CE LAW, ETHICS, AND

CONTRACTS
CE 14

AJDM
 Nature and Effect of Obligations
Article 1170

• Those who in the perform nce of their oblig tions re guilty of fr ud, negligence, or del y,
nd those who in ny m nner contr vene the tenor thereof, re li ble for d m ges.
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 Nature and Effect of Obligations
Article 1170

• It contempl tes th t the oblig tion w s eventu lly performed but the obligor is guilty of
bre ch thereof. Here, the bre ch of the oblig tion is volunt ry.

• (1) Fr ud (deceit or dolo). — As used in Article 1170, it is the deliber te or intention l ev sion of
the norm l ful illment of n oblig tion.

• ( ) As ground for d m ges, it implies some kind of m lice or dishonesty nd it c nnot

cover c ses of mist ke nd errors of judgment m de in good f ith. It is synonymous to b d
f ith in th t it involves design to misle d or deceive nother.
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Nature and Effect of Obligations
Article 1170

• (b) Article 1170 refers to incident l fr ud (dolo incidente) committed in the perform nce of n
oblig tion lre dy existing bec use of contr ct.

• (c) Under Article 1170, the fr ud is employed for the purpose of ev ding the norm l ful illment
of n oblig tion nd its existence merely results in bre ch thereof giving rise to right by the
innocent p rty to recover d m ges. The Civil Code refers to civil fr ud. Crimin l fr ud gives
rise to crimin l li bility.
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 Nature and Effect of Obligations
Article 1170

• EXAMPLE:

• S obliged himself to deliver to B 20 bottles of wine, of p rticul r br nd. S delivered 20

bottles knowing th t they cont in che per wine. S is guilty of fr ud nd is li ble for d m ges
to B.

• If B bought the 20 bottles of wine on the f lse represent tion of S th t the wine is th t s
represented by the l bels, the fr ud committed by S is c us l fr ud. Without the fr ud, B
would not h ve given his consent to the contr ct. He h s the right to h ve the contr ct
nnulled or set side on the ground of the fr ud. (Arts. 1390, 1391.)
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 Nature and Effect of Obligations
Article 1170

• EXAMPLE:

• In the irst situ tion, the remedy of B is not nnulment of the contr ct of s le which is not
ected by the incident l fr ud but to cl im d m ges. If the fr ud employed by S to get B’s
consent w s not the princip l inducement th t led B to enter into the contr ct, the fr ud is
lso incident l under Article 1344 nd it will likewise give rise only to n ction for d m ges.
(see Art. 1344, p r. 2.)
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 Nature and Effect of Obligations
Article 1170

• ILLUSTRATIVE CASE:

• Li bility of p rty uthorized by nother to exercise discretion, for honest mist kes or errors
of judgment.

• F cts: C, contr ctor, brought ction to recover the ctu l costs of the construction of the
building of B, plus 12-1/2% for nd on ccount of his services nd superintendence of the
building, s per contr ct. B lleged th t through C’s negligence in the construction of the
building nd the purch se of m teri ls, B su ered d m ges.

• B’s countercl ims re founded upon C’s mist kes nd errors of judgment in the employment
of l bor nd the purch se of m teri ls.
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Nature and Effect of Obligations
Article 1170

• Issue: Assuming th t there were such mist kes or errors of judgment, would C be li ble for
them under the contr ct?

• Held: No. The f ct th t the price of lumber or of l bor went up or down, or w s che per t
cert in time, would not m ke C li ble for bre ch of contr ct, so long s he w s exercising
his best judgment nd cting in good f ith. Under the contr ct, the m teri ls were to be
purch sed by C “in such qu ntities nd t such times s m y ppe r to be to your [B’s]
interest.” This vested in C discretion ry power s to the time nd m nner for the purch se
of m teri ls.
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Nature and Effect of Obligations
Article 1170

• (2) Negligence (f ult or culp ). — It is ny volunt ry ct or omission, there being no m lice,

which prevents the norm l ful illment of n oblig tion. (see Arts. 1173, 1174.)
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• (3) Del y (mor ). — This h s lre dy been discussed under Article 1169 which determines the
commencement of del y. It h s been ruled th t the del y in the perform nce of the
oblig tion under Article 1170 must be either m licious or negligent. Thus, where the omission
of the buyer to sign check, one of 24 post d ted checks which were delivered to the seller
who did not bother to c ll the buyer to sk him to sign the check, w s mere “in dvertence’’
on the p rt of the buyer, the l tter w s held not li ble for d m ges resulting from the del y
in the p yment of the v lue of the unsigned check.
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Nature and Effect of Obligations
Article 1170

