Obligations & Contracts - Nature & Effects

Accessories

things joined to, or included with, the principal thing for the latter's embellishment, better use, or completion, e.g., key of a house; frame of a picture; bracelet of a watch; machinery in a factory; bow of a violin

Ordinary and extraordinary

Kinds of fortuitous events

Non-personal Obligation

Article 1167 remedies only applies to obligations to do that are

Personal Obligation

only the obligor can do

Situations when the obligation to deliver arises

(1) Generally, the obligation to deliver the thing due and, consequently, the fruits thereof, if any, arises from the time of the perfection of the contract. Perfection in this case refers to the birth of the contract or to the meeting of the minds between the parties. (Arts. 1305, 1315, 1319.) (2) If the obligation is subject to a suspensive condition or period (Arts. 1179, 1189, 1193.), it arises upon fulfillment of the condition or arrival of the period. -However, the parties may make a stipulation to the contrary as regards the right of the creditor to the fruits of the thing. (3) In a contract of sale, the obligation arises from the perfection of the contract even if the obligation is subject to a suspensive condition or a suspensive period where the price has been paid. (4) In obligations to give arising from law, quasi-contracts, delicts, and quasi-delicts, the time of performance is determined by the specific provisions of law applicable.

Situations where the payment presumptions will be negated

(1) With reservation as to interest or prior installments; retainment of right to the interest (2) Receipt for a part of principal; implies that the CR waives his right to apply the payment to the interest first (3) Receipt without indication of particular installment paid ; The presumption does not arise because there is do date, hence, it does not assume that prior installments have been paid. (4) Non-payment proven.

The requisites for legal delay

(a) If the obligation is due or demandable; (b) failure of the debtor to perform his (positive) obligation on the date agreed upon. (c) the creditor judicially or extrajudicially demands the debtor's performance.

Diligence required arises when

(a) There is a standard of care agreed upon by the contract (b) If there is no agreed-upon standard of care, specific legal provisions may apply--if such exists, since negligence is dependent on the case. (c) If the law nor the contract does not state the diligence which is to be observed, then that which is expected of a good father of a family shall apply.

Remedies of Non-personal Obligation To do

(a) To have the obligation performed by himself, or by another. (b) If personal considerations are involved, then at the debtor's expense; (c) to recover damages. (Art. 1170.); especially if it is a personal obligation. In case the obligation is done in contravention of the terms of the same or is poorly done, it may be ordered (by the court) that it be undone if it is still possible to undo what was done

Requisites of fortuitous event

1.) the cause of the unforeseen and unexpected occurrence, INDEPENDENT of human will 2.) COULD NOT be foreseen 3.) IMPOSSIBLE for the debtor to comply with his obligation in a normal manner 4.) debtor must be FREE from any participation in the aggravation of the injury resulting to the creditor.

Void

A stipulation for the payment of usurious interest is AS if there was no stipulation with regards to interest

It has been delivered

An obligee will have dominion or real rights over the said object or thing which includes its fruits, if (Art. 1164)

Substituted or replaced at the debtor's expense

Article 1165 makes an obligor liable for fortuitous event if the obligor is in delay or has promised to deliver the same thing to two or more persons who do not have the same interest. when held liable, the remedies are?

Personal Obligation

Article 1167 remedies does not apply in a

free from human intervention

Article 1174 provides that fortuitous events may release an obligor from liability due to the non-fulfillment of his obligation because it becomes impossible for the obligor to fulfill the obligation in a regular manner. However, it must be

Article 1165

Article that states that even if the generic thing being held by the obligor is lost, the obligor should still comply with his obligation by replacing the thing lost with that of the same kind and quality as agreed upon. This is in line with the principle that the genus never perishes

Civil Fruits

Those derived by virtue of a juridical relation, e.g., rents of buildings, price of leases of lands and other property and the amount of perpetual or life annuities or other similar income. (Art 442)

gross negligence

Conduct that constitutes a willful or reckless disregard for a duty or standard of care.

mora accipiendi

Delay on the part of the creditor in accepting the performance of the debtor

Mora solvendi

Delay on the part of the debtor to fulfill his obligation

Ordinary fortuitous events

Events which are common and which the contracting parties could reasonably foresee. (e.g., rain)

