business laws chapter 2 (di pa tapos)

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.

Specific or determinate thing

A thing is said to be specific or determinate when it is particularly designated or physically segregated from others of the same class. (Art. 1459.)

Examples:

1. The watch I am wearing.

2. The car sold by X.

3. My dog named “Terror.”

4. The house at the corner of Rizal and del Pilar Streets.

5. The Toyota car with Plate No. AAV 316 (2008).

6. This cavan of rice.

7. The money I gave you.

Generic or indeterminate thing

A thing is generic or indeterminate when it refers only to a class or genus to which it pertains and cannot be pointed out with particularity.

Examples:

1. A Bulova calendar watch.

2. The sum of ₱1,000.

3. A 2016 Toyota car.

4. A cavan of rice.

5. A police dog.

Specific thing and generic thing distinguished

Specific thing: A determinate thing is identified by its individuality. The debtor cannot substitute it with another although the latter is of the same kind and quality without the consent of the creditor. (Art. 1244.)

(2) Generic thing: A generic thing is identified only by its species. The debtor can give anything of the same class as long as it is of the same kind.

Specific thing and generic thing (Example 1)

If S’s obligation is to deliver to B a Rolex calendar watch, S can deliver any watch as long as it is a Rolex with calendar.

But if S’s obligation is to deliver to B a particular watch, the one S is wearing, S cannot substitute it with another watch without B’s consent nor can B require S to deliver another watch without S’s consent although it may be of the same kind and value. (See Art. 1244.)

Specific thing and generic thing (Example 2)

If S’s obligation is to deliver to B one of his cars, the object refers to a class which in itself is determinate.

Here, the particular thing to be delivered is determinable without the need of a new contract between the parties; it becomes determinate upon its delivery. (See Art. 1349.)

Duties of debtor in obligation to give a determinate thing

The duties of the debtor are:

1. Preserve or take care of the thing. — In obligations to give (real obligations), the obligor has the incidental duty to take care of the thing.

Diligence of a good father of a family

The phrase has been equated with ordinary care or that diligence which an average (a reasonably prudent) person exercises over his own property.

Another standard of care

If the law or the stipulation of the parties provides for another standard of care (slight or extraordinary diligence), said law or stipulation must prevail. (Art. 1163)

Example: Under the law, a common carrier (person or company engaged in the transportation of persons and/or cargoes) is bound to carry the passengers safely as far as human care and foresight can provide, using utmost (i.e., extraordinary) diligence of very cautious persons, with a due regard for all the circumstances. (Art. 1755)

In case of accident, therefore, the common carrier will be liable if it exercised only ordinary diligence or the diligence of a good father of a family.

Agreement on the standard of diligence

The parties may agree upon diligence which is more or less than that of a good father of a family but it is contrary to public policy (see Art. 1306) to stipulate for absolute exemption from liability of the obligor for any fault or negligence on his part. (See Arts. 1173, 1174.)

Factors to be considered in diligence

The diligence required necessarily depends upon the nature of the obligation and corresponds with the circumstances of the person, of the time, and of the place. (Art. 1173.)

It is not necessarily the standard of care one always uses in the protection of his property. As a general rule, the debtor is not liable if his failure to preserve the thing is not due to his fault or negligence but to fortuitous events or force majeure.

Obligation to preserve a determinate thing (Example)

S binds himself to deliver a specific horse to B on a certain date.

Pending delivery, S has the additional or accessory duty to take care of the horse with the diligence of a good father of a family, like feeding the horse regularly, keeping it in a safe place, etc.

S must exercise that diligence which he would exercise over another horse belonging to him and which he is not under obligation to deliver to B.

But S cannot relieve himself from liability in case of loss by claiming that he exercised the same degree of care toward the horse as he would toward his own, if such care is less than that required by the circumstances.

If the horse dies or is lost or becomes sick as a consequence of S’s failure to exercise proper diligence, he shall be liable to B for damages.

The accessory obligation of S to take care of the horse is demandable even if no mention thereof is made in the contract.

Reason for debtor’s obligation to preserve the thing

The debtor must exercise diligence to insure that the thing to be delivered would subsist in the same condition as it was when the obligation was contracted.

