OBLIGATIONS on the ground of failure to state a cause of
action
Article 1156-1162. General Provisions
Article 1156. An obligation is a juridical necessity
to give, to do or not to do.
 Civil obligations = give creditor or active
party (obligee) a right to enforce their
performance in courts of justice
 Four essential requisites of an obligations:
o Passive Subject (Obligor)
o Active Subject (Obligee)
o Prestation/Object
o Juridical/Legal Tie
 Form of obligations (manner in which an
obligation is incurred)
o General Rule: law does not require
any form in obligations arising
from contracts for their validity or
binding force
o Obligations arising from other
sources do not have a form at all
 Obligations vs. Right vs Wrong
o Obligation = act which the law will
enforce
o Right = power a person has under
the law (to demand from another a
prestation)
o Wrong = cause of action;
act/omission of one party in
violations of the legal right(s) of
another (also, “injury”)
 Existence of cause of action
o Legal right in favor of plaintiff
o Correlative legal obligation on the
part of defendant to respect/not to
violate said right
o An act/omission in breach or
violation of said defendant with
consequential injury or damage to
the plaintiff for which he may
maintain an action for the recovery
of damages or other appropriate
relief
*If any element is absent, complaint
becomes vulnerable to a motion to dismiss
 Kinds of Obligation
o Real (to give)
o Personal (to do/not to do)
 Includes “not to give”
Art. 1157. Obligations arise from:
 Law
 Contracts
 Quasi-Contracts
 Acts or omissions punished by law
 Quasi-Delicts (“Torts”)
 Private act = contracts
Also imposed by law = quasi-contracts,
delicts, quasi-delicts
 Law = imposed by law itself
 Contracts = stipulation of the parties
 Quasi-contracts = arising from lawful,
voluntary and unilateral acts which are
enforceable to the end that no one shall be
unjustly enriched or benefited at the expense
of another
 Crimes or acts punished by law = arising
from civil liability which is the consequence
of criminal offense
 Quasi-delict (tort) = arising from damage
caused to another through an act or
omission, there being fault or negligence and
no pre-existing contractual relation between
the parties
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.
 Legal obligations = obligations arising from
law; not presumed because they are
considered a burden upon the obligor/debtor;
considered as “exceptions” rather than
“rules”
 “Special laws” = all other laws not
contained in the Civil Code and
  Obligations derived from law are not
enforceable/demandable
Article 1159. Obligations arising from contracts
have the force of law between the contracting
parties and should be complied with in good faith.
 Contractual obligations = arising from
contracts or voluntary agreements; stipulated
by two parties
 Contract = meeting of minds between two
persons whereby 1 binds himself with
respect to the other, to give something or to
render some service
 Binding force = neither may renege
therefrom w/o the consent of the other
o law recognizing the obligatory
force of contracts will not permit
any party free from liability
o whatever fairly puts a person in
inquiry where means of knowledge
are at hand, full truth might have
been ascertained (purchaser on
installment basis had full
knowledge of the terms &
conditions of the sale, to which she
obliged herself to abide, cannot
feign ignorance of said rules)
o if one of the parties allege some
defect in the contract as reason for
invalidity, such should be proved
by him by convincing evidence
since its validity/compliance cannot
be left to will of one of them.
o Courts have no alternative but to
enforce valid & binding contracts
as they were agreed upon & written
when the terms are clear and
readily understandable, leaving no
room for interpretation.
 Does not mean that
contract is superior to the
law; provisions of positive
law which regulate
contracts are included and
shall limit and govern
relations between the 2
contracting parties
o Compromising agreements =
executory & not appealable; must
comply w/ requisites of contracts
 Requirements of a valid contract
o not contrary to law, morals, good
customs, public order and public
policy
o contract may be valid but not
enforceable
 Approval of government
 Compliance in good faith (no party is
permitted to change his mind)
 Liability breach of contract
o Actionable injury inheres in every
contractual breach
 Unreasonable delay in demanding
performance
o Failure of either party to demand
performance of the obligations of
the other for an unreasonable length
of time may render the contract
ineffective where the contract does
not provide for the period within
which the parties may demand
performance of their respective
undertakings.
o Mere failure of a party to respond
to a demand letter, in the absence
of other circumstances making an
answer requisite or natural does not
constitute an implied admission of
liability
 Preservation of interest of promisee
o A breach upon the contract confers
upon the injured party a valid cause
for recovering that which may have
been lost/suffered.
Article 1160. Obligations derived from quasi-
contracts shall be subject to the provisions of
Chapter 1, Title XVII, of this Book.
 Quasi-contractual obligations
= Juridical relation resulting from certain
lawful, voluntary and unilateral acts by
 virtue of which that the parties become
bound to the end that no one will be unjustly
enriched or benefited at the expense of
another.