Article 1163

Every person obliged to give something is also obliged to take care of it with the proper diligence of a good father of a family unless the law or the stipulation of the parties requires another standard of care. In other words, the creditor has a right to the delivery of the object in the state or condition agreed upon. Thus, if the debtor does not take care of the thing or object, she will be liable for damages. Logic: If there is an obligation to deliver, then there is an obligation to maintain agreed conditions unless stated by the party or law. Else, the obligor is liable for the damages. This article refers to objects that are 'to give'

Perfection of Contract

Generally, the obligation to deliver the thing due and, consequently, the fruits thereof, if any, arises from the time of the _________

Accessions

Goods that are physically united with other goods in such a manner that the identity of the original goods is not lost are the fruits of, or additions to, or improvements upon, a thing (the principal), e.g., house or trees on a land; rents of a building; airconditioner in a car;dividends accruing from shares of stocks; etc

Remedies of Indeterminate object

Has same rights as a creditor who has the right to the delivery of a determinate thing. In addition, the creditor can have the thing delivered by a third person at the expense of the debtor. Summary: Sourcing from third person at the debtor's expense, rescission, substitution with damages, specific performance,

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. This provision refers to an obligation to do. An obligation to do can be something that; -Personal Obligation; only the obligor can do -Non-personal Obligation; something which anyone else can do

It is not substitutable

If determinate object were the obligation, ________ The exact same thing must be delivered

inferior quality

If the indeterminate or generic thing's quality and circumstances have not been stated the debitor cannot deliver a thing of

fulfillment of the condition or period

If the obligation is subject to a suspensive condition or period (Arts. 1179, 1189, 1193.) It only arises upon

suspensive condition or a suspensive period

In a contract of sale, the obligation arises from the perfection of the contract even if the obligation is subject to a ______ where the price has been paid.

Article 1174

This articles states that; no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable. Except in cases where; (a) it is expressly specified by the law (b) when it is otherwise declared by stipulation (c) when the nature of the obligation requires the assumption of risk; insurance

the fruits, accessions, and accessories

In addition to the obligation to deliver a specific or determinate thing, and preserve the thing, The obligor has other obligations which are?

will not be extinguished

In cases where fortuitous events prohibits a debtor in delivering a generic object, the obligation

Executed in a public document

In contract of sale, delivery takes place when the _________ in a public document; such as a house and lot. However, the Court also has stated it "only gives rise to a prima facie presumption of delivery" or accepted as correct until proven otherwise.

Nature of the obligation, Circumstances of the person, circumstances of time

In determining the issue of negligence where loss or damage occurs, the following factors must be considered;

delay is impossible

In negative personal obligations, non-fulfillment may take place but _________ for the debtor fulfills by not doing what has been forbidden him (art. 1168)

applicable provisions in the law

In obligations to give arising from law, quasi-contracts, delicts, and quasi-delicts, the time of performance is determined by

Neither party incurs delay

In reciprocral obligations where the other does not comply or is not ready to comply in a proper manner

Delay may be incurred by the other

In reciprocral obligations where the other has fulfilled his obligation

iniquitous or unconscionable

It is contrary to morals when the interest rate is The court has ruled that if interest rates is declared as ____ when it will either enslave their borrowers or lead to a hemorrhaging of their assets.

Contractual negligence, Civil Negligence, Criminal Negligence

Kinds of negligence according to source of obligation

Mora solvendi, Mora accipiendi, Compensatio morae

Legal delay or mora may be classified into three

Delivery

Needed to pass ownership Stated in the legal maxim; nonnudis pactis, sed traditione dominia rerum transferentur

Criminal negligence

Negligence resulting in the commission of a crime. The same negligent act causing damages may produce civil liability arising from a crime liability that can occur when a person's careless and inattentive actions cause harm Behavior in which a person fails to reasonably perceive substantial and unjustifiable risks of dangerous consequences. a degree of carelessness amounting to a culpable disregard of rights and safety of others

Civil negligence

Negligence which by itself is the source of an obligation between the parties not formally bound before by any pre-existing contract. It is also called "tort" or "quasidelict". A pre-existing contractual relation between the parties does not, however, preclude the existence of culpa aquiliana, as per Article 1157) a failure to fulfill one's duty, or a failure to follow the normal standards of conduct for a reasonable person. Negligence becomes a source of obligation in itself without a pre existing contract

Demanded, judicially or extrajudicially

Obligations can only incur delay when?

