular obligation chargeable chargeable to a particular debtor is not yet due. He will be answerable nonetheless for all prestations which fall due although chargeable to the other co-debtors. Article 1212. Each one of the solidary creditors may do whatever may be useful to the others, nut not anything which may be prejudicial to the latter.
Solidary creditors may perform acts which are useful or beneficial to the others. A relationship of mutual agency exists by an among solidary creditors. PREJUDICIAL ACTS: If a solidary creditor performs am act whihch is prejudical to his cocreditors, the act may have valide legal effects, but the performing creditor shall be liable to his co-creditors. The rights of the co-creditors shall subsist but enforceable only against the creditor who alone executed the prejudicial act. Article 1213. A solidary creditor cannot assign his rights without the consent of the others.
Mutual agency is the essence of their active solidarity which is based on mutual trust and confidence. Mutual trust. Each solidary creditor will be confident that his solidary co-creditors will only act for the good of all the solidary creditors and that they will not act to prejudice others. A solidary creditor cannot assign his rights without the consent of the others.
UNAUTHORIZED Assignment of rights Payment made to him by the debtor does not extinguish the obligation. He is considered a stranger. Whatever acts he does, will not bind the other creditors. Article 1214. The debtors may pay any one of the solidary creditors; but if any deman demand, d, judic judicia iall or extraextra-jud judici icial al has has been been made made by one one of them, them, paym payment ent
should be made to him.
As soon as one of the creditors make the demand, the mutual representation of the cred credit itor ors s with with resp respec ectt to ea each ch othe other, r, whic which h is the the basi basis s of a solid solidar ary y obli obliga gati tion on,, momentarily ceases, and therefore the debtor must only pay the one who, at the moment of demand, seeks the full payment of the obligation. This is to avoid confusion. In case of two or more demands made by the other creditors, the first demand must be given preference or priority.
Article 1215. Novation, compensation, confusion or remission of the debt, made by any any of the the so soli lida dary ry cred credit itor ors s or with with any any of the the so soli lida dary ry debt debtor ors, s, shal shalll extinguish the obligation, without without prejudice to the provisions of Articlw 1219.
Novation: the change of creditors, debtors or the principal condition of the contract, must be clear to release the solidary obligation of the debtors.
Compensation: merger of the characters of creditor and debtor in the same person.
Remission: condonation of an obligation. Essentially gratuitous and the acceptance by the obligor is necessary. necessary. Have the effect of extinguishing the debt or obligation which is due to all of them. The one who had collected the debt shall be liable for the shares of corresponding to all his cocreditors.
The creditor who may have executed any of these acts, as well as he who collects the debt, shall be liable to the others for the share in the obligation corresponding corresponding to them. Article 1216. The creditor may proceed against any one of the solidary debtors or some or all of them siumultaneously. The demand made against one of them shall not be an obstacle to those which may be subsequently be directed against the others, so long as the debt has not been fully collected. Article 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may choose which offer to accept.
He who made made the the paym paymen entt may may clai claim m from from his his co-d co-deb ebto tors rs only only the the shar share e whic which h corresponds to each, with the interest for the payment already made. If the payment is made before the debt is due, not interest for the intervening period may be demanded. When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor debtor payin paying g the obliga obligatio tion, n, such such share share shall shall be borne borne by all all his co-de co-debto btors rs,, in proportion to the debt of each. Article 1218. 218. Payment by a solidary debtor shall not entitle him to reimbursement reimbursement from his co-debtors if such payment is made after the obligation has prescribed or become illegal. Article 1219. The remission made by the creditor o the share which affects one of the the so soli lida dary ry debt debtor ors s does does not not rele releas ase e the the latt latter er from from his his resp respon onsi sibi bili lity ty towards the co-debtors, in case the debt had been totally paid by anyone of them before the remission was effected. Articl Article e 1220. 1220. The remiss remission ion of the whole whole obliga obligatio tion, n, obtain obtained ed by one one of the
solidary debtors, does not entitle him to reimbursement reimbursement from his co-debtors. Arti Articl cle e 1221 1221.. If the the thin thing g has has been been lost lost or if the the pres presta tati tion on has has beco become me impos impossib sible le witho without ut the fault fault of the solida solidary ry debtor debtors, s, the the obliga obligatio tion n shall shall be extinguished.
