Obligations

Introduction to Contracts
Obligation defined
• An obligation is a juridical necessity to
give, to do or not to do.

• Latin word “obligare”

• To bind through giving, doing or not doing
something.

Article 1156, New Civil Code of the Philippines (NCC)

Obligation – TO GIVE
• Consists in the delivery of a movable or
an immovable thing in order to create a
real right, or for the use of the recipient,
or for possession or to return it to the
order.
Obligation – TO DO
• To render work or services, mental or
physical or merely to conclude a juridical
operation such as promise to give a bond.
Obligation – NOT TO DO
• To abstain from some act

It includes not to give, both being negative

obligations
Requisites of an Obligation
• Juridicial/Legal Tie or Vinculum
• That which that binds, links or connects the parties, usually the
source of the obligation.
• Object/Prestation
• Conduct required to be observed by the debtor
• Which is the giving, doing or not doing something
• Creditor/Obligee/Active Subject
• A person who is entitled to demand the fulfillment of the
obligation.
• Debtor/Obligor/Passive Subject
• A person who is bound to the fulfillment of the obligation.
Example
• Juan entered into a contract with Jose whereby Juan agreed to
deliver a TV.

• Juridicial/Legal Tie or Vinculum

• Contract
• Object/Prestation
• Delivery of the TV
• Creditor/Obligee/Active Subject
• Jose
• Debtor/Obligor/Passive Subject
• Juan
Forms of Obligations
• Can be
• Oral
• In writing
• Partly oral and partly in writing
Sources of Obligation
• Article 1157 Obligations arise from:
1. Law
2. Contracts
3. Quasi-contracts
4. Crimes – Acts or Omissions
punished by law
5. Quasi-delicts
1. Law
• When they are imposed by law itself.

• Article 1158. Obligations derived from law are not

presumed. Only those expressly determined in this
Code or in special laws are demandable, and shall be
regulated by the precepts of the law which establishes
them; and as to what has not been foreseen, by the
provisions of this Book.
Example
• The rendering of medical assistance in case of illness is
comprised among the mutual obligations to which
spouses are bound by way of mutual support. This
liability arises from the obligation which the law has
expressly established between married couples.
2. Contracts
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 force
2. Requirement of a valid contract

• Article 1159. Obligations arising from contracts have the

force of law between the contracting parties and should
be complied with in good faith.
Compliance in Good Faith
• Compliance or performance in accordance 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.
Example
• The obligation to repay a loan or indebtedness by virtue of an
agreement.
3. Quasi-contract
• Extra-contractual obligations
• Juridical relations based on the principle that no one shall be
unjustly enriched or benefited at the expense of another.

• Art. 2142. Certain lawful, voluntary, unilateral acts give rise

to juridical relation of quasi-contract to the end that no one
shall be unjustly enriched or benefited at the expense of
another.

• Two Kinds
• Negotorium Gestio
• Solutio Indebiti
3.1 Negotorium Gestio
• Art. 2144. Whoever voluntarily takes charge of the
agency or management of the business or property of
another, without any power from the latter, is obliged
to continue the same until the termination of the affair
and its incidents, or to require the person concerned to
substitute him, if the owner is in a position to do so.
3.2 Solutio Indebiti
• Art. 2154. If something is received when there is no right
to demand it, and it was unduly delivered through
mistake, the obligation to return it arises.

The requisites of a solutio indebiti are:

(a) There is no right to receive the thing delivered; and
(b) The thing was delivered through mistake.
3.3 Other Quasi-Contracts
• Article 2164 Stranger gives support without the
knowledge of one legally obliged;
• Expenses for the treatment of a person injured in an
accident or becomes ill and who cannot give consent;
• During calamities, properties are saved without consent;
• Agreement in a community to contribute to protect them
from lawlessness etc;
• One who is restrained to pay the tax of another.
4. Crimes
• Acts or Omissions punished by Law
• Civil obligations arising from criminal offenses shall be
governed by the penal laws.
• When a crime is committed, one is liable both criminally
and civilly for the consequence of his actions or
omissions.
Scope of Civil Liability
The extent of the civil liability arising from crimes is governed by
the Revised Penal Code and the Civil Code. This civil liability
includes:
• (1) Restitution;
• (2) Reparation for the damage caused; and
• (3) Indemnification for consequential damages.
• Article 100 (RPC). Every person criminally liable for a
felony is also civilly liable.
• Rationale: commission of a crime causes not only moral
evil but also material damage. When criminal action is
instituted, the civil action for the recovery of the civil
liability arising from the offense charged is impliedly
instituted.
5. Quasi-delicts or Torts
• Art. 2177. Whoever by act or omission causes damages
to another, there being fault or negligence, if there is no
pre-existing contractual relation between the parties, is
called a quasi-delict
• A quasi-delict is a legal wrong doing committed through
fault or negligence causing damage to a person or
property thereby obliging the wrong doer to pay for the
damage done, provided there exist no contractual
relation between them.
Requisites of Quasi-delicts
• Before a person can be held liable for quasi‐delict, the
following requisites must be present:
1. There must be an act or omission;
2. There must be fault or negligence;
3. There must be damage caused;
4. There must be a direct relation of cause and effect
between the act or omission and the damage;
5. There is no pre‐existing contractual relation between
the parties.
Example
• A 3-year-old child was bitten by a dog of her neighbor. As a
result, she got infected by rabies and died. Can the neighbor
be held liable for the acts of the dog?

• A signboard hanging out of a building dropped on a car

resulting in total wreck. The car owner sues the building
owner and demand to replace the car. Building owner cites
the strong wind as force majeure condition indicating no fault
on his part. Decide.
Quasi-delicts
• It is founded on equity also known as culpa aquiliana or
culpa extra-contractual

2 Kinds of Negligence
• Culpa Aquiliana
• Negligence independent of contractual relations
• Culpa Contractual
• Negligence in the performance of contracts
Illustration
• While trying to pass each other on a narrow bridge, a
passenger truck and a private automobile collided, and
the plaintiff, a passenger in the truck, was injured. The
owner of the passenger truck was made a defendant,
although a chauffer was driving the truck, and the owner
of the private car was also made a defendant, although
he was not in the car, which was being driven by his 18-
year old son and in which members of his family were
then riding.
• The court found both drivers negligent, basing his liab. of
the owner of the truck to the plaintiff on the contract of
carriage; while the liab. of the owner of the private car
was based on Art. 2180 of the Civil Code. As against the
owner of the truck, there was culpa contractual and as
against the owner of the automobile, there was culpa
acquiliana.

• New Civil Code Article 2180

• The father and, in case of his death or incapacity, the mother, are
responsible for the damages caused by the minor children who live in their
company.
• Guardians are liable for damages caused by the minors or incapacitated
persons who are under their authority and live in their company.
Civil Liability
(1) Restitution
(2) Reparation for the damage caused
(3) Indemnification for consequential
damages
Crime Distinguished from
Quasi-delict:
Crimes
Criminal or malicious intent
Punishment
Affects public interest
Criminal AND civil liabilities
Can NOT be compromised by the
Parties themselves
Guilt must be proved beyond
Reasonable doubt
Quasi delicts
Only negligence
Indemnification of offended
parties
Concerns private interest
Only civil liabilities
Can be compromised as any other
Civil liability
Proved by preponderance of
Evidence
Case Analysis 1
A 15-year old high school student stabs his classmate who
is his rival for a girl while they were going out of the
classroom after their last class.
• A. Is the school still held liable for the injury?
• B. Assuming that the school is responsible for the action
of the high school student, what will be the defense of
the school?
Case Analysis 2
If during class hours, while the teacher was chatting with
other teachers in the school corridor, a 7 – year old male
pupil stabs the eye of another boy with a ballpen during a
fight, causing permanent blindness to the victim, who
could be liable for damages for the boy’s injury
• A. Teacher
• B. The school authorities
• C. The guilty boy’s parents
• D. All of the above
Case Analysis 3
Would the school authority be liable for any accident that
happens to its students in the school bus or because of traffic
accidents to and from the school?