• (4) Contr vention of the terms of the oblig tion. — This is the viol tion of the terms nd
conditions stipul ted in the oblig tion. The contr vention must not be due to fortuitous
event or force m jeure. (Art. 1174.) The unil ter l ct of termin ting contr ct without leg l
justi ic tion by p rty m kes him li ble for d m ges su ered by the other pursu nt to
Article 1170.
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 Nature and Effect of Obligations
Article 1170

• Fr ud nd negligence distinguished.

• Fr ud m y be distinguished from negligence s follows:

• (1) In fr ud, there is deliber te intention to c use d m ge or injury, while in negligence, there
is no such intention;

• (2) W iver of the li bility for future fr ud is void (Art. 1171.), while such w iver m y, in cert in
sense, be llowed in negligence;
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 Nature and Effect of Obligations
Article 1170

• Fr ud nd negligence distinguished.

• (3) Fr ud must be cle rly proved, mere preponder nce of evidence not being su icient, while
negligence is presumed from the bre ch of contr ctu l oblig tion; nd

• (4) L stly, li bility for fr ud c nnot be mitig ted by the courts, while li bility for negligence
m y be reduced ccording to the circumst nces. (Art. 1173.)
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 Nature and Effect of Obligations
Article 1170

• They re simil r in th t both re volunt ry, th t is, they re committed with volition but in
fr ud, p rty, by his volunt ry execution of wrongful ct, or willful omission, knows nd
intends the e ects which n tur lly nd necess rily rise from such ct or omission which
deliber te intent is l cking in negligence. It being st te of the mind, fr ud m y be inferred
from the circumst nces of the c se.
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 Nature and Effect of Obligations
Article 1170

• When negligence is equiv lent to fr ud.

• Where the negligence shows b d f ith or is so gross th t it mounts to m lice or w nton

ttitude on the p rt of the defend nt, the rules on fr ud sh ll pply. (see Art. 1173.) In such
c se, no more distinction exists between the two t le st s to e ects.

• Gross negligence is negligence ch r cterized by w nt or bsence of or f ilure to exercise

even slight c re or diligence, or the entire bsence of c re, cting or omitting to ct on
situ tion where there is duty to ct, not in dvertently but willfully nd intention lly.
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Nature and Effect of Obligations
Article 1171

• It evinces thoughtless disreg rd of or conscious indi erences to consequences insof r s

other persons m y be ected, without exerting ny e ort to void them.

• Responsibility rising from fr ud is dem nd ble in ll oblig tions. Any w iver of n ction for
future fr ud is void. (1102 )
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 Nature and Effect of Obligations
Article 1171

• Responsibility rising from fr ud c n be dem nded with respect to ll kinds of oblig tion
nd unlike in the c se of responsibility rising from negligence (Art. 1172.), the court is not
given the power to mitig te or reduce the d m ges to be w rded. This is so bec use fr ud
is deemed serious nd evil th t its employment to void the ful illment of one’s oblig tion
should be discour ged.
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 Nature and Effect of Obligations
Article 1171

• W iver of ction for future fr ud is void.

• According to the time of commission, fr ud m y be p st or future.

• A w iver of n ction for future fr ud is void (no e ect, s if there is no w iver) s being
g inst the l w nd public policy. (Art. 1409[1].) A contr ry rule would encour ge the
perpetr tion of fr ud bec use the obligor knows th t even if he should commit fr ud he
would not be li ble for it thus m king the oblig tion illusory.
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 Nature and Effect of Obligations
Article 1171

• W iver of ction for p st fr ud v lid.

• Wh t the l w prohibits is w iver nterior to the fr ud nd to the knowledge thereof by the

ggrieved p rty.

• A p st fr ud c n be the subject of v lid w iver bec use the w iver c n be considered s

n ct of generosity nd m gn nimity on the p rt of the p rty who is the victim of the fr ud.
Here, wh t is renounced is the e ects of the fr ud, th t is, the right to indemnity of the p rty
entitled thereto.
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Nature and Effect of Obligations
Article 1172

• Responsibility rising from negligence in the perform nce of every kind of oblig tion is lso
dem nd ble, but such li bility m y be regul ted by the courts, ccording to the
circumst nces.
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 Nature and Effect of Obligations
Article 1172

• Responsibility rising from negligence dem nd ble.