If there was fault on the part of any one of them, all shall be responsible to the creditor, for the price and the payment of damages and interest, without prejudice to their action against the guilty or negligent debtor. If through a fotuitous event, the thing is lost or the performance has become impossible after one of the solidary debtors has incurred in delay through the judicial or extra judicial demand upon him by the creditor, the provisions of the preceeding paragraph paragraph shall apply. Article 1222. A solidary debtor may, in actions filed by the creditor; avail himself of all defenses which are derived from the nature of the obligation and of those which are personal to him, or pertain to his own share. With respect to those which which person personall ally y belon belong g to the others others,, he may may avail avail himse himself lf thereo thereoff only only as regards that part of the debt for which the latter are responsible.
Divisible and Indivisible I ndivisible Obligations: (Articles 1223 – 1225)
1. Indivisibil Indivisibility ity of Obligation Obligation vs. vs. Indivisible Indivisible Thing: Thing: 2. Test Test of of Indiv Indivisi isibili bility: ty: Obligations with a Penal Clause: (Articles 1226 – 1230)
1. Concept Concept and Purpose Purpose of Penal Penal Clause: Clause: (Manila (Manila Racing Racing Club vs. Manila Manila Jockey Jockey Club, 69 P 55; SSS vs. Moonwalk, 221 S 119; Caridad Estate vs. Santero, 71 P 114) 2. Exception to the Purpose Purpose of Penal Penal Clause: Clause: (Bachrach (Bachrach vs. Espiritu, 52 P 346; Cabarroguis Cabarroguis vs. Vicente, 107 P 340) 3. Reduc Reductio tion n of Penalty Penalty:: (Jiso (Jison n vs. vs. Co Court urt of Appeals, Appeals, 164 S 339; 339; Umali Umali vs. Miclat Miclat,, 105 105 P 1007) 4. Proof Proof of Actual Actual Damages Damages:: (Lambert (Lambert vs. vs. Fox, 26 P 558) 558)
EXTINGUISHMENT EXTINGUISHMENT OF OBLIGATIONS Payment or Performance: (Articles 1232 – 1261, Rule 57 of the Rules of Civil Procedure, R.A. 529 Uniform Currency Act, Insolvency Law)
1. Substantia Substantiall Performanc Performance e in Good Good Faith: (Angeles (Angeles vs. Calasanz, Calasanz, 135 S 323; 323; Pagsibigan Pagsibigan vs. Court of Appeals, 221 S 202; JM Tuason vs. Javier, 31 S 829) 2. Complete Completeness ness by Estoppe Estoppel: l: (Esguerra (Esguerra vs. Villanue Villanueva, va, 21 S 1314) 1314) 3. Effect of Payment by and to Third Third Persons: Persons: (Tanguilig vs. Court of Appeals, Jan Jan 2, 1997; 1997; PNB vs. Court of Appeals, 256 S 44) 4. Dation Dation in Payment: Payment: (Calt (Caltex ex vs. IAC, IAC, 215 215 S 580) 580) 5. Effects Effects of Partial Partial Payment: Payment: (Nasse (Nasserr vs. Cuevas, Cuevas, 188 S 812) 6. Currency Currency of Payment: Payment: (Fortunad (Fortunado o vs. Court of Appeals, Appeals, April 25, 1991; 1991; Tibajia Tibajia vs. Court of Appeals, Jun 4, 1993; General Insurance vs. Union Insurance, 179 S 530) 7. Extraor Extraordinar dinary y Inflation Inflation or deflation deflation of currency: currency: (Velasco (Velasco vs. Meralco, Meralco, 42 S 556; Filipino Filipino Pipe Foundry vs. NAWASA, 161 S 32; Gonzalo Maluel Co. vs. Central Bank, 38 S 533) 8. Applica Applicatio tion n of Paym Payment ents: s: (Magda (Magdalen lena a Estate Estates s vs. vs. Rodri Rodrigue guez, z, 18 S 967; 967; Balta Baltazar zar Vs. Lingayen Gulf Inc., 14 S 522) 9. Cesion: Cesion: (Lopez (Lopez vs. vs. Court Court of Appeal Appeals, s, 114 S 671) 10.Tender of Payment and Consignation (Adelfa Properties vs. Court of Appeals, 240 S 565; Soco vs. Militante, 123 S 160; Ponce De Leon vs. Syjuco, 90 P 311; Federation of United United NAMA NAMARC RCO O Distri Distribut butor ors s vs. vs. Natio National nal Ma Mark rketi eting, ng, 4 S 867; 867; PNCC PNCC vs. Co Court urt of Appeals, May 5, 1997; Naga Telephone vs. Court of Appeals, 73 S 637) Loss of the Thing Due: (Articles 1262 – 1269; Yu Tek Co. vs. Gonzales, 29 P 384; Labayen vs. Talisay-Silay Milling, 52 P 440) Condonation or Remission : (Articles 1270 – 1274 and 748 – 752) Confusion: (Articles 1275 – 1277; Sochayeseng vs. Trujillo, 31 P 153; Yek Ton Lin vs. Court of Appeals, 46 S 473; Chittick vs. Court of Appeals, 166 S 219) Compensation: (Articles 1278 – 1290, Rule 6 of the Rules of Civil Procedure)
