BOOK IV

Obligations and Contracts

TITLE I
Obligations

CHAPTER I
General Provisions
ARTICLE 1156.
“An obligation is a juridical necessity to give, to do or not to do. (n)”
“Ang obligasyon ay isang Juridical necessity na magbigay, gawin at hindi
gawin.”
Obligation derived from the latin word “obligatio” meaning tying or binding.
Joridical necessity connote that in case of noncompliance, there will be legal
sanction.
Elements:
 Active Subject – the one is demanding the performance (Creditor)
 Passive Subject – the one bound to perform the prestation to give, to give, to
do or not to do
 Prestation or Object – the subject matter of the obligation
 Efficient Cause – the juridical tie or vinculum by virtue of which the debtor
has become bound to perform the prestation
ARTICLE 1157.
Obligation arise from:
1. Law;
2. Contracts;
3. Quasi-Contracts;
4. Act or omissions punished by law; and
5. Quasi-delicts
Ang obligasyon ay maaaring manggaling:
1. Batas;
2. Kontrata;
3. Quasi-Kontrata
4. Kilos o kilos na masama na pinaparusahan ng batas; at
5. Quasi-delicts
Sources of Obligations
 Law (obligation ex lege)-like the duty to pay taxes and to support one’s
family.
 Contracts (obligation ex contractu) – like the duty to repay a loan by virtue of
an agreement.
 Quasi-contracts (obligations ex quasi-contractu) – like the duty to refund an
“over change” of money because of the quasi-contract of solution indebiti or
“undue payment.”
 Crimes or Acts of Omissions Punished by Law (obligations ex maleficio or ex
delicto) – like the duty to return a stolen carabao.
 Quasi-delicts or Torts- (obligation ex quasi-delicto or ex quasi-maleficio)-like
the duty to repair damage due to negligence.
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 foreseen, by the provisions of this Book. (1090)”
“Ang mga obligasyon na hango sa batas ay hindi inaakala. Ang mga obligasyon
lamang na hayagang nakasaad sa Code na ito at sa mga espesyal na batas ang
may bisa, at pinapatakbo ng mga utos ng batas na nagtatag ng mga ito; para sa
mga obligasyon na hindi inaasahan, sila ay bibigyang bisa ng probisyon ng
Libro na ito.”
Discussion:
When obligations are not expressly provided by law, they cannot be presumed
to exist – thus making the not demandable nor enforceable.
When the act itself is the source of the obligation and not the law:
The law merely acknowledges the existence of an obligation generated by an
act; It constitutes a contract, quasi-contract, delict or quasi-delict;
Its only purpose is to regulate the obligation which did not arise from the law.
When the source of the obligation is the law itself:
The law creates the obligation;
The act upon which it is based is nothing more than a mere factor for
determining the moment when it becomes demandable.
ARTICLE 1159.
“Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith.”
“Ang mga obligasyon na nag simula sa mga kontrata at nagkaroon ng bisa sa
batas sa pagitan ng mga nagkasundong partido ay dapat gampanan ito ng may
mabuting kalooban.”
*Distinction between Obligation and Contract
Obligation – is a judicial necessity to give, to do or not to do (1156), while
Contract – is the meeting of the minds between two persons whereby one bind
himself with respect to the other, to give something or to render some services.
(Art.1305)
Obligation Arising from contracts – it is an established doctrine of law and
sustained by the settled practice of the courts, that a man obligates himself to do
that to which he promises to be bound, because that which is agreed to in a
contract is the law between such contracting parties. This rule, however, is
subject to a condition that a court is not contrary to law, morals, good customs,
public order, or public policy.
ARTICLE 1160.
“Obligations derived from quasi-contracts shall be subject to the provisions of
Chapter I, Title XVII of this Book.”
“Ang mga obligasyong galing sa quasi-contracts ay maipapasailalim sa mga
probisyong nakasaad sa Chapter I, Title XVII ng Librong ito.”
Discussion:
A quasi-contract is a juridical relation which arises from a lawful, voluntary and
unilateral act/s executed by somebody for the benefit of another and for which
the former must be indemnified to the end that no one shall be enriched or
benefited at the expense of another (Article 2142).
