Obligation

THE AWESOME NOTES OBLIGATION

PRELIMINARY

OBLIGATION; defined ART. ART. 1156 1156 an obligation is a juridical necessity to give, to do or not to do ESSENTIAL REQUISITES OF OBLIGATION 1. a juridical juridical or legal legal tie; which which binds the parties to the obligation and which may arise either from bilateral or unilateral acts of persons 2. an active active subject; subject; known as as the credito creditorr or obligee, who can demand the fulfillment of the obligation 3. a passive passive subjec subject; t; known known as the the debtor debtor or obligor, from whom the obligation is juridically demandable demandable 4. the fact, fact, the the prestation prestation or or service; service; which which constitutes the object of the obligation DIFFERENT KINDS OF PRESTATION 1. to give ive 2. to do; do; and and 3. not not to to do do NOTE • obligation not to give is already included in obligation not to do • philippine definition of obligation is only limited to obligation and does not include a right. for this, no one can be compelled to exercise a right, and a right is waivable while an obligation is not. CLASSIFICATION OF OBLIGATION

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SOURCES OF OBLIGATION

THE FF ARE SOUCES OF OBLIGATION 1. law 2. cont contra ract cts s 3. quasiquasi-con contra tracts cts 4. delicts; delicts; acts acts or omissions omissions punishab punishable le by law 5. quas quasii-de deli lict cts s OBLIGATION DERIVED FROM LAW ARE NOT PRESUMED TEST IN DETERMINING WHETHER AN OBLIGATION IS DERIVED FROM LAW OR NOT AN OBLIG ATION IS DERIVED DERI VED FROM LAW; when there is a law establishing the obligation and the act or condition upon which it is based is nothing more than a factor for determining the moment when it becomes demandable AN OBLIG ATION IS DERIVED DERI VED FROM OTHER SOURCES (OTHER THAN LAW); when the law merely recognizes or acknowledges the existence of an obligation generated by an act which may constitute a contract, quasi-contract, delict or quasi-delict, and its only purpose is to regulate such obligation FF OBLIGATIONS ARE DERIVED FROM LAW 1. ART. ART. 2014; no action action can can be maintained maintained by the winner for the collection of what he has won in a game of chance. but any loser in a game of chance may recover his loss from the winner , with legal interest from the time he paid the amount lost, lost, and subsidiarily from the operator or manager of the gambling house. 2. ART. ART. 291; obligation obligation of the spouses spouses to support each other 3. WORKMEN'S WORKMEN'S COMPENSA COMPENSATION TION ACT ACT;; in re: obligation of the employer 4. ART. ART. 634; obligati obligations ons of the owners owners of the dominant and servient estates in legal easements 5. othe others rs.. .... .. Art. 1158. Obligations derived from law are not presumed. Only those expressly determined in this Code or in special laws are demandable, and shall be regulated by the precepts of the law which establishes

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prepared by: ronie ablan

THE AWESOME NOTES OBLIGATION them; and as to what has not been foreseen, by the provisions of this Book. Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. Art. 1160. 1160. Obligations derived from quasicontracts shall be subject to the provisions of Chapter 1, Title XVII, of this Book. (n) Art. 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. (1092a) Art. 1162. 1162. Obligations derived from quasidelicts shall be governed by the provisions of Chapter 2, Title XVII of this Book, and by special laws. (1093a)

NATURE AND EFFECTS

OBLIGATION TO GIVE

RIGHTS AVAILABLE TO CREDITOR - would depend whether the obligation is determinate/specific determinate/specific or indeterminate/generic IF THE OBLIGATION IS DETERMINATE 1. to compel compel specific specific performanc performance e 2. to recover recover damaged damaged in in case case of breach breach of the obligation IF THE OBLIGATION IS INDETERMINATE 1. to ask for performa performance nce of the the obligatio obligation n 2. to ask that that the obligat obligation ion be complie complied d with at the expense of the debtor 3. to recover recover damages damages in case case of breach breach of of the of the obligation AN OBLIGATION OBLIGATION IS DETERMINATE; DETERMINATE; when the object thereof is particularly designated or physically segregated from all others of the same class A N O B L I G AT I O N INDETERMINATE; when opposite sa above. haha

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DUTIES OR OBLIGATIONS WHICH ARE IMPOSED UPON THE DEBTOR OR OBLIGOR IF THE OBLIGATION IS DETERMINATE 1. to deliver deliver the things things which which he he has obligati obligation on himself to give 2. to take take care of of the thing thing with with the proper proper diligence of a gfoaf 3. to deliver deliver all acces accession sions s and accesso accessories ries 4. to pay damages damages in case of breach breach of of obligation IF THE OBLIGATION IS INDETERMINATE 1. to deliver deliver the the thing thing which which must neither neither of superior not inferior quality 2. to pay damages damages in case of breach breach of of the obligation WHEN DOES THE CREDITOR ACQUIRES RIGHT OVER THE THING WHICH IS THE OBJECT OF THE OBLIGATION AS WELL AS TO THE FRUITS THEREOF IN RE: AS TO THE FRUITS from the moment the obligation to deliver arises when does obligation to deliver arises • f o r o b l i g a t i o n s a r i s i n g f r o m contracts; - from the moment of the perfection of the contract UNLESS: there is a stipulation to the contrary • for obligations arising from law and others; - would depend upon the provisions of NCC or of special laws creating and regulating them. what kinds of right acquired • prior to delivery; only personal right - right to demand and compel for the delivery • after delivery; real right is acquired - a right which is enforceable against the whole world

IS

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THE AWESOME NOTES OBLIGATION IN RE: LOST OF THE OBJECT DUE TO FORTUITOUS EVENT; liability of the obligor IF THE OBLIGATION IS DETERMINATE GEN RULE: obligor or debtor cannot be held liable for damages EXE: 1. when obligor is already in delay 2. when he is negligent 3. when he promised to deliver the same thing to 2/more persons who do not have the same interest IF THE OBLIGATION IS INDETERMINATE RULE: debtor or obligor is still liable RATION: as only determinate thing or object can be destroyed by a fortuitous event genus numquam peruit - genus never perishes

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ACTS OR OMISSION OF THE OBLIGOR RESULTING TO BREACH OF OBLIGATION THEY ARE: 1. default or mora 2. fraud or dolo 3. negligence or culpa 4. negligence or culpa; and 5. contravention of the tenor of the obligation. DEFAULT OR MORA ESSENCE the non-fulfillment of an obligation with respect to time KINDS OF MORA MORA SOLVENDI - delay of the obligor to perform the obligation mora solvendi ex re; if the obligation is an obligation to give mora solvendi ex persona; when the obligation is an obligation to do.

OBLIGATION TO DO

THE OBLIGOR IS OBLIGED TO • the obligation shall be executed at his cost; when 1. he fails to do the obligation; or 2. he does it in contravention of he tenor of the obligation • what has been done poorly shall be undone

OBLIGATION NOT TO DO

SHOULD THE OBLIGOR PERFORMS WHAT HAS BEEN FORBIDDEN HIM it shall be undone at his expense

MORA ACCIPIENDI - delay of the obligee to accept the delivery of the thing which is the object of the obligation COMPENSATION MORAE - delay the parties or obligor in reciprocal obligation. WHEN IS OBLIGOR OR DEBTOR INCUR DELAY RULE: from the time the obligee or creditor demands from him, judicial or extrajudicial, the fulfillment of his obligation - and in spite of such demand, he is unable to comply with the obligation. EXE: WHEN DEMEND IS DISPENSED WITH 1. when the obligation or the law expressly so declares 2. when from the nature and circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract 3. when demand would be useless, as when the obligor has rendered it beyond his power to perform NOTE: a promissory note stating that the debt shall be paid on a certain date does not

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THE AWESOME NOTES OBLIGATION dispenses the req of prior demand before a debtor can be held in delay. MANRESA when the law or obligation expressly so declares; as a basis of dispensing the need of demand, - it is indispensable that it is expressly added either by stipulation or law that the obligor shall incur in delay if he fails to fulfill the obligation upon the arrival of the designated date or that upon the arrival of such date de ma nd sh al l no t be necessary. EXAMPLE WHEN DEMAND IS NO LONGER NECESSARY - when a capitalist partner fails to contribute the amount stipulated to the the partnership upon the arrival of the designated date. failure to contribute the amount promised upon the arrival of the stipulated dated - automatic that such capitalist partner becomes a debtor of the partnership, and likewise liable for interest and damages from the time he should have complied with his obligation IN RE: RECIPROCAL OBLIGATION; when does one of the party incur in delay RULE: 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. WHEN ONE BE DEEMED IN DELAY from the moment one of the parties fulfills his obligation, delay by the other begins.