Without the accessory duty to take care of the thing, the debtor would be able to afford being negligent and he would not be liable even if the property is lost or destroyed, thus rendering illusory the obligation to give.

Duties of debtor in obligation to give a determinate thing

The duties of the debtor are:

(1) Preserve or take care of the thing — The obligor has the incidental duty to take care of the thing due with the diligence of a good father of a family pending delivery.

(2) Deliver the fruits of the thing — This is discussed under Article 1164.

(3) Deliver the accessions and accessories — This is discussed under Article 1166.

(4) Deliver the thing itself — (Arts. 1163, 1233, 1244; as to kinds of delivery, see Arts. 1497 to 1501.)

(5) Answer for damages in case of non-fulfillment or breach — This is discussed under Article 1170.

Duties of debtor in obligation to deliver 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. (See Art. 1246.)

Duties of debtor in obligation to deliver a generic thing (continued)

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. (See 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. (1095)

Different kinds of fruits

The fruits mentioned by the law refer to natural, industrial, and civil fruits.

Natural fruits

The spontaneous products of the soil, and the young and other products of animals.

Examples:

• Grass.

• All trees and plants on lands produced without the intervention of human labor.

---

Industrial fruits

Those produced by lands of any kind through cultivation or labor.

Examples:

• Sugar cane.

• Vegetables.

• Rice.

• All products of lands brought about by reason of human labor.

Civil fruits

Those derived by virtue of a juridical relation.

Examples:

• Rents of buildings.

• Price of leases of lands and other property.

• The amount of perpetual or life annuities or other similar income. (Art. 442.)

Right of creditor to the fruits

The creditor is entitled to the fruits of the thing to be delivered from the time the obligation to make delivery arises.

The intention of the law is to protect the interest of the obligee should the obligor commit delay, purposely or otherwise, in the fulfillment of his obligation.

When obligation to deliver fruits 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 the fulfillment of the condition or arrival of the term. 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 the law applicable.

Right to fruits in a contract of sale (Example)

S sold his horse to B for ₱15,000. No date or condition was stipulated for the delivery of the horse. While still in the possession of S, the horse gave birth to a colt.

Question: Who has a right to the colt?

In a contract of sale, "all the fruits shall pertain to the vendee from the day on which the contract was perfected."(Art. 1537, 2nd par.)

Hence, B is entitled to the colt. This holds true even if the delivery is subject to a suspensive condition (e.g., upon the demand of B) or a suspensive period (e.g., next month) if B has paid the price.

But S has a right to the colt if it was born before the obligation to deliver the horse has arisen (Art. 1164).

Right to the colt when purchase price is not yet paid

If B has not yet paid the purchase price, upon the fulfillment of the condition or the arrival of the period, S does not have to give the colt and B is not obliged to pay legal interest on the price since the colt and the interest are deemed to have been mutually compensated. (See Art. 1187.)

Personal right

Personal right is 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.

Real right

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

Personal right and real right distinguished

In personal right, there is a definite active subject and a definite passive subject, while in real right, there is only a definite active subject without any definite passive subject. (See Art. 1156.)

(2) A personal right is binding or enforceable only against a particular person, while a real right is directed against the whole world.

Personal right and real right (Example)

X is the owner of a parcel of land under a Torrens title registered in his name in the Registry of Property. His ownership is a real right directed against everybody. There is no definite passive subject.

If the land is claimed by Y who takes possession, X has a personal right to recover from Y, as a definite passive subject, the property.

If the same land is mortgaged by X to Z, the mortgage, if duly registered, is binding against third persons. A purchaser buys the land subject to mortgage which is a real right.

Ownership acquired by delivery

Ownership and other real rights over property are acquired and transmitted in consequence of certain contracts by tradition or delivery. (Art. 712.)

In sale, mere agreement on the terms thereof does not effect transfer of ownership of the thing sold in the absence of delivery, actual or constructive, of the thing.

Meaning of “he shall acquire no real right over it until the same has been delivered to him”

The creditor does not become the owner until the specific thing has been delivered to him.

