Lesson Title: OBLIGATIONS AND CONTRACTS

“An Extract from the New Civil Code”

TITLE I-OBLIGATIONS

Chapter 1: GENERAL PROVISIONS

Article 1156. An obligation is a juridical necessity to give, to do or not to do.

Article 1157. Obligations arise from:
 Law;
 Contracts;
 Quasi-contracts;
 Acts or omissions punished by law;
 Quasi-delicts. (1089a)

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. (1090)
Article 1159. Obligations arising from contracts have the force of law between the contracting
parties and should be complied with in good faith. (1091a)
Article 1160. Obligations derived from quasi- contracts shall be subject to provisions.
Article 1161. Civil obligations arising from criminal offenses shall be governed by the penal
laws, subject to the provisions of article 2177, and of the pertinent provisions of Chapter 2,
Preliminary Title, on Human Relations, and of regulating damages. (1092a)
Article 1162. Obligations derived from quasi-delicts shall be governed by the provisions of
Chapter 2, Title XVIII of this Book, and by special law. (1093a)

Chapter 2: NATURE AND EFFECT OF OBLIGATIONS

 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. (1904a)
 Article 1664. 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. (1905)
Article 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the
right, granted him by article 1170, and 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.
- I 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 deliver. (1906)
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. (1097a)
Article 1167. If a person obliged to do something fails to do it, the same shall be executed at his
cost.
Article 1168. When the obligation consists in not doing, and the obligor does has been forbidden
him, it shall also be undone at his expense, (1099a)
Article 1169. Those oblige to deliver or to do something incur in delay from the time oblige
judicially or extra – judicially demands from theme 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 declares; or
(2) When from the nature and the circumstances of the obligation it appears that the
destination of the time when the thing is to be delivered or the service is to rendered was
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 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)
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)
Article 1171. Responsibility arising from fraud is demandable in all obligations. Any waiver of
an action for future fraud is void. (1120a)
Article 1172. Responsibility arising from negligence in the performance of every king of
obligation is also demandable, but such liability maybe regulated by the courts, according to the
circumstances. (1130)
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
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 of which is to be observed in the performance,
that which is expected of a good father of a family shall be required. (1104a)
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)
Article 1175. Usurious transaction shall be governed by special laws.
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)
- Presumption means “the inference as to the existence of a certain fact which if not contradicted
is considered as true.”
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)
Rights of Creditors
 In order to satisfy their claims against the debtor, creditors have the following
successive rights:
1. To levy by attachment and execution upon all the property of the debtor, except such as
are exempt by law from execution;
2. To exercise all the rights and actions of the debtor, except, such as are inherently personal
to him;
3. To ask for the rescission of the contracts made by the debtor in fraud of their rights.
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)
As a rule, all rights acquired in virtue of an obligation are transmissible, except in the
following cases:
1. When the law so provides.
2. When the parties stipulate otherwise
3. When the obligation is purely personal in nature.
TITLE II: CONTRACTS

Chapter 1: GENERAL PROVISIONS

Article 1305. A contract is a meeting of minds between two persons whereby one binds himself,
with respect to the other, to give something or to render service. (1254a)
Elements of Contract:
1. Essential element
2. Natural elements
3. Accidental elements
Stages of a Contract
1. Preparatory or conception
2. Perfection or birth
3. Consumption or death
Characteristics of Contract
1. Freedom to contract
2. Relativity
3. Obligatory Force
4. Mutuality
Classification of a Contract:
1. As to perfection
a. Consensual
b. Real Contract

2. As to dependence to other contract.

a. Principal
b. Accessory
c. Preparatory
3. According to name or designation
a. Nominate
b. Innominate
c.
4. According to the nature of obligation
d. Unilateral
e. Bilateral
 5. According to risk involved
a. Commutative
b. Aleatory -

