Title 1, Bk 4, Title 1, Ch 1

Thursday, 18 January 2018 2:09 PM

ART 1156
• Re definition: if you should look only at one side
○ it should be on point of view of the creditor/obligee/creditore/accipiens -- one who can oblige
○ not the debtor/obligor/solvens/deodor -- one who obliges
○ bec creditor is the active subject --> it's the creditor who can demand from a debtor a particular
prestation or conduct (to give, to do or not to do), and the particular obligation (source) binds them
together
▪ Bec if debtor does not move--> all to do is to remain passive or not move --> wait until it
becomes a natural obligation --> if natural, then debtor can no longer be forced to pay; but if
pays, cannot take it back
▪ However, natural obligation can be a causa for reconversion of natural back to civil by
novating it
▪ Natural obligation vs civil obligation
○ Creditor cannot force person to pay natural obligation
○ Creditor can force person to pay civil obligation
• but civil code looks at the debtor side
• BUT should be looked at both sides -- COMPLETE DEFINITION
○ Legal relation bet 2 parties (creditor and debtor) where creditor can demand from debtor a
particular conduct (prestation to give, to do or not to do)
▪ To give: specific or generic thing
▪ To do or not to do
▪ Essentially there are 2 prestations: to give and not to give
□ Bec to do is a species of to give
□ To do
▪ There can be 4 prestations --> sir gave different answer in next session, which I think is
more correct
1. to give
2. to do
3. not to do
4. not to give
○ Why is to give mentioned, and not "not to give"? Bec there are 2 prestations to give
▪ To give specific thing
▪ To give general thing
○ Species of prestation to do, for ex is to render service
• Etymology:
○ To bind around both parties
▪ legare -- to bind, unite
▪ Root word also of ligation (Dr. ties the fallopian tube)
▪ o -- around
• Elements
○ 2 subjects: active and passive
○ Object or prestation
▪ Object is NOT a thing
▪ It is a juridical necessity to do, to give or not to give
○ Juridical tie/vinculum juris/efficient cause are the sources of obligations
▪ What binds the contracting parties with respect to the obligation and the prestation?
▪ SOURCE OF THE OBLIGATION:
□ Kinds
 Contracts
 quasi-contracts
 Torts
 Crimes
 Law --> obligations can come solely from the law itself
□ Law helps creditor realize the prestation in a contract between parties --> helps him
file an action to enforce the obligation or cancel the obligation (aka rescission but in
the sense of cancellation of the obligation) --> dahil hindi mo mabayaran obligation,
let's have a recission and in return, pay damages! ( recission + damages )
 If creditor DOES NOT demand from debtor; debtor can remain passive! If he
succeeds while obligation is demandable, and creditor does not move, and
debtor remains passive (does not pay or perform), and if enough time has
passed for the obligation to have prescribed through extinctive prescription and
creditor fails to demand, debtor is now in LEGAL DELAY
◊ Exstinctive prescription (law of oblicon): obligation extinguished by lapse
of period of time when obligation can be demanded --> if obligation
prescribed, it becomes natural obligation and cannot be legally enforced
( just wait for debtor to have conscience to pay VOLUNTARILY )
 There is a DEFAULT prescription: 5 years!!
◊ Acquisitive prescription (law on property): By lapse of time, one can own
ownership and rights --> possession in the concept of owner, not in

Notes Page 1
 ownership and rights --> possession in the concept of owner, not in
mere holder
 Ordinary
 Extraordinary
◊ Even if action has not yet prescribed, there is the common law concept
of estoppel; if you can persuade court to apply estoppel, the one
claiming will be estopped --> the court will not hear the creditor's action
on the ground of estoppel by lapses
◊ Extra-judicial demand vs judicial demand (in court; demand to pay)
 Not legally necessary to give extra-j demand first before filing one
 If debtor fails to perform prestation; creditor can ask for damages and perform
the obligation or damages and rescission
◊ If creditor wins, he is entitled to damages in the form of a payment of a
sum of money
◊ After promulgation of decision, and has become final and executroy,
creditor can ask to issue a writ of execution --> all of properties of debtor
not exempt from execution will answer for the value of the obligation
 there will be a money obligation when creditor files action for
debtor to perform obligation or to rescind
 Damages will be in form of sum of money, or if subject matter of
contract is already partially paid, and the obligation is cancelled,
creditor must return what the debtor has paid
 Literally, debtor will lose all properties except those needed for
him to survive; house he built where his family stays is the family
home even w/o need of constituting it as such will be sold and
creditor will be given up to the extent of 300k; mansion will be
sold at public auction and out of the proceeds, you will only get
300k
• Perfectly reciprocal obligation: Contract of purchase and sale
○ Reciprocal: you pay, I deliver!
○ 2 prestations in a reciprocal obligation:
▪ Prestation to buy
□ Debtor is buyer
▪ Prestation to sell
□ Debtor is seller
○ You agree on a price; then, when the contract is perfected…
▪ the buyer has to pay purchase price; and
▪ Seller has to delivers goods
○ Until buyer pays, creditor is not obligated to give goods EXCEPT if there is an agreement that they
shake hands on terms of the sale or give approval, then that's perfected contract of sale; but buyer
has to pay purchase price before seller hands over goods except if there is an agreement that
seller will deliver the goods today and be paid at another time
1) sale on credit
□ still a sale but no longer the usual sale
□ Seller will deliver now
□ Buyer can pay at another time
2) Sale for future delivery (future sale) -->
□ Reverse: buyer pays ahead than the delivery of the goods and latter will be delivered
at another time
□ why does buyer agree to pay? Although goods will be delivered later, buyer expects
that price of the goods will rise so he will earn a profit
• Other obligation that is reciprocal but not perfect: contract of lease
○ Bec one of the parties should perform his obligations first, and then party pays later
○ Ex. Kasambahay -- work first then pay at the end of the month

ART 1157
• Sources of obligations
1. Law -- e.g. taxes
▪ Obligations arising ex-lege
▪ Law imposes obligation on someone
▪ Law will help the creditor enforce the obligation by the State apparatus which is the judicial
system
2. Contracts
▪ Obligations arising ex-contractu
▪ Art 1159: one of basic principles of contracts
□ Contracts can be law-in-themselves by the stipulations agreed by the parties -->
stipulations will bind the parties and will be the law between the contracting parties
□ Enforceable only if not contrary to law, morals, good customs, public policy or public
order
3. Quasi-contract
▪ Ex-quasi-contractu
▪ Lawful acts that are based on the principle that no one shall be enriched at the expense of
another
□ However, the law does not prohibit one from enriching himself --> but it should be on
a LAWFUL act that does not effect expense on another

Notes Page 2
 a LAWFUL act that does not effect expense on another
▪ Kinds
1. Neogtiorum hestio: property or business of another is in danger of being lost or
suffering losses/damages, and somebody has the good sense of taking care of it w/o
any authorization from its owner
 Officious manager is the hestor negotiorum
 Whatever expenses he incurs or damages he has to pay in pursuance of this
officious management will be reimbursed --> obligation is through quasi-
contract
◊ I saved your property and spent my own money; your goods are saved,
just reimburse me for the money that I spent
 Proper Neogitorium hestio --> the owner's business or property must be in
danger of damages or losses
◊ If acts is ratified later on by the owner, then the provision that will be
applied is based on the ratified contract --> reimburse
◊ If disavowed; then it's an unenforceable contract --> it is still
reimbursed
 Improper NH (not in danger of damages or losses)
◊ If acts is ratified later on by the owner, then the provision that will be
applied is based on the ratified contract --> reimburse
◊ If disavowed; then it's an unenforceable contract --> cannot be
reimbursed
2. Solutio indebitii: payee (one to whom payment is made) on an obligation that is not
due will be unjustly (in exchange for nothing) enriched on the expense of the payer
UNLESS it is a voluntary payment of natural obligation
3. Other kinds
 Good Samaritan: somebody (3rd person) performs the obligation for another
and he spends money and intends to be reimbursed; basis for reimbursement
is quasi-contracts
 Ex. There is an accident, and bystander out of goodness of his heart takes
vehicular victim to the hospital; spends for taxi cab and initial cost of paying the
deposit in hospital; paying for part of the medicines needed; and he intends to
be reimbursed --> basis for reimbursement is a quasi-contract
4. Crimes/Delicts: acts and omissions punishable by law
▪ Obligations arising ex-delicto/ex-maleficio (ex: from)
▪ For every crime and felony there is usually a civil liability for the damages done to the victim
▪ Most crimes carry with them civil liability but there are felonies in RPC that do not carry civil
liability
□ This can be enforced
□ Do not carry civil liability
 TREASON especially of giving aid or comfort
 Criminal contempt
 Gambling bec proceeds of crime will be confiscated already
▪ General rule: upon the filing of the criminal action, civil action is impliedly filed
□ Some exceptions
 unless action to file a civil action is reserved
 violations of Bill of Rights
▪ Justifying circumstances DOES NOT incur civil liability
□ EXCEPT for #4
 Any person who, in order to avoid an evil or injury, does not act which
causes damage to another, provided…
 has to pay damages
▪ Exempting circumstances has civil liability
□ except #4 & #7 --> does not have to pay damages
 Any person who, while performing a lawful act with due care, causes an injury by
mere accident without fault or intention of causing it
 Any person who fails to perform an act required by law, when prevented by some
lawful insuperable cause
▪ Liability
□ Accused is primarily liable
□ Subsidiary liability can arise in case of insolvency of those primarily liable
□ Only way out is either to…
 deny employer-employee relationship; or
 deny existence of the facts
▪ Re civil liability on acquittal
□ Scenario 1: If accused is acquitted on basis of REASONABLE DOUBT and there is
no statement that he never was the actor (which implies accused is the actor, but
acquitted bec of reasonable doubt) --> presumption is he was negligent but guilt not
proven beyond reasonable doubt --> still liable of civil liability
□ Scenario 2: If accused is acquitted bec perpetrator DID NOT commit the act -->
cannot be held civilly liable
5. Torts
▪ Obligations arising ex-quasi-delicto/ex-quasi-maleficio --> gives rise to civil damages but not
criminal liability

Notes Page 3
 criminal liability
▪ No existing contractual relations except in one of the cases: PSBA
▪ Rule: single act or omission may give rise to several causes of action
□ Quintessential example: negligent act may give rise to 3 causes of action
 Breach of contract -- preponderance of evidence
 Quasi-delict -- preponderance of evidence
 Delict -- beyond reasonable doubt so that the civil liability will be set in
□ QUESTIONS as guide
 Who do you want to make liable?
 What is the quantum of proof necessary? Amount of evidence needed?
 Why you want to make them liable? Punishment of crime or payment for
damages?
□ E.g. vehicular mishap: driver was negligent
 Contract of passenger with the driver
 Other person at fault
 Owner of car
▪ A2180 or vicarious liability or (some persons are made liable of some negligent act of
others): primary liability incurred in behalf of another
□ History
 During renaissance in Europe, most activities, even ordinary activities, there is
the guild system (artisans are members of a guild -- guild for carpenters,
sculptors, artists, etc.) --> apprenticiable --> "master" is liable for the acts of the
apprentice
□ Possible defense of employers
 exercise due diligence in the selection and supervision of employees! -->
drivers were all subjected to a test of qualification, etc.
 No employer-employee relationship
 DENY EXISTENCE OF THE FACTS

OTHER NOTES
• quintessentially perfectly reciprocal obligation: marriage
• DEFECTIVE CONTRACTS - memorize
• Memorize provisions w/ more than 3 pars
• Memorize periods of prescription -- WHEN DO YOU START COUNTING THE PERIOD? When does the
action accrue
• What actions are imprescriptible
• Know what crimes do not carry civil liability -- e.g. treason, gambling
• Obligation created by the constitution: all citizens should owe allegiance to the PH especially in times of
war, contempt

You can make sack of rice (divisible thing) an indivisible obligation

In Solidary and Joint, what matters is the plurality of debtors and creditors and their relationship
Delivery of indivisible thing can be made divisible (e.g. assembling a car)

Notes Page 4
Title 1, Bk 4, T1, Ch 2
Thursday, 25 January 2018 2:33 PM

Gifts for sir

ROLLS ROYCE PHANTOM CAR -- only 3 in the world
HORSE (DA VINCI'S)
PIG
CIVET CAT

PRESTATION
• 4 Prestations --> different from sir's answer in previous session
1. To give a determinate and specific -- ONLY ONE THING IN THE WORLD
▪ If this thing dies, debtor cannot deliver anymore or perform the obligation
2. To give a generic or indeterminate
3. To do
4. Not to do/not to give
• Why is to give mentioned and not "not to give"?
○ bec it has 2 aspects
▪ Determinate; OR
▪ Generic
○ Former has accessory obligations
• Principal prestation is to give a specific and determinate thing but together with this
are the accessory obligations
○ Buyer can accept horse w/o accessories --> can waive delivery of accessories if
he wants to
○ If seller does not deliver the accessories, can sue him for damages for the value
of the accessories
○ BUT "you cannot force a debtor to really perform an obligation unless he really
wants to; you can sue a debtor in court but if he does not want to perform, you
cannot compel him to perform personally" --> you can lead the horse to the
water, but cannot compel a horse to drink the water
▪ Required by decision (judicial decision) to execute the absolute deed of sale
but he would not sign --> is there a way to execute it? YES, INDIRECTLY!!
Buyer can still become the owner
□ ans is not in civil code but rules of court --> Execution of Judgements
provision (S10) --> you want to become the owner but you will not
become its owner unless seller executes the public document selling
to you that land and surrendering it to you the (for example torrens title
for a parcel of land)
□ if you already won action for specific performance but debtor refuses
to deliver…
 cite him for contempt + ask court to authorize another person
(clerk of court or sheriff) to execute the deed of absolute sale for
and behalf of the defendant with the same effect as if it were
done by the defendant seller himself; OR
 ask court to state in its judgement or decision that if the debtor
does not want to execute the transfer of ownership, "the court
can tell register of deeds where the land is registered to cancel
the registration of this particular parcel of land in the name of the
defendant, and for the register of deeds to issue a new transfer
certificate of title in the name of the winning plaintiff"
• THERE ARE NO accessories in "to give a generic or indeterminate thing"
○ No need to take good care of generic thing with diligence of good father of a
family
○ Only obligated to deliver BUT in the matter of payment or performance, the rule
of payment in (A1246) applies
▪ Debtor cannot deliver an INFERIOR member of the genus but can deliver a
superior
▪ Creditor cannot demand a SUPERIOR member of the genus but can accept
an inferior KNOWINGLY --> waived his right not to accept an inferior
• There are no fruits in generic things even if, for example, the herd produces younglings

Notes Page 5
 • There are no fruits in generic things even if, for example, the herd produces younglings
• In between classification between generic and specific: DELIMITED GENERIC THING
○ Still generic but delimited as to place or source where you are going to procure or
get it
○ Rule: genus never perishes
▪ but in actuality, genus can LEGALLY PERISH but NOT PHYSICALLY
▪ Better phrasing: genus never physically perishes
○ Generally, no accessory obligation in delivery but there is at least accessory
obligation to take good care of the source/place
▪ Eg. 10 pigs from Keano's piggery should be delivered --> take good care
not of the 10 pigs but of the piggery specifically; though still deliver 10
generic pigs
▪ Debtor guilty of negligence by admitting sick pigs in the source w/o
quarantine is LIABLE
• Accessory
1. Before delivery, debtor has accessory of obligation to take care of it with the
diligence of a good father of a family UNLESS stipulated another kind of
diligence --> CANNOT BE THAT THERE IS NO DILIGENCE because contrary to
public policy (can be used for fraud)
▪ History: good father of a ROMAN FAMILY (Bonus Patres Familias) --> he
had the power of life and death over his children and wife under concept of
Roman Paterfamilias
▪ Father of a family = ORDINARY diligence
▪ Extraordinary diligence = utmost diligence of very cautious person -->
person is already cautious to begin with but is elevated to the highest
diligence
2. Deliver accessions and accessories
▪ Accessions
□ 2 kinds
 Discreta, which are the fruits
◊ Fruits will grow out of the principal thing itself (literally or
figuratively)
◊ Kinds
 Natural
– Even if still in womb or not yet out, already a
fruit
 Industrial
 Civil
– Periodic income like rentals
– Computed daily
 Continua: something is attached to the principal in such a way
that the attachment CANNOT be separated from principal w/o
damage or injury --> two are together through attachment
▪ Accessories
□ Something is attached to principal but does not damage the principal if
removed
□ E.g. car accessory: hydraulic jack, the cross-rings, spare parts like tire
(TOOLS)
3. Deliver the fruits
▪ Most of the time, fruits remain with debtor
▪ By intention or stipulation, fruits can go to creditor

BREACH OF OBLIGATION
• Breach of obligation
1. Fraud in the performance of obligation
▪ Obligation has already been created
▪ It is in the performance that there is fraud
▪ It is not the fraud in taking the consent of the contracting party --> this is
called CAUSAL FRAUD: fraud as cause of giving the consent --> contract
is voidable or annullable
□ Kinds of Fraud: see Woodhouse v Halili
▪ Ex