Determinate thing

Particularly designated or physically segregated from all others of the same class.

prima facie presumption of delivery

Presumes that an object has been delivered or accepted as correct, until proven otherwise.

personal right

Prior to delivery, the buyer only has this kind of right against the seller, which consist mainly of the right to demand delivery when the thing is due.

Indeterminate thing

Something that has reference only to a class or genus; obligation to deliver is not so extinguished by fortuitous events. The obligation remains the obligation to "deliver a motorcycle" calls for the obligation to give any kind of motorcycle regardless of the make or model of the motorcycle. one can deliver any object for as long as it satisfies the description of the object to be delivered.

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. Logic; If the obligation to deliver arises, then the creditor will have rights to the fruits. However, he shall have no real right over the property. Bottomline; The general rule is that the creditor has the right to the fruits of the thing from the time the obligation to deliver it arises. However, it can only be demanded on the date of delivery. Ownership over the thing though is only required when such an object is delivered to him. The essential element therefore of ownership is delivery. By this article, the creditor is entitled to the fruits of the thing to be delivered from the time the obligation to make delivery of the thing arises. This is to protect his interests, if the obligor commits delay, purposely or in fulfillment of the obligation.

Risk

The debtor shall be held liable if there is an assumption of?

Stipulation

The debtor shall be held liable in the contract, in cases of fortuitous events

When the obligation or the law declares

The demand by the creditor shall not be necessary for a legal delay to arise when? (1)

When the nature and circumstances is a controlling motive

The demand by the creditor shall not be necessary for a legal delay to arise when? (2)

When a demand is useless due to the debtor's fault

The demand by the creditor shall not be necessary for a legal delay to arise when? (3)

Legal Delay

The failure to perform an obligation on time which failure constitutes a breach of the obligation. This arises only when the creditor/obligee demands, extrajudicially or judicially. Also referred to as mora

Proper diligence of good father

The minimum benchmark of an obligation, according to the law. If the law or contract does not state the diligence which is to be observed in the performance, this diligence shall be required.

Personal Right

The right or power of a person (creditor) to demand from another (debtor), as a definite passive subject, the fulfillment of the latter's obligation to give, to do or not to do.

Natural Fruits

The spontaneous products of the soil and the young and other products of animals, without human intervention

law, stipulation, assumption of risk, delivery of generic thing

There are instances when the obligor will still be liable even if the performance of the obligation is made impossible by the fortuitous event

Situations where the obligor is in breach of the obligation to do

This applies to obligation to do, where ; 1. non-fulfillment of the act. 2. fulfillment of the obligation but contrary to what is required of the obligor. 3. fulfillment of the obligation but in a poor manner

Article 1171

This article provides that responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void. (1102a)

Article 1172

This article provides that responsibility arising from negligence in the performance of every kind of obligation is also demandable but such liability may be regulated by the courts, according to the circumstances (1) In the performance of every kind of obligation, the debtor is also liable for damages resulting from his negligence or culpa. -The courts, however, are given wide discretion in fixing the measure of damages. The reason is that negligence is necessarily dependent upon the circumstances of each particular case. (2) When both parties to a transaction are mutually negligent in the performance of their obligations, -the fault of one cancels the negligence of the other. Thus, their rights and obligations may be determined equitably under the law prescribing unjust enrichment. No one shall enrich himself at the expense of another.

Article 1170

This article provides that the debtor/obligor can be held liable for the damages for the determinate thing.

Article 1166

This article provides that the obligation to give a determinate thing includes that of delivering all its accessions and accessories, even though they may not have been mentioned. Logic; If there is an obligation to deliver a determinate thing, then it also includes accessions and accessories not mentioned, unless stipulated in the agreement. However, if the parties stipulate to exclude the accessions and accessories, then they are not included in the sale. Similar if it excludes the principal.