• (1) In the perform nce of every kind of oblig tion, the debtor is lso li ble for d m ges
resulting from his negligence or culp . The courts, however, re given wide discretion in
ixing the me sure of d m ges. The re son is bec use negligence is question which must
necess rily depend upon the circumst nces of e ch p rticul r c se. Moreover, negligence is
not s serious s fr ud bec use in the c se of the former, there is no b d f ith or deliber te
intention to c use injury or d m ges. The courts, however, m y incre se the d m ges.
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Nature and Effect of Obligations
Article 1172

• (2) When both p rties to tr ns ction re mutu lly negligent in the perform nce of their
oblig tions, the f ult of one c ncels the negligence of the other. Thus, their rights nd
oblig tions m y be determined equit bly under the l w prescribing unjust enrichment. No
one sh ll enrich himself t the expense of nother.
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 Nature and Effect of Obligations
Article 1172

• V lidity of w iver of ction rising from negligence.

• (1) An ction for future negligence (not fr ud) m y be renounced except where the n ture of
the oblig tion requires the exercise of extr ordin ry diligence s in the c se of common
c rriers. (see Art. 1733.)

• (2) Where negligence is gross or shows b d f ith, it is considered equiv lent to fr ud. B d
f ith does not simply connote negligence or b d judgment c using d m ges to nother.
Any w iver of n ction for future negligence of this kind is, therefore, void.
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 Nature and Effect of Obligations
Article 1172

• E ect of negligence on the p rt of the injured p rty.

• Suppose the creditor is lso guilty of negligence, c n he recover d m ges?

• Article 2179 of the Civil Code provides:

• “When the pl inti ’s own negligence w s the immedi te nd proxim te c use of his injury,
he c nnot recover d m ges. But if his negligence w s only contributory, the immedi te nd
proxim te c use of the injury being the defend nt’s l ck of due c re, the pl inti m y
recover d m ges, but the courts sh ll mitig te the d m ges to be w rded.” (see Arts. 2214,
2215. )
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 Nature and Effect of Obligations
Article 1172

• In other words, to be entitled to d m ges, the l w does not require th t the negligence of
the defend nt should be the sole c use of the d m ge.

• There is contributory negligence on the p rt of the injured p rty where his conduct h s
contributed, s leg l c use to the h rm he h s su ered, which f lls below the st nd rd to
which he is required to conform for his own protection.

• The defense of contributory negligence of the injured p rty does not pply in crimin l c ses
where the o ense w s committed by the ccused through reckless imprudence since one
c nnot llege the negligence of nother (e.g., dece sed w s driving with n expired license)
to ev de the e ects of his own negligence.
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Nature and Effect of Obligations
Article 1173

• The f ult or negligence of the obligor consists in the omission of th t diligence which is
required by the n ture of the oblig tion nd corresponds with the circumst nces of the
persons, of the time nd of the pl ce. When negligence shows b d f ith, the provisions of
Articles 1171 nd 2201, p r gr ph 2, sh ll pply.

• If the l w or contr ct does not st te the diligence which is to be observed in the

perform nce, th t which is expected of good f ther of f mily sh ll be required.
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 Nature and Effect of Obligations
Article 1173

• Me ning of f ult or negligence.

• (1) F ult or negligence is de ined by the bove provision. (p r. 1.)

• (2) According to our Supreme Court, “negligence is conduct th t cre tes undue risk or h rm
to nother. It is the f ilure to observe for the protection of the interests of nother person,
th t degree of c re, prec ution nd vigil nce which the circumst nces justly dem nd,
whereby such other person su ers injury.”
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 Nature and Effect of Obligations
Article 1173

• Test for determining whether person is negligent.

