Obligation and contracts outline (LAW101)

6 June 2016

Law – rule of conduct or action or observance set forth by the State, through the legislative Body (Congress) approved by the Chief Executive (President) to be observed by the Citizens. Example: Obligation to pay tax. Contract – meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service (Art. 1305). Quasi-contract – lawful, voluntary and unilateral acts give rise to the juridical relation (quasi-contract) to the end that “no one shall be unjustly enriched or benefited at the expense of another.”

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– Negotiorum Gestio
– Solutio Indebiti
– other quasi-contracts

Delict (Felony) – acts or omissions punishable under Act 3815, as amended, otherwise known as the Revised Penal Code of the Philippines. Quasi-Delict – Act or omission that causes damage to another, there being fault or negligence… (Art. 2176, Civil Code) Article 1158. “Obligations derived from law are not presumed. Only those expressly determined in this Code (Civil Code) or in special laws are demandable, and shall be regulated by the precepts of the law which establishes them…” Article 1159. “Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.” Two Sources of Obligations

In general, there are only two sources of contracts, namely: 1. Law [comprising law (Civil Code and other special laws), delict (under the Revised Penal Code), quasi-contract (chp 1, Title XVII of the Civil Code), and quasi-delict (chp 2, Title XVII of the Civil Code)] 2. Contract – agreement/s of two (or more) persons that comprise two parties. SUMMARY

1. Obligation is a legal responsibility of an obligor/debtor to give/do to/for the obligee/creditor something/some act that is lawful, in a lawful way and means. 2. Obligation arise from law, contract, quasi-contract, delict, and quasi-delict. But in general there are only two souces of Obligation: Law and Contract. Nature and Effect of Obligation

Art. 1163. “Every person obliged to give something is also obliged to take care of it with the diligence of a good father of a family, unless the law or the stipulation of the parties requires another standard of care.” Diligence of a good father of a family – a care that a loving father, who is always mindful of what is good , would observe to ensure that nothing wrong will happen to his family under a given circumstance. Rights of Creditor

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.” Fruit of the thing – anything that the “thing” (the object of the obligation) may “produce”. Kinds of “Fruits”:

1.Natural fruits – those that by its nature a thing may produce.
e.g. crops, young of an animal, etc
2.Civil fruits – those not produced by nature, and that one is entitled to by legal rights.
e.g. rent, interest, salary, wage, dividend, etc.

Rights Over the Object of the Obligation
1.Personal right – right to demand from the obligor to deliver the object of the obligation. 2. Real right – right of an owner of a thing to hold the same against anybody in the world. Rights of creditor when the obligor incurred breach of obligation Article 1165. “When what is to be delivered is a determinate thing, the creditor, in addition to the right granted in Article 1170, may compel the debtor to make 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 fortuitous event until he has effected the delivery.”

Fortuitous events – events which could not be foreseen, or which, though
foreseen, were inevitable (art. 1174) Kinds of “thing”
Determinate thing – one which description is determined as not to mistake it for any other in its class (genus). Generic (indeterminate) thing – one which description conforms to all the others in the same class (genus); thus it can be any of those belonging in the same class. Article 1170, Civil Code

“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.”

Damage – indemnification in the form of money, decreed by competent court, to be delivered by one person for harm he caused to the person or property of another.

Kinds of Breach of Obligation
1.Fraud (dolo)– malicious and intentional scheme to cause damage to another. 2.Negligence (culpa) – 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 (art. 1173). 3.Delay (mora)– situation wherein one fails to deliver or perform the object of obligation on time. 4. Contravention of tenor of the obligation – performing the obligation contrary to, or not in accordance with, what is agreed upon by the parties. Kinds of Fraud

1. Causal Fraud – scheme employed in order to cause the other to enter into a contract from which the obligation arise. 2. Incidental Fraud – malicious scheme carried out in the performance of an obligation.

Effect of Fraud to an Obligation
Causal fraud:obligation is void from the very beginning (void ab initio) because the contract from which they arise is not valid.
Incidental fraud: the obligation is rescindable. The contract from which the obligation arises is valid. The innocent party is the one who has the right to rescind.
Rescind – cancel; Rescission – cancellation; Rescindable – cancellable

Kinds of Negligence
1. Simple (ordinary) negligence – lack of foresight, lack of skill, without bad faith or not conscious of any harm or damage as consequence of an act.
2. Wanton negligence – with bad faith or conscious of any harm or damage as consequence of an act. Kinds of Delay (Mora)
1.Mora solvendi – delay of the obligor/debtor to perform his obligation.
*ex re – the obligation is to “give”
*ex persona – the obligation is to “do”

2.Mora accipiendi – delay of the obligee/creditor to accept delivery of the object. 3. Compensatio morae – delay of both parties in reciprocal obligation. Obligations of Obligor

Art. 1166. “The obligation to deliver a determinate thing includes that of delivering all its accessions and accessories, even though they may not have been mentioned.” Art. 1167. “If a person obliged to do something fails to do it, the same shall be executed at his cost.”

“The 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.” Art. 1168. When the obligation consists in not doing, and the obligor does what has been forbidden him, it shall also be undone at his expense. Incurring Delay

Art. 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.”
General Rule: NO DEMAND, NO DELAY.

Exceptions to the General Rule
“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.’

Delay in Reciprocal Obligation
‘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 fulfill his obligation, delay by the other begins.’” Kinds of Demand:

1. Judicial demand – by filing a suit in court.
2. Extrajudicial demand – done by other means (usually through a demand letter) other than by filing a suit in court. Demandability of Responsibility (to pay damges)

Art. 1171. “Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void.”
waiver – to expressly give up one’s legal right, and not to pursue the same in a certain circumstance. Art. 1172. “Responsibility arising from negligence in the performance of every kind of obligation is also demandable, but such liability may be regulated by the courts, according to the circumstance.”

Art. 1173 (2nd par.). “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.” Art. 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, though foreseen, were inevitable.” Presumptions of Payment

Art. 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.

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