Presumptive Consent -The consent in quasi-contracts is referred to as
presumptive consent. Since a quasi-contract is unilateral contract created by the
act/s of the gestor, the consent is provided by law through presumption. This
consent gives rise to multiple judicial relations which result in obligations for
the delivery of the thing or rendition of service.
ARTICLE 1161.
“Civil obligations arising from criminal offenses shall be governed by the penal
laws, subject to the provisions of Article 2177, and the pertinent provisions of
chapter 2, Preliminary title on Human Relations, and to Title XVIII of this
Book, regulating damages.”
“Ang mga obligasyong sibil na nagmumula sa mga criminal na opensa ay dapat
pamunuan ng mga batas na pang penal, na naayos sa mga probisyon ng
Artikulo 2177 at ng mga pertenenteng probisyon ng Chapter 2, Prelimary Title
sa Human Relations at ng Title XVIII ng aklat na ito na nagsasaayos ng mg
danyos.”
Rules Governing Civil Obligations Arising fromm Criminal offenses.
Penal laws like the Revised Penal Code. The Penal Code contains a Chapter on
civil liability (Articles 100 to 113)
Article 2176 (Quasi – delict)
Pertinent provisions of chapter 2 (Preliminary Title) on Human Relations –
particularly Articles 26, 29, 30, 32, 33, 35 and 36, NCC;
Title XVII of this code involving damages (Articles 2195 to 2235)
ARTICLE 1162.
“Obligations derived from quasi-delicts shall be governed by the provisions of
Chapter 2, Title XVII of this Book, and by special laws. (1093a)”
“Ang mga obligasyon na nagmula sa quasi-delicts ay nasasakupan ng probisyon
ng Chapter 2, Title XVII ng Aklat na ito, at ng mga espesyal na batas.”
Discussion:
A quasi delict is an act or omission by a person which causes damage to another
giving rise to an obligation to pay for the damage done, there being fault or
negligence but there is no preexisting contractual relation between the parties.
Requisites of Quasi delict.
Before a person can be held liable for quasi delict, the following requisites
must be present:
There must be an act or omission;
There must be fault or negligence
There must be damage caused;
There must be a direct relation of cause and effect between the act or omission
and the damage; and
5.There is no preexisting contractual relation between the parties.
Crime Distinguished from Quasi delict.
In crime, there is criminal or malicious intent or criminal negligence, while in
quasi delict, there is only negligence;
In crime, the purpose is punishment, while in quasi delict, indemnification of
the offended party;
Crime affects public interest, while quasi delict concerns private interest in
crime, there are generally two liabilities: criminal and civil, while in quasi
delict, there is only civil liability;
Criminal liability cannot be compromised or settled by the parties themselves,
while the liability for quasi delict can be compromised as any other civil
liability;
In crime, the guilt of the accused must be proved beyond reasonable doubt,
while in quasi de1ict the fault or negligence of the defendant need only be
proved by preponderance (i.e., superior or greater weight) of evidence.

CHAPTER II
Nature and Effect of Obligation
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. (1094a)”
“Ang bawat tao na obligado na magbigay ng isang bagay ay obligado rin na
pangalagaan ito na may tamang pagkalinga tulad ng isang ama ng tahanan,
maliban kung ang batas o ang stipulasyon ng mga partido ay nangangailangan
ng iba pang pamantayan ng pagaalaga.”
Discussion:
“The diligence of a good father of a family” is the diligence required on this
article and if extraordinary diligence is required, then the obligor shall exercise
extraordinary diligence.
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)”
“And nagpautang ay may karapatan sa mga bunga ng bagay mula sa oras na ang
obligasyon na ihatid ito ay nagsimula. Ngunit, Siya ay dapat walang “real right”
sa mga bagay na nasaad hanggang ang mga ito ay maihatid sa kanya.”
Discussion:
The Debtor’s Obligation to deliver arise when:
1. When the obligation is based on law, quasi-delict, quasi-contract or crime,
specific provisions of the applicable law shall determine when the delivery shall
be done or affected.