Hence, when there has been no delivery yet, the proper court action of the creditor is not one for recovery of possession and ownership but one for specific performance or rescission of the obligation. (See Art. 1165.)

Ownership acquired by delivery (Example)

S is obliged to give to B on July 25 a particular horse.

Before July 25, B has no right over the horse. B will acquire a personal right against S to fulfill his obligation only from July 25.

If the horse is delivered on July 30, B acquires ownership or real right only from that date.

But if on July 20, S sold and delivered the same horse to C, a third person (meaning that he is not a party to the contract between S and B) who acted in good faith (without knowledge of the said contract), C acquires ownership over the horse and he shall be entitled to it as against B.

S shall be liable to B for damages. (Art. 1170.)

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

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. (1096)

Remedies of creditor in real obligation

In a specific real obligation (obligation to deliver a determinate thing), the creditor may exercise the following remedies or rights in case the debtor fails to comply with his obligation:

(a) Demand specific performance or fulfillment (if it is still possible) 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 recover damages. (Art. 1170); or

(c) Demand payment of damages only, where it is the only feasible remedy.

Specific real obligation (obligation to deliver a determinate thing)

In an obligation to deliver a determinate thing, the very thing itself must be delivered. (Art. 1244.) Consequently, only the debtor can comply with the obligation.

This is the reason why the creditor is granted the right to compel the debtor to make the delivery. (Par. 1, Art. 1165.)

The creditor cannot use force or violence upon the debtor. The creditor must bring the matter to court and the court will be the one to order the delivery.

Specific real obligation (Example)

S sells his piano to B for ₱20,000. If S refuses to comply with his obligation to deliver the piano, B can bring an action for fulfillment or rescission of the obligation with the payment of damages in either case. (Art. 1191.)

In case of rescission, the parties must return to each other what they have received. (Art. 1385.)

Rights to demand fulfillment and rescission

The rights to demand fulfillment and rescission with damages (see Art. 1170) are alternative, not cumulative, meaning the election of one is a waiver of the right to resort to the other. (See Art. 1191.)

B may bring an action for damages only even if this is not expressly mentioned by Article 1165. (See Art. 1170.)

Generic real obligation (obligation to deliver a generic thing)

A generic real obligation can be performed by a third person since the object is expressed only according to its family or genus.

It is not necessary for the creditor to compel the debtor to make the delivery, although he may ask for performance of the obligation.

In any case, the creditor has the right to recover damages under Article 1170 in case of breach or violation of the obligation.

The manner of compliance with an obligation to deliver a generic thing is governed by Article 1246.

Generic real obligation (Example)

S obliges himself to deliver to B 100 sacks of rice on December 4 for ₱100,000.

If S does not comply with his obligation, B may buy rice from C, a third person.

If B paid C ₱10,000, he may recover (assuming B has not yet paid S) ₱10,000 from S.

Furthermore, B can also hold S liable for damages in view of Article 1170 as in the case of the delivery of a determinate thing.

Fortuitous event and debtor’s responsibility

Paragraph 3 gives two (2) instances when a fortuitous event does not exempt the debtor from responsibility.

It refers to a determinate thing. An indeterminate thing cannot be the object of destruction by a fortuitous event because genus nunquam perit (genus never perishes). (See Arts. 1174, 1263.)

Delay and fortuitous events

Delay is discussed in Article 1169, and fortuitous events are discussed in Article 1174.

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

Accessions are the fruits of a thing or additions to or improvements upon a thing (the principal).

Examples:

• House or trees on a land.

• Rents of a building.

• Air-conditioner in a car.

• Profits or dividends accruing from shares of stocks.

Accessories

Accessories are things joined to or included with the principal thing for the latter’s embellishment, better use, or completion.

Examples:

• Key of a house.

• Frame of a picture.

• Bracelet of a watch.

• Machinery in a factory.

• Bow of a violin.

Difference between accessions and accessories

While accessions are not necessary to the principal thing, the accessory and the principal thing must go together.

Both can exist only in relation to the principal. Accession is also used in the sense of a right, i.e., right to the fruits and/or accessories of a thing.

Right of creditor to accessions and accessories

The general rule is that all accessions and accessories are considered included in the obligation to deliver a determinate thing although they may not have been mentioned.