 No deliberate entering into a formal
agreement but law considers the parties as
having entered into one regardless of their
intention to prevent injustice
 If one claims to have enriched somebody
pursuant to a contract with a 3rd party, cause
of action should be against the 3rd party who
may seek relief (if there is any ground) from
the beneficiary.
 Kinds of Quasi Contracts
o Negotiorum gestio = voluntary
management of the property/affairs
w/o the knowledge or consent of
the owner
 Juridical relation oes not
arise if:
 Property/business is not neglected nor
abandoned in which case the provisions
of Civil Code regarding unauthorized
contracts shall govern; or
 The manager has been tacitly authorized
by the owner in which case the rules on
agency shall govern.
o Solutio indebiti = juridical relation
which is created when something is
received when there is no right to
demand it and it was unduly
delivered through mistake
 Based on the ancient
principle (no one shall
enrich himself unjustly at
the expense of another)
 Applies where:
 Payment is made when there exists no
binding relation between payor, who
has no duty to pay, and the person who
received the payment
 payment is made through mistake and
not through liberality or some other
cause
o general presumption: “money paid
by one to another was due to the
latter”
Article 1161. Civil obligations arising from
criminal offenses shall be governed by the penal
laws, subject to the provisions of Article 2177, and
of the pertinent provisions of Chapter 2,
Preliminary Title on Human Relations, and of
Title XVIII of this Book, regulating damages.
 Civil liability + criminal liability =
offense…
o On the public (for breaching social
order)
o On the victim
 Criminal liability w/o civil liability =
o No material damage; e.g. traffic
violation, gambling, etc.
o Liable criminally but not civilly
* Liable civilly but not criminally = Quasi-delict (not
a criminal offense)
 Right to recover of injured party may be
enforced for damages based on civil liability
o Reservation & Waiver
 Waives civil action
 Reserves civil action to
institute separately
 Institutes prior to criminal
action
o Independent civil action
 Pertains only to the civil
action for the recovery of
civil liability arising from
the offense charged and
not recovery civil liability
under certain articles of
the Civil Code arising
from the same act or
omission (which may be
prosecuted separately w/o
reservation)
 Scope of Civil Liability
o Arising from crimes governed by
Revised Penal Code & Civil Code
 Restitution
 Reparation for damage
caused
  Indemnification for
consequential damages
Article 1162. Obligations derived from quasi-
delicts shall be governed by the provisions of
Chapter 2, Title XVII of this book, and by special
laws.
 Quasi-delicts = act or omission by a person
(“tortfeaser”) which causes damage to
another in his person, property or rights
giving rise to an obligation to pay for the
damage, there being fault or negligence but
there is no pre-existing contractual relation
between the parties
 Requisites:
o Act or omission by the defendant
o Fault or negligence of the
defendant
o Damage caused to the plaintiff
o Direct relation or connection of
cause and effect between the act or
omission and the damage
o No pre-existing contractual relation
between the parties
 Recovery of damages twice for the same
act/omission is prohibited
o 2 causes of action
 civil liability (ex delicto)
 criminal liability (ex quasi
delicto)
o Option given to offended party
 civil liability + criminal
responsibility in
negligence cases, offended
party has the option
between:
 action for enforcement of civil liability
(based on culpa criminal)
 action for recovery of damages (based on
culpa aquiliana)
* 2 distinct civil liabilities – two causes of action may
be availed of subject to the caveat that the offended
party cannot recover damages twice for the same act
or omission or under both causes
Article 1163-1178. Nature and Effect of Obligations

Article 1163. Every person obliged to give

Crime Quasi-Delict
1) Criminal/malicious
intent or criminal
negligence
2) Affects public
interest
3) Criminal & Civil
liability
4) Punishment
5) Cannot be
compromised/settled
by the parties
themselves
6) Proved beyond
reasonable doubt
7) Subsidiary liability of
person responsible
for the author of the
act
something is also obliged to take care of it with the
1) Only negligence proper diligence of a good father of a family,
2) Concerns unless the law or the stipulation of the parties
private interest requires another standard of care.