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FRAUD OR DOLO ESSENCE conscious and intentional proposition to evade the normal fulfillment of his obligation 2 KINDS OF DOLO DOLO CAUSANTE

DOLO INCIDENTE

fraud in the performance of a pre-existing obligation

fraud in the perfection of the contract

fraud is present only du ri ng th e performance of the obligation

fraud is present only at the time of the b i r th of the obligation

fraud is employed - in order to evade the normal fulfillment of an obligation

fraud is employed - for the purpose of securing the consent of the other party to en te r in to th e contract

results to - non-fulfillment or br ea ch of th e obligation

results to - vitiation of consent

rights of the creditor/ obligee - to r e co v e r damages from the debtor or obligor

rights of the creditor/ obligee/ innocent party - to ask for annulment of he contract; or - fulfillment plus damages

parang mali to. refer to pg. sa contracts part NEGLIGENCE OR CULPA ESSENCE the omission of the diligence which is required by the nature of the obligation, and corresponds with the circumstances of the persons, of the time and the place NOTE: IF COUPLED WITH BF - art. 1171 and 2201 par. 2 will apply. DILIGENCE REQUIRED GEN RULE: the diligence required as stated in the law or contract EXE: when there is no such desgnation: - DOGFOAF

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TEST OF NEGLIGENCE WON the defendant in doing the alleged negligent act use the reasonable care and caution which an ordinary and prudent person would have used in the same situation? CULPA CONTRACTUAL

CULPA AQUILIANA

there is a preexisting contract

there is none. - quasi-delict

negligence defendant is an incident performance obligation

of the merely in the of an

negligence of the de fe nd an t is substantive and independent

the source of liability is breach of contract

the source of liability is the defendant's negligent act or omission

sufficient prima facie proof to warrant recovery - the contract itself and its breach

negligence of the defendant must be proven.

liability of the employer is based on the principle that - the negligence of the employee is con clu sive ly presumed to be the negligence of the employer

- the negligence of the employee is pr im a fa ci e presumed to be the negligence of the employer

primarily liable

subsidiary

not a defense - proof of due diligence in the se le cti on an d supervision of the employee

available defense

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FORTUITOUS EVENT

FORTUITOUS EVENT ESSENCE is an event which cannot be foreseen, or which though foresee, is inevitable CONTRA FORCE MAJEURE a fortuitous event which is dependent upon human intervention (wars, strike, riots. etc) - but nonetheless, ordinarily used interchangeably with fortuitous event KINDS OF FORTUITOUS EVENT 1. FORTUITOUS EVENT PROPER (ACTOF GOD); absolutely independent of human intervention 2. FORCE MAJEURE (FUERZA MAYOR); an event which is dependent upon human intervention other than the obligor 3. ORDINARY FORTUITOUS EVENT; which usually happens or which could have been reasonable foreseen 4. EXTRAORDINARY FORTUITOUS EVENT; an event which does not usually happen and which could not have been reasonably foreseen. IN RE: LIABILITY FORTUITOUS EVENT

ARISING

FROM

GEN RULE: no person shall be responsible - for those events which could not be foreseen, or which though foreseen, were inevitable. REQUISITES; in order that the obligor cannot be held liable due to fortuitous event a. the cause of the breach of the obligation must be independent of the human or will of the debtor b. t h e e v e n t m u s t b e e i t h e r unforeseeable or unavoidable (impossibility to foresee or to avoid, and not mere difficulty) c. the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and d. the debtor must be from any participation in, or aggravation of the injury to the creditor (note: Au st ri a Ca se , di am on d ri ng , ninakaw nung nag lalakad sya sa madilim na lugar)

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NOTE: defective brakes, tire blowouts and other similar nature, cannot be classified as fortuitous event per se within the meaning of the kaw EXE: 1. expressly specified by law (NCC ART. 552 par 2, 1165 par 3, 1268, 1942, 1979, 2147, 2148, 2159) 2. when it is otherwise declared by stipulation 3. when the nature of the obligation requires the assumption of risk (volenti non fit injuria - no wrong is done to one who consents; best ex. insurance contracts and workmen's compensation act)

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REMEDIES OF THE CREDITOR

3 GENERAL REMEDIES OF THE CREDITOR for protection of his right against debtor 1. to exhaust the property in possession of the debtor 2. to be subrogated to all of the rights and actions of the debtor save those which are inherent in his person (accion subrogatoria) 3. to impugn all of he acts which the debtor may have dine to defraud him ( accion pauliana) NOTE: #2 and #3: are only subsidiary remedy to #1

INSTANCES WHEN A PERSON IS CIVILLY LIABLE EVEN WHEN NON-PERFORMANCE IS DUE TO FORTUITOUS EVENT 1. when by law, the debtor us liable even for fortuitous event 2. when by stipulation of the parties 3. when the nature of the obligation requires the assumption of risk 4. when the object of the obligation requires the assumption of risk 5. when the object of the obligation is list and the loss is due partly to the fault of the debtor 6. when the debtor promised to deliver the same thing to 2/mire persons who do not have the same interest 7. when obligation to deliver arise from a criminal offense 8. when the obligation is generic

KINDS OF CIVIL OBLIGATION

FF PRIMARY CLASSIFICATION OF AN OBLIGATION 1. pure, conditional and with a term or period 2. alternative and facultative 3. joint and solidary 4. divisible and indivisible 5. with and without a penal clause OTHER CLASSIFICATION 1. natural and civil (1156, 1423) 2. legal, conventional and penal (1158-1162) 3. real and personal (1156, 1163-1168) 4. determinate and generic (1163-1164) 5. positive and negative (1163-1168) 6. accessory and principal (1166, 1230) 7. unilateral and bilateral (1191) 8. simple and multiple (119, 1206) 9. individual and collective (1207)

PURE AND CONDITIONAL OBLIGATION PURE OBLIGATION DEFINITION is one whose effectivity or extinguishment does NOT depend upon the • fulfillment or non-fulfillment of a condition or • upon the expiration of a term or a period and which, as a consequence, is characterized by the quality of immediate demandability DISTINCTIVE CHARACTERISTIC immediate demandability

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THE AWESOME NOTES OBLIGATION - but such is not infringed or violated when a reasonable period is granted for performance CONDITIONAL OBLIGATION DEFINITION an obligation whose effectivity is subordinated to the fulfillment or non-fulfillment of a future and uncertain fact or event CONDITION; defined a future and uncertain event upon which an obligation is made to depend REQUISITES OF A VALID CONDITION 1. futurity 2. uncertainty IN RE: UNCERTAIN BUT PAST EVENT VALID: provided that it is unknown to the parties. it shall be treated either as a term/ period or as a condition; depending on the circumstances of the case. as a period/ term; when past event is already known to the whole world but unknown to the parties - so that the proof or ascertainment will surely come to pass ie. A promises to pay B if B can prove that C was born on July 15, 2012 as a condition; when past event unknown to the whole world and to the parties - so that the proof or ascertainment thereof may or may not happen ie. A promises to pay B if it can prove that Gloria had an illicit affair with Perez. CLASSIFICATION OF CONDITION IN RE: PERFECTION/EXTINGUISHMENT SUSPENSIVE - when the fulfillment of the condition results in the acquisition of the rights arising out of the obligation RESOLUTORY - when the fulfillment of the condition results in the extinguishment of rights arising out of the obligation

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SUSPENSIVE CONDITION

RESOLUTORY CONDITION

fulfillment of the con dit ion , the obligation arises or become effective

fulfillment of the con dit ion . the ob li ga ti on is extinguished

if not fulfilled, no if not fulfilled, the juridical relation is juridical relation is created consolidated prior to fulfillment - no right is acquired, but there is hope or expectancy that they w i l l so o n b e acquired, which is protected by law

- rights are already acquired but subject to threat of extinction

NOTE: condition shall be deemed fulfilled when the obligor prevents its fulfillment, voluntarily. IN RE: IN WHOM DEPENDS FULFILLMENT OF THE CONDITION

THE

POTESTATIVE - depends upon the will of a party to the obligation void if depends upon the will of the debtor, valid if dependent upon the will of the creditor (being naturally interested in the fulfillment of the obligation). note: as to the validity or nullity, it only affects the condition and not the obligation itself. if invalid, it shall be deemed as if not written. EXE: to the rule that the condition is void when the potestative condition is dependent upon the will of the debtor (therefor; still valid) 1. when the condition is a resolutory condition, not suspensive (only logical as it is naturak that the debtor is interest that he can re-acquire the rights which have already been vested un the creditor upon the constitution of the obligation; the position of the debtor