This rule is based on the principle of law that the accessory follows the principal.

In order that they will be excluded, there must be a stipulation to that effect.

Obligation to deliver accessions or accessories

Unless otherwise stipulated, an obligation to deliver the accessions or accessories of a thing does not include the latter.

Example: A sale of the improvements (e.g., house) upon a land is not a sale of the land itself.

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. (1098)

Situations contemplated in Article 1167

Article 1167 refers to an obligation to do, i.e., to perform an act or render a service.

It contemplates three (3) situations:

(1) The debtor fails to perform an obligation to do;

(2) The debtor performs an obligation to do but contrary to the terms thereof; or

(3) The debtor performs an obligation to do but in a poor manner.

Remedies of creditor in positive personal obligation

1) If the debtor fails to comply with his obligation to do, the creditor has the right:

(a) To have the obligation performed by himself, or by another, unless personal considerations are involved, at the debtor’s expense; and

(b) To recover damages. (Art. 1170)

(2) In case the obligation is done in contravention of the terms of the same or is poorly done, it may be ordered...

Performance by a third person

A personal obligation to do, like a real obligation to deliver a generic thing, can be performed by a third person.

While the debtor can be compelled to make the delivery of a specific thing (Art. 1165), a specific performance cannot be ordered in a personal obligation to do because this may amount to involuntary servitude, which as a rule, is prohibited under our Constitution. (Art. III, Sec. 18[2])

Compelling performance by debtor prohibited

A specific performance cannot be ordered in a personal obligation to do because this may amount to involuntary servitude.

A personal obligation to do may be performed by a third person, unlike an obligation to deliver a specific thing where the debtor may be compelled to make the delivery.

Indemnification of creditor for damages

Where the personal qualifications of the debtor are the determining motive for the obligation contracted, the performance of the same by another would be impossible or would result to be so different that the obligation could not be considered performed.

Hence, the only feasible remedy of the creditor is indemnification for damages.

But where the obligation can still be performed at the expense of the debtor notwithstanding his failure or refusal to do so, the court is not authorized to merely grant damages to the creditor.

Performance by third person (Example: Construction of house)

X binds himself to construct a house for B. Among other things, it was stipulated that the house shall have three (3) bedrooms, each of which to have an area of five (5) meters by four (4) meters, and that the kitchen shall be painted all white.

If X does not construct the house, B may ask C to construct the house at the expense of X.

Suppose X constructed the house but the size of the bedroom is not five (5) meters by four (4) meters or the kitchen is not painted all white.

In this case, B can ask X to have it done according to the obligation.

If the obligation may be performed by another at the expense of X, the court will order X to pay B the amount paid by B to C, and not merely grant damages to B.

Poor performance of obligation to do (Example)

If the kitchen was painted white but the painting was poorly done, B may ask X that it be undone or, in case of X’s refusal, he may ask C to paint the kitchen at the expense of X.

In no case, however, can X be compelled to comply with the obligation against his will.

Personal qualification as determining motive (Example)

If the obligation contracted by X is to sing in the night club of B and he fails to comply with his obligation, the performance of the same by another would be impossible or would result to be so different that the obligation could not be considered performed.

Here, the personal qualification of X is the determining motive for the contract.

In this case, the only practical remedy of B is indemnification for damages.

Article 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. (1099a)

Remedies of creditor in negative personal obligation

In an obligation not to do, the duty of the obligor is to abstain from an act.

Here, there is no specific performance. The very obligation is fulfilled in not doing what is forbidden. Hence, in this kind of obligation, the debtor cannot be guilty of delay.

As a rule, the remedy of the obligee is the undoing of the forbidden thing plus damages. (Art. 1170)

However, if it is not possible to undo what was done, either physically or legally, or because of the rights acquired by third persons who acted in good faith, or for some other reason, the remedy is an action for damages caused by the debtor’s violation of his obligation.

Negative personal obligation (Example)

B bought a land from S. It was stipulated that S would not construct a fence on a certain portion of his land adjoining that sold to B.

Should S construct a fence in violation of the agreement, B can bring an action to have the fence removed at the expense of S.