2. When the obligation is subject to a suspensive condition, the obligation to
deliver arises from the happening of the condition.
3. When the obligation is subject to a suspensive term or period, the obligation
to deliver arises from the lapse of the term or period.
4. When there is no condition or term, the obligation to deliver arises from the
constitution, creation or perfection of the obligation.
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 have the same interest, he shall be responsible for fortuitous
event until he has effected the delivery.”
“Kapag kung ano ang upang maihatid ay isang maliwanag na bagay, ang
pinagkakautangan , bilang karagdagan sa kanan ipinagkaloob sa kanya ng
Article 1170, maaaring pilitin ang may utang upang gawin ang paghahatid.
Kung ang bagay ay hindi tiyak o generic, maaari niyang hilingin na ang
obligasyon na nakasunod sa sa kapinsalaan ng ang may utang.
Kung ang obligor pagkaantala, o ipinangako upang maihatid ang parehong
bagay sa dalawa o higit pang mga tao na hindi magkaroon ng parehong interes,
siya’y magiging responsable para sa di-inaasahang pangyayari hanggang sa siya
ay maapektuhan ang paghahatid.”
Yu Tek v. Gonzales
Facts: A obligated himself to sell for a definite price a certain specified quantity
of sugar of a given quality, without designating a particular lot.
Issue: In case the sugar is lost by a fortuitous event, who bears loss prior to
delivery, the seller or the buyer?
Held: In this case, the seller bears the loss because what was delivered was not
a specific thing, but a generic thing. And genus never perishers. Incidentally,
the sale here cannot be said to have been already perfected because of the lack
of physical segregation from the rest of the sugar.
ARTICLE 1166.
“The obligation to give a determinate thing includes that of delivery of all its
accessions and accessories, even though they may not have been mentioned.
(1097a)”
“Kasama sa obligasyon na magbigay ng determinadong bagay ang pagbibigay
ng lahat ng accessions at accessories nito kahit na hindi sila nabanggit.”
Discussion:
 Accession – includes everything produced by a thing, as well as all
incorporated or attached with it, may it be natural or artificial
 Accession discreta – right to the fruits
 Accession continua – includes both accession natural (i.e. alluvial deposits)
and accession industrial (i.e. those built, planted or sowed on the land of the
landowner)
 Accessories – includes things that are united or attached as ornaments to the
principal thing, for the latter’s use or perfection (i.e. spare tire of a car,
television antennas, cellphone chargers, moviehouse chairs, etc.)
Note: Although the delivery of determinate thing includes all its accessions and
accessories, the parties in the contract may stipulate that certain accessions or
accessories may not be included in the delivery. Both parties have the freedom
to stipulate such things.
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)”
“Kapag ang tao ay obligado na gumawa ng isang bagay ngunit hindi nya ito
nagawa, ito ay maipapataw sa kanya.
Itong panuntunan na ito ay dapat obserbahan kapag ito ay ginawa nya na kontra
sa tenor ng obligasyon. Ito ay masasaad na kung ano ang napabayaang gawin ay
hindi na dapat gawin.”
*Coverage of Article
1. the obligor failed to fulfill a positive personal obligation, that is, “to do”
something;
2. he fulfilled the obligation but in contravention of the agreement; and
3. there was fulfillment but the same is poor or inadequate.
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.”
“Kapag ang obligasyon ay obligasyong hindi gawin ang isang bagay, at ginawa
ng may obligasyon ang ipinagbabawal, ito ay kailangang ipasawalang bisa ng
gumawa gamit ang sariling gastos.”
Discussion:
This article pertains to negative personal obligation, or the obligation not to do.
In addition to the obligation of the obligor to undo the forbidden act of thing, he
may also be made liable for damages caused by doing that which was
forbidden.
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 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. (1100a)
Ang mga obligadong mag hatid o magsagawa ng isang bagay ay mababalam
mula sa oras na ang obligee ay judicially o extra judicially na hiningi na
maisagawa o maihatid ang bagay na ito.