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THE AWESOME NOTES OBLIGATION when the cndition is resolutory is exactly the same as the position of the creditor when the condition is suspensive) 2. when the potestative condition does not refer to the perfection of an obligation, rather to a pre-existing obligation (ie. babayaran ko yung utang ko sayo last year oag kat apo s kun g mabenta yung bahay ko)

CASUAL - depends upon chance and/or upon the will of a 3rd person MIXED - depends partly upon the will of the party to the obligation and partly upon chance and/or 3rd person ie. debtor executed a PN promising to pay his obligation to the creditor as soon as he has received funds derived from the sale of his property in a cretain place - ca nn ot be de em ed potestative condition; as the sale does not solely depends upon the will of the debtor, but also upon the concurrence of other factors such as: acceptability of the price and condition of sale, and presence of buyer who is ready, able and willing to purchase the land IN RE: CAPABILITY OF REALIZATION POSSIBLE - capable of realization according to nature, law, public policy, or good customs IMPOSSIBLE

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IN RE: SUSCEPTIBILITY OF DIVISION DIVISIBLE - susceptible of partial realization INDIVISIBLE IN RE: NUMBER OF CONDITIONS CONJUNCTIVE - when there are several conditions, all of which must be realized ALTERNATIVE - when there are several conditions, one of which must be realized IN RE: MANNER IN WHICH A CONDITION IS SET FORTH EXPRESS IMPLIED WHO SHALL INURE THE BENEFITS OF IMPROVEMENTS OR THE LOSS DUE TO ITS DETERIORATION OR LOSS; when such occurred prior to the happening of suspensive condition. AS TO THE LOSS if without fault of the debtor - obligation is extinguished otherwise - debtor is liable for damages LOSS; defined - when it perishes, or goes out of commerce, or disappear in such a way that its existence is unknown or it cannot be recovered AS TO DETERIORATION if without fault of the debtor - to be borne by the creditor otherwise - creditor may choose between rescission or fulfillment, plus indemnity for damages in either case

IN RE: NATURE OF CONDITION AS TO IMPROVEMENTS POSITIVE - involves the performance of an act NEGATIVE - involves non-performance of an act

if by nature or time - shall inure to the benfit of the creditor if at the expense of the debtor - debtor has no right over the improvement other than that granted to usufructuary

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THE AWESOME NOTES OBLIGATION same rules will apply if the obligation is subject to resolutory condition ANG NAIBA LANG the debtor is the person who is obliged to return the object of the obligation in case of fulfillment of the condition, while the creditor is the person in whom the thing or object must be returned. RECIPROCAL OBLIGATION are those which are created or established at the same time, out of the same cause, and which results in mutual relationship of creditor and debtor between the parties. ART. 1191 IN CASE OF NON-FULFILLMENT BY ONE PARTY WHAT IS INCUMBENT UPON HIM the injured party may choose between 1. fulfillment; or 2. rescission of the obligation; or - with payment of damages in either case 3. rescission after he opted for fulfillment; it fulfillment becomes impossible BASIS: the power to rescind obligation is implied in reciprocal obligation NOTE: as to rescission, there shall be a corresponding obligation of mutual restitution. but this shall be without prejudice to the rights of third persons who have acquired the thing in gf (Art. 1385 and 1388 and Mortgage Law) NOTE: art. 1191 shall apply only when the power to rescind is not expressly granted in the contract or is silent in the obligation. as there can be no implied power when expressly recognized. can Art. 1191 be applied in lease contract and in partnership? IN LEASE CONTRACT; what is applicable is Art. 1659 - while Art. 1656 is a restatement of Art. 1191; however, the former omitted the provision found in Art. 1191 giving the court discretionary power to refuse the rescission of contracts if in their judgment the circumstances warrants the fixing of a term which the obligor may fulfill the obligation

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exe: when failed to contribute the whole amount, art. 1786 and 1788 will apply ART. 1192 WHAT IF BOTH OF THE PARTIES IN RECIPROCAL OBLIGATION HAVE COMMITTED BREACH; who shall be liable THE FIRST INFRACTOR - who liability shall be equitably tempered by the court IF IT CANNOT BE DETERMINED AS TO WHO FIRST COMMITTED THE BREACH - obligation shall be extinguished, and each shall bear his own danage

OBLIGATION WITH A PERIOD

DEFINITION those obligations whose demandability or extinguishment are subject to the expiration of a term or a period TERM OR PERIOD; defined is an interval of time, which exerting an influence on an obligation as a consequence of a juridical act, either suspending its demandability or produces its extinguishment CONDITION IN GENERAL refers to an event

REQUISITES 1. futurity 2. uncertainty FULFILLMENT may or may not happen

INFLUENCE UPON THE OBLIGATION upon the very existence of the obligation itself

TERM/PERIOD

refers to an interval of time

1. futurity 2. certainty

will surely come to pass, although it may not be known

on ly up on demandability

it s

IN PARTNERSHIP gen rule is, art. 1191 is applicable

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THE AWESOME NOTES OBLIGATION A S TO RETROACTIVE EFFECTS meron

A S TO THE EFFECT OF THE WILL OF DEBTOR if the fulfillment of th e con di ti on depends solely upon the will of the debtor, it shall affect the validity of the ob li ga tio n, in general.

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IT IS WITH A CONDITION; when if the uncertainty consist whether the day will come or not. in general: no UNLESS: there is a stipulation to the contrary

FOR WHOSE BENEFIT THE TERM/PERIOD IN TH E PE RF OR MA NC E OF AN OBLIGATION GENERAL: presumed that it is for the benefit of both the creditor and debtor

kahit na ganun, obligation is still valid

KINDS OF TERM OR PERIOD SUSPENSIVE - the obligation becomes demandable only upon the arrival of a day certain RESOLUTORY - the obligation is demandable at once, although it is terminated upon the arrival of a day certain. LEGAL - granted by law CONVENTIONAL - by stipulation JUDICIAL - conditions given by court DEFINITE - the date or the time is known beforehand - a day certain which must necessarily come, although it may not be known when INDEFINITE - it can only be determined by an event which must necessarily come to pass, although it may not be known when Q: if the happening of a future event is fixed by the parties for the fulfillment or extinguishment of an obligation, what is the nature of the obligation? IT IS WITH A TERM; when - the event will necessarily come, although the date or time when it will come may be uncertain.

HENCE: neither can demand nor compel for the performance of the obligation before the expiration of the term or a period EXE : if it can be proved either from the tenor of the obligation or from other circumstance that - the period has been established for the benefit of either the creditor or the debtor. IN STAN CE S WH ER E CO UR T IS EMPOWERED TO FIX THE DURATION OF A TERM OR A PERIOD 1. if the obligation does not fix a period but from its nature and circumstances it can be inferred that a period was intended by the parties 2. if the duration of the period depends upon the will of the debtor 3. if the debtor binds himself to pay when his means permits him to do so example for #2 when the terms of the obligation is for debtor to pay as soon as his means permits him to do so. - in here, action for specific performance will not lie on the ground of prematurity. the proper remedy is to go to court for it to fix the duration of a term or a period. INSTANCES UNDER THE NCC WHEN THE DEBTOR SHALL LOSE EVERY RIGHT TO MAKE USE OF THE TERM OR PERIOD 1. when after he obligation has been contracted, he becomes insolvent. unless, he gives a guaranty or security for the debt 2. when he dies not furnish to the creditor the guaranties or securities which he has promised 3. when by his own act he has impaired said guaranties or securities after their establishment, and when through a fortuitous event they disappear, unless he immediately gives a new one equally satisfactory 4. when the debtor violates any undertaking in consideration of which the creditor agreed to the period; and 5. when the debtor attempts to abscond

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ALTERNATIVE AND FACULTATIVE OBLIGATION ALTERNATIVE OBLIGATION; defined juridical relations which comprehends several objectives or presentations which are due but the payment or performance of one of them would be sufficient FACULTATIVE OBLIGATION; defined juridical relations where only one object or prestation has been agreed upon by the parties to the obligation, but the obligor may deliver or render another in substitution. FACULTATIVE A S T O O B J E C T DUE only one object is due A S TO COMPLIANCE may be complied with by the delivery of another object or performance of another prestation in substitution of that which is due

AS TO RIGHT OF CHOICE pertains to the debtor

A S TO THE EF FE C T OF FOR TUI TOU S EVENT if without fault of the debtor, the loss of the object of the ob li ga ti on or impossibility of performance r e su l t s to extinguishment of the obligation