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 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. (1100a)

Meaning of delay

The word delay, as used in the law, is not to be understood according to its ordinary meaning in common parlance.

A distinction should be made between ordinary delay and legal delay (default or mora) in the performance of an obligation.

Ordinary delay

Ordinary delay is merely the failure to perform an obligation on time.

Legal delay or default or mora

Legal delay or default or mora is the failure to perform an obligation on time which failure constitutes a breach of the obligation.

Kinds of delay or default

The kinds of delay or default are:

(1) Mora solvendi — the delay on the part of the debtor to fulfill his obligation (to give or to do).

(2) Mora accipiendi — the delay on the part of the creditor to accept the performance of the obligation.

(3) Compensatio morae — the delay of the obligors in reciprocal obligations (like in sale), i.e., the delay of the obligor cancels the delay of the obligee, and vice versa. The net result is that there is no actionable default on the part of both parties.

No delay in negative personal obligation

In an obligation not to do, non-fulfillment may take place but delay is impossible because the debtor fulfills the obligation by not doing what has been forbidden him. (See Art. 1168.)

Requisites of delay or default by the debtor

There are three (3) conditions that must be present before mora solvendi can exist or its effects may arise:

(1) Failure of the debtor to perform his positive obligation on the date agreed upon;

(2) Demand (not mere reminder or notice) made by the creditor upon the debtor to comply with his obligation, which demand may be either:

• Judicial (when a complaint is filed in court); or

• Extrajudicial (when made outside of court, orally or in writing); and

(3) Failure of the debtor to comply with such demand.

Burden of proof in delay

The above presupposes that the obligation is already due or demandable. (See Art. 1279[4].)

The creditor has the burden of proving that demand has been made.

Similarly, it is incumbent upon the debtor to prove that the delay was not caused by his fault to relieve himself from liability. (See Arts. 1173, 1174.)

Ordinary delay (Example)

S obliged himself to deliver to B a specific refrigerator on December 10.

If S does not deliver the refrigerator on December 10, he is only in ordinary delay in the absence of any demand from B although a period had been fixed for the fulfillment of the obligation.

The law presumes that B is giving S an extension of time within which to deliver the refrigerator. Hence, there is no breach of the obligation and S is not liable for damages.

If a demand is made upon S by B on December 15 and S fails to deliver the refrigerator, S is considered in default only from that date.

If an action for specific performance is filed by B on December 20, the payment of damages for the default must commence on December 15 when he made the extrajudicial demand and not on December 20.

In the absence of evidence as to such extrajudicial demand, the effects of default arise from the date of the judicial demand, that is, from the filing of the complaint.

Effects of delay

1) Mora solvendi — The effects are:

(a) The debtor is guilty of breach or violation of the obligation;

(b) He is liable to the creditor for interest (in case of obligations to pay money) (Art. 2209) or damages (in other obligations). (Art. 1170)

In the absence of extrajudicial demand, the interest shall commence from the filing of the complaint.

(c) He is liable even for a fortuitous event when the obligation is to deliver a determinate thing. (Arts. 1165, 1170)

However, if the debtor can prove that the loss would have resulted just the same even if he had not been in default, the court may equitably mitigate or reduce the damages. (Art. 2215[4])

In an obligation to deliver a generic thing, the debtor is not relieved from liability for loss due to a fortuitous event.

He can still be compelled to deliver a thing of the same kind (See Art. 1263) or held liable for damages. (Art. 1170)

---

Mora solvendi

Mora solvendi is the delay on the part of the debtor to fulfill his obligation (to give or to do).

The effects are:

(a) The debtor is guilty of breach or violation of the obligation;

(b) The debtor is liable to the creditor for interest in obligations to pay money or damages in other obligations;

(c) The debtor is liable even for a fortuitous event when the obligation is to deliver a determinate thing.

Mora accipiendi

Mora accipiendi is the delay on the part of the creditor to accept the performance of the obligation.