Notes Page 6
 ▪ Ex
1) Substitution of another specific thing with another --> making it appear
as if it is the same specific thing to be delivered
2) For generic thing
a. Short-weighing
b. Short-counting
c. Short-measuring
▪ Party cannot waive by stipulation a future fraud but can waive for a past
fraud
2. Negligence (culpa) in the PERFORMANCE of the obligation
▪ There is want of care required by the obligation with the debtor
▪ He not taking care of the specific thing
▪ Diligence of a good father of a family vs. utmost diligence of very cautious
persons (extraordinary diligence)
□ Common carriers fall on extraordinary diligence --> engaged in
transportation of goods and passengers
 Engaged in LEASE OF SERVICES --> all professions are lease
of services
 Vs lease of things
□ There are certain cases where the common carrier can reduce by
stipulation IN WRITING the diligence required only to ordinary -->
NEVER TO "NO DILIGENCE" --> BUT must be coupled with other
considerations than just the service (e.g. reduction of fare or
freightage fees)
▪ Guilty of concurrent negligence (at the same time) during fortuitous event =
cannot hide behind defense of fortuitous event
□ He will be in default or breach of obligation
3. Delay or default
▪ Performance is out of time --> debtor does the obligation but not on time
▪ General rule: in order to make debtor in default, creditor must first make a
demand (judicial or extrajudicial) WHEN the obligation is already due and
demandable
□ Exceptions to rule of need for demand --> no need for creditor to
make a "demand assuming the obligation is due and demandable" in
the ff:
1) Law or stipulation provides otherwise
2) When the time really requires it
3) Demand is already useless
□ There is no default or delay in an obligation
▪ not-to-do or not-to-give (negative obligations)
▪ With a resolutory condition
▪ Kinds
1) Compensation morae
▪ In reciprocal or bilateral obligation, especially in a quintessential
example of contract of purchase and sale (perfectly reciprocal),
both parties are both reciprocally obligated to perform their
respective prestations
□ Vendor deliver thing sold, vendee has to pay purchase
price
□ Unless both parties agree to perform these on different
dates (sale on credit or sale for future delivery), it is
supposed to be performed almost simultaneously
□ Perfected when the parties AGREE to the number of things
to be sold and the price --> once they agree and consent
given is not vitiated (fraud, undue influence, mistake of
fact, intimidation, force), then contract is already perfected
even if there is no performance of the two parties --> they
then have to agree WHEN they should consummate the
same (PERFECTED but still executory)
□ When will one party become in default?
 If seller DELIVERS principal + accessories,
accessions + fruits to the buyer who has not paid him

Notes Page 7
 accessions + fruits to the buyer who has not paid him
yet the full purchase price --> buyer becomes owner
+ seller here becomes unpaid seller --> buyer
becomes in default or in delay
▪ PRACTICAL TIP: don’t DELIVER until paid; must be
simultaneous
▪ BUYER ONLY BECOMES IN DELAY if creditor has already
fulfilled his part of the obligation
▪ POSSIBLE REMEDIES if one is already ready to perform (not
yet performed but already ready)
i) For the party ready and willing and able to perform
prestation --> go to court and make a tender of payment
and consignation (file a consignation case in court; but
expensive bec you'll need atty, pay for docket fees, etc.)
 Tender of payment and consignation is a special form
of payment
ii) SO just choose rescission (cancel the sale) --> but no
damages can be sought for because creditor himself did
not yet deliver
▪ EXCEPTIO NON ADEMPLETI CONTRACTUS
□ Exceptio means defense
□ Since buyer is not ready to give full purchase price, seller is
not obligated to perform his side of the contract
□ If one is ready and other is not, the one ready is NOT
OBLIGATED to perform his obligation Mora accipiendi
□ THEN LET US BOTH BE IN COMPENSATION MORAE; if
one of them performs, then damages may arise (A 1191)
 Rescission; OR
 Specific performance
2) Mora solvendi (know the exceptions and examples)
4. Contravention of the tenor of the obligation or other violations of the obligation
▪ Myriad little ways contract has been breached that is not embraced by fraud
or negligence in performing the obligation bec fraud and delay is only non-
performance NOT ON TIME
▪ Breach of obligation that may not be one of the three preceding breaches
▪ Other ways that are not fraudulent, negligent, delay
▪ Obligation has a spirit or tenor
▪ 3 examples
1) Typewriter case -- but can actually be placed under the preceding 3
a) Arrietta v Larry - be sure to know what are the contracts that
are included in an issuance of a letter of credit; and what is a
letter of credit
2) Telefast vs Castro is best example!
5. WORST: Total non-performance of obligation or the debtor says "I WILL NEVER
FULFILL THE OBLIGATION" even before it becomes due --> anticipated
breach
• Courses of action of creditor (where in both, there is damages)
1. Force the debtor to perform the obligation --> action for specific performance +
damages --> JUDICIAL DEMAND; OR
2. Rescind the obligations --> not mean rescission of a rescissible contract (i.e.
rescission proper) but "CANCEL the obligation + damages"
3. Extrajudicial demand
• In all of these breaches, creditor can ask for damages
○ Favorite damages of lawyers
▪ MORAL (sleepless nights, sullied or damaged reputation, etc)
▪ then exemplary
▪ then temperate
▪ then nominal (right has been breached but you are entitled to this; consuelo
de bobo)
○ Why favorite? because you don't need to prove it; just convince the court that you
are entitled and how much
• Defense of fortuitous event

Notes Page 8
 • Defense of fortuitous event
○ Default or delay OR total failure
○ Cannot use for breach of obligation through:
1. Negligence; OR
2. fault/fraud; OR
3. contravention of the tenor
○ Kinds
▪ Act of man
□ Strikes, lockouts, war, holdup
□ Independent of will of debtor
▪ Act of god
□ Independent of will of man
• Personal right is to demand from a passive subject (debtor) a particular prestation --> if
does not pay, cannot force him to pay
○ Action to collect credit is action in personam
○ Debt here DIES with the debtor
○ Obligation to give fidelity dies with the husband
○ DISTINCTION
▪ Obligation creates a personal right --> it's a right of obligation
▪ BUT right can be enforced against a particular debtor and his heirs,
administrators, or asignee
□ As if these are extensions of debtor himself
• Obligation to pay a sum of money, or property to be sold: if debtor dies before payment
but debt survives, even if debtor dies, his estate will be considered as the debtor
himself (artificial person)
○ Artificial persons
▪ Testate estate
▪ Intestate estate
○ All debts will be paid by these

REMEDIES OF CREDITOR
• "you cannot force a debtor to really perform an obligation unless he really wants to; you
can sue a debtor in court but if he does not want to perform, you cannot compel him to
perform personally" --> you can force to put a horse near the water, but cannot compel
a horse to drink the water
▪ Required by decision (judicial decision) to execute the absolute deed of sale but
he would not sign --> is there a way? YES, INDIRECTLY!! Buyer can still become
the owner --> ans is not in civil code but rules of court --> Execution of
Judgements provision (S10) --> you want to become the owner but you will not
become its owner unless seller executes the public document selling to you that
land and surrendering it to you the (for example torrens title for a parcel of
land) --> if you already won action for specific performance but debtor refuses to
deliver --> cite him for contempt + ask court to authorize another person (clerk of
court or sheriff) to execute the deed of absolute sale for and behalf of the
defendant with the same effect as if it were done by the defendant seller himself
OR ask court to state in its judgement or decision that if the debtor does not want
to execute the transfer of ownership, "the court can tell register of deeds where
the land is registered to cancel the registration of this particular parcel of land in
the name of the defendant, and for the register of deeds to issue a new transfer
certificate of title in the name of the winning plaintiff"
• Scenario:
▪ Buyer accepts horse
▪ But creditor does not give the accessories even if he was given 1 year to deliver
▪ There can be partial rescission --> you have the horse but you don't want the
accessories anymore; hence buyer is entitled to damages but only for the
accessories
• Delivery of a generic thing --> SUBSTITUTED PERFORMANCE
▪ If debtor is in default (did not deliver), is buyer helpless? NO, there is substituted
performance --> buyer as creditor can procure it from some other source (3rd
person) and charge ADDITIONAL COST to the debtor as damages
▪ Additional costs: the difference in the "price stipulated in contract and the

Notes Page 9
 ▪ Additional costs: the difference in the "price stipulated in contract and the
price of what was actually bought from 3rd party" as actual damages + the
cost of looking for a substitute
• Obligations to do
▪ If there is a person w/ same skill and talent as that of debtor, he can perform the
obligation --> can be a substitute
▪ E.g. redo your door, retile your bathroom, reroof your house --> any
carpenter or mason who has same skill can perform it
▪ Charge the extra cost to the debtor as actual and compensatory damages if
debtor is in default or failed to perform
▪ Purely personal obligation to do: nobody else but the debtor can do it
• Obligations not to do
▪ Strictest of all obligations bec there can be NO DELAY or DEFAULT on his part
▪ Any little way of doing what he promised not to do is already a breach

SUBSIDIARY REMEDIES
• Rescissible contract is VALID, just like voidable contracts --> it still creates rights and
obligations BUT is subject to rescission (can be rescinded)
• 2 subsidiary remedies of creditor in case debtor is in a state of insolvency: accion
subrogatoria and accion pauliana
• Insolvent: assets < liabilities hence cannot pay creditor
▪ Only obligation that dies w/ debtor are the PURELY PERSONAL obligations
▪ Cannot send debtor to jail if he cannot pay his obligation BUT can be imprisoned
if guilty of a criminal offense in the process (process of paying debt, you commit
estafa --> not bec you didn't pay debt but bec guilty of falsification, fraud or the
like)
• 3 groups of actions
1. Accion subrogatoria
▪ Creditor can step into the shoes of the debtor (creditor 2) in order to
claim/collect due and demandable credits of the debtor
□ Can only do this if debtor cannot pay bec he is insolvent
□ If solvent, creditor will run after his properties
▪ Should be filed only when the creditor has PURSUED ALL PRINCIPAL
REMEDIES available to him (e.g. collection) --> when sheriff cannot find
any property belonging to debtor, it is only then that creditor can file this
action --> "you cannot squeeze blood from a turnip, even if the turnip is a
red turnip"
▪ E.g. Debtor 1 owes Creditor 1 10m
□ C1 learns that d1 is also a creditor of d2
 D2 owes d1 15m --> already due and demandable and yet d1
neglects to collect it
□ C1 can file an action for correction for and behalf of d1 for the
collection of the 15m
 D2 can make all defense available as if it was d1 who filed an
action against him
□ If c1 wins, he will only get what d1 owes him (10m + damages)
2. Accion pauliana
▪ He can rescind all contracts entered by insolvent debtor done in fraud of
creditor --> debtor did not have enough assets for his liabilities BUT he was
still able to transfer properties to third persons
□ Transferred either gratuitously or in collusion with the transferee so
that he will be left MORE INSOLVENT THAN HE WAS AT THE
MOMENT
□ Law allows creditor who knows of the transfer of these properties to
rescind that contract by direct action --> effect: bring back that
patrimony to the insolvent debtor so that he will not be as insolvent as
he was before; the property will now then be available to be paid to
the creditor
▪ 2 kinds of contracts w/ transferee that can be rescinded
□ Gratuitous: transfers property by DONATION to a trasferee (heirs,
spouses, relatives) and receives no value in consideration in return
 If gratuitous, this can readily be rescinded regardless if he was in

Notes Page 10
  If gratuitous, this can readily be rescinded regardless if he was in
good or bad faith bec trasnferee did not lose any money
□ Under onerous contract of sale but actually no valuable consideration
transpired or was transferred to him --> not an honest to goodness
sale but a fictituous sale
 In case of onerous or contract of sale, one who filed must prove
that transferee was in collusion (bad faith) with transferee
□ BUT, in case of onerous contracts, action pauliana is NOT
AVAILABLE if the transfer of the property was under an arms-length
honest to goodness transaction
 No accion pauliana if insolvent debtor receives much less of the
property he sold --> bec if u r insolvent and all u have are
properties difficult to liquify (convert into money) bec there are no
takers, u sell it at a huge discount --> insolvent debtor receives
consideration for it, then cannot rescind this because it is a
BARGAINED FOR CONTRACT
3. Direct actions or accions directa - actions specifically authorized by law to be filed
by certain creditors --> 4 provisions of CC w/c allow special kinds of creditors to
file DIRECT (PRIMARY) ACTION to those not privity to the contract (heir,
administrator, etc) for the collection of his credit --> exceptions to the
RELATIVITY PRINCIPLE BETWEEN PARTIES IN CONTRACTS
1. A 1652
○ lessor can ask for collection for the sub-lessee WHO HAS DEBT to
the lessee -- if sub-lessee has no debt to lessee, then cannot collect
2. A 1729
○ Owner of residential lot --> hired contractor to build a bldg to the
residential lot (e.g. 10m) --> contractor hired laborers --> contract of
laborers is between them and contractor, not the owner --> owner has
debt 5m to contractor and contractor has debt to laborers --> laborers
can file action of collection against owner
3. A 1608
○ Sale with the right of repurchase or apacto-diretro sale --> transfers
the ownership but subject to resolutory condition: in case vendor
exercises right to repurchase, ownership of vendee is extinguished
 Seller sells property but reserves right to buy it back within a
certain period stipulated in the contract
 Vendee-aretro becomes the owner of the property sold but his
ownership is subject to resolutory condition (future and uncertain
event: i.e. exercise of right of seller to repurchase
○ BUT IF the vedor-aretro DOES NOT exercise right to repurchase
within the stipulated period, the vendee-aretro may want to file an
action to have it declared that the right to repurchase has elapsed or
prescribed --> becomes FULL OWNERSHIP
4. A 1893
□ Principal has an agent --> agent w/o authority of principal appoints a
sub-agent --> principal can sue sub-agent directly even if there is no
privity of contract in case of negligence by sub-agent
• Scenario: creditor X invited other creditors in filing an accion bec the creditor wanted to
collect 15m and the filing fee is enormous --> creditor: "help me contribute to the filing
fee and cost of litigation" --> All other creditors don't want to --> BUT supposing
creditor X alone files the action and succeeded in collection --> now comes the other
creditors --> rule: other creditors can still claim part of their credit from the total even if
they did not help in contributing to the filing and cost of litigation
 Accion subrogatoria
□ General rule: creditor X is NOT PREFERRED over what he collected
□ What can he do?
 Writ of garnishment of the credit --> species of attachment that is
an ancillary remedy in any action where DEFENDANT IS
INSOLVENT (main requirement) --> attach tangible or corporeal
property (land, car, etc.) vs. garnish a credit (incorporeal: can't
see it) --> HE BECOMES PREFERRED TO WHAT HE
COLLECTS

Notes Page 11
 COLLECTS
 Accion pauliana: property returned to patrimony of insolvent debtor, the
creditor who filed is preferred over the other creditors

Fortuitous event
• Main question: is he guilty of concurrent negligence or contribute to the damage? If he
did, cannot hide behind this defense
• General rule: no one shall be held liable for the happening of the fortuitous events
○ Exceptions: 1174, 1165 par 3, 552, 1942, 1979, 2001, 2147, 1268
 Contract of commodatum, quasi-contract of negotiorum hestio and solutio
indebitii
 sir' fave is 552
□ Possessor in bad faith from the very beginning (knew the fatal defect
in the title --> he knew seller is not the true owner of the title)
□ No one can give what one does not have --> if seller is not owner of
property, he cannot transfer ownership, but only possession

Usurious transactions
• Usury law is no INEFFECTIVE but it's still there --> usurious transactions should be
void but hardly has there been an action for declaration of nullity of usurious
transactions
• Commodatum: gratuitous loan for use --> borrow friend's condo for a weekend
○ Can be moveable or immovable
○ GRATUITOUS: do not consider valuable consideration for its use
 If w/ valuable consideration (payment) --> lease already; no longer
gratuitous
• Eastern Shipping Lines case: all about damages because of negligence in
performing the obligation --> not loan or forbearance of money or goods or credit
○ Loan of goods: there can be a loan of goods --> you borrow goods --> e.g. poor
farmer goes to another farmer who borrows palay and will pay with palay
○ Loan of credit: you borrow someone's credit --> e.g. borrow credit card
○ Loan of money
○ WHAT IS FORBEARANCE OF MONEY GOODS OR CREDIT? This is in this
case

Rights and obligations are usually transmissible or assignable unless law or stipulation
prohibits it
• E.g. of intransmissible obligations
○ Obligations in marriage
○ Obligations purely personal
○ Obligations not to do
• E.g. of transmissible obligations
○ Sale

OTHERS
• In contract and sale (reciprocal obligations), there are 2 different prestations
○ Vendor
▪ is debtor to deliver the goods
▪ Is creditor to receive the payment
○ Vendee
▪ is debtor to pay
▪ Creditor to receive the goods
○ You give so I will give also
• Arrietta v Larry - be sure to know
○ What are the contracts that are included in an issuance of a letter of credit
○ What is a letter of credit
• Incidental vs Fraudulent: Woodhouse v Halili
• KNOW GENERAL RULE for true or false exams
• Contract of ANTIKRESIS -- ____ v roque
• A1544
○ If 2nd vendee acquire ownership w/o knowing of the first sale, he is in good faith;