• (1) Re son ble c re nd c ution expected of n ordin ry prudent person. — “The test for
determining whether person is negligent in doing n ct whereby injury or d m ge results
to the person or property of nother is this: Would prudent m n, in the position of the
person to whom negligence is ttributed, foresee h rm to the person injured s re son ble
consequence of the course bout to the pursued? If so, the l w imposes the duty on the
ctor to refr in from th t course or to t ke prec ution g inst its mischievous results, nd
the f ilure two do so constitutes negligence. Re son ble foresight of h rm followed by the
ignoring of the dmonition born of this provision, is the constitutive f ct of negligence.”
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 Nature and Effect of Obligations
Article 1173

• Simply st ted: “Did the defend nt in doing the lleged negligent ct use the re son ble c re
nd c ution which n ordin ry prudent person would h ve used in the s me situ tion. If not,
then he is guilty of negligence.’’
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 Nature and Effect of Obligations
Article 1173

• (2) No h rd nd f st rule for me suring degree of c re. — By such test, it c n re dily be

seen th t there is no h rd nd f st rule whereby the degree of c re nd vigil nce required is
me sured. It is dependent upon the circumst nces in which person inds himself situ ted.
All th t the l w requires is th t it is lw ys incumbent upon person to use th t c re nd
diligence expected of prudent nd re son ble men under simil r circumst nces.

• In other words, the existence of negligence in given c se is not determined by reference to

the person l judgment of the ctor in the situ tion before him. It is the l w th t considers
wh t would be reckless or negligent in the m n of ordin ry intelligence nd determines
li bility by th t.
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 Nature and Effect of Obligations
Article 1173

• F ctors to be considered.

• Negligence is question of f ct, its existence being dependent upon the p rticul r
circumst nces of e ch c se. It is never presumed but must be proven by the p rty who
lleges it. In determining the issue of negligence where loss or d m ge occurs, the following
f ctors must be considered:

• (1) N ture of the oblig tion. — e.g., smoking while c rrying m teri ls known to be
in l mm ble constitutes negligence;

• (2) Circumst nces of the person. — e.g., gu rd, m n in the prime of life, robust nd
he lthy, sleeping while on duty is guilty of negligence;
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 Nature and Effect of Obligations
Article 1173

• F ctors to be considered.

• (3) Circumst nces of time. — e.g., driving c r without he dlights t night is gross
negligence but it does not by itself constitute negligence when driving during the d y; nd

• (4) Circumst nces of the pl ce. — e.g., driving t 60 kilometers per hour on the highw y is
permissible but driving t the s me r te of speed in Quezon Boulev rd, M nil , when tr ic
is lw ys he vy is gross recklessness.

• When the source of n oblig tion is derived from contr ct, the mere bre ch or non-
ful illment of the prest tion gives rise to the presumption of f ult on the p rt of the obligor.
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 Nature and Effect of Obligations
Article 1173

• ILLUSTRATIVE CASES:

• 1. Negligence in the c re of goods.

• F cts: S disch rged l rge shipment of pot toes belonging to B into lorch which w s
then left for two d ys in the sun tightly closed nd without ventil tion. As result, the
pot toes rotted nd bec me useless.

• Issue: Is S li ble for the loss?

• Held: Yes. S w s guilty of gross negligence with respect to the c re of the pot toes,
perish ble property.
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Nature and Effect of Obligations
Article 1173

• Kinds of diligence required.

• Diligence is “the ttention nd c re required of person in given situ tion nd is the

opposite of negligence.’’ Under Article 1173, the following kinds of diligence re required:

• (1) th t greed upon by the p rties, or lly or in writing;

• (2) in the bsence of stipul tion, th t required by l w in the p rticul r c se (like the
extr ordin ry diligence required of common c rriers); nd
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 Nature and Effect of Obligations
Article 1173

• (3) if both the contr ct nd l w re silent, then the diligence expected of good f ther of
f mily (p r. 2.) or ordin ry diligence.

• Whether or not the negligence of the obligor is excus ble will depend on the degree of
diligence required of him. Under No (3), for ex mple, the obligor is not li ble for d m ges
where his negligence is one which ordin ry diligence nd prudence could not h ve gu rded
g inst.
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 Nature and Effect of Obligations
Article 1174

• Except in c ses expressly speci ied by the l w, or when it is otherwise decl red by
stipul tion, or when the n ture of the oblig tion requires the ssumption of risk, no person
sh ll be responsible for those events which could not be fore- seen, or which, though
foreseen, were inevit ble.
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Nature and Effect of Obligations
Article 1174

• Me ning of fortuitous event.

• A fortuitous event is ny extr ordin ry event which c nnot be foreseen, or which, though
foreseen, is inevit ble. In other words, it is n event which is either impossible to foresee or
impossible to void.

• The essence of fortuitous event consists of being h ppening independent of the will of
the obligor nd which h ppening, m kes the norm l ful illment of the oblig tion impossible.
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Nature and Effect of Obligations
Article 1174

• Fortuitous event distinguished from force m jeure.