The effects are:

(a) The creditor is guilty of breach of obligation;

(b) The creditor is liable for damages suffered, if any, by the debtor;

(c) The creditor bears the risk of loss of the thing due. (See Art. 1262)

(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 or deposit in court of the thing or sum due. (See Art. 1256)

Compensatio morae

Compensatio morae is the delay of the obligors in reciprocal obligations, where the delay of the obligor cancels the delay of the obligee and vice versa.

Legally speaking, there is no default or delay on the part of both parties.

If the delay of one party is followed by that of the other, the liability of the first infractor shall be equitably tempered or balanced by the courts.

If it cannot be determined which of the parties is guilty of delay, the contract shall be deemed extinguished and each shall bear his own damages. (Art. 1192)

When demand is not necessary to put debtor in delay

As a general rule, delay by the debtor begins only from the moment a demand, judicial or extrajudicial, for the fulfillment of the obligation is made by the creditor.

Without such demand, the effect of default will not arise.

The exceptions are:

(1) When the obligation so provides.

When obligation provides that demand is not necessary (Example)

D promised to pay C the sum of ₱20,000 on or before November 30 without the need of any demand.

Therefore, if D fails to pay on November 30, he is automatically in default.

Parties stipulate to dispense with demand

In this case, the parties agree that demand is not necessary before the debtor is considered in delay.

The mere fixing of the period is not enough. The arrival of the period merely makes the obligation demandable.

Before its arrival, the creditor cannot demand performance.

The obligation must expressly declare that demand is not necessary or must use words to that effect, such as:

• “The debtor will be in default.”

• “I will be liable for damages.”

Fixing of the period and demand

The mere fixing of the period does not place the debtor in delay.

The arrival of the period only makes the obligation demandable. Demand is still necessary unless the obligation expressly provides otherwise.

Demand in loan agreement (Example)

The contract of loan between D and C provides that failure of D to pay any installment therein stipulated would mature the entire obligation.

It does not state that in such an event, D shall thereafter be in default.

Demand is still necessary to hold D in default upon failure to pay any such installments.

He is not liable for interest for default for the whole debt except from the time that judicial or extrajudicial demand for payment is made upon him.

When the law provides that demand is not necessary

Demand is not necessary when the law itself provides that the debtor is automatically in delay.

Examples:

(1) Under the law, taxes should be paid on or before a specific date; otherwise, penalties and surcharges are imposed without the need of demand for payment by the government.

(2) The partner is liable for the fruits of the thing he may have promised to contribute to the partnership from the time they should have been delivered without the need of any demand. (Art. 1786; see Art. 1788.)

When time is of the essence

Demand is not necessary when the time of performance is a controlling motive for the establishment of the contract.

Examples:

• The delivery of balloons on a particular date when a children's party will be held.

• The making of a wedding dress where the wedding is scheduled at a certain time.

• Payment of money at a particular time so that the creditor could pay off certain debts due on the same date.

• The delivery of a car to be used in a trip at a particular time.

In these cases, the debtor is fully aware that performance after the designated time would no longer benefit the creditor.

In agreements of this kind, the time element is important as performance itself.

Time is not of the essence

When the time of performance is not fixed or is stated in general or indefinite terms, time is, as a rule, not of the essence of the contract.

In such cases, performance must be made within a reasonable time.

What is a reasonable time will depend upon the circumstances of the particular case.

It is not necessary for the contract to categorically state that time is of the essence; intent is sufficient.

When demand would be useless

Demand is unnecessary when it would be useless or unavailing because the debtor has already made performance impossible.

Example:

S obliged himself to deliver a specific horse to B on September 5.

Through S’s negligence or deliberate act, or by reason of a fortuitous event for which S has expressly bound himself responsible (See Art. 1174), the horse died on September 2.

Under this situation, any demand for the delivery of the horse on September 5 would be useless as S has made it impossible for him to perform his obligation.

Demand is also unnecessary where there has been a prior absolute refusal by S or S has manifested an intention not to comply with his obligation.

When there is performance by a party in reciprocal obligations

In case of reciprocal obligations, the performance of one party is conditioned upon the simultaneous fulfillment on the part of the other.

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.

This is known as compensatio morae.

From the moment a party fulfills or is ready to fulfill his obligation, delay by the other begins.

Page 39 ka na (di pa tapos tohh)