Notes Page 12
 ○ If 2nd vendee acquire ownership w/o knowing of the first sale, he is in good faith;
hence, he becomes the owner of that thing
▪ First vendee (buyer) cannot sue second vendee to recover possession of
car on ground that first vendee was first buyer
▪ 1st vendee also cannot file against seller an action for specific performance
bec he has already delivered to the second vendee --> vendor cannot
recover item from second then give to first bec ownership is already on
second
○ Proper and only action --> first vendee can file an action for rescission +
damages against the seller
▪ All he has is perosnal right of obligation AGAINST VENDOR; no right
against second sale
○ BUT IF NOT YET DELIVERED, first vendee can still sue the vendor, and still
have claim on the thing bec vendor is still owner
• Contract can transfer both ownership (real rights) and non-ownsership (non-real rights)
• Deed of conditional sale: there is a sale but subject to performance of buyer (payment
of FULL purchase price) at a given period
○ Vs contract to sell: not selling anything yet but agreeing to sell the specific thing
for a certain purchase price --> selling the possibility that if buyer pays full
purchase price, the seller will give absolute deed of sale
• De ruth angeles case: 1169 vis-a-vis 1191
○ Resolutory condition: There is a future and uncertain event that will cause the
extinguishment of the obligation
○ If on the date that we agreed to consummate the sale, the seller is not ready to
delver the determinate thing, then buyer who is ready to pay full purchase price
can now declare the contract as rescinded --> that the resolutory condition has
occurred
▪ NOT A SURE FIRE --> creditor can question the rescission and then there
is a litigation (e.g. Song Fo vs Hawaiian)
□ Serious delay – rescission is valid
□ Slight delay – court can give buyer benefit of a period to which he can
perform the obligation
• KNOW THE EXTINCTIVE PRESCRIPTIONS OF ACTIONS
• In addition of the requisites of a valid contract: DELIVER OF THE OBJECT OF THE
CONTRACT
○ There will be no simple loan if the money is not delivered by the lender
○ You need to deliver!
• Presumptio juris tantum --> aka prima fascie
• preumptio juris et de jure --> absolute presumption

Notes Page 13
Title 1, Bk 4, T1, Ch 3, S1
Tuesday, 13 February 2018 2:52 PM

Classifications of Obligations
• Primary classifications are found in the sub-sections of the Civil Code
1. Pure and conditional
2. Obligation with a period
3. Alternative obligations
4. Joint and solidary obligations
5. Divisible and Indivisible
6. Obligations with a penal clause
• Secondary classifications are spread throughout the Civil Code
1. Positive and negative
2. Suspensive and resolutory
3. Possible and Impossible
i. Physical
ii. Juridical
4. Determinate and indeterminate
5. Accessory and principal
6. Civil and natural obligations
7. Simple or multiple
i. Conjunctive
ii. Disjunctive
1) Facultative
2) Alternative

Classification of Pure Obligations

• Pure vs. "conditional AND obligations w/ a period"
• Pure is not subject to a condition and a period

Classification of Conditional Obligations (not obligations with a period or term)

• Civil Code uses "future OR uncertain event" --> does not use "AND" bec A1179(1) is
the definition of a pure obligation
○ This is a shortcut definition
○ Uses OR bec wants us to realize that a pure obligation is NEITHER subject to a
condition nor a period therefore demandable at once
○ If certain, it is a period
○ Longer definition: future AND uncertain event OR a future but certain event
• A1187
○ Once donation inter vivos has been perfected, donor is the one who can be
obliged to perform prestation --> UNILATERAL OBLIGATION --> donor can be
required by donee to perform prestation of the gratuitous obligation
○ There is no retroactivity in
▪ Resolutory conditional obligation
▪ Obligation with a period, both resolutory and suspensive
○ There is retroactivity in suspensive: if the condition happens, the effects retroact
to when the obligation was constituted
▪ Scenario 1: preferential personal right to buyer 1 to demand the delivery VS
second buyer
□ First obligation: w suspensive condition that happens after 5years and
executory only after 5 years
□ Second obligation: without suspensive condition but is executory after
2 years
□ After 5 years, there was no delivery yet to the second buyer
□ Suspensive condition of first obligation RETROACTS to time when
obligation was created --> meaning mas may preferrential right 'yung
first buyer kaysa sa second kasi it is as if naging effective-demandable
'yung first obligation ever since it was created
▪ Scenario 2

Notes Page 14
 ▪ Scenario 2
□ First obligation: w suspensive condition that happens after 5years and
executory only after 5 years
□ Second obligation: without suspensive condition but is executory after
2 years
□ After 2 years, second buyer demands delivery and it was delivered to
him --> he becomes owner
□ Then 5 yrs passed and the suspensive condition happens
□ First buyer has NO CAUSE OF ACTION against buyer 2 anymore;
only remedy is ask for rescission and damages against seller
• Suspensive and resolutory: made to depend on FUTURE AND UNCERTAIN EVENT
or PAST AND UNKOWN EVENT
○ Effects are exact opposites
▪ Suspensive: obligation is not yet created until the happening of future and
uncertain event --> what is there is HIGH HOPES or EXPECTANCY that
the future and uncertain event will occur
□ Only when it occurs will the obligation be created; EVEN IF THERE IS
A CONTRACT OR AGREEMENT, if there is a suspensive condition,
there is still no obligation and rights --> only when the condition
happens will there be rights and obligations (see case of Taylor v Uy
vis-a-vis Rustan Mill)
□ In the meantime, it's STILL IN THE PROCESS of being created/born
□ INCHOATE RIGHT or expectancy is protected by law --> not yet
ripened into a full-blown right
 E.g. if seller agreed to sell a specific horse to buyer but subject
to a suspensive condition, i.e. if buyer's wife agrees to it
◊ Scenario: while husband is still asking for consent of "wife
w/c is inchoate", the would be seller is not taking good care
of that specific horse w/ diligence of a good father of a
family --> would-be-vendee could ask him to comply with
his accessory obligation --> pls take care of the horse
naman --> if seller does not want to take care, buyer
can file for an action (protection afforded by law)
 If would be creditor whose obligation is subject to suspensive
condition learns that would be debtor is about to sell (hence no
delivery yet) the specific horse to another buyer for another
price, then creditor can file a case to the court from selling it to
another --> 'cause if pending the suspensive condition, resells
the specific horse to another buyer and then the second buyer is
shrewd enough to execute the proper deed of sale and indorse
the transfer of registration of large cattle, and then deliver the
horse and certificate, then buyer becomes new owner SO AS
LONG AS buyer is in good faith --> too late for first vendee to
recover that specific horse bec ownership has already been
transferred to second vendee
◊ REMEDY of first buyer is to ask for rescission + damages
bec of breach of obligation through fraud or delay
□ When suspensive already occurs, GIVE AMPLE TIME for debtor to
pay or perform the prestation
 Cannot be that debtor always brings his horse or sum of money
once the suspensive condition arises --> does not need to carry
money all the time --> IMPRACTICAL!
 MUST MAKE A DEMAND to inform the debtor
▪ Resolutory: obligation is already created and subject to extinguishment if
the future and uncertain event occurs
□ Parties shall REVERT to the status quo prior to the
agreement/contract
□ Roles of creditor and debtor are reversed
 Original creditor will become the debtor in the return of what he
received
 Original debtor will become a creditor to receive what he gave
□ Resolutory condition over MANY generic things: e.g. 10 pigs then

Notes Page 15
 □ Resolutory condition over MANY generic things: e.g. 10 pigs then
resolutory condition happens after 10y
 Must the deliverer send the SAME 10 pigs na tumanda OR
deliver different set pigs bec should deliver pigs of the same
condition 10 years earlier
• Upon whose will will the future and uncertain event occur?
○ Potestative: depends on the will of ONE of the parties
▪ NOTE: If happening of future and uncertain event will depend upon will of
BOTH DEBTOR AND CREDITOR ONLY (not upon chance or will of 3rd
person) --> VOID and NOT POTESTATIVE --> WHY VOID?????
□ Condition cannot be made to depend upon will of both creditor and
debtor only; if you add chance, then valid
▪ Kinds
1) Simple potestative
2) Pure potestative
a) Depends SOLELY on will of creditor --> valid and is in fact a
PURE OBLIGATION
◊ I (debtor) shall pay you (creditor) when you want to
◊ Applies only to a positive suspensive condition
b) Depends SOLELY on will of debtor in a positive-suspensive
condition --> VOID bec condition is illusory --> eg debtor will
pay creditor only if debtor feels like it
◊ Reason: obligation becomes illusory bec person has power
not to perform his prestation and fulfill his part of the
obligation --> I will pay only when I want to
◊ Permutations
 BUT if it is a pre-existing obligation and then debtor
says he will pay only when he can, will it make entire
obligation void? NO only the condition not entire
obligation
– Debt is already existing and then upon demand
by creditor, debtor says "I will pay when I have
money" --> indefinite period bec sooner or later
he will have money --> cannot be that forever
he will not have money --> VALID
– If there is a PRE-EXISTING OBLIGATION, then
a suspensive condition was created that
depends only on the sole will of the debtor, the
only thing that will be extinguished is that
condition that depends only on the sole will of
the debtor (kasi may existing obligation na, e!),
and not the entire obligation
◊ TAKE NOTE
 perfect pure potestative condition dependent
upon the sole will of debtor in a positive
suspensive condition: Debtor promises to pay if he
wants to
 Not "perfect pure potestative condition dependent
upon the sole will of debtor in a positive suspensive
condition"
– "If he has money" or "if he is able to raise the
money" --> these are indefinite periods
– If debtor promises to pay little by little or when
my means improve or when I shall have
money --> obligation with an indefinite
period --> it will come but you don't know when
but it will but don't know but will but not know
but
– REMEDY of creditor
 Creditor must ask the court that credit has
arrived, i.e. he has money AND make the
indefinite period a DEFINITE one -->

Notes Page 16
 indefinite period a DEFINITE one -->
cannot immediately make an extra-judicial
demand to pay
 Order debtor to pay w/in the period; no
payment and period lapses, then debtor is
in default
c) Depends solely on will of debtor in a resolutory condition -->
VALID
◊ In resolutory condition, roles of creditor and debtor are
reversed
◊ Original debtor will be the one to determine when the future
and uncertain event will occur and depends solely upon the
will
 E.g. I will return this if I want to
 He does not want to --> obligation will not be
extinguished at all bec future and uncertain event will
not occur
• If period made to depend solely on will of debtor --> indefinite
period --> courts will determine what period was probably
contemplated by parties
• If suspensive period DEPENDS SOLELY on debtor, period is
indefinite and must file an action to be fixed by the courts
○ E.g. you can pay me WHEN you want to; payable when
able (pay me WHEN you are able)
○ Creditor can ask court to fix a period
• If condition was made to depend solely on debtor --> void
○ Casual
○ Mixed - potestative + casual
• Nearest to conditional obligations is obligation with indefinite period
○ HOW DO U DISTINGUISH BETWEEN THE TWO??
○ Key to understanding this: finding out whether the event is SURE TO HAPPEN
even if you don't know WHEN EXACTLY it will happen
▪ In an indefinite period, future event is SURE to occur --> it will surely come
but NOT KNOW WHEN it will come --> future but certain
▪ E.g. death of a person, war
○ Suspensive is future and uncertain
○ Period
▪ Indefinite or definite
▪ Resolutory or suspensive
• Possible or impossible
○ Physical or legal impossibility
▪ Legal: not contrary to public policy, good customs, good morals -->
SHOULD NOT BE ILLICIT OR ILLEGAL --> else, WHOLE OBLIGATION is
void; but if the condition can be disregarded without affecting the other
conditions, then it is only the illicit condition is void, the others are valid -->
"SEPARABILITY CLAUSE"
○ Obligations created gratuitously vs onerous
• Suspensive Positive or Suspensive negative
○ Difference in effects
▪ One that governs positive is 1184
□ Future and uncertain event --> it indubitably appears that it will not
occur anymore or it will no longer happen --> obligation is
extinguished
□ Promise of a house and lot is given to a woman if he gives birth to a
baby boy naturally in 2yrs --> extinguished if
 Woman becomes infertile
 Woman bears a girl
▪ Negative is 1185
□ Obligation is EFFECTIVE if it indubitably appears that the condition
will no longer occur or can never be realized, or if the time lapses
□ I will give you this house and lot if you are not married until you reach
the age of 28 --> obligation is effective if

Notes Page 17
 the age of 28 --> obligation is effective if
 Still unmarried
 Becomes a priest
• Kinds of conditions
○ Divisible or indivisible
○ Express and implied
○ Single or multiple/several conditions
▪ Alternative condition: DO NOT COMPLY WITH ALL; if there are 2, only 1; if
there are 3, you can fulfill one or two, but not 3
• Reciprocal or bilateral obligation
○ ALL CONTRACTS ARE BILATERAL AS TO PARTIES but may have unilateral or
bilateral obligations
▪ You cannot enter into contract with your own self UNLESS you are an agent
of another person or if you are the agent of both the seller and the buyer
(acting as the agent of EITHER one or BOTH)
○ THERE IS AN IMPLIED RESOLUTORY CONDITION IN RECIPROCAL
OBLIGATIONS (A1191)
▪ There is a future and uncertain event (i.e. one that will cause the
extinguishment of the obligation -->
○ A1186 vs "purely potestative + positive suspensive" condition
▪ Latter: if happening of future and uncertain event depends solely on will of
debtor --> ENTIRE obligation being illusory is VOID
▪ Former: deemed FULFILLED if debtor prevents the happening
○ A1191
▪ Creditor is the seller to deliver the goods
▪ Debtor is vendor to pay the purchase price
▪ Default on one of parties only starts when one of the parties perform his
prestation; in the meantime, both of them will be in compensatio morae;
unless one of them performs
□ In a reciprocal obligation, to be safe, do not perform unless the other
is READY to perform his prestation OTHERWISE if one of them
performs, and the other is in default, e.g. seller is not paid full price but
horse was delivered --> buyer can just ride the horse and
disappear --> other party CAN JUST ESCAPE the obligation
□ IF JUST PARTIAL PAYMENT, still in compensatio morae, not yet full
fulfillment of prestations
▪ Delay on the part of the creditor: debtor wants to perform obligation but
creditor w/o any reason refuses to accept the tender of payment
□ Have to go to court for a CONSIGNATION CASE: Plaintiff-debtor has
performed his obligation and his obligation has been extinguished
 Consigned asset will bein custodia legis --> court provides an
administrator to take care of the thing pending the case
 Obligation of seller to deliver thing sold will be extinguished
through proper tender of payment and consignation hence will
no longer be liable to those things, and obligation and
responsibility will turn over to the buyer who did not accept the
thing w/o just cause
▪ Buyer in delay of paying obligation --> on date agreed to consummate sale,
both are not ready, willing and able to fully perform their respective
prestations (buyer not ready to pay full purchase price + seller cannot
deliver horse) --> COMPENSATIO MORAE
□ Both in default but default of seller is offset w/ that of buyer
□ NO DAMAGES CAN BE ASKED OR GIVEN BY THE COURT BUT he
can refuse to perform fully his prestation until the other is ready to
perform fully as well
□ Only when one of them FULLY performs his prestation will default
begin on the other
▪ Ready, willing and able party has 2 options when the other party is not yet
ready, willing and able
1. Force buyer to pay purchase price (specific performance) OR
2. Cancel the sale (rescind the obligation)
 BUYER CAN STILL QUESTION RESCISSION made by seller

Notes Page 18
  BUYER CAN STILL QUESTION RESCISSION made by seller
especially if he still wants do specific performance and push
through w/ obligation --> now he's ready to pay purchase price
even if payment is late and "breached" the contract
◊ Present evidence of ea party to prove if it is SLIGHT delay
or GROSS delay