A S TO THE EF FE CT OF CULPABLE LOSS the culpable loss of the object which the debtor may deliver in substitution before the substitution is effected does not give rise to any liability on the part of such debtor

the culpable loss of any of the object wh ic h ar e alternatively due before the choice is made may give rise to a liability on the part of the debtor

ALTERNATIVE ALTERNATIVE OBLIGATION; who has the right of choice several objects are due

may be compiled with by the delivery of one of the objects or by the performance of one of the prestation wh ic h a re alternatively due

may pertain even to the creditor or a third person

the loss or impossibility of all of the objects or prestations which are due without any fault of the debtor is necessary to the extinguishment of the obligation

GEN RULE: upon the debtor EXE: 1. when the right has been expressly granted to the creditor 2. when it has been expressly granted to 3rd person when are the parties bound by the choice from the very moment that - the choice has been communicated by the party who has the right to make it to the other party supposing the right of choice belongs to the debtor, does the creditor have the right to impugn the choice made? - no. EFFECT IF 3 OR MORE OBJECTS WHICH ARE ALTERNATIVELY DUE, IF ONE, OR MORE, OR ALL OF THE OBJECTS ARE DESTROYED IF THE RIGHT OF CHOICE BELONGS TO THE DEBTOR (IF DUE TO FORTUITOUS EVENT) 1. if 2 or more of the objects remain, the obligation still subsists retaining its alternative character 2. if only one remains, the obligation still subsits, but it cease to be alternative. it becomes a simple obligation to deliver the remaining object 3. if none remains, the obligation is extinguished

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THE AWESOME NOTES OBLIGATION (IF DUE TO THE FAULT OF THE DEBTOR) 1. if 2 or more objects remain, the obligation still subsists retaining its alternative character. debtor cannot be held liable for damages. 2. if only one remains, the obligation still subsists, but it ceased to be alternative. it becomes an obligation to deliver the remaining object. debtor cannot be held liable for damages 3. if none remains, the obligation is converted to an obligation to indemnify for damages. the indemnity shall consist - the value of the last object to be loss PLU S: con seq uen tia l damages IF RIGHT OF CHOICE BELONGS TO CREDITOR (IF DUE TO THE FAULT OF THE DEBTOR) 1. if 2 or mire of the objects remains, the obligation still subsists, retaining its alternative character. debtor is not liable for damages. but should the creditor chooses any of those which were lost, the debtor is liable for the value of the object plus damages. 2. if only one remains, the obligation still subsists, but cease to be alternative. it becomes a simple obligation to deliver the remaining object or to indemnify for damages depending upon the discretion of the creditor. same as above should the creditor chooses any of those which were lost 3. if only one remains, the obligation is converted into an obligation to indemnify for damages. THE INDEMNITY SHALL CONSIST 1. the price of the object chosen by the creditor; 2. plus, consequential damages IN FACULTATIVE OBLIGATION; should the substitute is lost or destroyed through the fault of the debtor IF THE LOSS OR DESTRUCTION TOOK PLACE AFTER THE SUBSTITUTION HAS BEEN MADE - debtor is liable for damages BEFORE SUBSTITUTION - debtor cannot be held liable

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JOINT AND SOLIDARY OBLIGATION JOINT OBLIGATION; defined AKA mancum or mancimunada or pro rata an obligation where there is a concurrence of several creditors or several debtors, or of several debtors or creditors, by virtue of which • each of the creditors has a right to demand • while each of the debtor is bound to render compliance with his proportionate part of the prestation which constitute the object of the obligation SOLIDARY OBLIGATION; defined AKA joint and several an obligation where there is a concurrence of several creditors, or of several debtors, or of several creditors and debtors, by virtue of which • each of the creditor has a right to demand, • while each of the debtor is bound to render entire compliance with the prestation which constitute the object of the obligation NOTE: THE LAW PRESUMES SOLIDARITY UNLESS: when the stipulation, law nature of the obligation requires solidarity (ie, liability for torts) CHARACTERISTICS OF A JOINT DIVISIBLE OBLIGATION 1. each creditor can demand only for the payment of his proportionate share of the credit, while each debtor can be held liable liable only for the payment of his proportion share of the debt 2. a joint creditor cannot act in representation of the other creditor, while a joint debtor cannot be compelled to answer for the acts or liability of the other debtor HENCE; in a joint obligation, supposing the debtors are X, Y, and Z, and the creditors are A, B, C, there is actually 9 obligations - x debt to a, to b, and to c. - y debt to a, b and to c - z debt to a, to b, and to c. IN HERE: each debtor is liable to each of the creditor, to the extent of his proportionate share of the debt. - should the co-creditor malveresed the amount paid to him for the entire debt, the injured creditor can still compel the joint debtor to pay his share on the debt.

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THE AWESOME NOTES OBLIGATION JOINT INDIVISIBLE OBLIGATION

JOINT DIVISIBLE OBLIGATION

obligation can be enforced only by proceeding against all of the debtors. - as compliance of the oblig ati on re qu ir es th e concurrence of all of them - not susceptible of partial fulfillment creditors cannot act in representation of the others if anyone of the debtor in a joint indivisible obligation should fail to comply with his undertaking, the obligation is converted into one of indemnity for damages. - however, the the debtor who may have been ready to comply with what is incumbent upon him shall not contribute to the indemnity be yo nd th e corre spondi ng portion of the price of the thing or the value of the service i n w h i ch t h e obligation consists. - while those who failed or refuse to comply, they are liable not only to liability mentioned above but as well as for damages WHEN AN OBLIGATION IS DEEMED SOLIDARY 1. when the obligation expressly so states 2. when the law r equires solidarity 3. when the nature of the obligation requires solidarity

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INSTANCES WHERE THE LAW REQUIRES SOLIDARITY 1. if 2/more heirs take possession of the estate, they shall be solidarily liable for the loss or destruction of a thing devised or bequeathed, even though only one of them should have been negligent 2. all partners are liable solidarily with the partnership for everything chargeable against the partnership (Art. 1822 and 1824) 3. if 2 or more persons have appointed an agent for a common transaction or undertaking, they shall be solidarily liable to the agent for all consequences of the agency 4. even when an agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full power 5. when there are 2/more bailees to whom a thing is loaned in the same contract. 6. the responsibility of 2/more officious manager shall be solidary, unless the management has assumed to save the thing or business from imminent danger 7. the responsibility of 2/more payees, when there has been payment of what is not due 8. the responsibility of 2/more persons who are liable for quasi delict is solidary 9. principal, accomplice and accessories, each within their respective class, shall be liable severally (in solidum) among themselves for their quotas and subsidiarily for those of the other persons liable. though, may order of preference, first against the principal, then to the accomplice, and lastly to the accessory KINDS OF SOLIDARITY ACTIVE SOLIDARITY - solidarity among creditors - a tie or vinculum among several creditors of one and of the same obligation by virtue of each of them, • in relation to his co-creditors, possesses the character of creditor only with respect to his share in the obligation, • but in relation to the common debtor/s, represents all of the other creditors. ~ mutual agency is created among the solidary creditors. pwede mag demand for the whole debt or demand including the share pertaining to his co-creditor, and liable to reimburse the latter's share. PASSIVE SOLIDARITY - solidarity among debtors

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THE AWESOME NOTES OBLIGATION - a tie or vinculum among several debtors of one and the same obligation by virtue of which each of them, • in relation to the common creditor/s, represents all of the other debtor, and • in relation to his co-debtors, possesses the character of debtor only with respect to his share in the obligation. ~ in here, each debtor is liable for the entire amount of debt to the creditor, but only liable to the extent of share in the obligation to his co-debtors. hence, should a solidary debtor pays the entire debt, he may ask for reimbursement from his co-debtor, corresponding their shares on the obli. MIXED SOLIDARITY - solidarity among debtors and debtors SOLIDARITY

INDIVISIBILITY

AS TO NATURE refers to legal tie or vi nc ul um an d consequently, to the pa rt ie s of th e obligation

to the prestation which constitutes the object of the obligation

A S TO REQUISITES indispensable req: - plurality of subjects A S TO THE EF FE C T OF BREACH when obligation is converted into a co nt ra ct of in de mn ity, th e solidary character of the oblig ati on remains

not required

the indivisibility character of the ob li ga ti on is terminated.

Q: can solidarity exists although the creditors or debtors may not be bound in the same manner and by the same periods and conditions? A: yes ART. 1211 HENCE; supposing there are different maturity in a solidary obligation. the solidary creditor cannot demand from a solidary debtor the entire debt when some of the obligation is still not matured.