1. Concept Concept and Distincti Distinctions ons with Other Other Means Means of Extinguishin Extinguishing g an Obligation: Obligation: 2. Requisite Requisites: s: (Garcia (Garcia vs. Lim Chiu Chiu Sing, 59 P 562; Domingo Domingo vs. Carlito Carlitos, s, 8 S 443; Soriano Soriano vs. Compania General, 18 S 999; Republic vs. Mambulao, 4 S 622; Gullas vs. PNB, 62 P 519; Ong vs. Court of Appeals, 177 S 402; Perez vs. Court of Appeals, 127 S 636; Mialhe vs. Manalili, 6 S 453 3. Other Other Kinds of Compen Compensa satio tion: n: (Pion (Pionee eerr Insura Insurance nce vs. Co Court urt of Appeal Appeals, s, 180 S 156; 156; Sesbreno vs. Court of Appeals, 222 S 466)
Novation: (Articles 1291 – 1304)
1. Conc Concep ept: t: (Aja (Ajax x Ma Mark rket etin ing g vs. vs. Co Cour urtt of Appe Appeal als, s, 248 248 S 222; 222; Ma Magd gdal alen ena a Esta Estate tes s vs. vs. Rodriguez, 18 S 967; Cochingyan vs. R & B Surety, 151 S 339; Guerrero vs. Court of Appeals, 29 S 791) 2. Kinds: Objective, Subjective, or or Mixed: (Padilla vs. Levy Hermanos, Hermanos, 69 69 P 681; Ramos Ramos vs. Gibbon, 67 P 371) 3. Requisite Requisites: s: (Garcia (Garcia vs. Court Court of Appeals Appeals,, 191 S 493) 493) 4. Delegacion vs. vs. Expromision Expromision (Gaw vs. IAC, IAC, 220 S 405; Asia Asia Bank vs. Elser, Elser, 54 P 994) 5. Legal Legal Subrogatio Subrogation: n: (Chemphil (Chemphil vs. Court Court of Appeal Appeals, s, 251 S 257) 257) Application of Payments: 1. PAYM PAYMENT ENT OR PERFOR PERFORMA MANC NCE E – delive delivery ry of money money and perfo perform rmanc ance, e, in any other other manner of the obligation REQUISITES FOR VALID PAYMENT/PERFORMANCE A. With re respect to to pr prestation it itself: lf: (1) identity (2) integrity or or co complet leteness (3) indivisibility B. With Wi th res respe pect ct to par parti ties es - must must be mad made e by prop proper er part party y to prop proper er part party y (1) Payor (a) (a) Payo Payorr - the the one one perfo perform rming ing,, he can can be the debtor debtor himsel himselff or his his heir heirs s or ass assigns igns or his agent, or anyone interested in the fulfillment of the obligation; can be anyone as long as it is with the creditor's consent (b) 3RD 3RD perso person n pays/p pays/per erfor forms ms - only only the the credito creditor's r's cons consent ent;; If perf perfor orma mance nce is don done e also also with debtor's consent - he takes the place of the debtor. There is subrogation except if the 3rd person intended it to be a donation (c) 3rd 3rd perso person n pays/p pays/perf erfor orms ms with with conse consent nt of cred credito itorr but not not with with debto debtor's r's cons consent ent,, the repayment is only to the extent that the payment has been beneficial to debtor (2) Payee (a) (a) payee payee - cred credito itorr or oblige obligee e or succes successor sor in inter interest est of tra transf nsfere eree, e, or or agent agent (b) (b) 3rd 3rd per perso son n - if any any of of the the ff. ff. con concu cur: r: i. it must must have have redo redoun unde ded d to to the the obli oblige gee' e's s ben benef efit it and and only only to the the ext exten entt of of suc such h benefit ii. it falls under art 1241, par 1,2,3 - the benefit is total so, performance is total (c) anyone anyone in pos posses sessio sion n of the credit credit - but but will will appl apply y only only if if debt debt has not been been previously garnished PAYMENT MADE TO AN INCAPACITATED PERSON , VALID IF: 1. Inca Incapa paci cita tate ted d per perso son n kep keptt the the thin thing g del deliv iver ered ed,, or or 2. Inso Insofa farr as as the the paym paymen entt has has been been bene benefi fici cia al to to him him PAYMENT TO A 3RD PARTY NOT AUTHORIZED, VALID IF PROVED & ONLY TO THE EXTENT OF BENEFIT; PRESUMED IF: 1. Afte Afterr paym paymen ent, t, 3rd 3rd per perso son n acqu acquir ires es the the cred credit itor or’s ’s righ rights ts