OTHERS
• JUDICIAL PERIOD or period fixed by court CAN NO LONGER BE EXTENDED by the
courts
• Read Gaite v Fonacier --> instructive of indefinite period vs suspensive condition
• Read osmena vs rama and longara cases: selling of house does not depend solely
on the will of the debtor --> at most, a mixed condition, at the very least, a simple
postetative --> pre-existing obligation + debtor pay debt only when he has sold his
house = CREDITOR INTENDS TO BE PAID FOR SURE kasi ang tagal na nu'ng
obligation, e; hence the obligation should not be voided on ground that obligation is a
purely potestative one + meron pa namang posibleng BUYER dahil sa magandang
offer ng pagbenta ng house
○ In both cases, obligation is a pre-existing obligation; obligation has already
existed
▪ Longara: advances has been made over a period of time even after death
of original debtor; widow and children were asking for cash advances
▪ Osmena:
○ Take note how long the original debt has been in existence; when was the
original loan made
○ Put yourself in mind of creditor who agreed to be paid when the proceeds of the
houses in Spain were received by the heirs of the debtor --> what was on his
mind when he agreed
○ Similarity in law in the facts: both obligations are PRE-EXISTING OBLIGATIONS
▪ Longara: loans that have been given by Hermosa over a period of time
during the Japanese occupation --> original creditor died so it is not the
original creditor that is the creditor, but it is still the original debtor --> loan
was given before 1942 --> MORE THAN 10 yrs have passed from first
promissory not to second MEANS collection of credit has become a
NATURAL OBLIGATION; so by way of the second promissory note where
the loan was acknowledge by the 2nd creditor, the natural obligation
became a civil obligation again; when course of action has prescribed 10
years from due date, debtor needs to acknowledge again the promissory
note to revert it to a civil one
□ In the process of being sold and is in the process of being transmittted
in the PH
▪ Osmena: loans as well to the sugar --> loan was given 1890
□ "when he shall have sold the house" hence it is a pre-existing
obligation
▪ In both cases, creditors were allowing the debtors enough time to raise
money bec they don't have money as yet; they have solid assets but not yet
been able to convert it into money; so asking for enough time --> IS THAT A
CONDITION?? NOO!!!! --> CREDITOR INTENDED TO BE PAID SOONER
RATHER THAN NOT AT ALL!! Kaya nga binigyan ng oras para mag-ipon
□ When I have received proceeds from house in Spaon
□ When I have sold my house in Cebu
□ Do you think if the house is not sold in Rama, or if the proceeds in the
Heromsa case were lost (so the proceeds will never arrive), do u
mean to say creditors will not expect to be paid if the conditions have
not been fulfilled?? NO!! Creditor STILL EXPECTS and IS CERTAIN
to be paid! --> Selling of house is not subject only to the will of the
debtor --> dependent on other factors!!
▪ If obligation subject to suspensive condition, appening of which depends
upon sole will of debtor, and condition does not happen, debtor will no
longer pay??! NO, creditor will still expect payment even if the condition
does not happen!!
▪ Osmena v Rama: if you consider it as a suspensive condition, it is a

Notes Page 19
 ▪ Osmena v Rama: if you consider it as a suspensive condition, it is a
condition that depends solely on the will of the debtor; is this correct?
Selling of a house dependent on the will of the debtor?? NO! It's a SIMPLE
POSTETATIVE CONDITION!! Circumstancse may occur where debtor will
have to choose either to sell the house or not to sell the house, and starve;
so he might be forced to sell the house --> NOT A PURE POTESTATIVE
but a SIMPLE POTESTATIVE
▪ EVEN IF IT WERE SO, it should not be that the WHOLE OBLIGATION
should be declared void but only the illicit condition --> why? BECAUSE
THERE HAS ALREADY BEEN A PRE-EXISTING OBLIGATION!!
▪ PT: THIS IS NOT A CONDITIONAL OBLIGATION THAT DEPENDS UPON
THE SOLE WILL OF THE DEBTOR!!!
• Taylor v Uy Chien Piao --> resolutory condition
○ Taylor: it might be that the machineries never arrived in 6mos bec Uy Tien Piao
has cancelled the order but then he is merely guaranteed 6mos employment
○ "any reason" includes employer can cancel the order
○ FIND OUT WHAT ARE THE EXIGENCIES AT THAT TIME!! That may have
resulted to the cancellation of the order
• Parks v Province of Tarlac
○ Know the princple of the local gov't included
• Cases re forests
○ UP vs de los angeles AND Song fo v Hawaiian PH --> RECIPROCAL
OBLIGATIONS
▪ debtor can contest rescission by the creditor if there was only a slight
breach or delay --> SLIGHT DELAY is not ground for rescission --> court
will set a period for the fulfillment
▪ UP v Angeles --> automatic rescission BUT can still be questioned in court
□ Alumco was already in default, and there was already a pre-existing
obligation when Alumco executed a contract that contained a cluase
that in case Alumco does not tender payment, UP can rescind
○ Rustan Pulp & Paper Mills v IAC
• Onerous v Gratuitous
○ Onerous prestation is governed by provisions on contracts
○ Gratuitous obligation --> simple OR remuneratory donation
▪ Rumenatory: reward for past faithful services that do not amount to a
payable debt
• IF PROVISION DOES NOT SAY WHETHER SPECIFIC OR GENERIC THING, it's
generally a specific thing
○ E.g. applicable to A1189 --> specific thing!
• IF PROVISION DOES NOT SAY WHETHER SUSPENSIVE OR RESOLUTORY, it's
generally a suspensive condition
• Genus never perishes is actually "genus never physically perishes"
○ Limited generic thing can physically perish --> e.g. if all of Danding's pigs in his
ranch dies, when the obligation is to deliver pigs only coming from Danding's
ranch
• Re fruits
○ Reciprocal -- no delivery yet and no payment; purchase price earns interest and
horse gives birth to a fowl --> COMPENSATED
○ He who owns the mare AT TIME OF BIRTH will own the fowl
▪ Only when the object of contract is delivered to buyer will ownership
transfer
▪ If fowl gives birth after delivery, buyer owns horse; if fowl gives birth before
delivery, debtor owns horse

Notes Page 20
Title 1, Bk 4, T1, Ch 3, S2
Tuesday, 20 February 2018 4:33 PM

Obligation w/ a period
• Classifications
○ Suspensive or resolutory
▪ Suspensive -- from a day certain -- ex die
□ There is already an obligation; just a matter of time of waiting for the
time to occur
□ Time is certain
□ SUSPENSIVE PERIOD: presumption is that benefit is for BOTH
debtor and creditor
○ Creditor cannot demand payment before suspensive period
▪ If obligation earns interest, then benefit is the increase in
the interest in addition to the principal amt
▪ If obligation to pay a sum of money does not earn interest,
what is the benefit creditor gets?
○ Debtor cannot compel creditor to accept payment before
suspensive period
▪ More time to raise the amount to be paid
▪ More time for the delivery of the good
▪ Resolutory -- up to a day certain -- in diem
□ There is some FUTURE and UNCERTAINTY -- future event may or
may not arrive
▪ Suspensive condition may be made as a condition -- I will give you this car
if by the Dec 21 2018 you are still unmarried --> fixed period but MADE as a
condition bec uncertain whether you are still unmarried once the day comes
○ Express or implied
○ DEFINITE OR INDEFINITE
▪ Definite
□ 1 yr (365 days) from today
□ At this specific date
▪ Indefinite
□ Debtor can pay obligation when he is able to, when he has money
□ When the squatters have been evicted from the lot (eviction is a
foregone conclusion or sure to happen PROVIDED that debtor is the
real owner; bec squatters will necessarily be evicted)
□ 2-step process: when creditor thinks debtor already has money can he
right away say pls pay right away? NO bec of the indefinite period
 FILE ACTION to fix period --> to make indefinite period a definite
one; I SAW HE HAS MONEY SO PLS COURT MAKE SURE HE
PAYS ME at whatever time you shall fix
◊ When suspensive definite period arrives as set by court,
court will order debtor to pay
 NON-EXTENDIBLE by both parties and courts; if there is non-
payment by debtor, interest accrues on the date specified
◊ Parties can extend the court's fixed date SECRETLY; but if
the debtor is not able to pay still even w/ own compromise
date by parties, creditor can still have an action for
damages and COURT CAN STILL AWARD DAMAGES but
the interest shall accrue from the day of the fixed date
○ Voluntary, Legal, or judicial
▪ Legal or provided for by law
□ Sale w/ pacto de retro
□ Seller just reserves right to repurchase w/ no definite period
□ Period for exercising right of redemption
□ Period provided for the RULES OF COURT (e.g. when will decision
become final and exectory)
▪ Judicial period: period set by the court
• Deterioration, improvement, loss on a determinate thing w/ a suspensive period (1189

Notes Page 21
 • Deterioration, improvement, loss on a determinate thing w/ a suspensive period (1189
is applicable)

OTHERS
• Ponce de Leon
○ One of the parties is shrewd; wants to have the cake
○ Read chapter on payment!! To know what can be paid and where payment can
be made--> japanese war notes became worthless
▪ Where it can be made depends on if there is a stipulation or not
▪ No stipulation --> place is where that specific thing was at the time the
contract was made
○ He wants to pay in Jap war notes to pay for a partial of sugarland

Notes Page 22
Title 1, Bk 4, T1, Ch 3, S 3
Thursday, 22 February 2018 2:51 PM

Alternative and Facultative

• Multiple disjunctive obligation
• Focus on NUMBER OF PRESTATIONS --> multiple prestations

Alternative
• Kinds of prestations in alternative obligations --> prestations in an alternative
obligation can be any of these (kahit mixed; isang to do, isang specific, 3 generic, etc.
sa isang alternative obligation --> combinations available is only hampered by the 2
parties)
○ Prestation to give a specific thing
○ Deliver ANOTHER specific thing (specific race horse and specific car)
○ Deliver generic things
○ To do
○ Not to do
• Even if prestation are of different kinds, if agreed by parties, they know in their minds
that the relative value of these obligations are RELATIVELY THE SAME
○ Because if one of the alternatives is less, then debtor can just choose the
cheapest, least important, or least onerous (burdensome)
○ If creditor has right to choose, then he can just choose the most important to
him or the one w/ most value
• Must perform 1, 2, 3 or 4 but not 5/5 ELSE if 5/5 was performed it becomes a
conjunctive obligation
• If obligation is silent, DEBTOR chooses
○ DOES NOT NEED to notify creditor
○ Can be IMPLIED choice, by performance
○ Scenario:
▪ there are 3 alternative prestations
▪ on the day that debtor is supposed to perform obligation and choose
whichever alternative, if that debtor communicates his choice --> CAN NO
LONGER REVOKE or CHANGE his choice
□ no longer alternative, becomes a SIMPLE obligation;
□ so anything that happens to the specific horse affects the entire
obligation
• FOR AS LONG AS THERE IS AN ALTERNATIVE PRESTATION LEFT, and the
choice belongs to debtor, even if debtor loses specific thing through his fault, he can
still choose the remaining alternatives
○ trouble: wat if 2 of the alternatives are for the delivery of specific things, and
these were lost by debtor, and 3rd is a prestation to do, w/c has become legally
impossible --> theoretically difficult to say creditor can claim damages
▪ If 2/3 alternatives were lost, it becomes a simple obligation
• Choice in an alternative were given to creditor
○ if one prestation is for the delivery of specific thing and was chosen by creditor
but was lost through fault of debtor, can the creditor choose the value of the one
w/c was lost through the fault of debtor? DEPENDS, but always w/ damages
○ If debtor-buyer has not yet paid partially or fully for the horse, can seller be
bound to just give money for the horse instead of delivering it if seller was guilty
of negligence?
▪ Seller can be required to pay damages
▪ Debtor-buyer CANNOT choose the value for the horse bec DID NOT PAY
yet for the horse
○ But if the buyer has already paid partially to seal the obligation, or given earnest
money (given payment to show that he is SINCERE and EARNEST to buy
THAT SPECIFIC HORSE), then HE CAN ASK FOR THE VALUE of the horse +
damages
○ POINT: when creditor is given right to choose, if somehow, through fault of
debtor, the creditor is NOW LIMITED IN HIS CHOICES bec one or two
alternatives (w/c were specific things) is lost, creditor CAN CHOOSE that
alternative w/c now became impossible or lost + damages --> ONLY

Notes Page 23
 alternative w/c now became impossible or lost + damages --> ONLY
APPLICABLE IF HAS PAID PARTIALLY or FULLY
▪ He can still choose the remaining ones if he wants to
▪ This is so bec he is now forced to choose among the alternatives that he
would not have chosen when he really wants those that were lost

Facultative
• Principal prestation/s + substitute prestation/s
○ Any number is possible
▪ 1 principal + 3 subs
▪ 2 principal + 2 subs
▪ 3 principal prestations that go together + 3 principal prestations that go
together --> debtor can choose either all "3 principal as a whole" or all "3
substitute as a whole"
• Right to choose can only be given to DEBTOR; never to creditor
• BUT IF SEVERAL DAYS BEFORE DUE DATE, debtor calls up creditor and debtor
says I'll choose the substitute or choose the alternative --> NO MORE FACULTATIVE
bec has already communicated choice to deliver
○ TIP: until last moment, DO NOT CHOOSE!!
• IF ANYTHING happens to principal determinate thing, even if substitute is still there,
obligation is extinguished
○ PERO ang wais na debtor, hindi aaminin na may nangyari sa principal specific
thing through his fault, pero ibibigay na lang 'yung substitute
○ Even if creditor knows, cannot still ask for damages bec debtor is the one that
chose

Notes Page 24
Title 1, Bk 4, T1, Ch 3, S 4
Thursday, 22 February 2018 3:53 PM

Focus: TIE THAT BINDS or VINCULUM

• Relationship AMONG the multiple debtors and multiple creditors
○ What legal tie binds the creditors among ea other?
○ What legal tie binds the debtors among ea other?
• What is the tie that binds the multiple debtors or creditors to the prestation?? Either
JOINT or SOLIDARY
• Consequences arising from joint or solidary are vastly different

Solidary
• How created
1. By stipulation
2. By law
▪ Co-prinicpals in a crime
▪ Joint-tort-feasors
▪ 2 or more payees in a solutio indebitii
▪ 2 or more borrower in commodatum
▪ 2 or more officius managers of the same property
3. By nature of the obligation
• "Obligation that is in the joint and several" or "liability is joint and several" or "joint and
several obligations of A, B and C" or " I promise to pay… then below are signatures of
several co-debtors"
• Solidary debtor can be required to pay the ENTIRE obligation
• KEY TO UNDERSTANDING SOLIDARY
○ Passive solidarity: debtors are bound solidarily
▪ Relations among the co-debtors is one of Mutual Guaranty
□ sir: mutual guaranty is not the best term to be used but rather mutual
suretyship
□ Guaranty v surety
 Guaranty: liability for payment of the obligation exists for the
guarantor only when (guarantor can be req to pay obligation only
if) creditor has already used and exhausts all remedies he has
against the principal debtor but still no payment --> EXCUSSION
 Surety: guarantor who binds himself solidarily w/ principal debtor
ALTHOUGH he is not a co-debtor --> can be made to pay entire
obligation if creditor notifies him that he has made demand
payment from principal debtor but debtor does not want to pay
□ D1 is responsible for his own share but also guarantees the share of
D1, D2, D3 and D4
▪ Debtor must be fully reimbursed by co-debtors
▪ If NO DEMAND was made by any of the creditors of the due and
demandable obligation, debtor can pay to ANY of the creditors
▪ If one of the solidary co-debtors become insolvent, can the rest of the
solidary co-debtors be required to pay for the share of the insolvent? YES!!
They can be made to pay in addition to their own shares
□ D1 paid the whole obligation while d4 was insolvent --> d1 can ask for
the reimubrsement + share of each co-debtor from the share of the
insolvent debtor
○ Active solidarity
▪ Relations among the co-creditors is one of Mutual Agency
▪ None of the solidary creditors can assign the credit to a 3rd person unless
ALL solidary creditors agree bec of the MUTUAL AGENCY RELATIONSHIP
□ everyone has the trust and confidence of the others
□ Assignment of rights: c2 is going to sell his share in his solidary
credit --> thus, as assignor/seller, he will introduce a NEW solidary
creditor
 Why should there be the requirement of other creditors'
consent?

