TITLE I.

– OBLIGATIONS

GENERAL PROVISIONS

Introduction: The Law on Obligations and Contracts is a kind of positive law which deals with
the nature and sources of obligations, as well as the rights and duties arising from agreements
in contracts. It is important for everyone to know that in every obligation, there is a general
principle on human relations, that i : “Art. 19. Every person must, in the exercise of his rights
and in the performance of his duties, act with justice, give everyone his due, and observe
honesty and good faith.”

Art. 1156. An obligation is a juridical necessity to give, to do or not to do. (n)

Concept of Obligation:
Obligatory in its totality – The juridical relation, generated from facts, between two parties, one
of which is the creditor who can demand from the other, the debtor, a definite prestation
Correlative of Right:

Passive aspect of obligation:

The definition of obligation is in its passive aspect. Meaning, that are law merely stresses the
duty of the debtor when it speaks of obligation as a juridical necessity.

Four Definite Elements of Obligation

 An active subject – (creditor/obligee) who has the power to demand the prestation
 A passive subject – (debtor/obligor) who is bound to perform the prestation; has the
juridical necessity of adjusting his conduct to the demand of the creditor in accordance with the
efficient cause
 An object – (the prestation) is the conduct in which the debtor should act upon

To give – the delivery of a movable or immovable thing

To do – includes all kinds of work or services
Not to do – ceasing form doing acts; includes not to give

Requisites of Prestation:

1. Physically and juridically possible

2. Determinate or at least determinable according to pre-established elements or criteria
3. Must have a possible monetary value

Pecuniary Value. Traditionally, the prestation is subject of monetary appreciation. However, the
prestation need not to be of economic character to have a pecuniary value because all
interests, even moral ones, as long as it is acceptable by the law, have some pecuniary value.
 Juridical tie – Efficient Cause (Judicial cause/vinculum juris) is that of which binds or
connects the parties to the obligation.

It is based on the sources of obligation arising from:

1. Law must be expressly and impliedly set forth and cannot be presumed. Agreement of
parties is not necessary. Example: duty of paying taxes (Internal Revenue Code)
2. Bilateral acts. Contracts arise from the stipulation of parties; it is the “law” between
parties. Also, contract is a meeting of two minds between two parties whereby one binds
himself with respect to the other, to give something or render some services (Art.1305).
Example: settlement of a loan with interest by virtue of an agreement. (Art.1315)
3. Unilateral acts
4. Quasi-contracts are those that arise from lawful, voluntary and unilateral act based on
the maxim that no one shall unjustly enrich himself at the expense of another (Art. 2142)
Example: duty of returning an item he mistakenly received (solution indebiti)
5. Quasi delicts arise from damage caused to another through an act or omission, there
being by fault or negligence, but no contractual relation exists between the parties. Example:
road accident

Distinguished from Natural Obligation.

1. Civil obligations grant a person a right of action to compel their performance.

1. Natural obligations do not grant such right, but after voluntary fulfillment by the obligor,
they authorize the retention of what has been delivered or rendered by reason thereof.

ARTICLE 1157
OBLIGATION ARISE FROM; 1. LAW; 2. CONTRACTS; 3. QUASI-CONTRACTS; 4. ACTS OR OMISSIONS
PUNISHED BY LAW; 5. QUASI DELICTS;

1. LAW- There is obligation when it was imposed by the law.

Example: The obligation of both husband and wife to support their family.

2. CONTRACTS– When the both parties arise from stipulation.

Example: A borrowed money from B, B has the obligation to repay by virtue of agreement.

3. QUASI-CONTRACT-This are judicial relation arising from certain lawful,voluntary and unilateral acts by
virtue of which the parties become bound to each other based on the principle that no one shall be
unjustly enriched or benefited at the expenses of another.
 TWO KINDS OF QUASI-CONTRACTS

The obligation to return money paid by mistake or which is not due.

1. Solutio Indebiti, exist when;

a) Something is received;
b) When there is no right to demand it;
c) It was unduly delivered through mistake.

Example: Mr. A the assistant of Mr.B,in the absence of Mr.B, Mr.A received the amount of 5000
for the payment of B’s labor. Mr.A has the obligation to give the amount to Mr.B.

2. Negotiorum Gestio, Which exist when one:

a) Voluntary takes charge of the agency or management of the business or property of another.
b) Without any power from the latter.

Example: Mr. Juan the caretaker of house for rent received the amount of more than the
boarders due. Mr. Juan without the power of the owner of the house increase the payment
which is not due to the boarders. Mr. Juan has the obligation to return the money paid which is
not due to the boarders.

4. ACTS OR OMISSIONS PUNISHED BY LAW– Civil liability aroused and it is the consequences of the
criminal offense committed.