2. 3.
Credit ditor ra ratif tifies ies pa payment ent to to 3rd per pers son By cred credit itor or’s ’s con condu duct ct,, debt debtor or has has bee been n led led to make make the the pay payme ment nt (es (esto topp ppel el))
PAYMENT MADE IN GOOD FAITH TO A PERSON IN POSSESSION OF CREDIT SHALL RELEASE DEBTOR, Requisites: 1. Payment by debt debto or mus mustt be be ma made in goo good fa faith ith 2. Cred Credit itor or must must be be in poss posses essi sion on of of the the cre credi ditt & not not mere merely ly the the evid eviden ence ce of indebtedness C.
With With resp respect ect to time time and and place place of paymen paymentt - must must be be acco accordi rding ng to the obliga obligatio tion n
Where payment should be made: 1. In the the pla place des desig igna nate ted d in in the the obliga ligati tio on 2. If there there is no no expr express ess stipul stipulati ation on and and the the unde undert rtaki aking ng is is to delive deliverr a specif specific ic thin thing g– at the place where the thing might be at the moment the obligation was constituted 3. In other ther case case – in in the the plac place e of of the the domi domici cile le of the the deb debto torr Time of payment - time stipulated Effect of payment – extinguish obligation Except: order to retain debt SUBSTANTIAL PERFORMANCE 1. Atte Attemp mptt in Goo Good d Fait Faith h to per perfo form rm wit witho hout ut will willfu full or inten intenti tion onal al dep depar artu ture re 2. Deviation is slight 3. Omis Omissi sion on/D /Def efec ectt is tech techni nica call or unim unimpo port rtan antt 4. Must Must not not be be so so mat mater eria iall that that inten intenti tion on of part partie ies s is is not not atta attain ined ed Effect of Substantial performance in good faith 1. Obligo Obligorr may may recov recover er as though though there there has been been str strict ict and comple complete te fulfil fulfillme lment, nt, less less damages suffered by the obligee 2. Right ight to resc rescin ind d can canno nott be be use used d for for slig slight ht brea breach ch SPECIAL RULES/FORMS OF PAYMENT - Special Forms: a. Applic Applicati ation on of Paym Payment ents s – the design designat ation ion of the the debt debt whic which h pay paymen mentt shal shalll be be made made,, out of 2 or more debts owing the same creditor: stipulation or application of party given benefit of period – OK; to be valid: must be debtor’s choice or w/ consent of debtor Requisites for the Application of payment: 1. Various debts of the same kind 2. Same debtor 3. Same creditor 4. All debts must be due Exception: there may be application of payment even if all debts are not yet due if: a) parties so stipulate b) when when applic applicat ation ion of payme payment nt is is made made by the party party for for whos whose e bene benefit fit the term term has has been constituted 5. Payment is not not eno enoug ugh h to to ex exting tingui uish sh all debt debts s HOW APPLICATION IS MADE: 1. Debtor ma makes the designation 2. If not, not, cred credito itorr mak makes es it it by so stati stating ng in in the the rece receipt ipt that that he issues issues – unles unless s ther there e is cause for invalidating the contract 3. If neithe neitherr the the debto debtorr nor nor cred credito itorr has has made made the the appl applica icatio tion n or if the the appl applica icatio tion n is not not