Notes Page 25
 consent?
 Asignee-c1 will step into shoes of c1 as solidary creditor together
w/ c2 and c3 --> TRUST and CONFIDENCE IS NEEDED -->
since asignee can collect credit for all their shares, dapat hindi
manloloko si asignee-c1
○ Mixed solidarity
• C1 demands payment from D1 --> d1 can be required to pay the entire obligation; if
debtor comes up only w/ share of 30M out of the whole 150M, CAN creditor be legally
bound to accept it? NO. PERO siyempre in reality and practically, he can accept the
payment as partial payment but creditor can say "hoy d1 in default ka kasi kulang pa!";
in this case are the other debtors in default too? YES, they are all in default
ASSUMING of course all shares are also due and demandable
○ Acceptance of creditor of partial payment WITHOUT SAYING THAT "even w/
partial payment, DEBTORS ARE IN DEFAULT," creditor is deemed to have
waived default of debtors
○ NOTE: creditor cannot demand payment that has not yet been due and
demandable
○ C1 will declare that all 4 solidary co-debtors are now in default even if there is
partial payment --> c1 can still make and continue demand payment of what is
left --> c1 demands payment of the remaining 90m to d2; he can also claim
damages --> so on and so forth until all balance have been paid
▪ If a demand is made to d1, even if d1 does not like c1's face, he has to pay
to c1, and not to c2 nor c3 (A1214)
□ BECAUSE when c1 made a demand to d1, he is making a demand for
the share of his credit AND acts as an agent in behalf of C2's share
and C3's share --> collecting share of himself, c2's and c3's
▪ HOWEVER, co-debtors who were not in ACTUAL fault cannot be
compelled to contribute to the damages --> debtor-in-delay can be
made to pay WHOLE indmnity
□ D2 can, in the matter of reimbursement for the damages, rightly
say that he should not pay any part of the damages bec he is not
at fault --> in fact, if d1 had notified him that c1 made demand, he
could already have come up w/ the entire obligation! --> as to the
rest, they can also prove that had the demand of c1 to d1 had
been communicated to them by d1, they could've paid their share
▪ They can be required to contribute respective shares but not the
damages
▪ BURDEN OF PROVING THEY COULD PAY rests on them and
must be done
○ DELAY OF ONE SOLIDARY Co-DEBTOR IS DELAY OF ALL CO-DEBTORS
▪ Hence all can be made to pay for damages, subject to reimbursement from
the debtor/s-at-fault
▪ Or any one of them can pay the whole indemnity/damages --> but can be
reimbursed by other co-debtors --> SHARED DAMAGES
• Can be sued individually
• Solidary co-creditors cannot do anything prejudicial to his co-creditors; but there are
exceptions meaning co-creditor can do the ff even if prejudiced:
1. Novation
▪ Can be beneficial or can be prejudicial depending on the stipulation
2. Confusion
▪ Will be beneficial
3. Compensation
4. Condonation/remission
▪ Remission is an offer of a donation w/c must be accepted by the debtor
□ Equivalent to a GRATUITOUS INTERVIVOS DONATION of an
INCORPOREAL MOVEABLE PROPERTY
 No valuable consideration
 Out of pure generosity and liberality
 Credit is an incorporeal moveable property (415,416,417)
□ Donation is a contract and --> formal or solemn contract --> there is
an offer and an acceptance --> hence, PERFECTED UPON C1's
KNOWLEDGE of D1's acceptance; when donor LEARNED about the

Notes Page 26
 KNOWLEDGE of D1's acceptance; when donor LEARNED about the
acceptance, not merely communication (sinend pa lang ng donnee;
pero 'di pa natatanggap ni donor) of the acceptance
□ Debtor MUST accept it BUT THERE IS A PROPER FORM; cannot be
oral
 Intervivos donation of a moveable: MUST BE IN WRITING -->
must send a letter to debtor offering or telling him condonation
◊ EXCEPT: it can be orally made if 5000 or less --> must be
coupled w/ immediate delivery --> remission of this debt is
perfected once delivered
◊ If more, it must be in writing --> w/o these, donation is not
perfected
 If not proper form, invalid!
 THERE MUST BE A REPLY of acceptance
▪ Forgiveness of debt
▪ Effect to creditor who made the remission: he will be liable to the shares of
his co-creditors
▪ 3 remissions creditor can give
1) Remission of SHARE or WHOLE OBLIGATION
 Debtor to whose remission was made (in case of remission of a
share) --> co-debtors are still liable for the REMAINING
BALANCE
2) Remission of solidary tie --> MUST BE EXPRESSLY MENTIONED
 Debtor to whose remission was made will…
◊ Only be liable for his share
◊ No longer be liable for other's share
 There can be partial remission of the solidary tie
◊ Remission of whole solidary tie by the creditors will make
the obligation a joint obligation
◊ BUT, any sole solidary creditor can remit the solidary tie
that binds d1 to the other co-debtors; thus making him
alone as bound by his share --> needs to pay only the 5m;
no longer the guarantor of the other solidary debtors and
no longer obliged to pay whole obligation
◊ In this case, obligation is still 25m and can be collected to
ANY of the solidary co-debtors EXCEPT d1 --> until d1
pays, 25m pa rin; but if he pays, 20m na lang
3) Both
 No longer solidarily liable for remaining balance --> MUST BE
EXPRESSLY MENTIONED; else tie is not cut
 No longer liable for his share
▪ Situation: mixed solidarity
□ C1 sends letter to D1 telling him he is CONDONING or REMITTING
THE ENTIRE OBLIGATION of all co-debtors in favor of D1, in
writing --> debtor accepts --> are other co-debtors still liable?
 Relative to D1, D2, D3, D4 and D5, it is valid --> it will benefit co-
debtors
◊ But, d1 cannot ask anything from his co-debtors; d1 cannot
compel d5 to pay him
 General principle behind A1220: can't do this bec if
so he will be UNJUSTLY ENRICHED
 After entire obligation is extinguished, C1 must pay to his co-
creditors what he remitted
□ If d4 paid c4 the due and demandable 25M, but then there is
condonation --> perfection of donation came AFTER payment -->
A1219 applies
□ If c1 makes a demand of payment from d2, can d2 pay to c3? NO. bec
when c1 makes a demand to d2, he becomes the agent and
representative of ALL persons
 Only when any of solidary creditor has not demanded from any
of the solidary debtor can any co-debtor pay to any co-creditor
□ If d5 becomes insolvent to pay his share, rest of 4 solidary co-debtor

Notes Page 27
 □ If d5 becomes insolvent to pay his share, rest of 4 solidary co-debtor
shall proportionately share the share of d5 --> they will bear their own
share of 5M + 1,250,000 from the insolvent
 They become creditor of the insolvent and can make claim on an
insolvency case filed against the insolvent co-debtor
 If all properties have been gathered and brought back to
insolvent's estate, and once sold and proceeds are more than
his total liabilities, then the difference will be distributed among
the co-debtors
□ Total remission in favor of d1: entire obligation is extinguished as
perfected
 D1 cannot get shares of co-debtors else unjustly enriched
 BUT SUPPOSING c1 remitted only the WHOLE SHARE of d1,
and not the entire obligation
◊ Will that be valid against co-debtors? YES, as partial
remission
◊ Will it bind c2, c3, c4, c5? YES, as partial remission
◊ Balance is (original - partial remission)
◊ Is d1's liability for the shares of his co-debtors
extinguished? NO
 C2, after the remission, demands on D2 --> D2 can
use the remission to subtract from the original -->
'yung remaining balance na lang babayaran
– D1 need not pay anymore
– C1 cannot have any share of what C2 will
get; C2 will only appropriate the remaining
balance to the co-creditors who did not
remit meaning C1 no longer has any share
 BUT d1 has not yet been removed from the solidary
relationship --> still has the tie that binds him to co-
debtors
– UNLESS creditor explicitly and expressly states
that even debtor's tie has been cut
□ Minimum remission that can be granted to sole debtor; what is the
smallest amount that can be remitted --> the MINIMIST or SMALLEST
remission possible
 Smallest is not the portion of his total share
• A1222
○ 4 defenses of debtor
1. Defenses w/c are derived from the nature of the obligation
2. Of those w/c are personal to him
3. Of those that pertain to his own share
4. Those defenses that personally belong to others
○ Total defense: defense that makes the whole obligation void
▪ 1 and 2 are total
▪ 1 annuls the whole obligation of all co-debtors
▪ 2 annuls the whole obligation of the co-debtor affected and is no longer
bound along w/ other co-debtors
○ Partial defense: defense that only affects the defendant-debtor's share
▪ 3 and 4 are partial
▪ Annulling the obligation arising from the contract RELATIVE to the
defendant-debtor --> need not pay his own share BUT still bound to pay
other's share of debts
▪ Does not mean other solidary co-debtors need not pay anymore --> still has
to pay --> obligation still exists for the remaining solidary co-debtors
▪ BUT, defense available to d4 (not sued) can be used by d1 who is the
defendant in the case --> this will make him only required to pay the
(original - annulled)
○ Inchausti v Yulo: partial remission defense was used

Joint
• Joint obligation of common law

Notes Page 28
 • Joint obligation of common law
○ Anyone of the joint debtor can pay the entire obligation
○ But when sued for damages bec of default, breach, or delay, ALL debtors must
be sued
• Joint obligation of civil law --> this is what we use
○ "We promise to pay… then below are signatures of several co-debtors"
▪ 3 debtors consider themselves only as 1
▪ One for all and all for one
○ WE ARE TOGETHER BUT ALONE
▪ There are 3 of us
▪ But we are alone to our respective shares to our obligation
▪ What happens to them only happens to them; but they are bound to the
whole obligation
□ He alone is responsible for his own share and not responsible for
other's share
□ If d3 becomes insolvent, TOO BAD for creditor --> cannot demand
from other co-creditors
□ If d1 has enough money to pay for himself and also for d2,
 Creditors CANNOT refuse the valid tender of payment by d1 as
long as complete payment, and already due and demandable,
for d2's share --> although d1 is not legally liable for d2's share,
on his own, he can pay it bec in classification of payors, he is a
3rd person in so far as d2 is concerned (3rd person to d2; but
direct party to the whole obligation)
◊ D1 is not LEGALLY required to pay for D2 pero kung gusto
niya, puwede
◊ Classification of payors
 Debtor himself
 Heirs, administrator, executor or asignees, or
agent --> all the same as debtor
 Joint co-debtors --> NOT a principal debtor to others --> third person is
interested in the SHARES of other joint co-debtor
□ joint co-debtor cannot be legally req to pay for other's debts; ea
co-debtor is liable only for his own share of the whole share
 BUT relative to the shares of the others, he is a 3rd person
BUT first person as to his share (principal to his own
share)
◊ Solvency of other joint co-debtors will be liability of
only those co-debtors and not include others
 WHERE LIES CO-DEBTOR'S INTEREST OVER OTHER'S??
WHY IS HE INTERESTED ON THE PAYMENT OF THE
OTHER'S?
□ Vs. ordinary solidary co-debtor? Will have to pay entire
obligation --> PRINCIPAL; not a third person interested in
obligation bec can be req to pay entire obligation
 Insolvency of one will be shared proportionately by other
solidary co-debtors
 WHAT IS d1's interest in d2's share?? Bakit niya gustong
bayaran?
• SHOULD ALL BE SUED in whole

Joint Indivisible
• Usually the debtor --> tie that binds them is JOINT but prestation must be performed
ALL IN ONE GO
○ All should contribute their OWN part so that entire indivisbile obligation can be
performed
○ w/o respective contributions, obligation CANNOT be fully performed; hence delay
on part of ALL joint debtors (kahit isa lang na-delay)
▪ But although ALL of them are in default, it is only the joint debtors who do
not perform their parts who will be liable for the ENTIRE damages; those
who performed their part or those willing and ready to perform will not be

Notes Page 29
 who performed their part or those willing and ready to perform will not be
liable but still in default
▪ BUT IF the creditor has, for example, made a downpayment/advanced
payment or delivered something to the joint debtors, and the joint debtors
got portions of this downpayment --> when the creditor chooses to rescind
obligation, THEY MUST RETURN whatever they received from creditor and
creditor in return must return whatever he received from ea debtor
□ Liability of debtors
 Portions ea received from creditor + payment for damages
 EXCEPT those ready to perform or has performed will only
return what he received (no payment for damages)
○ That is why it is INFINITELY better for creditor to bind debtors SOLIDARILY
▪ So solidary creditors can demand from any of the solidary debtors
perforamnce of entire obligation
▪ If one is in default, all is liable and can be made to pay the damages
▪ POINT: when contracting, make sure there is a stipulation that makes
obligation in SOLIDARITY
• Deliver of a specific thing --> presumed to be indivisible
○ UNLESS for example KILOS of pork
○ BUT it doesn't mean that if object of contract is divisible thing, obligation cannot
be made indivisible --> indivisible obligation w/ divisible thing
▪ Object of contract is divisible: 100 tons of rice
• Illustration
○ Creditor wanted debtors to build jeep (part 1, part 2, part 3)
○ Creditor paid 50% as downpayment
○ Due date came --> part 1 was not delivered; creditor bought a new jeep from
another shop w/c was 100 pesos more, and rescinded the contract
▪ Creditor must return parts 2 and 3 to respective debtor
▪ Debtor who was in ACTUAL default must pay 100 for damages + portion
part of downpayment he received
▪ Debtors who did their part must only return portion of downpayment they
received; cannot be made to pay for the damages

Others
• If solidary creditor chose specifically the solidary debtor who, from his knowledge, is
financially incapable of performing, still liable?
○ Defense: ok we are all in default but you precisely chose to zero in on our
weakest member to make us liable for damages --> YOU ABUSED YOUR
RIGHT; we are liable to you bec you abused your right
○ BUT even if weakest mem, he should have notified the rest, so entire obligation
can be paid
• If you're client must hide, he must hide in a State which has NO EXTRADITION
TREATY w/ PH
• STUDY 1222 colorally to that read INCHAUSTI v YULO
○ Why is it that Yulo could not be made liable to pay the entire obligation EVEN IF
there was no novation of the old promissory note? Only req to pay 1/2 of the old
or new obligation
○ Way to anylze the ruling: GRAPH THE RESPECTIVE DUE DATES OF THE
OBLIGATIONS of both the old promissory note and new promissory note
○ There are actually 4 defenses in this provision, not 3 --> be able to tell sir the 4
defenses available to a solidary co-debtor upon whom a demand is made by a
solidary-creditor or one sole creditor
○ Look at the ponente!
○ Creditor Inchausti DID NOT INTEND that Gregorio and other SHOULD NOT
BENEFIT from the remission; but y did court hold that they can still benefit from
the partial remission
▪ GREGORIO ought not to have benefitted from partial remmission; only
Carmen and 2 others should have benefitted
▪ BUT y was it that Gregorio was allowed to be benfitted from the reduction?
▪ Problem: Old promissory note and new CAN EXIST SIMULTANEOUSLY
TOGETHER
□ Gregorio is bound to old

Notes Page 30
 □ Gregorio is bound to old
□ Carmen and 2 others bound to new
□ WHY GREGORIO BENEFITS TO THE NEW??
• Is it LEGALLY POSSIBLE for a complicated obligation to contain all of the
classifications of obligations in this chapter?? Both pure, condition, indefinite, definite,
w resolutory, etc. etc, joint, solidary, divisble, indivisble, joint indivisible, etc. -->
THEORETICALLY POSSIBLE but you will be crazy to do this!

Notes Page 31
Title 1, Bk 4, T1, Ch 3, S 5
Thursday, 1 March 2018 3:19 PM

Focus: w/n obligation can be performed

• partially (divisible) or
• Not (indivisible
Prima fascie presumptions
• If thing that is object of contract is an INDIVISIBLE thing --> indivisible
obligation
○ Bec cannot be performed in parts
○ E.g. one live animal, house, car
○ UNLESS
▪ performance is in measurements: delivery of a specific herd of cattle
▪ Stipulated to be divisible (building of jeep is in stages)
• If obligation can be performed in certain number of days or can be measured by
metrical units (volume, area, linear length) --> divisible
○ Linear length: weave an Ilocos blanket (paid by the millimeter)

Notes Page 32
Title 1, Bk 4, T1, Ch 3, S 6
Thursday, 1 March 2018 3:36 PM

Obligation w/ a penal clause

• Penal clause requires a PRINCIPAL obligation
○ It is NOT the entire contract
○ It’s just PART OF A STIPULATION
▪ It's an ACCESSORY stipulation
▪ It's a provision IN CASE obligation is breached
• 2 purposes
○ Punitive: punishment
▪ Usually expressed in "if debtor breaches obligation, he's going to pay x% of
the value of the obligation then outstanding + interest it earned; and in case
the creditor needs to make a judicial demand by filing a case for collection
in court, debtor agrees to pay another x% of the value of the obligation in
addition to previous + atty's fees"
□ BUT court has discretion to reduce it if iniquitous
○ Reparatory: to repair the damage
▪ Penal clause is EXACTLY EQUIVALENT to the foreseen value of the
damages
□ Equivalent to liquidated damages and creditor need not prove the
damages (especially actual and compensatory damages)
□ Need to prove though exemplary and moral damages
▪ In effect, it's a PRE-AGREED measure of damages
▪ Parties agreed before hand, in case of breach, how much the value of the
damages is
▪ E.g. contractor promises to pay damages equivalent to PhP X per day of
delay
□ Penal clause can be extended if owner changes specifications of
project (e.g. need thicker road, wider road, thicker amt of cement, etc.)
• General rule: Debtor should first perform principal obligation; and only in case guilty of
partial performance or delay can penal clause be enforced
○ Exception: cannot be that debtor will choose to pay penalty instead of performing
UNLESS HE EXPRESSLY RESERVED THAT RIGHT
▪ If that is so, he can pay penalty instead of the object of the contract
▪ In this case, what has the obligation become? FACULTATIVE bec instead
of performing principal prestation, he is now performing the substitute
prestation w/c is payment --> THIS IS GIVEN TO DEBTOR ONLY