• Art. 218. The school, its administrators and teachers, or the

individual, entity or institution engaged in child are shall have
special parental authority and responsibility over the minor
child while under their supervision, instruction or custody.
• Authority and responsibility shall apply to all authorized
activities whether inside or outside the premises of the
school, entity or institution. (349a)
Classifications of
Obligations
Clasification according to…
1. Subject Matter or Prestition
1.1 Real Obligation
1.2 Personal Obligation
2. Sanction
2.1 Civil Obligation
2.2 Natural Obligation
3. Number of Parties Obliged
3.1 Unilateral Obligation
3.2 Bilateral Obligation
1. According to Subject Matter or
Prestition
1.1 Real Obligation
(Obligation to Give)
The subject matter is a thing which the
obligor must deliver to the obligee

1.2 Personal Obligation

(Obligation To Do or Not To Do)
The subject matter is an act to be done or
not to be done.
2. According to Sanction
2.1 Civil Obligation
Obligations which give to the creditor or obligee a
right under the law to enforce their performance in
courts of justice.

2.2 Natural Obligations

Not being based on positive law but on equity and
natural law, do not grant a right of action to enforce
their performance although in case of voluntary
fulfillment by the debtor, the latter may not recover
what has been delivered or rendered by reason
thereof.; precept based on“ do good and avoid evil”.
3. According to Number of Parties
Obliged
3.1 Unilateral Obligation
Only one party is obliged to perform the obligation.

3.2 Bilateral Obligation

Two parties are obliged to perform their respective
obligations.

• Bilateral reciprocal obligation – the parties perform their

respective obligations simultaneously.
• Bilateral non-reciprocal obligation – the parties do not have to
perform their obligations simultaneously.
Kinds of Obligations
Kinds of Obligations
1. Pure and Conditional
2. Obligation with a Period
3. Alternative and Facultative
4. Joint and Solidary
5. Divisible and Indivisible
6. Obligation with a Penal all Clause
1.1 Pure Obligation
• One which is not subject to any conditions and
no specific date is mentioned for its fulfillment
and is, therefore, immediately demandable.

Example:
• Mr. D obliges himself to pay Mr. C 1,000,000. the
obligation is immediately demandable because
there is no condition & no date is mentioned for
its fulfillment.
1.2 Conditional Obligation
• One which is superseded by a condition under
which it was created and which is not yet
accomplished.
• One, whose performance is subject to a
condition which may either be suspensive or
resolutory in effect.
• A condition is past event unknown to the parties
or a future uncertain event which has an
influence on an obligation.
Kinds of Conditions
1. Suspensive condition
2. Resolutory condition
3. Express condition
4. Implied condition
Kinds of Conditions
1. Suspensive condition
Is one the happening of which will give rise to the
obligation.

Example: Your father promised to give a car when you graduate.

2. Resolutory condition
Is one the happening of which will extinguish the
obligation.

Example: Your father promised to give you a monthly allowance until you
graduate.
Kinds of Conditions
3. Express condition
Is one created by express words. Express conditions
are usually denoted by language such as "if", "on
condition that", "provided that", "In the event that",
and "subject to" to make an event a condition.

Example:
Jose is to ship sacks of corn to Wally, and Wally agrees to
either return them if they don't satisfy him, or pay for
them. The contract states, “Wally's duty to pay for the
sacks of corn shall be conditional upon his being satisfied
with them."
Kinds of Conditions
4. Implied condition
A contractual condition that the parties have
implicitly agreed to by their conduct or the nature of
the transaction.

Example:
Ethel contracts to have Fred build her a lamp; this implies
that Ethel will instruct Fred on what kind of lamp to build,
either by choosing from a catalog or perhaps giving Fred
plans and with a description. Letting Fred know what kind
of lamp to build is an implied-in-fact condition that has to
happen before Fred actually has any duty to build it.
CASE 5: The Promise
• In two separate documents signed by him, Juan
Valentino "obligated" himself each to Maria and to Perla,
thus - 'To Maria, my true love, I obligate myself to give
you my one and only horse when I feel like It." - and -'To
Perla, my true sweetheart, I obligate myself to pay you
the P500.00 I owe you when I feel like it." Months passed
but Juan never bothered to make good his promises.
Maria and Perla came to consult you on whether or not
they could recover on the basis of the foregoing settings.
What would your legal advice be?
2. Obligation with a Period
• Obligation with a period is an obligation which contains a
stipulation defining a period in time yet to occur.

Types of Periods:
• Suspensive period – the obligation begins only upon the
arrival of the stipulated date.
Example: Mark is obliged to pay the house amortization
starting July 2009.