Ngunit, ang paghingi o pag demand ng obligee o ng nagpautang ay hindi
kinakailangan upang masabi na mayroon nang balam sa mga sitwasyon na ito:
(1) Kapag nakasaad ito sa obligasyon o sa batas.
(2) Kapag ayon sa kallikasan ng obligasyon na ang pag tatakda ng oras ay ang
nag cocontrol na motibo ng pagtatala ng kontrata.
(3) Kapag ang demand o paghingi ay walang bisa. Katulad ng pagkakataon na
naisakatuparan na ng obligor ang bagay na ito ng higit pa sa kakayahan nyang
maikumpleto o maisakatuparan ito.
Sa reciprocal obligations, wala sa sino mang piging ay mababalam kung ang isa
ay hindi isasakatuparan o hindi handa na isagawa ang bagay na ito sa tamang
paraan. Kapag nagawa na ng isang piging ang kanyang obligasyon, ang balam
ng isa ay magsisimula.
The delay contemplated in the article is legal delay or default and not ordinary
delay. To put an obligor in default (or mora), there must be demand made upon
him for the performance of the obligation either judicially or extrajudicially.
Demand is not necessary to place the obligor in default under the following
circumstances:
1. When the law or obligation expressly declares;
2. When from the nature of the contract, it appears that the time is of the
essence and this is the motivating factor in the establishment of the contract;
3. When demand would be useless;
4. When the debtor admits, he is in default.
Classes of Default
1. Mora solvendi – the default on the part of the debtor/obligor;
2. Mora accipiendi – the default on the part of the creditor/obligee;
3. Compensatio morae – the default on the part of both the debtor/obligor and
creditor/obligee which arises in reciprocal obligations the effect is the default of
one party neutralizes the default of the other.
ARTICLE 1170.
“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. (1101)”
“Ang mga nagsasagawa ng kanilang obligasyon na may kasalanan ng fraud,
nagligence, o delay o balam at sa mga nagsasagawa ng kanilang obligasyon na
hindi ayon sa napagkasunduan ay mananagot sa mga danyos.”
Discussion
 Fraud – A false representation of a matter of fact —whether by words or by
conduct, by false or misleading allegations, or by concealment of what should
have been disclosed—that deceives and is intended to deceive another so that
the individual will act upon it to her or his legal injury.
 Negligence – Conduct that falls below the standards of behavior established
by law for the protection of others against unreasonable risk of harm. A person
has acted negligently if he or she has departed from the conduct expected of a
reasonably prudent person acting under similar circumstances.
ARTICLE 1171.
“Responsibility arising from fraud is demandable in all obligations. Any waiver
of an action for future fraud is void.”
“Ang mga responsibilidad mula sa pandaraya ay maaaring hingin sa lahat ng
obligasyon. Kahit anong pagtalikdan sa aksyon sa pandaraya sa hinaharap ay
walang bisa.”
ARTICLE 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 circumstances. (1103)”
“Ang responsibilidad na sanhi ng kapabayaan ng pag gawa ng bawat obligasyon
ay demandable, subalit ang nasabing pananagutan ay regulated ng hukuman na
aayon sa pagkakataon.”
ARTICLE 1173.
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 person, 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.
Ang kasalanan o kapabayaan ng obligor ay binubuo sa pagkukulang ng na sipag
na kung saan ay kinakailangan sa pamamagitan ng likas na katangian ng
obligasyon at tumutugma sa mga pangyayari ng mga tao, ng oras at ng lugar.
Kapag kapabayaan ay nagpapakita masamang hangarin, ang mga probisyon ng
Artikulo 1171 at 2201, talata 2, ay dapat mag-apply.
Kung ang batas o kontrata ay hindi ipinapahayag na kung saan ay na-
obserbahan sa pagganap, na kung saan ay inaasahan ng isang mahusay na ama
ng isang pamilya ay dapat atasan.