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EFFECT OF REMISSION OF SOLIDARY OBLIGATION EFFECTED BY THE SOLIDARY CREDITOR UPON THE OBLIGATION ITSELF ART. 1215 if the remission is total, the entire obligation is extinguished. if it is partial, the obligation is extinguished in that part or aspect thereof to which the remission refers. UPON SOLIDARY CREDITORS the solidary creditor responsible for the remission shall be liable to the other creditors for the shares in the obligations corresponding to them. EXE: with their consent UPON SOLIDARY DEBTORS IF THE REMISSION COVERS THE ENTIRE OBLIGATION the obligation is totally extinguished and the entire juridical relation among debtors are terminated • does not entitle the debtor in whose favor the remission, to be reimbursed from his co-debtors • akin to donation IF THE REMISSION IS IN FAVOR OF ONE OF THE DEBTOR AND COVERS ONLY ITS ENTIRE OBLIGATION the debtor in whose favor the debt was remitted is released from the creditor/ s, but still liable to his co-debtor. • hence; still liable when one of his co-debtor is insolvent, proportionate to his share in the obligation IF THE REMISSION IS FOR THE BENEFIT OF ONE OF THE DEBTORS AND IT COVERS ONLY PART OF HIS SHARE IN THE OBLIGATION his character as a solidary debtor is not affected. It shall continue with resect to the creditor/s and his codebtors. NOTE: in case of payment made by a codebtor, the debtor is not subrogated to all of the rights of the creditor. RATION WHY NO SUBROGATION kasi the old obligation is extinguished upon payment made by the debtor, and a new obligation is created, from which his right to be subrogated is derived at.

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THE AWESOME NOTES OBLIGATION EFFECT OF DEATH OF A PARTY TO AN OBLIGATION (debtor/creditor) GEN RULE: it does not extinguish the obligation - obligation is transmissible to their heirs EXE: when transmission is prevented by 1. law 2. stipulation of the parties; and 3. nature of the obligation FF OBLIGATIONS WHICH ARE NOT EXTINGUISHED UPON DEATH OF A PARTY RULE 86 SEC 5 1. All claims for money against the decedent, arising from contract, express or implied, whether the same be due, not due, or contingent, 2. all claims for funeral expenses and expenses for the last sickness of the decedent, and 3. judgment for money against the decedent, Q: will the death of the principal debtor convert, decrease or nullify the substantive right of the solidary creditor, in re relation to contract of surety vis-a-vis liability of the surety?

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IN RE: COMPUTATION OF INTEREST it is counted not from the date payment was made, but on the date when the obligation become due. - hence, should the debtor pays the obligation prior to its maturity date, he can only collect the interest from his co-debtors for the amount does paid, from the time the debt matures and not from the date of payment. EFFECT SHOULD ONE OF THE CODEBTOR IS INSOLVENT AND THUS CANNOT REIMBURSE THE PAYING DEBTOR - the solvent debtors, including the paying debtor, shall be borne by them, in proportion to the debt of each. DEFENSES AVAILABLE TO A SOLIDARY DEBTOR IF THE CREDITOR PROCEEDS AGAINST HIM ALONE FOR THE PAYMENT OF THE ENTIRE OBLIGATION DEFENSES DERIVED FROM THE NATURE OF THE OBLIGATION 1. res judicata 2. prescription 3. vitiation of consent

A: NO PRELIMINARY although the contract of suretyship is merely an accessory contract, its liability is solidary with the principal creditor. hence, upon death of the principal debtor, will not affect the suretyship, in accordance with the nature of the surety's liability under the performance bond. - in which the creditor may, sue, separately or jointly the principal debtor and the surety. EFFECT OF PAYMENT MADE BY ONE OF THE SOLIDARY DEBTOR either partial or total extinguishment of the obligation, depending upon whether the entire amount of the debt is paid or only a part thereof.

DEFENSES PERSONAL TO HIM OR PERTAINING TO HIS OWN SHARE 1. minority 2. insanity 3. other defenses purely personal to him (ie. extenstion of time, but only with resect to one of the co-debtor, and not to all of them) DEFENSES PERSONAL TO OTHERS, BUT ONLY AS REGARDS THAT PART OF THE DEBT FOR WHICH THE LATTER ARE RESPONSIBLE only as a partial defense - can be assailed only with respect to the share of debt for which the debtor personally affected is responsible.

IN CASE THE DEBTOR PAY IN FULL; what are his rights against his codebtors - the paying debtor has a right to claim from his co-debtors the share which corresponds to them, with interest for the payment already made EXE: no right to be reimbursed - when the debtor paid the obligation which has long prescribed.

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THE AWESOME NOTES OBLIGATION DIVISIBLE AND INDIVISIBLE OBLIGATION DIVISIBLE OBLIGATION; defined those which have as their object a prestation which is susceptible of partial performance without the essence of the obligation being changed TEST: if separated into parts, its essence is not changed or its value is not decreased disproportionately, - because each of the parts into which it is divided are homogenous and analogous to each other as well as to the thing itself. INDIVISIBLE OBLIGATION; defined those which is not susceptible of partial performance, because otherwise the essence of the obligation will be changed. TEST if separated into parts, its essence is changed or its value is decreased disproportionately DIVISIBILITY OF AN OBLIGATION

DIVISIBILITY OF THE THING; which constitute the object of the obligation

re fe rs to th e performance of the prestation which constitutes the ob je ct of th e obligation

r ef er s to th e prestation itself, divisibility

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- as in the case of co-ownership DIVISIBILITY OF THE OBLIGATION IN RE AS TO THE DIVISIBILITY OF THE OBJECT OF THE OBLIGATION GEN RULE: if the object of the obligation is divisible, the obligation is also divisible, as evidently it is susceptible of partial compliance EXE: 1. if the obligation is indivisible by express provision of law 2. that the obligation is indivisible by intention of the parties Art. 1225. For the purposes of the preceding articles, obligations to give definite things and those which are not susceptible of partial performance shall be deemed to be indivisible. When the obligation has for its object the execution of a certain number of days of work, the accomplishment of work by metrical units, or analogous things which by their nature are susceptible of partial performance, it shall be divisible. However, even though the object or service may be physically divisible, an obligation is indivisible if so provided by law or intended by the parties. In obligations not to do, divisibility or indivisibility shall be determined by the character of the prestation in each particular case. NOTE: indivisibility of the object of the obligation necessarily follows that the obligation is likewise indivisible.

3 KINDS OF DIVISION QUANTITATIVE when the thing can be materially divided into parts and such parts are homogenous to each other - such as when the parts are separated from each other as in the cade of movables, or when the limits of the parts are fixed by metes and bounds as in the case of immovables QUALITATIVE when the thing can be materially divided, but the parts are not homogenous to each other, - such as, partition of an inheritance IDEAL OR INTELLECTUAL when the thing can only be separated into ideal or undivided parts, not material parts

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THE AWESOME NOTES OBLIGATION OBLIGATION WITH A PENAL CLAUSE OBLIGATION WITH A PENAL CLAUSE; defined is one with an accessory undertaking by virtue of which the obligor assumes a greater liability in case of breach of the obligation AS AN ACCESSORY OBLIGATION attached to a principal obligation by virtue of which the obligor is bound - to pay a stipulated indemnity or - to perform an agreed prestation for the purpose of insuring the performance of the obligation PURPOSES FUNCION COERCITIVA O DE GRANTIA - to insure the performance of the obligation FUNCION LIQUIDATORIA - to liquidate the amount of the damages to be awarded to the injured party in case of breach of the principal obligation FUNCION ESTICTAMENTE PENAL - in certain exceptional cases, to punish the obligor un case of breach of the principal obligation. NOTE: as a general rule, when the obligation is with a penal clause, it substitute the indemnity for damages and the payment of interest in case of breach. unless, damages will still lie should the obligor 1. refuses to pay the penalty 2. is guilty of fraud in the fulfillment of the obligation; or 3. s t i p u l a t i o n t o t h e c o n t r a r y (stipulated that there will be a penalty in case of default)

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PUNITIVE; when it is established for the purpose of punishing the obligor or the debtor in case of breach AS TO EFFECT SUBSIDIARY; when only penalty may be demanded in case of breach JOINT; when the injured party may both demand for the enforcement of the obligation and the penalty. NOTE: grossly exorbitant or unconscionable penalty does not necessarily result to its extinguishment. - court is at the liberty of reducing it. INSTANCES WHEN COURT MAY REDUCE THE PENALTY 1. if it is unconscionable or exorbitant 2. when there is partial compliance or 3. when there is an irregular performance made by the obligor or debtor NOTE! INSTANCES WHEN COURT MAY DELETE THE PENAL CLAUSE a. in case there is a substanti al compliance in GF b. when the penal clause itself suffers from fatal infirmity c. when exceptional circumstances so exists as to warrant it DISTINCTION BETWEEN LIQUIDATED DAMAGES GEN RULE: similar, if the penalty is compensatory. - no need here of proof of actual damages EXE: when the penalty is punitive - if it is punitive, not only the creditor or obligee entitled for liquidated damages, but as well as the stipulated penalty