Article 1176

This article provides that 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. Likewise, the receipt of a later installment of a debt without reservation as to prior installments, shall raise the presumption that such installments have been paid. Basically, if the creditor unconditionally accepts a principal repayment, then a rebuttable presumption arises that the interest has already. Likewise, when a creditor also unconditionally accepts later installments, it is presumed that earlier installments have been paid. However, these presumptions will be negated if there is an evidence

Article 1169

This article provides that 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 declare; 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.

Article 1170

This article provides that 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. This article enumerates instances when a party to an obligation can be liable for damages, as follows: -those guilty of fraud, negligence, or delay -those who violate the terms and conditions of their obligation.

Article 1168

This article provides that when the obligation consists in not doing, and the obligor does what has been forbidden him, it shall also be undone at his expense. Inn other words, if the obligor does an act which she agreed not to do, it will have to be undone at her expense. In addition, an obligor can be liable for damages for doing things which she was forbidden from doing.

Article 1173

This article states that 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.

No person can be forced to render service

Unlike in the case of an "obligation to give," in case of an "obligation to do," the creditor cannot file a case to compel the specific performance of an obligation to do. This is because?

Article 1175

Usurious transactions shall be governed by special laws. The Philippines has a Usury Law which provides no creditor may take a higher rate of interest than 12% per annum or the maximum rate prescribed by the Monetary Board of the Philippines. However, by virtue of CB Circular 905, these special laws has been rendered ineffective. Thus, the lender and borrower may agree on any interest rate. This notwithstanding that it is not contrary to morals if not the law. Otherwise, it is considered void

the act be undone at his expense and be held for damages

When the obligation consists in not doing and the obligor does what has been forbidden him, what can be demanded?

Legal interest

When the rate of interest intended by the parties is presumed by law, -which will only happen when the loan mentions interest but does not specify the rate thereof. (Art. 2209.) The same rate is allowed in judgments where there is no express contract between the parties in anticipation of the same. Its use is not justified where there is a stipulated rate of interest in the loan contract; A lender cannot also unilaterally; i.e., without the consent of the debtor, raise the interest rate

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. (a) If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor. (b) 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.

Extrajudicial Demand

a demand made outside the court, and can either be verbal or written. However, It is more prudent, to make this demand in writing; e.g., demand letter.

Conclusive presumption

a legal presumption in favour of one party that is final and cannot be rebutted by the other party

Situations where prima presumption is negated

a) "the instrument itself expresses or implies that delivery was not intended b) "failure of the buyer to take actual possession of the land sold c) "it is shown that such delivery was not effected, because a third person was actually in possession of the thing.

rebuttable presumption

an assumption that can be challenged in a court of law

compensatio morae

delay of the parties in reciprocal obligations; effect: as if there is no default.

superior quality

if the indeterminate or generic thing's quality and circumstances have not been stated the creditor cannot demand a thing of ______

Ordinary Delay

merely the failure to perform an obligation on time Frees the obligor from accountability from fortuitous event and damages.

Contractual negligence

negligence in contracts resulting in their breach. This kind of negligence is not a source of obligation. (Art. 1157.) It merely makes the debtor liable for damages in view of his negligence in the fulfillment of a pre-existing obligation resulting in its breach or non-fulfillment. It is a kind of civil negligence if it does not amount to a crime; There is a PRE-EXISTING obligation (arising from the contract) and there is FAULT IN CARRYING OUT such.

Judicial Demand

pertains to the filing of a complaint in court

Industrial Fruits

produced by lands of any kind through cultivation or labor

Non-personal obligation

something which anyone else can do

Remedies of Determinate Object

the creditor has a right to have the object delivered and she may enforce this right by the filing of a case for specific performance. The debtor could be demanded upon to make delivery, with additional liability for damages, the obligee can opt for rescission of the contract, with a right to also ask for damages from the obligor. demand for damages only under Art. 1170. Summary: Demand for damages, rescission with demand for damages, specific performance

Exception

the general rule is that no person is held responsible for a fortuitous event. However, article 1165 provides ____ which creates an obligation to , especially if he is in "legal delay"

Real Right

the right or interest of a person over a specific thing without a definite passive subject against whom the right may be personally enforced (like ownership, possession, mortgage, lease record)

Extraordinary fortuitous events

those events which are uncommon and which the contracting parties could not have reasonably foreseen (e.g., earthquake, fi re, war, pestilence, unusual flood)