Far East Bank and Trust Co. v. Estrella O. Querimit
Facts: Respondents filed a complaint against petitioner bank and certain
officials of the latter, alleging that the they refused to allow her to withdraw her
time deposit evidenced by four certificates of deposit in the total amount of
$60,000. The trial court ordered petitioner-bank and its officials to allow
respondent to withdraw her time deposit plus accrued interests. The Court of
Appeals (CA) affirmed the decision of the trial court with the modification that
petitioner-bank was solely liable because the latter has a personality separate
from its officers and stockholders. On appeal, the Supreme Court affirmed the
CA.
Held: Petitioner-bank failed to prove that it had already made payment
considering that the subject certificates of deposit were still in the possession of
the depositors. The principle that payment, in order to discharge a debt, must be
made to someone authorized to receive it is applicable to the payment of
certificates of deposit. Petitioner should, thus, not have paid respondent’s
husband or any third party the amount of the time deposit without requiring the
surrender of the certificates of deposit. Laches would also not defeat
respondent’s claim as she did not withdraw her deposit because she relied on
petitioner bank’s assurance that the interest would accumulate annually even
after maturity of the time deposit and she set aside the money therein for the
retirement.
ARTICLE 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. (1105a)
Maliban sa mga kasong nasasaad sa batas, o ayon sa mga napagusapan, o kung
ang kalikasan ng pananagutan ay nangangailangan ng nakikinitang panganib,
walang sinumang tao ang may pananagutan ukol sa mga pangyayaring hindi
inaasahan o kung ito man ay inaasahan ay hindi mapipigilan o maiiwasan.
Discussion:
This article is a continuance to ART. 1173. ART. 1174 explains a fortuitous
event that may have arisen during the event of doing the obligation. It is an
event which cannot be foreseen such as sudden coming of a storm which
considered an Acts of God or known as majeure or any other unexpected event
such as robbery, insurrection which is considered Acts of man.
The Philippine Civil Code distinguishes between two kinds of fortuitous
events namely:
1. Ordinary fortuitous events or those which are common and which the
contracting parties could reasonably foresee e.g. rain.
2. Extra-ordinary fortuitous events which are uncommon and which the
contracting parties could not have reasonably foreseen e.g. earthquake, fire,
unusual flood.
To be declared that such circumstances are fortuitous events the following
must be considered:
1. The event must be independent of the human will or the debtor
2. The event could not be foreseen, or if foreseen, is inevitable
3. The event must be of such a character as to render it impossible for the debtor
to comply with his obligation in a normal manner
4. The debtor must be free from any participation in, or the aggravation of, the
injury to the creditor, that is, there is no concurrent negligence on his part.
In case of fortuitous event there are still rules to be observed: When expressly
specified by law.: a) the debtor is guilty of fraud, negligence, or delay, or
contravention of the tenor of the obligation. (Arts. 1170. 1165, par.3)
Example: S is obliged to deliver a specific horse to B on August 10. S did not
deliver the horse on said date. If, on August 11, the horse died because it
was hit by lightning, S is not liable if no demand was made by B. His obligation
was extinguished. If the horse died after a demand was made by B, S is liable
for damages because he is guilty of (legal) delay. In this case the obligation of S
to deliver the horse is also extinguished but it is converted into monetary
obligation to pay damages. (Art.1165). b) the debtor has promised to deliver the
same (specific)thing to two or more persons who do not have the same interest.
Example: If S sold and promised to deliver.
ARTICLE 1175.
Usurious transactions shall be governed by special laws.
Ang mga usurious transactions ay papamamahalaan ng mga special laws.
Discussion:
What is Usury?
Usury, as defined in Black’s Law Dictionary, is the charging of exorbitant and
unconscionable rate of interest, higher than the interest allowed by law. In
layman’s term, it means loan sharking.
Special Laws Regulating Usury:
Central Bank Circular No. 905 which took effect on January 1, 1983 made the
Usury Law legally non-existent, as declared in the case of Liam Law vs
Olympic Sawmill Co. 129 SCRA 439 (1984). An excerpt from the case goes:
The special laws that used to govern usury are:
1. Act No. 2655 as amended by Act No. 3998
2. Commonwealth Act No. 399
3. Republic Act No. 337 and
4. Presidential Decree No. 116, 858 and 1684
Rules governing interest rates in relation to usurious transactions:
1. CBC No. 905 does not repeal the Usury Law. Only a law can repeal a law.
The circular merely suspended the law’s effectivity.