valid, then application, is made by operation of law WHO MAKES APPLICATION: General Rule: Debtor Exception: Creditor – a) Debto Debtorr with without out protes protestt acce accepts pts receip receiptt in in whic which h cred credito itorr spec specifi ified ed expre expressl ssly y and and unmistakably the obligation to which such payment was to be applied – debtor in this case renounced the right of choice b) When When mont monthly hly state statemen ments ts were were made made by the bank bank specif specifyin ying g the the applica applicatio tion n and and the debtor signed said statements approving the status of her account as thus sent to her monthly by the bank IN CASE NO APPLICATION HAS BEEN MADE 1. Apply payment to the most onerous 2. If deb debts ts are are of of the the same same nat natur ure e and and burd burden en,, app applic licat atio ion n shal shalll be mad made e to all all proportionately Article 1252. He who has various debts of the same kind in favor of one and the same creditor, may declare at the same time of making the payment, to which of them the same must be applied. Unless the parties so stipulate, or when the application of payment payment is made by the party for whose benefit the term has been constituted, application application shall not be made as to debts which are not yet due.
If the debtor accepts from the creditor a receipt in which an application of payment is made, the former cannot complain of the same, unless there is a cause for invalidating the contract. Similar to a case where the obligation is subject to an alternative obligation or prestation, the choice as to which debt the payment is to be applied is given to the debtor. For this purpose, the debtor must make a declaration as to which debt should the payment be applied. Application of payment cannot be made on debts, which are not yet due, unless the parties agree or when the application of payment is made by the party, which may either be the debtor or the creditor, for whose benefit the term has been constituted. The law likewise provides that if the debtor accepts from the creditor a receipt in which an application of payment is made, the former cannot complain of the same, unless there is a cause for invalidating the contract. It must be noted that the debtor must not only merely receive the receipt but he must accept the receipt.
Article 1253. If the debtor produces interest, payment of the principal shall not be deemed to have been made until the interests have been covered.
Merely director not mandatory. The payment of both principal and interest, in effect, constitutes two payments by the debtor. In fact according to the law, the receipt of the principal by the creditor without reservation with respect to the interest, shall give rise to the presumption that the interest has been paid. It is i s a rule that payment of the principal shall not be deemed to have been made until the interests have been covered. Rapanut v CA, in a contract involving installment payments with interest chargeable against the remaining balance of the obligation, it is the duty of the creditor to inform the debtor of the amount of interest that falls due and that he is applying the installment payments to cover the said interest. Otherwise, the creditor cannot apply the payments to the interest and then hold the debtor d ebtor in default for non-payment of installments on the
principal. Article 1254. When the payment cannot be applied in accordance with the preceeding rules, or if application can not be inferred from other circumstances, circumstances, the debt which is most onerous to the debtor, among those due, shall be deemed to have been satisfied.
If the debts due are of the same nature and burden, the payment shall be applied to all of them proportionately. The most onerous debt means the indebtedness which exacts the heavier burden from among many. A debt with an acceleration clause enabling the creditor to demand the payment of the whole obligation if the debtor defaults in even one amortization amortization or installment is more onerous than a debt payable in installment but without acceleration acceleration clause. A debt secured by a mortgage is more onerous than one, which i s not.