6. According to cause
a. Onerous
b. Gratuitous
c.
7. According to form
a. Oral
b. Written
Article 1306. The contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy.(1255a)
Article 1307. Innominate contracts shall be regulated by the stipulations of the parties, by the
provisions of Contracts, by the rules governing the most analogous nominate contracts, and by
the customs of the place.
Article 1308. The contract must bind both contracting parties; its validity or compliance cannot
be left to the will of one of them. (1256a)
Article 1309. The determination of the performance may be left to a third person, whose
decision shall not be binding until it has been made known to both contracting parties.
Article 1310. The determination shall not be obligatory if it is evidently inequitable. In such
case, the courts shall decide what is equitable under the circumstances.
Article 1311. Contracts take effect only between the parties, their assigns and heirs, except in
case where the rights and obligations arising from the contract are not transmissible by their
nature, or by stipulation, or by provision of law. The heir is not liable beyond the value of the
property he perceived from the decedent.
- If a contact should contain some stipulation in favor of third person, he may demand its
fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere
incidental. Benefit or interest of a person is not sufficient. The contracting parties must have
clearly and. deliberately conferred a favor upon a third person. (1257a)
Article 1312. In contracts creating real rights, third persons who come into possession of the
object of the contract are bound thereby, subject to the provisions of the Mortgage Law and the
Land Registration Laws.
Article 1313. Creditors are protected in cases of contracts intended to defraud them.
Article 1314. Any third person who induces another to violate his contract shall be liable for
damages to the other contracting party.
Article 1317. No one may contract in the name of another without being authorized by the latter,
or unless he has by law a right to represent him.
- A contract entered into in the name of another by one who has no authority or legal
representation, or who has acted beyond his powers, shall be unenforceable, unless it is ratified,
expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked
by the other contracting party. (1259a)

CHAPTER 2: ESSENTIAL REQUISITES OF CONTRACT

GENERAL PROVISIONS

Article 1318. There is no contract unless the following requisites occur:

1. Consent of the contracting parties;
2. Object certain which is the subject matter of the contract;
3. Cause of the obligation which is established. (1261)
Section 1. Consent
Article 1319. Consent is manifested by the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a counter-offer.
- Acceptance made by letter or telegram does not bind the offered except from the time it came to
his knowledge. The contract in such a case, is presumed to have been entered into the place
where the offer was made. (1262a)
Article 1320. An acceptance may be express or implied.
Article 1321. The person making the offer may fix the time, place, and manner of acceptance, all
of which must be complied with.
Article 1322. An offer made through an agent is accepted from the time acceptance is
communicated to him.
Article 1323. An offer becomes ineffective upon the death, civil interdiction, insanity, or
insolvency of either party before acceptance is conveyed.
Article 1324. When the offered has allowed the offered ascertain period to accept, the offer may
be withdrawn at any time before acceptance by communicating such withdrawal, except when
the option is rounded upon a consideration, as something paid or promised.
Article1325. Unless it appears otherwise, business advertisements of things for sale are not
definite offers, but mere invitations to make an offer.
Article 1326. Advertisement for bidders are simply invitations to make proposals, and the
advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears.
Article 1327. The following cannot give consent to a contract:
1.) Emancipated minors;
2.) Insane or demented persons, and deaf-mutes who do not know how to
write. (1263a)
Article 1328. Contracts entered into during a lucid interval are valid, contracts agreed to in a
state of drunkenness or during a hypnotic spell are voidable.
Article 1329. The incapacity declared in article 1327 is subject to the modifications determined
by law, and is understood to be without prejudice to special disqualifications established in the
laws.
Article 1330. A contract where consent is given through mistake, violence, intimidation, undue
influence or fraud is voidable.
Article 1331. In order that mistake may invalidate consent, it should refer to the substance of the
thing. Which is the object of the contract, or to those conditions which have principally moved
one or both parties to enter into the contract.
- Mistake as to the identity or qualifications of one of the parties will vitiate consent only when
such identity or qualifications have been the principal cause of contract.
- A simple mistake of account shall give rise to its correction. (1226a)
Article 1332. When one of the parties is unable to read, or if the contract is in a language not
understood by him, and mistake or fraud is alleged, the person enforcing the contract must show
that the terms thereof have been fully explained to the former.
Article 1333. There is no mistake if the party alleging it know the doubt, contingency, or risk
affecting the object of the contract.
Article 1334. Mutual error as to the legal effect of an agreement when the real purpose of the
parties is frustrated may vitiate consent.
Article 1335. There is violence when in order to wrest consent, serious or irresistible force is
employed.
- There is intimidation when one of the contracting parties is compelled by a reasonable and
well- grounded fear of an imminent and grave peril upon his person or property, or upon the
person or property of his spouse, descendants or ascendants, to give his consent.
- To determine the degree of the intimidation, the age, sex and condition of the person shall be
borne in mind.
- A threat to enforce one’s claim through competent authority, if the claim is just or legal, does
not vitiate consent. (1267a)
Article 1336. Violence or intimidation shall annul the obligation, although it may have been
employed by third Person who did not take part in the contract. (1268)
Article 1337. There is undue influence when a person takes improper advantage of his power
over the will of another, depriving the latter of a reasonable freedom of choice.
- The following circumstances shall be considered: the confidential, family, spiritual, and other
relations between the parties, or the fact that the person alleged to have been unduly influenced
was suffering from mental weakness, or was ignorant or in financial distress.
Article 1338. There is fraud when, through insidious words or machinations of one of the
contracting parties, the other is induced to enter into contract which, without them, he would not
have agreed to. (1269)
Article 1339. Failure to disclose facts, when there is a duty to reveal them, as when the
parties are bound by confidential relations, constitutes fraud.
Article 1340. The usual exaggerations in trade, when the other party had an opportunity
to know the facts, are not in themselves fraudulent.
Article 1341. A mere expression of an opinion does not signify fraud, unless made by
an expert and the other party has relied on the former’s special knowledge.
Article 1342. Misrepresentation by a third person does novitiate consent, unless such
misrepresentation has created substantial mistake and the same is mutual Art. 1343.
Misrepresentation made in good faith is not fraudulent but may constitute error.
Article 1344. In order that fraud may make a contract voidable, it should be serious and
should not have been employed by both contracting parties.
- Incidental fraud only obliges the person employing it to pay damages.
Article 1335. Simulation of a contract may be absolute or relative. The former takes place when
the parties do not intend to be bound at all; the latter, when the parties conceal their true
agreement.
Article 1346. An absolutely simulated or fictitious contracts void. A relative simulation, when it
does not prejudice third person and is not intended for any purpose contrary to law, morals, good
customs, public order or public policy binds the parties to their real agreement.
Section 2. Object of Contracts
Article 1347. All things which are not outside the commerce of men, including future things,
may be the object of contract. All rights which are not in transmissible may also be the object of
contracts.
- No contract may be entered into upon future inheritance except in cases expressly authorized
by law.
- All services which are not contrary to law, morals, good customs, public order or public policy
may likewise be the object of a contract. (1271a)
Article 1348. Impossible things or services cannot be the object of contracts. (1272) Art. 1349.
The object of every contract must be determinate so as to its kind. The fact that the quantity is
not determinate shall not be an obstacle to the existence of a contract, provided it is possible to
determine the same, without the need of a new contract between the parties. (1273)
Section 3. Cause of Contracts
Article 1350. In onerous contracts the cause is understood to be, for each contracting party, the
prostration or promise of a thing or service by the other; in remunerator ones, the service or
benefit which is remunerated; and in contrast of pure beneficence, the mere liberality of the
benefactor.(1274)
Article 1351. The particular motives of the parties in entering into a contract are different from
the cause thereof.
Article 1352. Contracts without cause, or with unlawful cause, produce no effect whatever. The
cause is unlawful if is contrary to law, morals, good customs, public order or public policy.
(1275a)
Article 1353. The statement of a false cause in contracts shall render them void, if it should not
be proved that they were rounded upon another cause which is true and lawful.
Article 1354. Although the cause is not stated in the contract, it is presumed that it exist and is
lawful, unless the debtor proves the contrary. (1277)
Article 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate
a contract, unless there has been fraud, mistake or undue influence.

References:
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