• (1) Acts of m n. — Strictly spe king, fortuitous event is n event independent of the will of the
obligor but not of other hum n wills, e.g., w r, ire, robbery, murder, insurrection, etc.

• (2) Acts of God. — They re those events which re tot lly independent of the will of every
hum n being, e.g., e rthqu ke, lood, r in, shipwreck, lightning, eruption of volc no, etc.
They re lso c lled force m jeure. The term gener lly pplies to n tur l ccident.

• In our l w, fortuitous events nd force m jeure re identic l in so f r s they exempt n

obligor from li bility. Both re independent of the will of the obligor.
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Nature and Effect of Obligations
Article 1174

• Requisites of fortuitous event.

• Whether n ct of m n or n ct of God, to constitute fortuitous event, it is essenti l th t:

• (1) The event must be independent of the hum n will or t le st of the obligor’s will;

• (2) The event could not be foreseen (unforesee ble), or if it could be foreseen, must h ve
been impossible to void (un void ble);

• (3) The event must be of such ch r cter s to render it impossible for the obligor to comply
with his oblig tion in norm l m nner; nd
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Nature and Effect of Obligations
Article 1174

• (4) The obligor must be free from ny p rticip tion in, or the ggr v tion of the injury to the
obligee.

• The bsence of ny of the bove requisites ( ll of which must be proved) would prevent the
obligor from being exempt from li bility.
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 Nature and Effect of Obligations
Article 1174

• ILLUSTRATIVE CASES:

• 1. Where the c r w s driven by n unlicensed ch u eur, the bre ch of the contr ct of

c rri ge c nnot be s id to be due to fortuitous event.

• F cts: X, eng ged in the business of c rrying p ssengers for hire, undertook to convey B nd
C from one point to nother in n utomobile. The utomobile w s oper ted by licensed
ch u eur who l ter llowed his ssist nt who h d no license but h d some experience in
driving, to drive the c r.

• Defects developed in the steering ge r nd fter zigz gging for dist nce, the c r left the
ro d nd went down deep emb nkment. B nd C su ered physic l injuries.
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 Nature and Effect of Obligations
Article 1174

• Issue: Is X li ble in d m ges?

• Held: Yes. X’s li bility is contr ctu l. By entering into the contr ct of c rri ge, X bound
himself to c rry B nd C s fely nd securely to their destin tion nd h ving f iled to do, he is
li ble in d m ges unless he shows th t the f ilure to ful ill his oblig tion w s due to c uses
mentioned in Article 1605. (now Art. 1174.) Upon the f cts st ted, the bre ch of the contr ct
w s not due to fortuitous events.
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 Nature and Effect of Obligations
Article 1174

• Rules s to li bility in c se of fortuitous event. A person is not, s rule, responsible for loss or
d m ge resulting from fortuitous events. In other words, his oblig tion is extinguished. The
exceptions re enumer ted below. (1) When expressly speci ied by l w. — In exceptions ( ), nd

• (c) below, the speci l strictness of the l w is justi ied.

• ( ) The debtor is guilty of fr ud, negligence, or del y, or contr vention of the tenor of the
oblig tion. (Arts. 1170, 1165, p r. 3.)

• (b) The debtor h s promised to deliver the s me (speci ic) thing to two or more persons who
do not h ve the s me interest for it would be impossible for the debtor to comply with his
oblig tion to two or more creditors even without ny fortuitous event t king pl ce.
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Nature and Effect of Obligations
Article 1174

• (c) The debt of thing cert in nd determin te proceeds from crimin l o ense, unless the
thing h ving been o ered by the debtor to the person who should receive it, the l tter refused
without justi ic tion to ccept it. (Art. 1268.)

• (d) The thing to be delivered is generic (Art. 1263.) for the debtor c n still comply with his
oblig tion by delivering nother thing of the s me kind in ccord nce with the principle th t
“genus never perishes”.

• (2) When decl red by stipul tion. — The b sis for this exception rests upon the freedom of
contr ct. (See Art. 1306.) Such stipul tion is usu lly intended to better protect the interest of
the creditor nd procure gre ter diligence on the p rt of the debtor in the ful illment of his
oblig tion. But the intention to m ke the debtor li ble even in c se of fortuitous event should
be cle rly expressed.
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Nature and Effect of Obligations
Article 1174

• Impossibility of perform nce must result from occurrence of fortuitous event.