3) Civil liability  Refers to an obligation to give a specific or
4) Indemnification determinate thing (when it is particularly
5) Can be designated or physically segregated from all
compromised as others of the same class) (e.g. the car sold by
any other civil X; cannot be substituted without consent)
liability o as opposed to generic or
6) Preponderance indeterminate (when it refers only
of evidence to a class or genus)
7) Direct and (e.g. the 2006 model car; anything
primary liability of the same class can be given as
of person long as it is of the same kind)
responsible for  Duties of an obligor to give a determinate
the author of the thing
act 1. To preserve or take care of the thing due;
2. To deliver the fruits of the thing (Art. 1164);
3. To deliver its accessions and accessories
(Art. 1166);
4. To deliver the thing itself; and
5. To answer for damages in case of
nonfulfillment or breach. (Art. 1170)
o Diligence of a good father of a
family – (real obligations) =
ordinary care or that diligence
which an average (reasonably
prudent) person exercises over his
own property
o Another standard of care – law or
stipulation of the parties provides
another standard of care (slight or
extraordinary diligence), said law
or stipulation prevails
 Common carrier (engaged
in transportation of
persons and/or cargoes) is
“bound to carry the
passengers safely as far as
human care and foresight
can provide, using utmost
(extraordinary) diligence
of very cautious persons,
with a due regard for all
the circumstances.” (Art.
1755)
*common carrier will be liable if it exercised
only diligence of a good father of a family
o Factors to be considered – diligence
required depends upon nature of
obligation and circumstances of the
person, time and place
o General Rule: Obligor is not liable
if his failure to preserve the thing is
not due his fault or negligence but
to fortuitous events or force
majeure
o Reason for debtor’s obligation – to
insure that the thing to be delivered
would have the same condition as it
was when the obligation was
contracted
 Duties of an obligor to give a generic thing
1. To deliver a thing which is of the
quality intended by the parties taking
into consideration the purpose of the
obligation and other circumstances (Art.
1246); and
2. To be liable for damages in case of
fraud, negligence, or delay, in the
performance of his obligation, or
contravention of the tenor thereof. (Art.
1170)
Article 1164. The creditor has a right to the fruits
of the thing from the time the obligation to deliver
it arises. However, he shall acquire no real right
over it until the same has been delivered to him.
 Fruits = natural, industrial and civil fruits
o Natural fruits – spontaneous
products of the soil, and the young
and other products of animals; all
trees and lands produced without
the intervention of human labor
o Industrial fruits – produced by
lands of any kind through
cultivation or labor
o Civil fruits – derived by virtue of a
juridical relation (e.g. rents of
buildings, amount of perpetual or
life annuities or other similar
income)
 Purpose: to protect the interest of the obligee
should the obligor commit delay, purposely
or otherwise, in the fulfillment of his
obligation
o In case of rescission, parties are
under “obligation to return the
things which were the object of the
contract, together with their fruits
and the price with its interest”
 Obligation to deliver the thing and fruits 
arises from the time of “perfection” = birth
of the contract or the meeting of the minds
between the parties
 Suspensive condition or period – a condition
(event in the future that may happen but not
certain of when it will happen) which, if
fulfilled, will give rise to an obligation (or
right)
o Parties may make a stipulation to
the contrary with regard to the right
 of the creditor to the fruits of the
thing
 Contract of sale: obligation arises from the
perfection of the contract even if the
obligation is subject to a suspensive
condition/period where the price has been
paid.
o “all the fruits shall pertain to the
vendee from the day on which the
contract was perfected.” (Art.
1537)
 Obligations to give arising from law, quasi-
contracts, delicts, and quasi-delicts, the time
of performance is determined by the specific
provisions of law applicable.
 Personal right or jus in personam or jus ad
rem = right or power of a person (obligee) to
demand from another (obligor) the
fulfillment of the latter’s obligation
o There are both active and passive
subjects; binding/enforceable only
against a particular person
 Real right or jus in re = right or interest of a
person over a specific thing (like ownership,
possession, mortgage, lease record);
o Only an active subject without any
definite passive subject;
binding/enforceable against the
whole world
 Ownership (and other real rights over
property) are acquired and transmitted by
law, donation, testate and intestate
succession, and in consequence of certain
contracts by tradition or by delivery
o “He shall acquire no real right over
it until the same has been delivered
to him”
o When there is no delivery yet,
proper action of creditor  for
specific performance or for
rescission of the obligation (Art.
1165), not for recovery of
possession/ownership
*Delivery of a thing constitutes a
necessary and indispensable requisite
for the purpose of acquiring ownership
*Agreement may only give jus ad rem
but not jus ad re
Article 1165. When what is to be delivered is a
determinate thing, the creditor, in addition to the
right granted him by Article 1170, may compel the
debtor to make the delivery.
If the thing is indeterminate or generic, he may
ask that the obligation be complied with at the
expense of the debtor.
If the obligor delays, or has promised to deliver
the same thing to two or more persons who do not
have the same interest, he shall be responsible for
any fortuitous event until he has effected the
delivery.