Notes Page 33
Extinguishment
Thursday, 1 March 2018 4:04 PM

Payment of performance is MOST NATURAL way to extinguish obligation

• That is what creditor expects
• To understand chapter on payments, categorize the provisions in this way:
○ Who may pay
○ To whom should payment be made
○ What should be paid
○ Where should it be paid
○ When should it be paid
○ WHY SHOULD THE DEBTOR PAY? No provision talks about this
○ HOW should the payment be made?
▪ 2 characterstics of a valid payment:
□ Identity: very same obligation should be paid
□ Integrity: it must be a FULL payment
• Problematical part: who may pay and to whom should payment be made
○ Can anybody pay? "YES IF/PROVIDED the 1) payment has identity and integrity 2) AND
the creditor accepts the payment" BUT creditor is NOT OBLIGATED to accept valid
tender of payment by 3RD PERSON NOT INTERESTED (even if complete payment or very
same prestation)
▪ 3rd person paying the obligation and obligation has integrity and identity, and
creditor accepts it --> OBLIGATION IS EXTINGUISHED bec it's a valid payment
□ But did debtor know the payment and consented? If so, CREDITOR CANNOT
REFUSE to accept it provided there is identity and integrity
□ Or did not know abt payment of 3rd person NOT interested in obligation?
 Creditor can refuse to accept it even if integrity and identity
 If 3rd person NOT interested pays obligation, can that debtor sue the
3rd person for damages? YES, he can sue. If obligation is sourced from
contract, that 3rd person is actually INTERFERING w/ contractual
relations of creditor-debtor --> he is in a sense USI or PAKI
 Character loan: you borrow in lieu of your "say-so" bec of your high
esteem --> your word is as good as your bond --> your word is as good
as if it's written --> that's the BEST CREDIT RATING you can have
○ You may lose this if you are not able to pay your debt but a third
person; other business may sense or perceive that you are on
the verge of bankruptcy
○ Debtor is being INSULTED by 3rd person in that " I'll pay for your
debt w/o your consent bec I CAN and I know YOU CAN'T "
○ DEBTOR CAN ASK FOR DAMAGES bec he cannot have a
CHARACTER LOAN or his words has lost integrity
▪ 3 types of 3rd person payors
1. 3rd persons interested in the obligation who intends to be reimbursed
 Concurrence of preference (2241 w/ respect to specific moveable
properties; 2242 specific immoveable properties -- e.g. real estate
mortgage or antichresis; 2244)
□ Hierarchy of preference
 Gov'ts credits is always top preference
 CASE: PLAZA THEATRE INCORPORATED
□ Difference in relative preference between immoveable nd
moveable
 Immoveable property: mortgage credit is lower in
preference than furnacer of materials (material man's lean
or refectionary credit; construction, reconstruction,
repair)
 Moveable property: credit guaranteed w/ pledge (pledgee
creditor) is higher than mechanic's lean

Notes Page 34
 creditor) is higher than mechanic's lean
□ In the preference of credits, less preferred creditor (or junior
creditor)
 Interest of junior creditor: BECOME THE senior creditor (or
a higher rank in the preference of credits) --> UPLIFTING
status from less preferred to a more preferred creditor
◊ Junior creditor is a third person interested in credit
of senior creditor
 Joint co-debtors --> NOT a principal debtor to others --> third person is
interested in the SHARES of other joint co-debtor
□ joint co-debtor cannot be legally req to pay for other's debts; ea
co-debtor is liable only for his own share of the whole share
 BUT relative to the shares of the others, he is a 3rd person
BUT first person as to his share (principal to his own
share)
◊ Solvency of other joint co-debtors will be liability of
only those co-debtors and not include others
 WHERE LIES CO-DEBTOR'S INTEREST OVER OTHER'S??
WHY IS HE INTERESTED ON THE PAYMENT OF THE
OTHER'S?
□ Vs. ordinary solidary co-debtor? Will have to pay entire
obligation --> PRINCIPAL; not a third person interested in
obligation bec can be req to pay entire obligation
 Insolvency of one will be shared proportionately by other
solidary co-debtors
 Guarantor or surety
 There is FULL reimbursement and payor will be legally subrogated to
rights of creditor --> he will become new creditor
2. 3rd persons not interested in the obligation (usi-sero; paki-alamero) who is
interested to be reimbursed
 3rd person must pay WITH THE KNOWLEDGE and CONSENT of
DEBTOR so that he will be reimbursed 100% of what he pays
□ OTHERWISE, if 3rd person pays AGAINST the will of debtor, and
he intends to be reimbursed, he will be reimbursed only up to
the extent that debtor was benefitted by payment
 E.g. 3rd person thought debt was 100k but debtor already
paid 25k or creditor condoned 25k, and he pays without
considering this, he cannot be reimbursed 100k but only
75k
 3rd person CANNOT LEGALLY subrogate creditor
□ If w/ knowledge and consent of debtor, 3rd person can legally
subrogate creditor
3. 3rd persons who DO NOT INTEND to be reimbursed, w/n interested or not
 MAKING AN OFFER OF A DONATION
 That offer of donation MUST BE ACCEPTED by creditor AS DONNEE -->
cannot NOT accept
□ 5K OR LESS, donation can be done ORALLY but WITH
SIMULTANEOUS DELIVERY (accept a donation of flowers or
chocolate NOT day after promise has been made but WHEN the
flower or choco itself is presented) --> perfected donation of
moveable property 5k or less
□ More than 5k --> must be in writing
 3rd person must write to debtor as donnee, and debtor as
donnee must REPLY in writing to accept it
▪ First person: persons THE SAME as the person required to pay (debtor) --> treated
as debtor himself
□ Anyone authorized by debtor to pay
□ Heirs, executors, administrators, assignees

Notes Page 35
 □ Heirs, executors, administrators, assignees
□ Death of debtor --> debt and assets goes to estate --> these ppl can pay
solely or TOGETHER the debt
 E.g. executor calculates the liabilities that survived (including debts to
gov't such as tax) the death of debtor and has the right to pay for the
debt
 Only after payment of ALL debts can legal heirs get their shares
 Court may appoint a receiver who can collect all credits and assets of
deceased --> if assets < liabilities, then estate is insolvent --> here,
creditors are forced to be paid only less than what debtor owes them
▪ But usually, you would like debtor himself to pay --> creditor wants to see debtor
himself personally making the payment as some sort of OBEY-sance --> debtor
must BOW; creditor wants to see debtor humbly delivering the payment
• To whom shall payment be made?
○ DEBTOR MUST BE SURE HE IS PAYING TO THE DULY AUTHORIZED PAYEE representing
the estate
▪ If there is an administrator appointed by court, then payment must be made to
him AND NOT to any indiv heir or widow ELSE you will have a problem --> you will
have to prove that your payment REDOUNDED TO BENEFIT OF CREDITOR
○ Original creditor would assign the credit and creditor notifies the debtor
▪ Debtor cannot pay to the original but to the asignee
▪ You must pay to creditor or his agent or his asignee or if the creditor is dead, you
cannot pay just to a compulsory heir or widow --> widow does not generally
represent the deceased's estate UNLESS widow gets representation judicially
○ If creditor is now incapacitated (e.g. he is lying in hospital bed and in comatose; DO NOT
PAY) --> who will issue a receipt and who will know that you will pay? In deep sleep, you
will whisper that you paid WTFFF
▪ Pay to the assignee or to the person legally allowed to receive the payment
○ You can pay also to person IN POSSESSION of the credit
▪ Who is this person in possession? Is he the one holding (per se) your promissory
note? NO!!! Person is in possession IF credit is a negotiable promissory note
payable to bearer (it's a bearer note; not a note payable to order)
□ E.g. person signs promissory note IN BLANK and endorses it to another, then
it's a promissory note payable to bearer
 Creditor ENDORSES the promissory note to the other person
 POINT: if you are going to pay to the other person, MAKE SURE
creditor gave his endorsement to him; kasi baka mamaya napulot lang
nu'ng taong 'yun 'yung promissory note
○ Debtor pays to 3rd person (aka not authorized to receive the payment)
▪ Effect of the payment: VALID if can be proved that payment benefitted the
creditor
▪ Lessor went to office of lessee and there is secretary, can u pay to sec? ONLY IF
there is authorization
▪ To the wife? SAFER TO PAY the wife than secretary
▪ But if u paid to the mail or house of the creditor; paid to the maid and there is
receipt --> NOT VALID tender of payment especially if maid uses it as her own
□ BUT if maid used the amt TO PAY FOR NEEDS OF THE HOUSE and BABY -->
THEN IT HAS REDOUNDED to benefit of creditor --> VALID PAYMENT
 Also if maid used partial of the payment as her salary, then it
redounded again to the benefit
□ But debtor must prove it redounded to the benefit of the creditor
▪ Such redounded benefit NEED NOT BE PROVED by debtor in the ff cases (see
provision for the exact list)
1. The payment was made to 3rd person but later on, 3rd person acquired the
creditor's right (e.g. became asignee, or he was the sole heir and creditor
died)
2. You pay to secretary, and when the creditor arrived and you told creditor
you paid to sec, then creditor says it's alright that you paid to my secretary

Notes Page 36
 you paid to sec, then creditor says it's alright that you paid to my secretary
3. Based on ESTOPPEL by representation or misrepresentation
 E.g. of misrepresentation: grandma does collection personally and did
not hire any collector for the rents of the rows of apartments she
owns
□ If lady goes on a round to collect payment and is accompanied
by a maid ALWAYS
□ If ea lessees pay the rentals and maid records the payments
every year for the same routine
□ Then one end of the month, it was only maid who went on the
rounds carrying the same records, and lessees were asking
where is your madame, and maid said I'm doing the rounds and
dutifully records the payment
□ Then the next week, madame does the rounds w/o maid -->
lessees will say we already paid last week --> madame: I never
authorized her, y u pay to her? --> lessee: you never told us we
can't pay to her, and she was recording the same payment to
the same record book and told us u can't collect last wk --> by
conduct of creditor, she led lessees believe that lessees could
pay to maid
□ Then a day after, madame receives a letter that maid considers
the rents she got as TERMINAL or RETIREMENT salary and as
compensation to all those yrs she was not given any bonuses
• WHAT Should be paid (answers the identity requisite)
○ Very same prestation that was promised
▪ To give
□ Specific thing
 NO SUBSTITUTION; same self specific thing
◊ Even if another specific thing (better or more valuable) is
substituted for the specific thing to be delivered in the contract,
still not allowed UNLESS first, the 2 parties agree to NOVATE the
obligation
◊ Novate first
 Must include accessions and accessories
 Must not suffer any deterioration, or must be lost through fault of
debtor
□ Generic thing:
 Debtor cannot deliver a mem of genus that is of INFERIOR quality
◊ Debtor can, on his own, deliver SUPERIOR
◊ Can deliver inferior IF creditor accepts w/o objection
 Creditor cannot demand SUPERIOR thing
▪ Not to do
□ STRICTEST
□ Anything done to an obligation not to do is already a breach of the
obligation
▪ Sum of money
□ Should be money of legal tender
□ CANNOT pay in foreign money UNLESS you conform to the exchange rate of
the Peso to the foreign money, or there is express stipulation that payment
must be made in foreign currency
□ Re: interest (A1956)
 2 senses in w/c interest is charged
◊ For use of money, goods or credit; loans or forebearance of
money, goods or credit
◊ Interest for breach of contract or default (in a sense, damages)
□ Extraordinary inflation or deflation: value of currency at TIME OF
CONSTITUTION of obligation is the one to be considered
Only time when provision considering inflation or deflation was

Notes Page 37
  Only time when provision considering inflation or deflation was
applied: Japanese currency that became worthless --> PONCE V DE
LEON case
• WHEN:
○ Depends upon the term
○ When the obligation becomes pure and creditor makes a demand UNLESS it falls under
exception that there is no need to make a demand
1. Law requires it that demand is not needed
2. Stipulation of parties themselves (e.g. "debtor promises to pay on or before a
fixed date w/o need of further demand")
3. By the nature of the obligation (time is controlling motive for the obligation)
4. If the debtor rendered it beyond his power to complete the obligation (e.g. he has
sold the thing to a second vendee; or in an obligation to deliver a specific thing,
through fault of debtor, the thing was lost)
• WHERE
○ Depends on stipulation
○ No place stipulated + delivery of specific thing = where the specific thing was at time
when contract was constituted
○ In the domicile of the debtor
▪ No place stipulated + delivery of generic thing
▪ No place stipulated + prestation to do
□ But, CAN DETERMINE BY THE NATURE OF THE OBLIGATION as well
□ E.g. singing telegram of happy bday
▪ If no place stipulated + not to do
○ Creditors usually knock at door of debtor to demand payment
▪ If debtor changes his residence IN BAD FAITH
□ If forgot inform his creditors in change of domicile and did this to evade
creditors
□ Or WILL NOT GO HOME except after midnight and will leave residence very
early to evade
□ DEBTOR WILL PAY THE ADDITIONAL COSTS as damages OF LOOKING FOR
HIM, COST OF TRANSPORTATION, AND OTHER EXPENSES, FOOD, LODGING
in connection with the demand for payment
• WHY should the debtor pay?
○ You can lead the horse to the water but cannot demand it to drink --> debtor in reality
cannot be compelled even by court order to pay debt if he does not want to --> can be
made in contempt of court, BUT still he may choose not to perform --> so why should
the debtor pay??
○ Bec if he does not pay even after extra judicial and judicial demand, court will
promulgate judgement adjudging debtor to pay --> if he still does not pay, when the
judgement becomes final and executory, then creditor can apply writ of execution and
sheriff will execute judgement BY LEVYING UPON PROPERTIES OF DEBTOR THAT ARE
NOT EXEMPT FOR EXECUTION
▪ Exempt from execution --> family home up to the amt of 300k; if more than 300k,
no longer sellable
▪ Properties will be sold at public auction for the value of the money judgement +
damages
• HOW payment is made
○ Provisions in civil code abt integrity of payment
▪ General rule: debt shall not have been understood to be paid unless obligation has
been COMPLETELY delivered or rendered as the case may be
▪ Substantial compliance/performance in good faith
□ Good faith amounting to full payment
 E.g. the thing to be delivered or to be paid was counted but there was
a miscount in good faith
 BUT the miscount can be paid in damages to creditor
▪ If obligee accepts w/o objection knowing it were incomplete or irregular -> waiver
of the partial/incomplete/irreg performance

Notes Page 38
 of the partial/incomplete/irreg performance
□ Irregularity: QUALITY of the things delivered

4 special modes/forms of payments

1. Application of payments
○ In application of payments, debtor loans from the SAME creditor, the SAME FUNGIBLE
thing (e.g. money, beer)
▪ D borrows from C, loan of 5M
▪ 1yr later: D borrows from C again, 3M
▪ D borrows from C again, 2M
▪ Total 10M
○ Assuming all credits are due and demandable
▪ Payment tendered by debtor is 5M, but note that this is not enough to pay for the
other debts; can D REQUIRE/COMPEL creditor to apply the 5M payment to all
three up to the extent of 1/2? Total of 10M can be extinguished by the 5M?
□ NO: BEC DEBTOR CANNOT MAKE A PARTIAL PERFORMANCE/PAYMENT
▪ In the application of payments, one of the parties will tell the other one "I'll apply
this 5M payment either to the first obligation (5M) or second + third (3M+2M =
5M)
□ General rule: debtor has right to make an application of payment
 Exception: if debtor does not make an application of payment,
creditor can make the application of payment
□ Usually debtor does not make an application; just pays the 5M, and it is the
creditor who makes the application of payment
 U know creditor makes the application of payment WHEN HE ISSUES
THE RECEIPT indicating how he made the application
□ However, if there is still a controversy as to what obligation has been
extinguished, the REFEREE IS THE JUDGE and DETERMINES w/c is the most
onerous debt or the debt that has the heaviest burden on the part of the
debtor
 Judge must take into consideration all the attendant facts and
circumstances of these obligations
◊ Biggest debt
◊ w/c one earns interest
◊ w/c has the highest interest if all earns inteest
◊ Is any of the obligations secured by a mortgage/pledge/chattel
mortgage
 If obligation has security, he will lose more bec he may
lose the property used as security --> more onerous
◊ Does one of the obligations have a solidary co-debtor
 No solidary co-debtor --> more onerous
 ALL BEING EVEN, w/c is the more onerous? Amts are the same + either
all have same interest or no interest --> THE OLDER DEBT IS THE MORE
ONEROUS
◊ If the debtor is a good faith debtor, oldest debt is most onerous
bec he has been worried about payment the longest time; he
has spent sleepless nights for the earliest debt
 There are debtors whose main concern is not paying but
borrowing some more from same creditor --> not in good
faith --> not worried about paying
▪ If debtor in the first place already has 10M, no longer need to make an application
of payments
▪ When you can make an application of payments
1. All obligations owed by debtor to creditor are DUE AND DEMANDABLE; and
2. For the payment of sum of money or deliver of same fungible thing
○ If the debtor insist that he has the right to make the application of payment first and he
already did choose it, but the choice of the creditor is another --> they cannot agree -->
it becomes a controversy --> debtor files action and says he has right to make