2. While the Usury Law ceiling on interest rates was lifted by the CB Circular
905, nothing in the said circular could possibly be read as granting carte
blanche authority to lenders to raise interest rates to levels which would either
enslave their borrowers or lead to a hemorrhaging of their assets (Almeda vs.
CA, 256 SCRA 292 [1996]).
3. Increase of interest rate unilaterally without the consent of the debtor is
illegal for it violates the principle of mutuality of contracts.
4. The determination of the illegality of a stipulated interest rate depends on the
circumstances of the case.
5. Jurisprudence shows that an interest rate of 12% to 25% per annum is
considered legal.
ARTICLE 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.
The receipt of a later installment of a debt without reservation as to prior
installments, shall likewise raise the presumption that such installments have
been paid. (1110a)
Ang pagtanggap ng prinsipal ng pinagkautangan nang walang reserbasyon sa
interest ay magbibigay ng pag-aakala na na ang nabanggit na interes ay bayad
na.
Ang pagtanggap ng pabaha-bahagyang kabayaran nang walang reserbasyon sa
naunang installment ay magbibigay rin ng pag-aakala na ang installment ay
bayad na.
Discussion:
A receipt issued by the lessor dated June 1, 1904 to the lessee covering the rent
for the month, shows that the rent for the prior month (May) had already been
paid. The presumption is rebuttal and not conclusive.
ARTICLE 1177.
The creditors, after having pursued the property in possession of the debtor to
satisfy their claims, may exercise all the rights and bring all the actions of the
latter for the same purpose, save those which are inherent in his person; they
may also impugn the acts which the debtor may have done to defraud them.
(1111)
Ang mga pinagkakautangan, pagkatapos ipaglaban ang kanyang pagmamay-ari
na nasa may utang upang ma-satisfy ang claims nito ay maaaring gamitin ang
kanyang karapatan na dalhin lahat ng aksyon ng may utang para sa katulad na
layunin, maliban na lamang sa mga likas na karapatan sa isang tao; maaari rin
nilang ikondena ang mga aksyon na ginawa ng may utang upang lokohin sila.
Discussion:
 Accion subrogatoria is an action where the creditor hose claims had not been
fully satisfied, may go after the debtors (third persons) of the defendant-debtor.
 Accion pauliana is an action where the creditor files an action in court for the
rescission of acts or contracts entered into by the debtor designed to defraud the
former.

ARTICLE 1178.
Subject to the laws, all rights acquired in virtue of an obligation are
transmissible, if there has been no stipulation to the contrary. (1112)
Naaayon sa batas, lahat ng karapatang nakamtan sa pamamagitan ng isang
obligasyon ang maaaring ilipat, kung walang nakasaad na taliwas dito.
Discussion:
Rights that do not fall under the exceptions are considered assignable or
alienable, but as a general rule, rights are transmissible except for the following:
a.) those not transmissible by their nature like purely personal rights;
b.) those not transmissible by provision of law.
Before you agree to sign a contract, you have to make sure that you can fulfill or perform the
obligations. Many individuals have found themselves breaching a contract because of not
thoroughly reading the terms and conditions. It is important to remember that the obligations
bind two or more parties. There are two kinds of obligations: pure and conditional.  What is
the difference between these two obligations?

CHAPTER III
DIFFERENT KINDS OF OBLIGATIONS
SECTION 1. - Pure and Conditional Obligations
Art. 1179. Every obligation whose performance does not depend upon a future
or uncertain event, or upon a past event unknown to the parties, is demandable
at once.
Every obligation which contains a resolutory condition shall also be
demandable, without prejudice to the effects of the happening of the event.