*creditor has the right to compel debtor to deliver
with the use of not force or violence but the court
 In a specific real obligation, if debtor fails to
comply with his obligation, creditor may:
a. Demand specific performance or
fulfillment of the obligation with a right
to indemnity for damages; or
b. Demand rescission or cancellation (in
certain cases) of the obligation, also
with a right to indemnity for damages
(Art. 1170); or
c. Demand the payment of damages only
where it is the only feasible remedy
(Art. 1170)
*only the debtor can comply with the
obligation
 In a generic real obligation, obligation may
be performed by a third person; not
necessary for creditor to compel the debtor
to make the delivery although creditor may:
o ask for performance of the
obligation; and
o recover damages under Art. 1170 in
case of breach of the obligation
 “no person shall be imprisoned for non-
payment of debt” (Art. III, Sec. 20
Constitution)
 o purely civil debt or arising from
contractual obligations
 non-payment of civil liability in a criminal
case  may be subject to subsidiary
imprisonment (Art. 1161)
 (Par. 3) instances when a fortuitous event
does not exempt debtor
*only refers to a determinate thing because
an indeterminate thing cannot be destroyed
by a fortuitous event
**genus nunquam perit (“genus never
perishes”)
o When obligor delays
o When obligor promises to deliver
the same thing to two or more
persons who do not have the same
interest
Article 1166. The obligation to give a determinate
thing includes that of delivering all its accessions
and accessories, even though they may not have
been mentioned.
 Accessions = fruits of, additions to, or
improvements upon
= may also be used in the sense of a
right over the products and whatever is
incorporated or attached to the thing
Accessories = things joined to or included
with the principal thing for its
embellishment, better use or completion
*both may exist only in relation to the
principal
o Unless stipulated otherwise,
obligation to deliver the
accessions/accessories does not
include the principal thing but
obligation to deliver the principal
thing includes the
accessions/accessories
Article 1167. If a person obliged to do something
fails to do it, the same shall be executed at his cost.
This same rule shall be observed if he does it in
contravention of the tenor of the obligation.
Furthermore, it may be decreed that what has
been poorly done be undone.
 Obligation to do (perform an act or render a
service)
 If debtor
o Fails to perform it; or
o Performs it but contrary to the
terms thereof; or
o Performs it in a poor manner
Creditor has the right to:
a. Have the obligation perform by himself,
or by another unless personal
considerations are involved, at the
debtor’s expense; and
b. Recover damages (Art. 1170)
 Can also be performed by a third person
like a generic real obligation
o Specific personal obligation  may
amount to involuntary servitude
which is prohibited under our
Constitution (Art. III, Sec. 18[2])
o If personal qualifications of the
debtor are the determining motive
for the obligation contracted (e.g. to
sing in a night club), obligation
could not be considered performed
 Only possible remedy 
indemnification for
damages
o Court is not authorized to merely
grant damages where obligation
can still be performed at the
expense of debtor despite his
failure or refusal to do so
Article 1168. When the obligation consists in not
doing, and the obligor does what has been
forbidden him, it shall be undone at his expense.
 Obligation not to do
 No specific performance; obligation is
fulfilled in not doing what is forbidden
 Cannot be guilty of delay (Art. 1169)
  Remedies:
o Undoing the forbidden thing plus
damages (Art. 1170)
o If not possible to undo physically
or legally or because of the rights
acquired by third persons who
acted in good faith, or for some
other reason, remedy is an action
for damages caused by debtor’s
violation of his obligation
Article 1169. Those obliged to deliver or to do
something incur in delay from the time the obligee
judicially or extrajudicially demands from them
the fulfillment of their obligation.
However, the demand by the creditor shall not be
necessary in order that delay may exist:
(1) When the obligation or the law expressly
so declares; or
(2) When from the nature and the
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; or
(3) When demand would be useless, as when
the obligor has rendered it beyond his
power to perform.
In reciprocal obligations, neither party incurs in
delay if the other does not comply or is not ready
to comply in a proper manner with what is
incumbent upon him. From the moment one of the
parties fulfills his obligation, delay by the other
begins.
 Legal delay or default or mora = failure to
perform an obligation on time which
constitutes a breach of the obligation
 Kinds of Delay
1. Mora solvendi = delay on the part of the
debtor to fulfill obligation by reason of
a cause imputable to him
o Requisites to exist or its effects to
arise:
a. Failure of debtor to perform
his (positive) obligation on the
date agreed upon;
b. Demand judicially or extra-
judicially (not mere reminder
or notice) made by creditor
upon the debtor to fulfill,
perform or comply with his
legal obligation
c. Failure of debtor to comply
with such demand
*presupposing that the
obligation is already due or
demandable and liquidated
o Creditor has the burden of proving
that a previous demand has been
made while debtor may relieve
himself from liability if he proves
that delay was not caused by his
fault (i.e. no fraud or negligence on
his part)
o Effects:
(a) Debtor is guilty of breach of
the obligation;
(b) Liable for interest in case of
obligations to pay money (Art.