Notes Page 39
 it becomes a controversy --> debtor files action and says he has right to make
application of payment --> debtor will win
▪ But if creditor really insists on the others, it is politic for debtor to just agree
BECAUSE
□ Debtor insists on applying to oblgiation 1, goes to court, court says ok
debtor you have the right to choose
 Debtor wins battle but loses war
□ Bec in the end, creditor can make demand on the others w/c the debtor did
not choose and hence the debtor will incur damages
▪ Point: practically, what the creditor wants, he should get
2. Payment by cession (ceding property)
○ To cede (verb) --> variation --> dacion en pago
▪ Pago is "payment"
▪ En pago is "in payment"
▪ Dasion: dar --> to give ; dasion --> giving
▪ "giving in payment"
○ Debtor owes MANY creditors; he cannot pay all of them because, for e.g. his assets
< liabilities; HE GIVES UP
▪ He meets w all creditors, tells them he does not enough property to pay liabilities
and gives up selling these properties --> authorizing all my creditors to SELL MY
properties
□ From the proceeds, they will determine how much ea will share
proportionately
□ If the proceeds of the sale of all these properties are LESS than debtor's
TOTAL INDEBTEDNESS --> liabilities to 5 creditors total 100M; all properties
were sold by creditors and sums 80M
 80 all goes to creditors
 BUT there will be a balance (20% ea to creditors)
 Question: can debtor now be required to pay later? Theoretically, yes
because the total proceeds is less than total liabilities --> debtor still
owes
◊ BUT THEN, debtor is already bankrupt and insolvent, what else
can creditor squeeze? Nothing more. Creditors will have to
await for BETTER TIMES
◊ Subject to suspensive condition
 Might win in lotto
 Might inherit from a relative
◊ IF NOT, nothing else they can do
○ What is infinitely better is a DATION EN PAGO
▪ The obligation is to pay a sum of money but instead of paying a sum of money,
delivers a property
□ Pay a sum of money is debt --> if debtor does not have this money, he can
have another THING to be given in lieu of money for the payment of his
obligation
▪ Debtor should always offer property WORTH MORE THAN the indebtedness bec if
not (if only same amount), creditor will not accept it bec might be more difficult to
be sold
▪ Obligation is NOVATED
▪ IN EFFECT, it is a sale; hence the implied WARRANTIES in sale are also present
□ Implied warranties of, for e.g., TITLE --> seller-debtor warrants to creditor
that there are no hidden defects
▪ IF DEBTOR instead of making a payment be cession of all of his properties, if he
can entice all creditors to agree to multiple dationes en pago
□ "here is a listing of all of my properties with its market value; and a listing of
my debts to you" --> if one wants a property and match his credit, then GO!
2 creditors can even combine their credits to get one of my properties
▪ INFINITELY BETTER bec at the end of the exercise of multiple dacion en pago, the
debtor now will NO LONGER OWE ANYTHING

Notes Page 40
 debtor now will NO LONGER OWE ANYTHING
3. Tender of payment and consignation --> MOST SPECIAL KIND
○ It's the debtor making demand to creditor to accept the payment --> debtor insists in
paying
▪ Debtor is now telling creditor: I am now willing and able to pay
▪ Normally it is debtor who waits for creditor to make a demands
▪ DEBTOR WANTS TO PAY
□ The tender he is paying is valid and good
○ General rule: creditor makes the demand
▪ Why will the debtor insist in paying instead of waiting for the demand or until the
action to enforce obligation prescribes (meaning obligation is extinguished)
1. Obligation is already due, and there is no need for a demand by the creditor
to make the debtor incur in default --> kumbaga automatic na 'yung
demand; 'di na kailangan hintayin 'yung demand, edi magbayad na debtor
2. To avoid risk of default, delay, or damages
3. MORE IMPORTANTLY, think about HORSES and PIGS --> debtor wants to
transfer the risk of losing the thing to the creditor ESPECIALLY IF A SPEICIFIC
THING + transfer/extinguish the expenses/cost of maintaining the 100 pigs
(bec these pigs are eating up his profits; everyday he does not deliver, he
pays for the sustenance of the pigs)
○ General rule: debtor should make a tender of payment
▪ Give 1st notice first to allow creditor to pay if he first refuses --> must be strictly
complied with
▪ Creditor refuses WITHOUT any JUSTIFIABLE reason --> debtor can make a
CONSIGNATION
□ Consignation is a CASE FILED by the debtor before the court
 Before making a consignation, debtor MUST MAKE a tender of
payment
◊ If the tender of payment is excused, can immediately file a
consignation even w/o tender of payment --> e.g. if creditor was
absent in the place stipulated where payment should be made
◊ Why doesn't debtor need tender of payment before
consignation if creditor is not in place of payment?
 bec if creditor is not there, there is no one to give the
payment to
 why bother make a tender if creditor is not there
 LAW DOES NOT REQUIRE A USELESS ACT
 Practical scenario --> Debtor is plaintiff; creditor is defendant -->
debtor-plaintiff owes creditor-defendant money, creditor refuses valid
tender of payment w/o justifiable reason w/c prompted him to give a
first notice, but creditor still refused, hence the present consignation
case
◊ First prayer: Court must first declare that there has been a valid
tender of payment
◊ Second prayer: obligation of debtor to creditor should be
declared extinguished due to tender of payment and
consignation
◊ Third prayer: compensation through justice and equity
□ Consignation is NOT A DUTY --> not NEED to make a consignation if
practically, debtor for example knows where exactly the creditor is or is just
a li'l late
□ DEPOSIT MONEY TO THE ACCOUNTABLE OFFICER: municipal/provincial/city
TREASURER
 Treasurer will issue an official receipt
 Receipt will be photocopied; original is to treasurer; photocopy is to
debtor
 Beneficiary is creditor; trustee is treasurer
IF debtor changes his mind and wants to withdraw his deposit, he

Notes Page 41
  IF debtor changes his mind and wants to withdraw his deposit, he
must file a motion before the consignation court authorizing the
plaintiff-debtor to withdraw the amt deposited before the treasurer
◊ Can't just withdraw the amt from treasurer w/o court
authorization BEC AMT DEPOSITED w/ treasurer is MONEY IN
THE CUSTODY OF THE COURT (in custodia legis); hence a formal
motion must be made to make a valid withdrawal
◊ IF creditor does not agree w/ withdrawal but court grants it,
parties go back to status PRIOR to filing of consignation case
HENCE debtor still owed the creditor
◊ But if creditor approves or consents to the withdrawal of the
amt by the debtor, then ALL GUARRANTORS and SURETIES and
SOLIDARY CO-DEBTORS are RELEASED as accessory obligors,
except for the debtor-plaintiff bec the BIRD WAS ALREADY IN
HAND, all that the creditor had to do was accept the bird but
allowed it to fly away --> unfair for guarantors and sureties to
still make them liable when all creditor had to do was accept the
payment; if later on the debtor could not pay (considering the
approval of the withdrawal), guarantor and sureties are still
made liable w/c is UNJUST and UNFAIR so release na dapat
▪ Debtor gives a 2nd notice --> must be strictly complied w but if court liberally
construes it, service of summons will be considered as substantial compliance for
the 2nd notice; bec together w/ summons is the attachment of the consignation
complaint/receipt containing the amt given to treasurer
○ There are 5 situations when tender of payment is not req
▪ Creditor is absent or incapacitated or unknown or does not appear at place of
payment
□ Absent IS DIFFERENT from not appearing at place of payment --> absent =
someone who is LEGALLY absent (see A381 par 2); those declared an
absentee
▪ NEVER PAY to an incapacitated person LEGALLY nor PHYSICALLY
□ Has no legal capacity --> can't legally consent
□ Physically bec he does not know you're paying --> why pay to an
unconscious creditor
□ PAY INSTEAD to the LEGAL guardian or asignee or administrator or heirs,
executor of will (whoever has the authority to legally represent the
incapacitated or deceased)
▪ Creditor refuses to give receipt
□ If u pay and u have no proof; then u'll have to prove that creditor benefitted
from the payment; u have burden of proving that; if u fail, there is no
payment at all
▪ When 2 persons r entitled to same credit
□ If he pays to one of the claimant, it might turn out he paid to the wrong
person/claimant hence invalid payment --> so, make a consignation instead
to be shur
▪ When title of obligation has been lost

Loss of the Thing due

• Applicable for prestation to give a generic or specific thing
○ If generic, the genus never physically perishes; but genus can legally perish --> outside
the commerce man
▪ Generic thing can be LEGALLY LOST; but not physically lost
▪ But DELIMITED GENERIC THING can be physically lost
□ Situated in ONE PLACE
□ "ecological niche" (e.g. polar bears)
○ If specific, can be lost physically
• Def'n of loss of thing due (A1189, par 2)
Kinds of physical and legal loss

Notes Page 42
 ○ Kinds of physical and legal loss
▪ Legal loss: if thing goes beyond the commerce of man
▪ Physical: thing can no longer be recovered
• Equivalent of loss of things due in
○ Prestations to do --> impossibility of performance of the obligation
○ Prestations to not do --> impossibility of non-performance
▪ E.g. promise not to join the army --> there is call-up of all abled-bodied citizens -->
u r required legally to join --> hence legal impossibility of non-performance
• 1266/1267 --> release of debtor from obligation
○ 2 kinds of impossibility
▪ Impossibility can occur PRIOR TO CREATION OF OBLIGATION; or
▪ A supervening impossibility w/o fault of debtor --> releases the debtor from
obligation
○ Supervening difficulty cannot release debtor UNLESS it is covered by 1267
▪ But it should be beyond contemplation of parties
▪ If supervening impossibility/difficulty is a RISK THAT COULD HAVE BEEN
FACTORED, then cannot hide behind the impossibility
□ If u agree to contract w/c at that time was not difficult but later on became
difficult, unless debtor can prove that the supervening difficulty in
performing obligation cannot be foreseen (beyond contemplation of parties;
could not have thought abt), then debtor is not released
 pacta su servanda (main rule): state parties through a treaty made a
law between them so they must comply w/ the treaty in good faith -->
civil law version of this is 1159
 Remusit stanterus (exception): 1267 is the corresponding PH Civil Law
• NAGA TELEPHONE VS CASURECO --> Sir: SC MISAPPLIED 1267
○ Although naga talehone only had a few subscribers at the time when they agreed to the
contract of alowing Naga to use CASURECO's electrical pole, y did not casureco provide
for a case/stipulation in case there was an increase in subscribers --> foreseeable naman
ah!!

Condonation or Remission of Debt

• This is a DONATION OF AN INCORPOREAL MOVEABLE THING (or intangible moveable thing)
• How to perfect the condonation; For validity of remission as donation
○ If value of credit > 5k, offer must be in writing and the acceptance as well
▪ w/o these, then the donation is not perfected at all --> donation is invalid
○ If 5k or less, no need to be in writing
▪ Implied remission is possible --> simply returned the note or payment or tore the
note
• 1274
○ For a pledge or mortgage to be valid, it must be constituted by the OWNER of the thing
○ DOES NOT NECESSARILY MEAN that it is the remission of the PRINCIPAL OBLIGATION
▪ Cannot presume that principal obligation has been condoned also
○ Whatever happens to accessory happens only to accessory; but what happens to
principal affects the accessory

Confusion or Merger of Rights

• Debtor also becomes his own creditor; only one person is both debtor and creditor
○ There cannot exist such obligation bec person himself is both debtor and creditor; EVEN
IF HE IS BIPOLAR, it cannot be
• Most likely happens in a series of assignment of credit
○ C is creditor and assigns credit to B, then B assigns it to Y, then Y assigns it to W, then W
happens to be the father of C --> so when W died, C became the heir and gets the
credit --> CONFUSION and MERGER --> NO OBLIGATION

Compensation
• 5 reqs for legal compensation
1. Parties are principal debtors and creditors of ea other in different obligations (there are

Notes Page 43
 1. Parties are principal debtors and creditors of ea other in different obligations (there are
AT LEAST 2 obligations + parties are principal to ea other)
▪ Can apply to joint, and also solidary obligations
▪ But it does not mean that it is only A and B
□ C, D, and F can be creditors or debtors in the other obligations where A and
B are present
2. Obligations are in the payment of sum of money OR delivery of the SAME FUNGIBLE
thing
▪ Fungible: things that r interchangeable (e.g. San Mig Pale Pilsen)
□ PERFECTLY exchangeable
□ Of the same quality
3. Obligations r due
4. Obligations must be LIQUIDATED and DEMANDABLE
5. and in neither is a controversy or right of retention that is communicated to the debtor
of these obligations, else that debtor cannot be compensated
▪ No lease pendente
▪ Credit is not mortgaged
▪ There is no mechanic's lean
• Once all of these reqs concur, all obligations will be extinguished UP TO THE CONCURRENT amt
(partial extinguishment)
○ Usually in compensation, especially legal compensation, both obligations are not
equal --> one while be higher than the other --> hence there is no total extinguishment,
only partial
• But in an actual case, it is difficult to know if the 5 reqs concur
○ Cannot realize AT THE MOMENT that legal compensation took place --> IT APPLIES
AUTOMATICALLY once the 5 reqs are met
○ But later on, you will have to check if there was legal compensation to claim it
▪ If you don't claim this w/in the PRESCRIPTIVE PERIOD, you can no longer avail it
▪ YOU SHOULD REALIZE KAAGAD THAT IT HAS TAKEN PLACE --> analyze ASAP!! Else
the other obligations of the debtor might have become natural obligations already
hence cannot require the debtor to pay involuntarily --> in this case, cause of
action of plaintiff has prescribed, and defendant can claim dismissal of case
○ Pt: this can be an actual defense in an action for specific performance
▪ B as debtor, can interpose this legal compensation for his other obligations
• 2 persons are debtors and creditors of ea other in 4 different obligations
○ In one obligation, A is the creditor, B is the debtor
▪ B owes A 10M
○ In the other, A is the debtor, B is the creditor
▪ A owes B 5M
○ In the other, A is debtor and B is creditor
▪ A owes B 1M
○ In another, A, D, and E are debtors, while B is a creditor
▪ A, D and E owe B 3M
• 4 kidns of compensation
1. Legal Compensation (this is the provision!!)
2. Conventional or voluntary compensation --> by AGREEMENT of the 2 parties
▪ What is the BAREST MIN in order that there be conventional compensation?
▪ Nothing to prevent parties from agreeing
□ But WHAT IS THE MIN req? is "the agreement" the min requirement of
having a conventional compensation? Are there other requisites?
3. Judicial compensation or set-off or counter-claim
▪ Setting off one obligation w/ another
▪ Usually, in a counter-claim, defense wants to not allow creditor to collect all credit
or wants not to allow credit to recover under his cause of action; sometimes it is in
the form of CLAIM FOR DAMAGES by the defendant (defendant says, "plaintiff
filed the action w absolutely no cause of action or that there is a clear disregard of
rights of defendant, or that creditor abused his right HENCE creditor becomes
liable to the debtor for damages")

Notes Page 44
 liable to the debtor for damages")
□ the defendant files a counter-claim in an action for specific performance
filed by creditor
□ Amt of damages is not LIQUIDATED but UNLIQUIDATED CLAIM; damages
becomes liquidated (known) when the judge promulgates the decision in
the action for collection --> can be appealed --> if highest court decides and
judgement becomes final and executory, then it has become FULLY
LIQUIDATED (u now REALLY know the amt of damages)
 Pt: you have to wait for the final judgement for there to be a judicial
compensation
4. Facultative compensation
▪ One of the parties will make one of the missing requisites PRESENT or deem it to
have already been satisfied/met so that all of the requisites for a valid legal
compensation will be there --> does not need the consent of the other party; it is a
unilateral decision
▪ When is there fac compensation?
□ When one or two of the essential reqs for legal compensation ARE NOT
PRESENT (it is usually requisite 2 or 3 or 4)
 E.g.
i) one debt is for payment of a sum of money, the other for a
generic thing --> DAPAT bawal kasi different prestations
ii) Both are for the delivery of a superior or ordinary mem of
genus --> cannot apply legal compensation bec objects of the
two obligations are different in kind
 One obligation: Arabian horse
 Other obligation: ordinary horse
iii) One obligation is not yet due
 Subjected to suspensive period
 Subjected to suspensive period
iv) Depends upon the will of the party --> whether he is going to
claim it
 One creditor can facultatively compensate
□ For i): If one obligation is for a payment of sum of money, and the other is
for a specific thing or several generic things, usually, this does not comply
with the 2nd requisite; but can these 2 obligations be compensated?
LEGALLY, they cannot. Conventionally, YES. Judicially, yes. But can they be
FACULTATIVELY compensated? YES.
 Note that IF THEY BOTH AGREE, it becomes conventional
compensation; this is not a facultative compensation --> what we're
asking is FACULTATIVE compensation
 You should convert the obligation to deliver the specific thing into A
CLAIM FOR DAMAGES bec of breach of the obligation (or default or
contravention or total non-performance or negligence) --> if the
debtor in the obligation to deliver that specific thing is in default, then
he is liable for damages (w/n action is for rescindment or specific
performance) and HENCE, THIS CAN BE CONVERTED to payment for
DAMAGES (w/c is in a payment for money) --> note however that no
one else knows how much the damages are (i.e. the damages is still
unliquidated) unless a decision by the court has been made, and has
been final and executory
◊ Trouble: WHO OF THESE 2 CREDITORS can claim the
compensation??
◊ Bec they r now of the same kind, then they can be compensated
□ For ii): THESE CAN BE FACULTATIVELY COMPENSATED by the CREDITOR OF
THE HIGHER OBLIGATION (more onerous obligation); The one who has the
more onerous debt can waive his right to the superior thing, and then
facultatively claim the compensation of both obligations; but he must be the
creditor of the higher or more onerous obligation