• Resolutory period – the obligation is valid only up to the

stipulated date.
Example: Tina bound herself to support Ariel until he
reaches the age of 21.
3.1 Alternative Obligation
• Alternative obligation is an obligation that has one or more
prestations/means to which the obligation can be fulfilled.
Once any one prestation has been accomplished, the
obligation is satisfied and terminated.

• Example: Gino obliged himself to deliver to Jerick a piano, a

TV set or a refrigerator.
3.2 Facultative Obligation
• Facultative obligation is one wherein only one prestation is
agreed upon but the debtor may render another in
substitution.

• Example: Conrado obliged himself to give Mario a Guess

perfume but they agreed that Conrado may substitute CK in
case there is no available stock.
4.1 Joint Obligation
• One in which each of the debtors is liable only for a
proportionate part of the debt, and each of the creditor
is entitled only to a proportionate part of the credit.

• Terms which indicate joint obligation:

• mancomunada, mancomunada simple or pro rate

“We promise to pay”

used by two or more signers
4.2 Solidary Obligations
• One in which each debtor is liable for the entire obligation,
and each creditor is entitled to demand the whole obligation.
• Each creditor has a right to demand, and each debtor is bound to
render compliance, with the entire prestation; but as to co-debtor
he is liable only for his share

Terms which indicate solidary obligation

• mancomunada solidaria, joint and several, in solidum, juntos o
separadamente,

“I promise to pay”
followed by signatures of two or more persons
“Individually and collectively”
“Individually liable”
“Individually and jointly liable”
Case Analysis 6
Four Korean medical students rented the apartment of
ABC University for a period of one year. After one
semester, three of them returned to their home country
and the fourth transferred to a boarding house. The
University discovered that they left unpaid telephone
bills in the total amount of Php 80, 000. The University
demanded that the fourth student pay the entire amount
of the unpaid telephone bills.
• A. Is the claim of the University correct?
• B. In what instance can the University validly demand
from the fourth student to pay the whole amount of the
unpaid telephone bills?
5.1 Divisible
• Divisible obligation is obligation which is are susceptible to
only partial performance. This comes initially on the
agreement by all parties on how the obligation is to be
complied with and guided by the provision of law which
imposes the obligation.
• Example: A tenant is bound to pay two hundred dollars a year
rent to his landlord, the obligation is entire, yet, if his landlord
dies and leaves two sons, each will be entitled to one hundred
dollars; or if the landlord sells one undivided half of the estate
yielding the rent, the purchaser will be entitled to receive one
hundred dollars, and the seller the other hundred.
5.2 Indivisible
• Indivisible obligation is an obligation that cannot be
subdivided, cannot be performed in part and agreed upon as a
whole and single obligation.

Obligations deemed indivisible:

• Obligations to give definite things;
• Obligations which are not susceptible of partial performance;
• Obligations provided by law to be indivisible even if the thing
or service is divisible;
• Obligations intended by the parties to be indivisible even if the
thing or service is divisible.
Obligations considered under the law to be divisible:
• Execution of a number of days of work;
• Accomplishment of work by metrical units;
• Analogous things which by nature are susceptible to partial
performance;
• Obligations to pay in installment.
6. Obligation with a Penal
• Obligation with a penal clause is an obligation which stipulate
a penalty if in case, the obligation is not met. These penalties
shall substitute for the indemnity for damages and interests
associated with non-compliance.
• A penal clause is an accessory undertaking to assume greater
liability in case of breach. It is a form of guaranty for the
fulfillment of an obligation by establishing an aggravation of
responsibility.
Purposes of attaching a penal clause
• To ensure its performance.
• To substitute a penalty for the indemnity for damages and the
payment of interest in case of non-compliance
• To punish the debtor for non-compliance of his obligation.
Kinds of Penal Clauses
• Subsidiary penal clause – when only the penalty can be demanded.
Ex. Capitol motors agreed in a contract to deliver to Mr. Santos the
latest model of Mercedez Benz on or before February 1, 2009. In case
they fail to do so, they’ll have to pay a penalty of Php10,000 to Mr.
Santos.

• Joint penal clause – when both the principal obligation and the
penalty can be enforced.
Ex. ABC Builders Inc. bound themselves to build the 7- storey
Administration building of XYZ Realty Corp. for the amount of Php1M
in 6 months time. In case of delay in the construction, ABC builders
will have to pay a penalty of Php5,000 for every week’s delay.
THE END