2209); In the absence of
extrajudicial demand, interest
starts from the filing of the
complaint; and
(c) Liable even for a fortuitous
event when the obligation is to
deliver a determinate thing
*if debtor can prove that the loss
would have resulted even if he had
not been in default, court may
equitable mitigate damages
*obligation to deliver a generic thing: debtor
is not relieved from liability for loss due to a
fortuitous event and is compelled to deliver a thing of
the same kind (Art. 1263) or held liable for damages
(Art. 1170)
2. Mora accipiendi = delay on the part of
the creditor without justifiable reason to
accept the performance of the obligation
o Effects:
(a) Creditor is guilty of breach of
obligation
 (b) Liable for damages suffered, if
any, by the debtor
(c) Bears the risk of loss of the
thing due (Art. 1162)
(d) Where the obligation is to pay
money, the debtor is not liable
for interest from the time of the
creditor’s delay; and
(e) The debtor may release himself
from the obligation by the
consignation of the thing or
sum due (Art. 1256)
3. Compensatio morae = in reciprocal
obligations where the delay of one
cancels the delay of the other
o Effects:
(a) Delay of the obligor cancels
out the delay of the oblige (and
vice versa);
*Net result: no actionable
default on the part of both
parties (neither one is guilty of
delay)
(b) If delay of one is followed by
that of the other, liability of the
first shall be equitably
tempered or balanced by the
courts. If it cannot be
determined which is guilty of
delay, contract shall be deemed
extinguished and each shall
bear his own damages (Art.
1192).
 Delay is impossible in negative personal
obligation
 Generally, obligor incurs mora or delay and
is deemed to have violated his obligation
when demand for performance marks the
time
o Without demand, debtor would not
yet be considered in breach of his
obligation unless:
(1) Obligation so provides
e.g. “A promised to pay C the sum
of P20,000 on or before Nov. 30
without the need of any demand”
*not enough to fix the period;
arrival of period makes it
demandable only; obligation must
express to that effect “the debtor
will be in default” or “I will be
liable for damages”
*demand is necessary to hold
obligor in default upon failure to
pay any such installment, but he is
not liable for the whole debt except
from the time that judicial or
extrajudicial demand for payment
is made upon him
(2) When the law so provides
(3) When time is of the essence
*when time is stated in general or
indefinite terms, time is not of the
essence but delivery must be made
within a reasonable time
(reasonable time = depends upon
the circumstances of the particular
case)
*even if time is of the essence, a
breach of contract may be waived
by other party’s treating the
contract as still in force
(4) When demand would be
useless
(5) When there is performance by
a party in reciprocal
obligations
*neither incurs a delay if the other
does not comply or is not ready to
comply in a proper manner with
what is incumbent upon him (Art.
1169, last par.) = compensatio
morae
*where contract of sale imposes on
the seller obligation to deliver to
the buyer a reasonably habitable
dwelling for his undertaking to pay
the stipulated price in monthly
amortizations, seller cannot invoke
the buyer’s suspension of payment
as cause to cancel the contract if
seller did not fulfill obligation to
put house in a habitable state
*where parties fix a period for
performance, neither party can
demand performance nor incur
delay before expiration of the
period
 *obligations under an option to
buy, where payment is contingent
upon execution of deed of sale by
the owner of the property; so notice
of decision to buy need not be with
actual payment
 It is not necessary to declare in order to
make time of the essence; there are certain
situations wherein it is held that time is of
the essence from the nature of the agreement
itself
Article 1170. Those who in the performance of
their obligations are guilty of fraud, negligence, or
delay, and those who in any manner contravene
the tenor thereof, are liable for damages.