Dacion en Pago – mode of extinguishing an obligation whereby the debtor alienates in favor of the creditor property for the satisfaction satisfaction of monetary debt; extinguish up to amount of property unless w/ contrary stipulation; A special form of payment because 1 element of payment is missing: IDENTITY • Governed by law on sales • Conditions for a valid dacion: 1) If cre credit ditor or con conse sent nts, s, for for a sal sale e pres presup uppo pose ses s the the cons consen entt of bot both h part partie ies s 2) If daci dacion on will will not not pre preju judi dice ce the the oth other er cred credit ito ors 3) If debt debto or is is not not judi judici cial ally ly decl declar ared ed inso insolv lven entt c. Cess Ce ssion ion/A /Assi ssignm gnment ent in Favor Favor of credit creditor ors s – the proces process s by by whic which h debto debtorr tra transf nsfer er all the properties not subject to execution in favor of creditors is that the latter may sell them and thus, apply the proceeds to their credits; extinguish up to amount of net proceeds ( unless w/ contrary stipulation ) Kinds: 1. Lega egal – gov governe rned by the the ins insolve lvency ncy law law 2. Volun luntary – agreement of of cr credito itors REQUISITES FOR VOLUNTARY ASSIGNMENT a) More than 1 debt b) More than 1 creditor c) Comple plete or pa partia tial ins inso olven lvenc cy of of deb debttor d) Aban Abando donm nmen entt of of all all deb debto tor’ r’s s prop proper erty ty not not exem exempt pt fro from m exe execu cuti tion on e) Acce Accept pta ance nce or or con conse sent nt on the the par partt of of the the cred credit itor ors s EFFECTS: a) Credi Credito tors rs do not not becom become e the the owne owner; r; they they are are merely merely assig assigne nees es with with autho authorit rity y to sell sell b) Debto Debtorr is relea release sed d up to the amoun amountt of of the the net net pro procee ceeds ds of the sale, sale, unless unless there there is a stipulation to the contrary c) Credi Credito tors rs will will colle collect ct cre credits dits in the the order order of prefer preferenc ence e agre agreed ed upon, upon, or or in defau default lt of of agreement, agreement, in the order ordinarily established by law l aw d. Consignation Tender -the act of offering the creditor what is due him hi m together with a demand that the creditor accept the same (When creditor refuses w/o just cause to accept payment, he becomes in mora accepiendi & debtor is released from responsibility if he consigns the thing or sum due) Consignation – the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment; generally requires prior tender of payment REQUISITES OF VALID CONSIGNATION: (1) Existence of of va valid de debt (2) Consi Co nsigna gnatio tion n was was made made beca because use of of some some lega legall cause cause - pre previo vious us vali valid d tende tenderr was was unjustly refused or circumstances making previous tender exempt (3) Prior Prior Not Notice ice of of Consi Consigna gnatio tion n had been been give given n to the the perso person n interes interested ted in in perfo perform rmanc ance e of obligation (1st notice) (4) actua actuall depo deposit sit/Co /Consi nsigna gnatio tion n with with proper proper judici judicial al autho authorit rities ies (5) (5) subs subseq eque uent nt noti notice ce of Co Cons nsig igna natio tion n (2nd (2nd noti notice ce)) Effects: Extinguishment of obligation (1) (1) Debt Debtor or may may ask ask judg judge e to ord order er can cance cella llati tion on of of oblig obligat atio ion n
(2) Runni unning ng of int inter ere est is is sus suspe pend nded ed (3) Befor Before e credi creditor tor acce accepts pts or or befor before e judge judge decla declares res cons consign ignati ation on has has been been proper properly ly made, obligation remains ( debtor bears risk of loss at the meantime, after acceptance by creditor or after judge declares that consignation has been properly made – risk of loss is shifted to creditor) Consignation w/o prior tender – allowed in: 1. cred credit itor or abse absent nt or or unk unkno nown wn// does does not not appe appear ar at the the pla place ce of paym paymen entt 2. inca incapa paci cita tate ted d to to rec recei eive ve paym payme ent at the the tim time e it it is is due due 3. refuses uses to iss issue rece eceipt ipt w/o jus just ca cause use 4. 2 or or mor more e cre credi dito torr cla claim imin ing g the the same same righ rightt to to col colle lect ct 5. titl itle of obligation has has been lost Article 1255. The debtor may cede or assign his property to his creditors in payment of his debts. This cession, unless there is stipulation to the contrary, shall only release the debtor from responsibility for the net proceeds of the thing assigned. The agreements which, on the effect of the cession, are made between the debtor and his creditors shall be governed by special laws.