CLASSIFICATION OF PENALTY AS TO ORIGIN LEGAL; when it is constituted by law CONVENTIONAL; by agreement of the parties AS TO PURPOSE COMPENSATORY; when it established for the purpose indemnifying the damages suffered the obligee or creditor in case breach

is of by of

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MODES OF EXTINGUISHING OBLIGATION

1. 2. 3. 4.

payment or performance loss of the thing due condonation or remission of the debt confusion or merger of the rights of the creditor and debtor 5. compensation; and 6. novation OTHER CAUSES 1. annulment 2. rescission 3. fulfillment of the resolutory condition 4. prescription

PAYMENT OR PERFORMANCE

PAYMENT; defined not only the delivery of money but also the performance, in any other manner, of an obligation PAYMENT BY 3RD PERSON; may it compel the creditor to accept the payment GEN RULE: no. but creditor may accept it. EXE: 1. when made by a 3rd person who has an interest in the fulfillment of the obligation (ie. guarantor, co-debtor; the 3rd person here is not entire stranger to the contract) 2. when there is a stipulation to the contrary (in here, the creditor waives his right to refuse to. deal with strangers to the obli) RIGHTS OF THE 3RD PERSON WHO PAYS THE OBLIGATION IF WITH THE KNOWLEDGE AND CONSENT OF THE DEBTOR 1. he can recover from the debtor the entire amount which he has paid 2. he is subrogated to all of the rights of the creditor IF WITHOUT KNOWLEDGE OF AGAINST THE WILL OF THE DEBTOR 1. he can recover only insofar as the payment has been beneficial to the said debtor

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OF BENEFITS RECEIVED BY THE DEBTOR - to proceed against the creditor; following the principle against unjust enrichment at the expense of another TO WHOM PAYMENT MUST BE MADE 1. the person in whose favor the obligation has been constituted 2. his successor-in-interest; or 3. any person authorized to received it. HENCE; payment made to person other than those mentioned above, is not be a valid payment. EXE: a. payment made to 3rd person, redounded to the benefit of the creditor b. payment to the possessor of the credit, provided that it was made in gf when is such benefit to creditor (a.) is presumed: i. if after the payment, the 3rd person acquires the creditor's right ii. if the creditor ratifies the payment to the 3rd person iii. if by the creditor's conduct, the debtor has been led to believe that the 3rd person had authority to receive the payment RULE ON PARTIAL PAYMENT unless there is a stipulation to the contrary - the creditor cannot be compelled to accept partial payments, neither the debtor be compelled to make such payment Q: si A may utang kay B worth 10k. 5k lang pera ni A upon maturity date, which A offered to B as payment, partially. this was refused by B. ang ginawa ni A, binigay nya yung 5k sa anak ni B, instructing him to give it to his father. pero nanakaw yun kay anak. can A compel B to accept partial payment? may B recover the full amount of the debt? A: creditor cannot be compelled to accept partial payment. hence, refusal is valid. B can still demand for the entire amount, kasi si anak, hindi naman sya authorized representative ni B nor authorized by the same to receive such payment

REMEDY OF THE 3RD PERSON WI TH RE SP EC T TO TH E DIFFERENCE BETWEEN THE AMOUNT PAID AND THE EXTENT

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THE AWESOME NOTES OBLIGATION IN WHAT CURRENCY SHALL PAYMENT BE MADE (domestic obligation) RA 8183 all monetary obligations shall be settled in the Philippine currency which is the legal tender in the Philippines, HOWEVER the parties may agree that the obligation or transaction shall be settled in any other currency at the time of the payment LEGAL TENDER; defined such currency which may be used for the payment of all debts, whether public or private HENCE: valid lagi yung payament - so long as the currency used is considered the legal tender of the Phil at the time the payment was made. NO VALID PAYMENT by way of PN, BoE or other mercantile documents EXE: 1. after it has been cashed (for negotiable instruments) or 2. when through the fault of the debtor, such instruments were impaired (only for papers and documents executed by a 3rd person and delivered by the debtor to the creditor, may include negotiable instrument, so long as that the debtor is not the maker or drawer) 3. cashier's check; which operates as an assignment of a art of the fund to the creditors. hence, it is equivalent to delivery to the creditor in cash in an amount equivalent to the amount credited to his account.

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RULE IN CASE OF EXTRAORDINARY INFLATION OR DEFLATION OF PHIL CURRENCY WHAT WILL BE THE BASIS OF PAYMENT - the value of the currency at the time of the establishment of the obligation PROVIDED: there is an official pronouncement or declaration of the existence of an extraordinary inflation or deflation - absence of which; the rules enunciated here will not be applied EXTRAORDINARY INFLATION/ DEFLATION; defined uncommon decrease or increase in the purchasing power of the currency which could not have been reasonably foreseen. REQUISITES 1. there must be a decrease or increase in the purchasing power of the currency which is unusual or beyond common fluctuation in the value of said currency; and 2. such increase or decrease could not have been reasonably foreseen or was manifested beyond the contemplation of the parties at the time of the establishment of the obligation

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SPECIAL FORMS OF PAYMENT

THE FF ARE SPECIAL FORMS OF PAYMENT: 1. application for payment 2. dation in payment 3. payment by cession 4. tender of payment and consignation

APPLICATION FOR PAYMENT

APPLICATION FOR PAYMENT; defined the designation of the debt which the payment must be applied when the debtor has several obligations of the same kind in favor of same creditor REQUISITES 1. there must be only one debtor and only one creditor 2. there must be 2 or more debts of the same kind 3. all of the debts must be due; and 4. the amount paid by the debtor must not be sufficient to cover the total amount of all the debts EXE FOR #1 if a debtor is indebted to the partnership and also to the managerial partner at the same time, and both debts are due and demandable - the debtor may apply the payment to the managerial partner, provided it is more onerous - in here; there are 2 creditors. NOTE: di exe yung solidarity among debtors, following the principle of mutual agency among solidary debtors. so in fact, there is only one debtor, and hence, does not constitute as an exception. TO WHOM DOES THE RIGHT TO MAKE AN APPLICATION OF PAYMENT BELONGS GEN RULE: to the debtor EXE: should the debtor fails to avail himself of this right, the creditor may wrest the initiative from him by giving to him a receipt designating the debt to which the payment shall be applied.

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EXE TO EXE: should the debtor refuses it. so in effect; wala talagang exception. oh jurado, dimi mung pasikot! LEGAL APPLICATION OF PAYMENT • when neither the debtor nor the creditor makes any application of payment, or if it cannot be inferred from other circumstances which is the most onerous debt to the debtor among those which are due, THE FF RULES SHALL BE APPLIED 1. where there are various debts which are due but were incurred on different dates, the oldest is the most onerous 2. where one bears interest and the other does not, the former is more onerous 3. where one is secured and other is not, the former is more onerous 4. where the debtor is bound as principal in one and as guarantor ir surety in another, the former is more onerous 5. where the debtor is bound as a solidary debtor in one and as the sole debtor in another, the former is more onerous • if the debts due are of the same nature and burden, - the payment shall be applied to all proportionately

DATION IN PAYMENT

DACION EN PAGO/ DATION IN PAYMENT A SPECIAL MODE OF PAYMENT - the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding obligation. AKIN TO CONTRACT OF SALE an objective novation of the obligation - where the thing offered as an accepted equivalent of the performance of an obligation is considered as the object of the contract of sake, while the debt is considered as purchase price. govern by the law on sales

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THE AWESOME NOTES OBLIGATION PAYMENT BY CESSION

DEFINITION a special form of payment whereby the debtor - abandons ALL of his property for the benefit of his creditors in order that from the proceeds thereof, the latter may obtain payment of their credits REQUISITES 1. plurality of debts 2. partial or relative insolvency of the debtor 3. acceptance by the creditor KINDS 1. CONTRACTUAL; found in art. 1255 2. JUDICIAL; which is regulated by Insolvency Law DATION IN PAYMENT AS TO NUMBER OF CREDITORS there is only one creditor A S TO THE F I N A N C I A L CONDITION OF THE DEBTOR not necessarily in a state of financial difficulty AS TO EFFECT extinguishes the obligation, but only as to the extent of the value of the thing delivered - either as agreed upon or as may be proved EXE: the silence of the parties signifies that they consider the delivery of the thing as the equivalent of the performance of the obligation