 Grounds for liability
(1) Fraud (deceit or dolo) = deliberate or
intentional evasion of the normal
fulfillment of an obligation
*as a ground for damages, includes
malice or dishonesty
*cannot cover cases of mistake and
errors made in good faith
*synonymous to bad faith (implies a
design to mislead or deceive another by
which undue advantage is taken of the
latter
*Moral damages may be recovered in
addition to other damages
*refers to incidental fraud or dolo
incidente  differs from causal fraud
or dolo causante (employed in the
execution of a contract);
(2) Negligence (fault or culpa) = voluntary
act/omission, there being no bad faith or
malice, which prevents normal
fulfillment of an obligation; failure to
exercise that degree of care required by
the circumstances
(3) Delay (mora) (Art. 1169)
(4) Contravention of the terms of the
obligation = violation of the
terms/conditions stipulated in the
obligation (should not be due to force
majeure); includes unilateral act of
terminating a contract w/o legal
justification
 Breach of contract = failure w/o justifiable
reason to comply with the terms of a
contract (intentionally or unintentionally)
o Measure of recoverable damages 
fair and just; commensurate to the
loss sustained as a consequence of
the defendant’s act
o Remedy serves to preserve
contractual interests of obligee
(may include)
(a) Expectation interest = interest
in having the benefit of his
bargain by being put in as good
a position as he would have
been had the contract been
performed
(b) Reliance interest = interest in
being reimbursed the loss
caused by reliance on the
contract being put in as good a
position as he would have been
had the contract not been made
(c) Restitution interest = interest in
having restored to him any
benefit that he has conferred on
the other party
o Excuse from ensuing liability
o Duty of obligee to minimize his
damages  if obligee’s negligence
was contributory to the loss, court
may equitable mitigate damages
 Recoverable damages in obligation to pay
money
o Penalty interest for delay or non-
performance
 penalty interest = indemnity for
damages if obligor incurs in delay;
not included in the computation of
interest; a distinct claim and may
be demanded separately
o Rate of penalty interest
 agreed upon penalty interest
 regular monetary interest (if no
stipulation of penalty interest)
 legal interest of 6% (if no
regular interest agreed upon)
 Fraud vs. Negligence
Fraud Negligence
 (1) deliberate (1) no such  Courts are given discretion in fixing the
intention to cause intention measure of damages and may increase
damage/injury (2) waiver may be damages as well
(2) waiver of the allowed in  both mutually negligent = fault of one
liability for future negligence cancels or neutralizes the negligence of the
fraud is void (Art. (3) presumed other where rights and obligations may be
1171) from the breach of determined equitably under the law
(3) fraud must be contractual prescribing unjust enrichment
clearly proved, obligation  future negligence may be renounced except
mere (4) liability may be where nature of obligation requires
preponderance of reduced according extraordinary diligence (as in the case of
evidence not being to circumstances common carriers)
sufficient (Art. 1173) o void if negligence is gross or shows
(4) liability cannot bad faith
be mitigated  Kinds of negligence
o Contractual negligence (culpa
 If negligence shows bad faith or is so gross contractual) = negligence in
that it amounts to malice or wanton contracts resulting in their breach;
attitude on the part of the defendant, rules not a source of obligation
of fraud shall apply o Civil negligence (culpa aquiliana)
 Gross Negligence = failure to exercise even = negligence by itself is the source
slight care or diligence, or the entire absence of an obligation; no pre-existing
of care; acting or omitting to act on a contract
situation where there is a duty to act, not  Also called tort or quasi-
inadvertently, but willfully and intentionally, delict
with complete disregard for the harmful *quasi-delict as cause for breaching a
consequences of his conduct to others contract: might permit governing
principles of civil negligence
o Criminal negligence (culpa
Article 1171. Responsibility arising from fraud is criminal) = negligence resulting in
demandable in all obligations. Any waiver of an the commission of a crime;
action for future fraud is void. damages may produce civil liability
 Refers to incidental fraud arising from crime or create an
 Court is not given the power to mitigate or action for quasi-delict
reduce the damages to be awarded *aggrieved party may choose between
 Waiver for past fraud can be valid as an act criminal action or civil action for
of generosity on the part of the victim, damages but not both
renouncing the effects of the fraud, that is,  if culpa aquiliana, employer may excuse
the right to indemnity of the party entitled himself proving that he had exercised “all
thereto. the diligence of a good father of a family to
prevent the damage” but may not use this
excuse if culpa contractual (though may still
Article 1172. Responsibility arising from mitigate damages)
negligence in the performance of every kind of  if plaintiff’s own negligence was the
obligation is also demandable, but such liability immediate & proximate cause of injury, he
may be regulated by the courts, according to the cannot recover damages but if his
circumstances. negligence is only contributory, he may
 recover the damages which courts may
mitigate
o defense of contributory negligence
of injured party does not apply in
criminal cases
 presumption of contractual negligence
o in an action for quasi-delict =
negligence/fault should be clearly
established; in a breach of contract,
action can be pursued by proving
existence of contract and failure to
comply
o in a contract of carriage, obligor is
the carrier; if he failed to
transport the passenger to his
destination, the fault or negligence
of the carrier is presumed
 it is sufficient for the
plaintiff to prove the
existence of the contract of
carriage and the damages
or injuries suffered by him
 driver’s negligence is the
carrier’s but driver is not
solidarily liable with the
carrier (exclusively
responsible to the
passenger without the
right to recover from
driver the latter’s
negligence)
Article 1173. The fault or negligence of the obligor
consists in the omission of that diligence which is
required by the nature of the obligation and
corresponds with the circumstances of the
persons, of the time and of the place. When
negligence shows bad faith, the provisions of
Articles 1171 and 2201, paragraph 2, shall apply.