Cession is another mode of extinguishing a debt. It is also a form of payment. When the law states that the debtor may cede or assign his property, it refers not only to the cession of one or a number of properties of the debtor but to all the properties of the debtor which are susceptible of and not exempted by law from being alienated. An example of a property which is generally exempted by law from being executed or sold is the family home. It may be sold provided that it strictly follows the requirements of law, such as the procurement of the written consent to the sale of the person who constituted the home as a family home and the latter’s spouse and a majority of the beneficiaries of legal age of the family home. If there is no agreement, the applicable law on preference of credit will apply. The creditors then will administer the totality of the ceded property without the ownership of being transferred to them.
SUBSECTION 3-- TENDER OF PAYMEND AND CONSIGNATION Article 1256. If the creditor to whom tender of payment has been made refuses without just cause to accept it, the t he debtor shall be released from responsibility by the consignation of the thing or sum due.
Consignation alone shall produce the same effect in the following cases: 1) When the creditor creditor is absent or unknown unknown or does not not appear at at the place of of the payment; 2) When he is incapacitated incapacitated to receive receive the payment at at the time it is due; 3) When withou withoutt just cause, cause, he refuses refuses to give give a receipt; receipt; 4) When two two or more more persons persons claim the the same right right to collect collect 5) When the the title title of the the obligatio obligation n has been been lost lost Article 1257. In order that the consignation of the thing due may release the obligor, it must first be announced to the persons interested in the fulfillment fulfillment of the obligation.
The consignation shall be ineffectual if it is not made strictly in consonance with the provisions which regulate payment.
Article 1258. Consignation shall be made by depositing the things due at the disposal of judicial authority, before whom the tender of payment shall be proved, in a proper case, and the announcement of the consignation in other cases.
The consignation having been made, the interested parties shall also be notified thereof. Tender of payment and consignation apply in any contract where there is an obligation to pay. In a contract to sell, the requisites of a valid tender must be complied with: The mere sending of a letter by the vendee expressing the intention to pay, without the accompanying accompanying payment, is not considered a valide tender of payment. It is consignation which is essential in order to extinguish the petitioner’s obligation to pay the balance of the purchase price. A contract to sell involves the performance of an obligation, not merely the exercise of a right or a privilege. Consequently, performance performance may be effected not by tender of payment alone but by both tender and consignation.
Consignation cannot cannot apply to cases where the lessee was given the right and option to buy the leased premises because the lessee merely exercised a right of option and had no obligation to pay said price until the execution of the deed of sale in his favor, which the lessor refused to do. In exercise of the right of redemption, consignation is not necessar n ecessary y for the reason that the relationship that existed between vendor and vendee a retro, was not one of debtor-creditor.
Far East Bank Case: Though a check is not legal tender, and a creditor may validly refuse to accept if it tendered as payment, one who in fact accepted a fully funded check after the debtor’s manifestation manifestation that it had been given to settle an obligation is estopped from later on denouncing the efficacy of such tender of payment. Consignation is the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment and it generally requires a prior tender of payment.
The debtor must show: 1) There There was was a debt debt due due 2) That the consignation of the obligation had had been made made because the creditor to whom tender of payment was made refused to accept it, or because he was absent or incapacitated, or because several persons claimed to be entitled to receive the amount due 3) That previous previous notice of the consignation consignation had had been given given to the person interested interested in the performance performance of the obligation 4) That the amount due was placed at the the disposal disposal of the court 5) That after after the consignation consignation had had been made made the person person was was notified thereof thereof
Without the notice first announced to the persons interested in the fulfillment of the obligation, the consignation as a payment is void. In order to be valid, the tender of payment must be made in lawful currency While payment in check by the debtor may be acceptable as valid, if no prompt objection to said payment is made, the fact that in previous years payment payment in check was accepted does not place its creditor in estoppel from requiring the debtor to pay his obligation in cash. Tender of a check to pay for an obligation is not a valid tender of payment thereof.