• It should be pointed out th t for the purpose of rele sing the debtor from his oblig tion, the
occurrence of the fortuitous event does not su ice. The impossibility of ful illing the
oblig tion must be the direct consequence of the event. If notwithst nding its occurrence,
the oblig tion c n be ful illed, it will subsist even if only in p rt.

• In order to see whether or not the fortuitous event produces the impossibility of ful illing the
oblig tion, the n ture of the oblig tion must be considered, nd ccording to whether it be
speci ic or gener l, etc., it will or will not be extinguished.
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 Nature and Effect of Obligations
Article 1174

• E ect of obligor’s negligence upon his li bility.

• (1) Negligence contributed to the loss or d m ge. — In order th t fortuitous event m y

rele se debtor from his oblig tion, it is necess ry th t he be free from previous negligence
or misconduct by which the loss or d m ge m y h ve been occ sioned. When the
negligence of person concurs with fortuitous event in producing loss, he is not
exempted from li bility by showing th t the immedi te c use of the d m ge w s the
fortuitous event.
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 Nature and Effect of Obligations
Article 1174

• (2) Negligence not contributory to the loss or d m ge. — But where both fortuitous event
nd l ck of due diligence re present under conditions th t the loss would h ve h ppened
with or without the negligence of the obligor — hence, the consequences re ll deriv tion
of the fortuitous event — it c nnot be s id th t responsibility rises therefrom. In such
c se, however, the courts re not bound to disch rge the obligor from ll li bility. Under the
l w (Art. 2215[4].), where “the loss would h ve resulted in ny event,” they “m y equit bly
mitig te the d m ges” which in view of the circumst nces the obligor should p y.
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Nature and Effect of Obligations
Article 1175

• Usurious tr ns ctions sh ll be governed by speci l l ws.

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 Nature and Effect of Obligations
Article 1175

• Usury is contr cting for or receiving interest in excess of the mount llowed by l w for the
lo n or use of money, goods, ch ttels, or credits. (Tolentino vs. Gonz les, 50 Phil. 558 [1927].)
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Nature and Effect of Obligations
Article 1175

• Kinds of interest.

• They re:

• (1) Simple interest. — when the r te of interest is stipul ted by the p rties (Art. 2209.);

• (2) Compound interest. — when the interest e rned is upon interest due (Arts. 2212, 1959.);
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 Nature and Effect of Obligations
Article 1175

• (3) Leg l interest. — when the r te of interest intended by the p rties is presumed by l w, s
when the lo n mentions interest but does not specify the r te thereof. (Art. 2209.) The s me
r te is llowed in judgments where there is no express contr ct between the p rties in
nticip tion of the s me. Its use is not justi ied where there is stipul ted r te of interest in
the lo n contr ct;

• (4) L wful interest. — when the r te of interest is within the m ximum llowed by (usury) l w
(Secs. 2, 3, Usury L w, Act No. 2655, s mended.); nd

• (5) Unl wful interest. — when the r te of interest is beyond the m ximum ixed by l w.
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 Nature and Effect of Obligations
Article 1176

• The receipt of the princip l by the creditor, without reserv tion with respect to the interest,
sh ll give rise to the presumption th t s id interest h s been p id.

• The receipt of l ter inst llment of debt without reserv tion s to prior inst llments, sh ll
likewise r ise the presumption th t such inst llments h ve been p id.
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Nature and Effect of Obligations
Article 1176

• EXAMPLES:

• (1) B owes C the mount of P10,000.00 with interest t 14% ye r. C issued receipt for the
princip l. The interest w s not referred to in the p yment whether or not it h s been p id.

• It is presumed th t the interest h s been previously p id by B bec use norm lly the p yment
of interest precedes th t of the princip l. (Art. 1253.) This, however, is only disput ble
presumption nd m y be overcome by su icient evidence th t such interest h d not re lly
been p id. (Art. 1176, p r. 1; see Hill vs. Veloso, 31 Phil. 160 [1915].)
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 Nature and Effect of Obligations
Article 1176

• EXAMPLES:

• (2) E is lessee in the p rtment of R, p ying P5,000.00 rent l month, E f iled to p y the
rent for the months of Febru ry nd M rch. In April, E p id P5,000.00 nd R issued receipt
th t the p yment is for the month of April.