If the law or contract does not state the diligence
which is to be observed in the performance, that
which is expected of a good father of a family shall
be required.
 Negligence = (also) creates undue risk or
harm to another
 Tests for determining negligence
o Expected of an ordinary prudent
person (reasonable care or caution
or avoidance of such course if harm
is foreseeable)
o Dependent upon the circumstances
 Factors to consider
o Nature of obligation
o Circumstances of person
o Circumstances of time
o Circumstances of the place
 Measure of liability for damages
*Civil Code provisions
o (In contracts/quasi-contracts)
Damages, for which obligor who
acted in good faith is liable, shall
be those that are the natural and
probable consequences of the
breach of the obligation
o (in case of fraud, bad faith, malice
or wanton attitude) obligor is
responsible for all damages
reasonably attributed to the non-
performance of the obligation
o Willful injury to property and
breach of contract where defendant
acted fraudulently or in bad faith
may be legal ground for awarding
moral damages
 Moral damages  not punitive in nature,
incapable of pecuniary estimation, must be
proportional to and in approximation of the
suffering inflicted
 Code of Commerce provisions
o Limited liability in maritime law
(“no vessel, no liability”)  cannot
be applied where shipowner fails to
overcome the presumption of
negligence
  Kinds of diligence (opposite of negligence;
attention and care required of a person in a
given situation)
(1) Agreed upon by the parties
(2) Required by law in the particular case
(no stipulation)
(3) Diligence expected of a good father of a
family (same as ordinary diligence or
that of a reasonably prudent person) (no
stipulation nor law)
Article 1174. Except in cases expressly specified by
the law, or when it is otherwise declared by
stipulation, or when the nature of the obligation
requires the assumption of risk, no person shall be
responsible for those events which could not be
foreseen, or which, through foreseen, were
inevitable.
 Fortuitous event (or caso fortuito) =
extraordinary; event that cannot be foreseen
or though foreseen is inevitable (impossible
to foresee or avoid)
o Force majeure = if fortuitous event
is an act of God
*both are independent of the will of the
obligor and exempt him from liability
o Requisites of a fortuitous event
(1) Independent of obligor’s will;
(2) Unforeseeable or unavoidable;
(3) Impossible for obligor to
comply with his obligation in a
normal manner; and
(4) Obligor must be free from any
participation in (or the
aggravation of) the injury to
the obligee
*absence of any would prevent
obligor from being exempt from
liability
 Kinds of fortuitous events
(1) Ordinary
(2) Extraordinary
 There must be no concurrent/previous
negligence or imprudence on the part of the
obligor
o Police report on robbery is not
sufficient to establish that the
obligor was not at fault
*proving that the loss was due to a
fortuitous event rests on him who
invokes it
 Person is not responsible for loss/damage
from the non-performance of obligation due
to a fortuitous event unless:
(1) (when expressly specified by law)
(a) Debtor is guilty of fraud, negligence, or
delay, or contravention of the tenor of
the obligation (Art. 1170, 1165 par. 3)
(b) Debtor has promised to deliver the same
(specific) thing to two or more persons
who do not have the same interest
(impossible for the debtor to comply
with his obligation even w/o any
fortuitous event taking place)
(c) Debt of a thing certain and determinate
proceeds from a criminal offense, unless
the thing having been offered by the
debtor to the person who should receive
it, the latter refused without justification
to accept it
(d) Thing to be delivered is generic (genus
nunquam perit)
(2) (when declared by stipulation)
*rests upon freedom of contract
(3) (when the nature of the obligation requires
the assumption of risk)
 Difficulty to foresee is not the same as
impossibility to foresee
 Impossibility of fulfilling obligation must be
the direct consequence of the fortuitous
event
 Effect of obligor’s negligence
(1) (contributory) Necessary that he be free
from previous negligence or
misconduct which the loss/damage may
have been caused
(2) (not contributory) with/without the
negligence, where both fortuitous event
and lack of due diligence are present,
consequences are all due to a fortuitous
event
 *courts are not bound however to
exempt obligor from all liability
Article 1175. Usurious transactions shall be
governed by special laws.