Example : Mr. X inflicted serious physical injury to Mr.Y, Mr.X will be responsible for the payment of all
the medical expenses and damages of Mr.Y. Hence, Mr.X has the obligation for the payments of medical
expenses and damages of Mr.Y.

5. QUASI DELICTS or TORTS– When they arise from damages caused to another,there being fault or
negligence,giving rise to the obligation to pay for the damage done. There must be no pre-existing
contractual relation between the parties.

Example : Mr. A bitten by my German dog, I as a possessor of that Dog has the obligation to the injury of
Mr. A caused by my Dog.

NOTE:

Obligation arising from quasi-contract, delict and quasi delicts are really imposed by law. In other words,
we have only two sources of obligation which is the LAW and CONTRACTS.

LEUNG BEN VS O’BRIEN

FACTS : An action was instituted in the court of first Instance of t

he city of manila by P.J O’Brien to recover the sum of P15,000 an alleged lost by Leung Ben to P.J O’Brien in a series
of gambling, banking and percentage games conducted prior to the institution of suit. Leung Ben’s stated in his
complaint that O’Brien asked for an attachment against the property of Leung Ben on the ground that the latter
was about to leave the Philippines with his intent to defraud his creditors. The attachment was issued through the
acting authority , the sheriff attached the amount of P15,000 and deposited by the O’Brien with the international
Banking Corporation.

The motion to squash the attachment filed by Leung Ben was dismissed by the court.
ISSUE : Whether or not the statutory obligation to restore money won at gaming an obligation arising from
contract,express or implied?

HELD: Where Act 1757 of the Philippine Commission recognizing the right to recover money lost in gambling,arises
the cause of action for recovery of money lost. In this case,the remedy was restored from historical antecedent
and Juris prudential sources of the common law as basis of Code of Civil Procedure on determining sources of
obligation. The court came up with the recognition of this remedy at one logical proper. That the duty of the
defendant to refund the money which he won from the plaintiff at gaming is a duty imposed by statute. It
therefore arises exlege (by virtue of law).

By all the criteria which the common law supplies,this a duty in the nature of debt and is properly classified as an
implied contract.The cause of action stated in the complaints in the lower court is based on a contract ,expressor
implied and is therefore of such nature that the court had authority to issue writ of attachment. The application for
the writ of certiorari must therefore be denied and the proceedings dismissed.

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 forseen by the provisions of this book.

Agreement unnecessary
Pelayo vs. Lauron 12 Phil 453

Obligations derived from law, never presumed;

The obligation of parents to support their minor (Art, 195 FC)
Obligation to pay taxes (Internal Revenue Code)
Obligation to deliver the presumptive legitimes of children (Art 51, FC)

Source of Obligations
Contract- like the duty of the contracting party to fulfill his undertaking in the contract (payment
of a loan)
Quasi-Contract- duty of the recepient to return what was delivered to him by mistake
Delict- duty of the culprit to pay the damage
Quasi-delict-duty of the tortfeasor to pay damages for causing death of a person.

Related cases

Santos vs CA (128 SCRA 428)

Dela Cruz vs Northern theatrical enterprises
Leung Ben Vs. O’ Brien
 Article 1159. Obligations arising from contracts have the force of law between the contracting
parties and should be complied with in good faith.

Validity of any contract expresses the principle of “autonomy of will”. It has its own provision, mandate
and guidelines that should be observe. however the “autonomy of will” will only be on its power of rule
if it is in consistent with other statute most specially the Constitution. If found to be otherwise the
autonomy of will of the contract will be ruled out

Falsification of contract is constituted when there is additional stipulation inserted in the original
contract. It is not imperative however that the contract will be superseded only the part with additional
stipulation with respect to the original contract will be ruled and the other subsequent part will still
govern.

Attorney’s should be in express form. An attorney could not avail of his professional fee without the
presence of express contract on his professional charge. However even with the presence of express
contract,the court may revise the attorney’s rate stipulated if it will be found unreasonable.

Art. 1160. Obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1,
Title XVII, of this Book. (n)

What is Quasi-Contract?

A quasi contract is a contract that exists by order of a court, not by agreement of the parties. Courts
create quasi-contracts to avoid the unjust enrichment of a party in a dispute over payment for a good or
service.

Concept of Quasi-Contract

1.Act giving rise to quasi-contract must be lawful distinguishing it from delict;

2.Act must be voluntary distinguishing it from quasi-delict which is based on fault or negligence
3.Act must be unilateral distinguishing it from contract which is based on agreement

Kinds of Quasi-Contract
Negotiorum gestio (management of business)
Solutio indebiti (the payment to one of what is not due to him)

Negotiorum gestio
Unauthorized management; arises whenever a person voluntary takes charge of the agency or
management of another’s abandoned business or property without the latter’s authority.

Solutio Indebiti
Undue payment; arises when a person unduly delivers a thing through mistake to another who
has no right to demand it.