TENDER OF PAYMENT:
**Antecedent of consignation, an act preparatory to the consignation. Which is the principal and from which the debtor desires or seeks to obtain. **May be extra-judicial CONSIGNATION: **Necessarily **Necessarily judicial and the priority of the first is the attempt to make a private settlement before proceeding to the solemnities of consignation. PURPOSE OF NOTICE: In order to give the creditor the opportunity to reconsider his unjustified refusal and to accept payment thereby avoiding consignation and the subsequent litigation. The previous notice is essential to the validity of the consignation and its lack invalidates the same. Article 1259. The expenses of consignation, consignation, when properly made, shall be charged against the creditor.
The creditor shall be responsible for the expenses of consignation because it was his failure to accept payment that led to the consignation.
Article 1260. Once the consignation consignation has been duly made, the debtor may ask the t he judge to order the cancellation cancellation of the obligation.
Before the creditor has accepted the consignation, or before a judicial declaration that the consignation has been properly made, the debtor may withdraw the thing or the sum deposited, allowing the obligation to remain in force. The consignation has a retroactive effect. The payment is deemed to have been made at the time of the deposit of the money in court or when it was placed at the disposal of the judicial authority. Prior to any withdrawal of the debtor of the amount, the creditor may accept the amount consigned either unconditionally or with reservation. reservation. In a consignation case, the creditor’s acceptance acceptance of the consigned amount but with an express reservation reservation that he is not admitting the correctness of the obligation and therefore he is not admitting the correctness correctness of the obligation and therefore he is also reserving his right to claim the balance in accordance with what is prayed for in his answer and counterclaims is valid.
Upon the declaration of the court that the consignation is valid, the debtor cannot anymore clami that he is the ownder of the said amount, hence he cannot withdraw it anymore.
Article 1261. If, the consignation consignation having been made, the creditor should authorize the debtor to withdraw the same, he shall lose every preference which he may have over the thing. The co-debtors, guarantors and sureties shall be released.
When there is already a finding by the court that there has been proper consignation and consequently the obligation has been cancelled, it is incumbent upon the creditor to obtain from the court the money deposited as payment.
SECTION 2—Loss of the thing due. Article 1262. An obligation, which consists in the delivery of a determinate thing, shall be extinguished if it should be lost or destroyed without the fault of the debtor, and before he has incurred delay.
When by law or stipulation, the obligor is liable even for fortuitous events, the loss of the thing does not extinguish the obligation, and he shall be responsible for damages. The same rule applies when the nature of the obligation requires the assumption of risk.
Example: If the specific and particular car to be delivered by the debtor is worth 500,000php 500,000php and it is i s lost through a fortuitous event, but the parties stipulate that the debtor, even under such circumstances, will still be liable, the creditor cannot insist on the delivery of the specific car because it has already been lost, but he can seek damages in the amount of 500,000 which is the value of the car.
Article 1263. In an obligation to deliver a generic thin, the loss or destruction of anything of the same kind does not extinguish the obligation. A generic thing is not a determinate thing. A generic thing, which is the object of the prestation cannot really be lost or destroyed unless the whole class of said thing i s destroyed, destroyed, hence the obligation subsists despite the loss or destruction of one thing in the said class. Example: if the debtor is bound to deliver a ball without any specification, he may deliver any kind of ball. If he buys one and subsequently loses it through a fortuitous event, his obligation is extinguished. The debtor has to simply buy another ball. Article 1264. The courts shall determine whether, under the circumstances, circumstances, the partial loss of the object of the obligation is so important as to extinguish the obligation.
This can only happen if the partial loss is so important so as to totally affect the whole object of the obligation. There is clearly a partial loss, which renders the computer system totally useless. In this case, the debtor can go to court and declare that the partial loss has extinguished his obligation to deliver the computer.
Article 1265. Whenever Whenever the thing is i s lost in the possession of the debtor, it shall be presumed that the loss was due to his fault, unless there is proof to the contrary, and without prejudice to the provisions of Article 1165. This presumption does not apply in case of earthquake, flood, storm or other natural calamity.