 Simple Loan or mutuum = contract whereby
one of the parties delivers to another money
or other consumable thing, upon the
condition that the same amount of the same
kind and quality shall be paid
o May be gratuitous or with a
stipulation to pay interest
 Usury = contracting for or receiving interest
in excess of the amount allowed by law for
the loan or use of money, goods, chattels, or
credits
 Kinds of interest
(1) Simple interest – rate is stipulated
(2) Compound interest – interest earned is
upon interest due
(3) Legal interest – rate of interest intended
by the parties is presumed by law (when
rate is not stipulated)
(4) Lawful interest – rate is within
maximum allowed by (usury) law
(5) Unlawful interest – beyond maximum
fixed by law
 Rules
o Legal rate = 6% per annum (when
interest is stipulated but no contract
as to the rate)
o Maximum rate
(a) 12% per annum (secured loan)
*Receipt (not agreeing) of
usurious interest is penalized
(b) 14% per annum (not secured)
*Agreeing/demanding of
usurious interest is also
punishable
(c) Rate prescribed by the
Monetary Board of the Central
Bank
 Monetary interest = interest fixed by the
parties
o Requisites for recovery
(1) Payment of interest must be
expressly stipulated;
(2) Agreement must be in writing;
and
(3) Interest must be lawful
 Compensatory interest = imposed by
law/courts as penalty/indemnity for damages
(if obligor is proved to have defaulted in the
performance of his obligation)
 (Central Bank Circular No. 905) rate of
interest shall not be subject to any ceiling
prescribed under the Usury Law
o Interest can be charged as
lender/borrower may agree upon
 Interest stipulated is excessive
o Interest rates which will enslave
borrowers or lead to a
hemorrhaging of assets may be
declared illegal if excessive,
exorbitant or unconscionable
 Escalation clauses = stipulations allowing
an increase in the interest agreed upon
o Not void unless it grants creditor to
unilaterally increase rate of interest
without conformity of the debtor
 Liability for legal interest
(1) Loan or forbearance of money = (actual
and compensatory) damages for non-
compliance is recoverable
(a) Debtor in delay is liable to pay
legal interest (6% per annum) as
indemnity for damages even in the
absence of stipulation (computed
from time of judicial or
extrajudicial demand)
(b) Interest due shall earn legal interest
from the time it is judicially
demanded; if no interest stipulated,
debtor is not liable to pay
compound interest even after
judicial demand
(c) Debtor cannot be considered
delinquent and liable to pay interest
where checks were offered backed
by sufficient deposits or is ready to
pay cash if creditor chose that
means of payment
(2) Other than loan or forbearance of
money = when obligation, not a loan or
forbearance of money, is breached, an
 compensatory interest may be imposed
at the discretion of the court
(3) Final and executory judgment awarding
a sum of money = when the judgment
awarding a sum of money becomes final
and executory, rate of legal interest
where case falls under (1) or (2), shall
be 6% from finality until its satisfaction
and judgment shall be considered a loan
or forbearance of money or credit
Article 1176. The receipt of the principal by the
creditor, without reservation with respect to the
interest, shall give rise to the presumption that
said interest has been paid.
The receipt of a later installment of a debt without
reservation as to prior installments, shall likewise
raise the presumption that such installments have
been paid.
 Conclusive presumption = cannot be
contradicted
 Disputable (or rebuttable) presumption =
can be contradicted or rebutted by
presenting proof to the contrary
 Presumptions in Art. 1176 do not apply
(1) When there is a reservation as to
interest or prior installments
(2) When receipt is only a part of principal
(first par. Only applies to receipt of last
installment of the entire installment)
(3) Receipt without indication of particular
installment paid (receipt does not recite
that it was issued for a particular
installment due)
(4) Payment of taxes
(5) If it has been proven that there is non-
payment of prior obligations
Article 1177. The creditors, after having pursued
the property in possession of the debtor to satisfy
their claims, may exercise all the rights and bring
all the actions of the latter for the same purpose,
save those which are inherent in his person; they
may also impugn the acts which the debtor may
have done to defraud them.
 In case of non-compliance, creditor may:
(1) Exact fulfillment (specific performance)
with the right to damages;
(2) Pursue the leviable (not exempt from
attachment – the sale of the property
wherein proceeds thereof are used as
payment – under the law) property of
the debtor;
(3) (After having pursued the property in
possession of the debtor) exercise all the
rights (like right to redeem and right to
collect from the debtor of his debtor)
except inherent in or personal to the
person of the debtor
(4) Ask the court to rescind or impugn acts
or contracts which debtor may have
done to defraud him when creditor
cannot recover in any manner his claim
*debtor is liable with all his property,
present and future, for the fulfillment of
his obligations, subject to exemptions
provided by law
Article 1178. Subject to the laws, all rights
acquired in virtue of an obligation are
transmissible, if there has been no stipulation to
the contrary.
 Exemptions are the ff.:
(1) Prohibited by law
(a) Contract of partnership
(b) Contract of agency
(c) Contract of commodatum
*commodatum = essentially gratuitous
(2) Prohibited by stipulation of parties
*must not be contrary to public policy
*such stipulation should be clearly
proved and not easily implied or at least
clearly inferable from the provisions of
the contract
 Article 1179-1230. Different Kinds of Obligations

SECTION 1
Pure and Conditional Obligations

Article 1179.