• The presumption is th t the rents for the months of Febru ry nd M rch h d lre dy been
p id. This is lso in ccord nce with the usu l business pr ctice whereby prior inst llments
re irst liquid ted before p yments re pplied to the l ter inst llments. Ag in, this
presumption is merely disput ble. (Art. 1176, p r. 2; see Rubert nd Gu mis vs. Smith, 11 Phil.
138 [1908]; Perez vs. G rci Bosque, 7 Phil. 162 [1906]; M nil Tr ding & Supply Co. vs.
Medin , 2 SCRA 549 [1961].)
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 Nature and Effect of Obligations
Article 1177

• The creditors, fter h ving pursued the property in possession of the debtor to s tisfy their
cl ims, m y exercise ll the rights nd bring ll the ctions of the l tter for the s me
purpose, s ve those which re inherent in his person; they m y lso impugn the cts which
the debtor m y h ve done to defr ud them.
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Nature and Effect of Obligations
Article 1177
• Remedies v il ble to creditors for the s tisf ction of their cl ims.

• In c se the debtor does not comply with his oblig tion, the creditor m y v il himself of the
following remedies to s tisfy his cl im:

• (1) ex ct ful illment (speci ic perform nce) with the right to d m ges;

• (2) pursue the levi ble (not exempt from tt chment under the l w) property of the debtor;

• (3) “ fter h ving pursued the property in possession of the debtor,’’ exercise ll the rights (like
the right to redeem) nd bring ll the ctions of the debtor (like the right to collect from the
debtor of his debtor) except those inherent in or person l to the person of the l tter (such s
the right to vote, to hold o ice, to receive leg l support, to revoke don tion on the ground of
ingr titude, etc.); nd
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Nature and Effect of Obligations
Article 1177

• Remedies v il ble to creditors for the s tisf ction of their cl ims.

• (4) sk the court to rescind or impugn cts or contr cts which the debtor m y h ve done to
defr ud him when he c nnot in ny other m nner recover his cl im. (see Arts. 1380-1389.)

• The debtor is li ble with ll his property, present nd future, for the ful illment of his
oblig tions, subject to the exemptions provided by l w. (see Art. 2236.)
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 Nature and Effect of Obligations
Article 1177

• EXAMPLE:

• On the due d te, D could not p y C his oblig tion in the mount of P300,000.00. However, D
owns c r worth bout P160,000.00 nd X is indebted to him for P40,000.00. Before the
due d te of the oblig tion, D sold his l nd worth P200,000.00 to Y.

• Under the circumst nces, the rights gr nted to C under the l w re s follows:

• ( ) He m y bring n ction for the collection of the mount of P300,000.00 with the right to
d m ges.
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 Nature and Effect of Obligations
Article 1177

• EXAMPLE:

• (b) If, inspite of the judgment rendered, D f ils to p y the mount due, C c n sk for the
tt chment of D’s c r so th t the c r m y be sold nd p yment m de from the proceeds of
the s le.

• (c) He m y sk the court to order X not to p y D so th t p yment m y be m de to him (C).

• (d) He m y sk the court to rescind or c ncel the s le m de by D to Y on the ground th t the

tr ns ction is fr udulent in c se he (C) c nnot recover in ny other m nner his credit. Note
th t this l st remedy c n be resorted to only if C could not collect in full his credit. (see Arts.
1381[3], 1387.) He must irst exh ust the properties of the debtor or subrog te himself in the
l tter’s tr nsmissible rights nd ctions.
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Nature and Effect of Obligations
Article 1178

• Subject to the l ws, ll rights cquired in virtue of n oblig tion re tr nsmissible, if there h s
been no stipul tion to the contr ry.
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 Nature and Effect of Obligations
Article 1178

• Tr nsmissibility of rights.

• All rights cquired in virtue of n oblig tion re gener lly tr nsmissible. (see Art. 1311.) The
exceptions to this rule re the following:

• (1) Prohibited by l w. — When prohibited by l w, like the rights in p rtnership, gency, nd

commod tum which re purely person l in ch r cter.
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 Nature and Effect of Obligations
Article 1178
• (2) Prohibited by stipul tion of p rties. — When prohibited by stipul tion of the p rties, like
the stipul tion th t upon the de th of the creditor, the oblig tion sh ll be extinguished or
th t the creditor c nnot ssign his credit to nother. The stipul tion g inst tr nsmission
must not be contr ry to public policy. (see Art. 1306.) Such stipul tion, being contr ry to the
gener l rule, should not be e sily implied, but must be cle rly proved, or t the very le st,
cle rly infer ble from the provisions of the contr ct itself.
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Thank you.