(1113)
Art. 1180. When the debtor binds himself to pay when his means permit him to
do so, the obligation shall be deemed to be one with a period, subject to the
provisions of Article 1197. (n)
Art. 1181. In conditional obligations, the acquisition of rights, as well as the
extinguishment or loss of those already acquired, shall depend upon the
happening of the event which constitutes the condition. (1114)
Art. 1182. When the fulfillment of the condition depends upon the sole will of
the debtor, the conditional obligation shall be void. If it depends upon chance or
upon the will of a third person, the obligation shall take effect in conformity
with the provisions of this Code. (1115)
Art. 1183. Impossible conditions, those contrary to good customs or public
policy and those prohibited by law shall annul the obligation which depends
upon them. If the obligation is divisible, that part thereof which is not affected
by the impossible or unlawful condition shall be valid.
The condition not to do an impossible thing shall be considered as not having
been agreed upon. (1116a)
Art. 1184. The condition that some event happen at a determinate time shall
extinguish the obligation as soon as the time expires or if it has become
indubitable that the event will not take place. (1117)
Art. 1185. The condition that some event will not happen at a determinate time
shall render the obligation effective from the moment the time indicated has
elapsed, or if it has become evident that the event cannot occur.
If no time has been fixed, the condition shall be deemed fulfilled at such time as
may have probably been contemplated, bearing in mind the nature of the
obligation. (1118)
Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily
prevents its fulfillment. (1119)
Art. 1187. The effects of a conditional obligation to give, once the condition
has been fulfilled, shall retroact to the day of the constitution of the obligation.
Nevertheless, when the obligation imposes reciprocal prestations upon the
parties, the fruits and interests during the pendency of the condition shall be
deemed to have been mutually compensated. If the obligation is unilateral, the
debtor shall appropriate the fruits and interests received, unless from the nature
and circumstances of the obligation it should be inferred that the intention of the
person constituting the same was different.
In obligations to do and not to do, the courts shall determine, in each case, the
retroactive effect of the condition that has been complied with. (1120)
Art. 1188. The creditor may, before the fulfillment of the condition, bring the
appropriate actions for the preservation of his right.
The debtor may recover what during the same time he has paid by mistake in
case of a suspensive condition. (1121a)
Art. 1189. When the conditions have been imposed with the intention of
suspending the efficacy of an obligation to give, the following rules shall be
observed in case of the improvement, loss or deterioration of the thing during
the pendency of the condition:
(1) If the thing is lost without the fault of the debtor, the obligation shall be
extinguished;
(2) If the thing is lost through the fault of the debtor, he shall be obliged to pay
damages; it is understood that the thing is lost when it perishes, or goes out of
commerce, or disappears in such a way that its existence is unknown or it
cannot be recovered;
(3) When the thing deteriorates without the fault of the debtor, the impairment
is to be borne by the creditor;
(4) If it deteriorates through the fault of the debtor, the creditor may choose
between the rescission of the obligation and its fulfillment, with indemnity for
damages in either case;
(5) If the thing is improved by its nature, or by time, the improvement shall
inure to the benefit of the creditor;
(6) If it is improved at the expense of the debtor, he shall have no other right
than that granted to the usufructuary. (1122)
Art. 1190. When the conditions have for their purpose the extinguishment of an
obligation to give, the parties, upon the fulfillment of said conditions, shall
return to each other what they have received.
In case of the loss, deterioration or improvement of the thing, the provisions
which, with respect to the debtor, are laid down in the preceding article shall be
applied to the party who is bound to return.
As for the obligations to do and not to do, the provisions of the second
paragraph of Article 1187 shall be observed as regards the effect of the
extinguishment of the obligation. (1123)
Art. 1191. The power to rescind obligations is implied in reciprocal ones, in
case one of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek
rescission, even after he has chosen fulfillment, if the latter should become
impossible.
The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who
have acquired the thing, in accordance with Articles 1385 and 1388 and the
Mortgage Law. (1124)
Art. 1192. In case both parties have committed a breach of the obligation, the
liability of the first infractor shall be equitably tempered by the courts. If it
cannot be determined which of the parties first violated the contract, the same
shall be deemed extinguished, and each shall bear his own damages. (n)