PAYMENT BY CESSION

plurality of creditors

debtor is in the state of partial or relative insolvency

it merely releases the debtor for the net proceeds of the things ceded or assigned EXE: there is a contrary intention

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TENDER OF PAYMENT & CONSIGNATION

TENDER OF PAYMENT the manifestation made by the debtor to the creditor of his decision to comply immediately with his obligations - it involves a positive and unconditional act by the obligor of offering legal tender currency as payment to the obligee for the former's obligation and demanding that the latter accept the same - as an antecedent of consignation - extrajudicial in character CONSIGNATION the deposit of the object of the obligation in a competent court in accordance with the rules prescribed by law after refusal or inability of the creditor to accept the tender of payment. - this is what produces payment, after the tender of payment was refused - judicial in character REQUISITES FOR A VALID CONSIGNATION for it to produce the effect of payment, 1. that there is a debt due 2. that the consignation has been made either because the creditor to whom tender of payment was made fused to accept the payment without just cause, or because any of the cause stated by law for effective consignation without previous tender of payment exists 3. the previous notice of the consignation had been given to the person interested in the fulfillment of the obligation 4. that the thing or amount due had been placed at the disposal of judicial authority 5. that after the consignation had been made, the persons interested in the fulfillment of the obligation had been notified INSTANCES WHERE PRIOR TE ND ER OF PAYM EN T IS DISPENSED WITH FOR THERE TO HAV E AN EF FE CT IV E CONSIGNATION 1. when the creditor is absent or unknown, or does not appear at the place of payment 2. when he is incapacitated to receive the payment at the time it is due 3. when, without just cause, he refuses to give a receipt 4. when 2/more persons claim the right to collect; and

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THE AWESOME NOTES OBLIGATION 5. when the title of the obligation has been lost REASON OF CONSIGNATION to avoid the performance of an obligation from becoming more onerous to the debtor by reason of causes not imputable to him NOTE: so pag ni refuse yung payment, ang dapat gawin, is to consign the amount tendered before the court. failure to do si, the responsibility of the obligor will still continue.

LOSS OF THE THING

LOSS OF THE THING; defined when the object of the obligation perishes, or goes out of the commerce of man or disappears in such a way that its existence is unknown or it cannot be recovered REQUISITES; for loss of thing to extinguish an obligation 1. that the thing which is lost is determinate 2. that thing is lost without any fault of the debtor 3. the thing is lost before the debtor incurred a delay. NOTE: if the loss of the thing is due to the fault of debtor, the obligation shall be converted to as a contract of indemnity EXE: when the obligor or debtor will still be held liable even if all of the requisites mentioned above are present 1. when by law, the obligor is liable for fortuitous events 2. when by stipulation, the obligor is liable even for fortuitous events 3. when the nature of the obligation requires the assumption of risk 4. when the loss of the thing is due partly to the fault of the debtor 5. when the loss of the thing occurs after the debtor has incurred a delay 6. when the debtor promised to deliver the same thing to 2/more persons who does not have the same interest 7. when the obligation is generic 8. when the debt of a certain and determinate thing proceeds from a criminal offense

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IMPOSSIBILITY (LEGAL OR PHYSICAL) OF PERFORMANCE IN AN OBLIGATION TO DO RULE: the obligor is released from the obligation EXE: 1. impossibility was due to his fault 2. the impossibility took place after he has incurred in delay NOTE: IN AN OBLIGATION NOT TO DO - such obligation is extinguished after it has become legally or physically impossible for him to do the prohibited actions, provided not due to his fault. ie: bawal mag tayo ng commercial complex sa subdivision lot for 10 years. what the obligor did, he converted the house into a restaurant. his defense, there is a valid ordinance converting the area as commercial lots from residential

REMISSION / CONDONATION

DEFINITION an act of liberality by virtue of which the obligee, without receiving any price or equivalent, renounces the enforcement of the obligation, as a result of which it is extinguished in its entirety or in that part or aspect of the same to which the remission refers REQUISITES 1. it must be gratuitous 2. it must be accepted by the obligor 3. the obligation must be demandable KINDS OF REMISSION AS TO FORM EXPRESS REMISSION - when it is made in accordance with the formalities prescribed by law for donations - see ART. 748 and 749 IMPLIED REMISSION - although not made in accordance with the formalities of donation, it can be deduced from the acts of the obligee or creditor

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AS TO THE EXTENT TOTAL REMISSION - when the entire obligation is extinguished PARTIAL REMISSION - when it refers only to the principal or to the accessory obligation or to an aspect thereof which affects the debtor, as for instance of solidarity AS TO CONSTITUTION INTER VIVOS - by agreement of the obligor and the obligee, which partakes a donation inter vivos MORTIS CAUSA - constituted by last will and testament, in which it partakes the nature of donation mortis causa IN RE: IMPLIED ADMISSION when not made not in accordance of the formalities of donation, but it can be deduced from the acts of the obligee or creditor INSTANCES: • when the promissory note is in the possession of the maker (debtor). - law presumes that the delivery to him is voluntarily made. (disputable) REQUISITES 1. that the document evidencing the credit was delivered by the creditor to the debtor 2. that such document is a private document; and 3. that the delivery was voluntary • when the thing pledged is in the possession of the pledgor-debtor. NOTE: mere letter remitting the debts and the debtor accepted it by letter, does not amount to implied remission of debt. - as to allow otherwise, the purpose of last sentence of ART. 1270 declaring that express condonation shall comply with the forms of donation, would be defeated. - this is an instance kasi of an express remission.

CONFUSION OR MERGER

DEFINITION the merger of the characters of creditor and debtor in the same person by virtue of which the obligation is extinguished REQUISITES 1. that the merger of the character of creditor and debtor myst be in the same person 2. that it must be place in the person of either the principal creditor or the principal debtor; and 3. it must be complete and definite COMPLETE AND DEFINITE does not mean that it will results to total or complete extinguishment of the obligation It means - whether the merger refers to the entire obligation or only a part thereof, it must be of such a character that there will be a complete and definite meeting of all the qualities of the creditor and debtor in the obligation, or in part or aspect thereof which is affected by the merger.

COMPENSATION

DEFINITION mode of extinguishing in their concurrent amount those obligations of persons who in their own rights are creditors and debtors of each other REQUISITES 1. there must be 2 parties, who in their own right, are principal creditor and principal debtors of each other 2. both debt must consist in money, or if the thing due is fungible (consumable), they must be of the same kind and quality 3. both debts must be due 4. both debts must be liquidated and demandable 5. there must be no retention or controversy commenced by the third persons over either of the debts and communicated in due time to the debtor (exe: after attachment or garnishment, there is still an excess) 6. the compensation must not be prohibited by law

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THE AWESOME NOTES OBLIGATION DIFFERENT KINDS OF COMPENSATION

COMPENSATION

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PAYMENT

AS TO CAUSE they have different requisites LEGAL - when it takes effect by operation of law from the moment all of the requisites prescribed by law are present VOLUNTARY - when the parties who are mutually creditors and debtors agree to compensate their respective obligations, even though all of the requisites from compensation may not be then present. A K I N T O FA C U LT AT I V E COMPENSATION - when one of the obligation is with a term and the other is a pure obligation. and the former renounces the. benefit of the term, making it a pure obligation and consequent compensation possible. - in here; the one who effects the compensation is the party who is entitled to oppose the same, for his right alone is prejudiced here. JUDICIAL - takes effect by judicial decree ie, in a suit for claim for damages. the defendant was also able to establish his entitlement for da mag es ag ain st th e complainant. AS TO EFFECT TOTAL - when the debts be compensated are equal to the amount. PARTIAL -when the debts to be compensated are not equal in amount.

takes effect by operation of law

takes effect by acts of the parties

capacity to give and acquire is not necessary

required

as a rule, only partial

as a rule, complete and indivisible

COMPENSATION

CONFUSION

AS TO NUMBER OF PERSONS - 2 persons, who in their own rights, are principal debtor and principal creditor to each other

- there is only one person in whom the is merged the qualities of the creditor and debtor

AS TO NUMBER OF OBLIGATION at least 2 obligations are involved COMPENSATION

there is only one

SET-OFF OR COUNTERCLAIM

requires that the 2 debts must consist in money, or if the th in g du e ar e fungible, they must be of the same kind and quality

not required

requires that the d e b t m u st b e liquidated

not required

need not be pleaed

must be pleaded

NOTE: bank has the right to set-off the deposit in hands for the payment of any indebtedness to it ob the part of the depositor RATION: when a person deposits his money in bank, a creditor debtor relationship is created, whereby the debtor is the former and the bank as the latter.

