Comprehensive Study Notes: Civil Code of the Philippines - Obligations and Contracts

OVERVIEW OF OBLIGATIONS AND CONTRACTS

• The body of rules governing obligations and contracts is found in $BOOK IV$ of the Civil Code of the Philippines. • It deals with the nature and sources of obligations and the rights and duties arising from agreements and particular contracts.

GENERAL PRINCIPLES OF LAW

• Definition of Law: A rule of conduct, just, obligatory, and laid down by a legitimate power for common observance and benefit. • Scope of Law: It determines not only the activities of men as rational beings but also the movements or motions of all objects of creation. • Divisions of Law:   1. Divine Law: Based on faith and the concepts of sin and salvation.   2. Natural Law: Based on morality or equity; it is regarded as the reasonable basis of state law.   3. Moral Law: Based on what is acceptable to society; it influences the development of state law.   4. Physical Law: Based on the laws of physical science.   5. Positive Law: The law imposed by the State and enforceable in court.

• Classifications of Positive Law:   - Private Law: Regulates the relations of the members of a community with each other for purely private ends.   - Public Law: Governs the relations of an individual with the State.   - Substantive Law: Establishes the rights as well as the duties of an individual.   - Procedural or Adjective Law: Lays down the procedure by which rights or claims may be enforced.

• Characteristics and Requisites of Law:   1. It is a rule of conduct.   2. It must be just or presumed to be just.   3. It is laid down by a legitimate power.   4. It is obligatory or compulsory.   5. Existence of a sanction or punishment in case of non-observance.

• Sources of Law:   1. Constitution   2. Legislation   3. Administrative rules and regulations   4. Judicial decisions or jurisprudence   5. Custom and other supplementary sources

• Article 3: Ignorance of the law shall excuse no one from compliance therewith ($\text{Ignorantia legis neminem excusat}$).

NATURE AND ELEMENTS OF OBLIGATIONS ($RA. 386, BOOK 4$)

• Definition ($Article 1156$): An obligation is a juridical necessity to give, to do, or not to do. • Kinds of Obligations According to Nature ($Article 1423$):   1. Civil Obligations: Give a right of action to compel their performance.   2. Natural Obligations: Based on equity and natural law; they do not grant a right of action to enforce performance and merge with moral obligations.

• Elements of an Obligation:   1. Active Subject: The one who can compel compliance with the obligation.   2. Passive Subject: The one compelled to comply with or perform the obligation.   3. Juridical or Legal Tie: Also known as the efficient cause; that which binds or connects the parties to the obligation.   4. Prestation: The object or undertaking of the obligation; that which is to be given, to be done, or not to be done.

SOURCES OF OBLIGATIONS ($ARTICLE 1157$)

• Obligations arise from the following sources:   1. Law   2. Contracts   3. Quasi contracts   4. Acts or omissions punished by law   5. Quasi delicts

• Obligations from Contracts ($Article 1159$): These have the force of law between the contracting parties and should be complied with in good faith.

PERFORMANCE AND BREACH OF OBLIGATIONS

• Execution at Cost ($Article 1167$): If a person obliged to do something fails to do it, it shall be executed at his cost. This also applies if he does it in contravention of the tenor of the obligation. Additionally, what has been poorly done may be decreed to be undone. • Liability for Damages ($Article 1170$): Those who are guilty of fraud, negligence, delay, or who in any manner contravene the tenor of the obligation in its performance are liable for damages.

FRAUD ($\text{DOLO}$ OR DECEIT)

• Definition: The intentional non-performance of an obligation; deception aimed at evading the normal fulfillment of the obligation and causing damage. • Demandability ($Article 1171$): Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void. • Classification of Fraud:   - Dolo Incidente (Incidental Fraud): Referred to in $Article 1170$. It is fraud incident to the performance of a pre-existing obligation.   - Dolo Causante (Causal Fraud): Discussed in $Article 1338$. It is fraud used by one party to secure the consent of the other party.

• Distinctions Between Dolo Incidente and Dolo Causante:   - Validity: $Dolo incidente$ does not affect the validity of the contract; $dolo causante$ renders contracts voidable (valid but subject to annulment due to defective consent).   - Timing: $Dolo incidente$ occurs during the performance of an obligation; $dolo causante$ occurs during the acquisition of consent for a contract.   - Remedy: $Dolo incidente$ makes the guilty party liable for damages; $dolo causante$ makes the contract defective and subject to annulment while also giving the innocent party the right to ask for damages.

NEGLIGENCE ($\text{CULPA}$ OR FAULT)

• Definition: Carelessness or lack of diligence. It consists of the omission of the diligence required by the nature of the obligation and corresponds with the circumstances of the persons, the time, and the place. • Bad Faith: When negligence shows bad faith, it is considered equivalent to fraud ($Article 1173$). • Regulation ($Article 1172$): Responsibility for negligence is demandable in all obligations, but courts may regulate such liability according to the circumstances. • Classification of Negligence:   - Contractual Negligence ($\text{Culpa Contractual}$, $Article 1170$): There is a pre-existing obligation arising from a contract and fault exists in carrying it out.   - Civil Negligence ($\text{Culpa Aquiliana}$): Negligence itself becomes the source of the obligation without a pre-existing contract.

DELAY ($\text{MORA}$ OR DEFAULT)

• Definition: Legal delay where failure to perform an obligation on time constitutes a breach. • Kinds of Delay:   1. Mora Solvendi: Delay on the part of the debtor to fulfill his obligation. It begins from the time of judicial or extrajudicial demand by the creditor ($Article 1169$). The debtor is liable for damages and for any damage caused by a fortuitous event during the delay.   2. Mora Accipiendi: Delay on the part of the creditor to accept the performance of the obligation. The creditor bears the risk of loss of the thing due.   3. Compensatio Morae: Delay of obligors in reciprocal obligations. The delay of the creditor neutralizes the delay of the debtor and vice versa. If one party's delay is followed by another's, the court balances the liability of the first infractor. If the first guilty party cannot be proven, the contract is considered extinguished.