AAA - BASTE / ATB


THE AWESOME NOTES OBLIGATION THEY MUST BE A PRINCIPAL CREDITOR AND PRINCIPAL DEBTOR TO EACH OTHER • hence; walang compensation kung yung anak nung crediotr yung nangutang kay debtor • wala ding compensation over the shares held by the SH over its indebtedness in the Corp, kasi, the capital stock of a corporation is a trust fund to be used more particularly for the security of creditors (corporate) THE FF ARE DEBTS NOT SUSCEPTIBLE TO COMPENSATION 1. debts arising from contracts of depositum 2. d e b t s a r i s i n g f r o m c o n t r a c t s o f commodatum 3. claims for support due by gratuitous title 4. obligations arising from criminal offense; and 5. certain obligations in favor of the government (ie. taxes, fees, duties and other of a similar nature)

NOVATION

DEFINITION is the substitution or change of an obligation by another, resulting in its extinguishment or modification, either by • changing its object or principal condition, or • by substituting another in place of the debtor, or • by subrogating a third person in the rights of the creditor KINDS OF NOVATION AS TO ITS ESSENCE OBJECTIVE OR REAL NOVATION - the change either in the cause, object or principal condition of the obligation SUBJECTIVE OR PERSONAL NOVATION - the substitution of another in the person of the debtor or to the subrogation of a third person in the rights of the creditor PASSIVE SUBSTITUTION - substitution of the person of the debtor ACTIVE SUBSTITUTION - subrogation in the rights of the creditor

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MIXED NOVATION - combination of objective and subjective novation AS TO FORM OR CONSTITUTION EXPRESS - declared in unequivocal terms that the obligation is extinguished by a new one which substitutes the same TACIT - when the old and the new obligations are incompatible with each other on every point AS TO THE EXTENT OR EFFECT TOTAL - results to absolute extinguishment of the old obligation PARTIAL - merely results to modification of the old obligation REQUISITES FOR EXTINCTIVE NOVATION TO APPLY 1. the existence of a previous valid obligation 2. the agreement of all the parties to the new contract; and 3. the extinguishment of the old obligation or contract; and 4. the validity of the new one FF ABOVE: novation is never presumed. - it must be proven that either express or tacit novation took place. - there must be animo novandi ILLUSTRATION OF INSTANCES WHERE THERE IS NO NOVATION: walang tacit novation when deed of partial partition was executed and a subsequent MOA that they will share alike and receive in equal shares in the proceeds of the sale of the property subject of partition - kasi, both agreements are not incompatible to each other. walang novation din where theparties agreed on the conversion of the loan into shares in a partnership and yet the new loan remained despite of the conversion. - kasi, the old obligation was not extinguished. walang novation din when the second and the new contract ratifies or acknowledges the old contract - kasi, not incompatible to each other.

AAA - BASTE / ATB


THE AWESOME NOTES OBLIGATION walang novation, when the second and the new contract either extends the date of payment for the old contract or provide another mode in the performance of the contract - di din kasi incompatible yung new contract sa old contract, neither there is a change in the obligatory relation between the parties which will alter the essence of the old obligation supposing in a new contract, it stipulates that a third person will assume the payment or performance of the old contract - still no novation, as it does not provide that the debtor shall be released from responsibility. same with if bond is provided for the performance of the obligation, - as the bond is merely an accessory to the original contract, and cannot be deemed as a new and separate contract TEST WHETHER NOVATION TAKES PLACE 1. whether the 2 obligations can stand together; and 2. if they can stand together; whether the 2 obligations are incompatible to each other RESULTING STIPULATIONS FROM NOVATION 1. to extinguish an existing obligation; and 2. to substitute a new one in place of the existing obligation hence; a subsequent agreement reducing a debt or money judgment does not results to novation - as there is no new or modified obligation arose out of the payment by the judgment debtor of the reduced amount to the creditor - neither the two are incompatible with each other INSTANCES WHERE NOVATION TAKES PLACE the period for payment of an obligation is shortened RATION: 1. clear case of incompatibility between the old and the new; and 2. there is an essential change or alteration of the principal condition of the old obligation PERO: extension of payment does not results to novation - as neither the old and the new obligations are incompatible with each other, nor it can be said that there is an essential change of alteration of the principal condition of the old obligation

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2 F OR M S O F N O VAT I O N S B Y SUBSTITUTION OF THE PERSON OF THE DEBTOR EXPROMISSION - the substitution of debtor us effected with the consent of the creditor at the instance of the new debtor, even without the knowledge or against the will of the old debtor REQUISITES 1. the initiative for the substitution must emanate from the new debtor 2. consent of the creditor to the substitution HENCE; EXPROMISSION CAN FURTHER BE CLASSIFIED TO • substitution with the knowledge and consent of the old debtor • substitution without the knowledge or against the will of the old debtor DELEGACION substitution of debtors effected with the consent of the creditor at the instance of the old debtor with the concurrence of the new debtor REQUISITES 1. the initiative for the substitution must emanate from the old debtor 2. consent of the debtor 3. acceptance by the creditor BASTA: regardless of the kind of substitution of old debtor by 3rd person, consent of the creditor is indispensable CREDITOR'S CONSENT TO NOVATION IS NEVER PRESUMED - law requires that the consent of the creditor must be express FF: renuntiatio non praesumitur a waiver of right may not be presumed unless the will to waive is indisputably shown by him who holds the right Q: in expromission, if the new debtor is unable to pay the obligation by reason of insolvency, can the creditor then proceed against the old debtor for payment? A: NO revival of the old obligation due to nonperformance by the new debtor, shall only lie in delegacion, when the substitution was made with the consent of the old debtor

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THE AWESOME NOTES OBLIGATION REQUISITES FOR THE OLD OBLIGATION NOT TO BE REVIVED DUE TO NON PERFORMANCE OF TH E NE W DE BT OR , IN DELEGACION 1. when the insolvency of the new debtor (delegado) was already existing and of public knowledge at the time when the original debtor (delegante) delegated his debt; OR 2. when such insolvency was already existing and known to the original debtor when he delegated his debts. 2 FORMS OF NOVATION BY SUBROGATING A THIRD PERSON IN THE RIGHTS OF THE CREDITORS CONVENTIONAL SUBROGATION - takes place by agreement of the original creditor, the third person substituting the original creditor and the debtor

CONVENTIONAL SUBROGATION

ASSIGNMENT OF RIGHTS

A S TO THE GO VER NI NG RULES - Art. 1300 - 1304 NCC

- Art. 1624 - 1627 NCC

A S TO THE NECESSITY OF THE DEBTOR's CONSENT - required

- not required

A S T O E F F E C T UPON OBLIGATION extinguishment of the old obligation and giving rise to a new one

LEGAL SUBROGATION - takes place without agreement of the parties but by operation of law because of certain acts. ART. 1302 Art. 1302. It is presumed that there is legal subrogation: 1. When a creditor pays another creditor who is preferred, even without the debtor's knowledge; 2. When a third person, not interested in the obligation, pays with the express or tacit approval of the debtor; 3. When, even without the knowledge of the debtor, a person interested in the fulfillment of the obligation pays, without prejudice to the effects of confusion as to the latter's share. EFFECT OF SUBROGATION IF THE SUBROGATION IS TOTAL it transfers to the person subrogated the credit with all the rights thereto appertaining either against the debtor or against third person, be they guarantors or possessors of mortgages, subject to the stipulation in a conventional subrogation IF THE SUBROGATION IS PARTIAL the creditor to whom partial payment has been made may exercise his right for the remainder. in other words, both the rights of the subrogee and the rights of the creditor shall co-exist. in case of conflict, the right of the creditor shall be preferred.

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A S T O E F F E C T UPON VICES defect or vices in the original obligation is cured AS TO THE TIME OF EFFECTIVITY from the moment of sub rog ati on or novation

transmitting the rights of the creditor to another person without modifying or extinguishing the obligation. - similar effect as in case of sale, the assignee would then ha ve ri gh t to proceed against the debtor

wala

as far as the debtor is concerned, arises from the moment of notification

example of assignment of credit bank purchases the credit of mr. X - as it does not involve any change in the original agreement between the buyer and the seller, nor vary the rights and obligations of the parties. CONSENT OF THE DEBTOR IS NOT REQ WHAT IS REQUIRED IS a mere notice for the debtor - only for the purpose of informing the debtor from the date of the assignment, that the payment should be made to the assignee

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Obligation

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