Notes Page 45
 creditor of the higher or more onerous obligation
 Creditor that can WAIVE his right NOT to receive an Arabian horse but
only an ordinary horse --> he can claim the compensation
 But the creditor in the delivery of an ordinary horse CANNOT claim the
compensation of the obligation in the delivery of the Arabian horse
□ For iii) where it is assumed that all requisites except 4th is present: how do
you make first obligation a pure obligation (i.e. making it due and
demandable)?
 The debtor can WAIVE the suspensive condition (debtor is the one
who can waive the benefit of the suspensive condition bec it is debtor
who cannot pay bec of the suspensive condition --> if waived, puwede
na magbayad si debtor; creditor cannot waive kasi lugi 'yung
debtor) --> hence facultative compensation can be applied
 BUT, NEITHER can claim the compensation in the case of suspensive
period bec the suspensive period is for the benefit of the creditor and
debtor UNLESS given to one of them
◊ If suspensive period is given for the benefit of the debtor?
Debtor can waive it and hence the obligation can be
facultatively compensated HOWEVER, it is highly improbable
that debtor will waive it in this case
◊ If suspensive period is given for the benefit of the creditor, what
will happen to the obligation?
• If obligation can be rescinded or annulled, then compensation can happen first before the
obligation is rescinded or annulled
○ You do not annul a void contract; you annul an annullable/voidable contract
• Assignment of right of the creditor in favor of a third person
○ It all depends upon whether the debtor of the obligation assigned to the third person
either consented to the assignment or "knew abt the assignment and did not consent"
▪ If debtor knew and consented to the assignment of credit, he should reserve the
right to compensate his own credit
▪ If knew the assignment but objected, then he can claim compensation of his own
credit but only to that prior the assignment
▪ If w/o knowledge, debtor can set-up the compensation of his own credit
○ When credits are assignable? Implied in A1178
▪ Cannot assign or sell future inheritance --> contract is void! Prohibited + there is
no object of the contract
□ Before father dies, heir/s does know how much his legal portion is BUT
SUBJECT TO SUSPENSIVE CONDITION
 father can still disinherit you
 or you can be unworthy of succeeding
 or parents can sell all of their properties and leave no inheritance
behind for the heirs
□ UNLESS court decides that parents are spend thrifts
○ Look at A1626
▪ Debtor pays orig creditor than asignee not knwing that credit has already been
assigned to a 3rd person --> impt thing here is creditor did not notify debtor;
hence, it is burden of 3rd person to notify the debtor that he is the new creditor
▪ This is one notification that will make obligation NOT subject to LEGAL
COMPENSATION --> bec this is a notification of the 3rd person that debtor cannot
pay to orig creditor --> bec creditor is no longer the principal creditor of that
obligation but the 3rd person
• If both obligations are payable for different places, there is indemnity for the expenses and
must be factored in the compensation --> decided by the court
• What can be the subject of the compensation? See A1287 and A1288
○ If one of the debts arises from the real contract of deposit (deposit of a warehouse man
or cold storage plant), then depositary cannot return the same fungible thing that he
received w/ another obligation of the same kind
▪ Deposit 100 muscovado sugar w warehouse man, and warehouse has obligation to

Notes Page 46
 ▪ Deposit 100 muscovado sugar w warehouse man, and warehouse has obligation to
return the muscovado sugar you deposited -> but in this case, warehouse man is
also your creditor for the deliver of another 100 muscovado sugar
□ In this case, warehouse man cannot compensate this bec one arises from
the real contract of deposit
▪ Real contract commodatum: u borrow jeep from your friend but your friend owes
u the delivery of another jeep --> these 2 cannot be compensated bec the
borrower in commodatum should return the bery same thing he borrowed from
the lender
○ Claim for FUTURE support by way of gratuitous title
▪ not past support bec it is already a credit; in this case this can be compensated w/
another obligation to pay a sum of money
▪ No compensation in future support bec the other one will lose the wherewithal to
survive
○ Civil liability arising from criminal offense
▪ Complainant owes you money, he files a charge against you for a crime, then you
are convicted of that crime where there is a civil liability --> u cannot compensate
civil liability from what the complainant owes you --> AGAINST PUBLIC POLICY -->
can be set-up by facultative compensation (Tolentino)

Novation
• Not absolute but (a RELATIVE extinguishment of an obligation + creation of a NEW obligation)
WITH THE SAME PARTIES
○ Objective Novation: object OR PRINCIPAL stipulations are changed
▪ The old obligation is extinguished but the objects are changed
▪ That's y dacion en pago, there is an objective novation
○ Subjective Novation
▪ Substitution of debtors: changing person of debtors
□ 2 ways this happens; 2 kinds w/c depends on whose initiative the new
debtor was presented
 Delegacion: old debtor presents the new debtor to the creditor, who
accepts the new debtor --> initiative of old debtor
◊ Creditor realizes it's better to have the new debtor bec very
solvent
 New debtor aka DELEGADO
 Old debtor aka DELEGANTE
 Creditor aka DELEGATARYO
◊ Even if old debtor has been released, can be still made liable if
at time he presented the new debtor and asked himself to be
released, he knows that new is insolvent, OR not know but new
is publicly known to be insolvent
 Expromision: ex (from) + promisyon (promise) = from the promise of
the new debtor --> initiative of the new debtor
◊ Initiative comes from the new debtor, and asks creditor to
release old debtor
◊ In this case, it is the fault of the creditor if new debtor is
insolvent, bec it is the creditor who accepts and must've
investigated --> old debtor cannot be made liable anymore
◊ Most important requisite here: old debtor must be released
 If creditor accepts new debtor but does not release the
old debtor --> joint liability!!there are now 2 debtors -->
but is this advantageous to the creditor if he accepts a
new one w/o releasing the old one? NO. there will be 2
debtors, but since there is no express statement that they
are bound solidary, then they are bound jointly. So accept
new debtor and make him be bound solidarily! This is
better. Otherwise, new debtor can only pay 1/2 and not
the whole obligation.

Notes Page 47
 the whole obligation.
▪ Subrogation of creditors: changing the person of the creditors
□ 2 kinds
 Legal subrogation (A1302)
◊ Legal subrogee (payer) steps into the shoes of old creditor
 Old creditor will be gone
 But all stipulations in the entire obligation will be
replicated --> there will only be a change in the creditor
◊ 3rd person interested in the obligation
 Jr. creditor who pays a sr. creditor
 Conventional subrogation
◊ DIFFERENT from assignment of credit --> WHAT IS THE
DIFFERENCE bet conventional and assignment
 Assignment of credit: all credits are assignable and
transmissible
◊ Essentially a sale of a "credit as an incorporeal
moveable property" but just take note that there is
an incorporeal immoveable property (A415 #10:
contracts of public works)
◊ Obligations are usually transmissible unless there is
stipulation against it, law does not allow it, or
nature of obligations is PURELY PERSONAL
◊ By consent of old creditor and debtor, new creditor changes the
old creditor
○ A1304: if the obligation of the debtor is 10m and a "3rd person not interested in the
obligation pays partially w. consent of debtor" or "3rd person interested pays partially
AND accepted by creditor", then he will be LEGALLY PARTIALLY SUBROGATED
▪ Old creditor will be preferred still over the partial legal subrogee
• Inchausti v Yulo: NOVATION IS NEVER PRESUMED; there must be INTENTION TO NOVATE
○ 2 kinds of objective novation
▪ Implied objective novation --> you have to prove the intention to novate + prove
that the old obligation CANNOT CO-EXIST w/ old obligation bec both obligations
are INCOMPATIBLE on all aspect
□ Problem here is one claiming there is novation must prove these 2
□ E.g. there is promissory note to pay loan of 10k on June 30, 2019 --> then
there is a second promissory note involving THE SAME loan of 10k but the
due date is Dec 31, 2018 --> if proven that there is ONLY ONE LOAN, then
this is an implied, objective novation
 HENCE, come June 20, 2019, no longer need to pay
 HOWEVER, what if first is Dec 31, 2018 then a second one is made due
on June 30, 2019? NOT A NOVATION, but an EXTENSION of
payment --> does not change the principal conditions
 Pt: REDUCTION is a novation bec both are not the same in all
aspects --> in the 2018, obligation still exists vs in the 2019, obligation
no longer exists
□ Unless u can prove that the new is incompatible w old, court will rule there
is no novation
▪ Express objective novation --> no problem here; only way to defend yourself is to
DENY the validity of the contract; but if valid and it's expressly stipulated that new
contract novates old contract, then the stipulation of the parties will hold
○ To be safe abt it, if u r drafting a contract that will novate the obligation, provide for the
novation EXPRESSLY para wala ng determination kung incompatible ba 'yung old and
new --> as long as there is express stipulation, ez to say there has been novation

OTHERS
• In co-ownership, ea owner CANNOT SPECIFICALLY pinpoint his PART of the object
○ If land is owned in common, none of the owners own the specific portion BUT AN
IDEAL/THEORETIC share --> so theoretically, ea stone, ea tree is owned by all w/ his own

Notes Page 48
 IDEAL/THEORETIC share --> so theoretically, ea stone, ea tree is owned by all w/ his own
share
▪ E.g. co-owners of house --> one cannot say, I own this room while the other owns
this room BEC EA ROOM is theoretically shared in ideal portions
▪ You will know your portion WHEN CO-OWNERS MAKE A PARTITION
• MEMORIZE 1279
○ Lawyers can use this legal compensation to reduce the obligations of your client to his
creditor bec legal compensation has taken place
○ 4 types of compensation
▪ Legal
▪ Conventional
▪ Judicial
▪ Facultative
○ MASTER FACULTATIVE COMPENSATION
• As a plaintiff-litigant, you don't want
○ Temperate damages: lukewarm damages --> higher than nominal but lower than
exemplary
○ Nominal damages: consuelo de bobo
• What u want as litigant is
○ EXEMPLARY DAMAGES --> court set example to other obligors not to commit whatever
the defendant did
○ Moral damages
○ Bec u don't need to prove these damages vs compensatory damages where
computation is necessary
• Difference between debt that is DUE from debt that is DEMANDABLE
• Midterm Exam
○ 43 T/F questions
▪ Statements of principles
▪ Theoretical statement
▪ To ans these ?s, if the statement needs qualification or there are exceptions, then
answer should be False
○ 10 MCQ
▪ 8/10 are cases
▪ 2/10 are statements
○ 8 Fill-in-the-Blanks (more than 2 paragraphs; or 3 or more items in 1 paragraph -->
memorize)

Notes Page 49
Contract
Tuesday, 3 April 2018 3:01 PM

• General principles of contracts

1. A1159: OBLIGATORY FORCE OF CONTRACTS
▪ stipulation of the parties shall be the law between them,
▪ and parties should perform obligation arising from the contract in good faith
2. A1306 and A1409(7): freedom to contract or autonomy of wills
▪ Contracting parties may establish such stipulations, terms and conditions and clauses
as they may deem convenient provided these are not contrary to
1) Law
2) Moral
3) Good customs
4) Public order
5) Public policy
▪ There is no law prohibiting entering of contracts re this subject or runs counter to
any prohibitory law
▪ Void is different from inexistent contract; here if stipulation is against any of the 5,
then the contract is void
□ But in 1409(2-6), these will be inexistent contracts
3. A1315: Consensuality of Contracts
▪ contracts are perfected by mere consent --> true only w/ respect to consensual
contracts
4. A1308: Mutuality of Contracts
▪ Contracts shall bind both contracting parties
▪ Validity or compliance can't be left to only one of them
5. Relativity of Contract: contracts will bind not only contracting parties but all persons who
are related to the parties (heirs, administrators, executors and assignees)
▪ All other parties will be 3rd persons: no relativity between the orig parties and these
persons
▪ Exceptions
1) 1311
2) Main exception to the principle: stipulation in favor of a 3rd person
(stipulation for others)
 Although not related to the orig parties in the contract, yet if there is a
stipulation (that stipulation is just part of the contract and not the whole
contract) in favor of this person (the requirement is that the parties
deliberately favored this third person), 3rd person must COMMUNICATE the
acceptance of the stipulation in his favor to the parties
◊ There is no existing agency-principal relationship existing bet the 3rd
person and any one of the two parties; else, if there is (like principal-
agent), then not a 3rd person but he is acting for one of the parties
◊ E.g. contract of sale of a buyer in manila and a seller in cebu for a
property located in Cebu
 Seller who is in Cebu stipulated that out of the 5M purchase
price, 1M should be paid to a 3rd person who happens to be a
creditor of the seller in another obligation; so that the amt to be
transmitted to Cebu will only be 4m and the other 1m should be
paid to the 3rd person
 3rd person is just a part of the contract price
 3rd person notifies/communicates the buyer in Manila that he is
accepting the stipulation made in his favor by the contract of sale
BEFORE the seller revokes the stipulation in his favor
 Once the 3rd person accepts the stipulation, buyer is obligated to
pay him
 5 requisites of a stipulation pour autrui
1) It is just a stipulation (a part of a contract), and not the whole
contract
2) Parties must deliberately and clearly stipulate it w/c is in favor of a
3rd person
3) 3rd person must clearly accept it by communicating this acceptance to

Notes Page 50
 3) 3rd person must clearly accept it by communicating this acceptance to
the person who's going to pay him (usually debtor) BEFORE the
stipulation is revoked by both parties or either of the parties (usually
by the creditor)
4) There must be no relationship of agency between the 3rd person and
one of the parties
 3rd person is not a privy to the contract; has nothing to do
5) The 3rd person must not be obligated to do something under the
stipulation; all he has to do is accept what is to be given
 It is really gratuitous in a sense
 3rd person who is essentially not related to any of the two parties
can enforce the stipulation that is made in his favor; but 3rd
person will not do anything but just accept
3) 4 accion direct
4) Accion subrogatoria
5) Accion pauliana
6) Laborers of independent contractors against the owner
 Laborers hired by a contractor who still owes wages when the owner has
not yet fully paid the contractor
▪ If 3rd person interferes or influences one of the parties to withdraw from the
contract and damages occur, then the other party can sue for damages against that
3rd person (basis is quasi-delict; tort)
• Contract is a meeting of the mind between two parties
○ Creates an obligation
• Any ABSENCE (not illegality!!!) of the essential requisites of the contract will make the
contract INEXISTENT or VOID
- But technically it's inexistent bec truly void contract are those contracts that are contrary
to morals, public policy, etc, prohibited by law or expressly declared by law as void
• 3 essential requisites of a valid contract
1. Consent of parties who have LEGAL CAPACITY to give consent
- Most difficult part
- Consent must be…
□ Free
 Not free if vitiated by force/intimidation/undue influence
□ Intelligent
 Not intelligent if one of the parties is sufferering from a mistake of FACT
 Mistake of LAW NEVER excuses; only mistake of FACT excuses
◊ Everyone is presumed to know the law even if they don't
 ABSOLUTE PRESUMPTION; not prima facie
 Exception
– MUTUAL ERROR (both suffering at same mistake) as to the
LEGAL EFFECT (not the law itself) --> e.g. they thought
stipulation is one of conditional sale when it is actually a sale
w/ a right to repurchase
 A1331: Mistake must be SUBSTANTIAL + must refer to what PRINCIPALLY
moves the party to give the consent
◊ Types of mistakes
 Mistake as to the substance of the thing w/c is the object of the
contract (e.g. you wanted to buy real gold but you bought fool's
gold)
– You wouldn't have bought the rock if you knew it wasn't real
gold
 Error to the person whom you are dealing w/ or donating the
property to
– E.g. you deal w/ donee A but you are actually dealing w/
another person
– Mistake the person to his qualification: you can ask for
annulment of contract bec you suffered under the mistake of
the qualification of the person --> he is not such an expert
– You woulnd't have donated the thing to that person you
dealt w had you known he wasn't really the person you
wanted the thing you donated

Notes Page 51
 wanted the thing you donated
 Error in kuwalitate (error in quality of the thing): e.g. you
thought it was pure gold when it was only 80% pure
 Error in kuwantitate (error in quality): you thought you were
buying 12ha but only 5ha was given
– You wouldn't have bought the land if you knew it were only
5ha
– BUT if buyer had opportunity to check and see the size of
the lot, then he cannot have a right of action to annul the
contract
◊ Mistake of fact must be SERIOUS enough that if he knew abt the true
facts, he would not have given his consent
 But if you knew about the contingency/defect and you bought it,
then you cannot ask for the annullment of the contract (bec of
the risk you took/ bec you knew the risk)
 Undue influence requisites
1. Superior-inferior relationship
2. Superior takes undue advantage of his position
 If arms-length transaction and true to goodness transaction, then
it's ok and there is no undue influence
 Persuasion is not taking undue advantage of one's superiority
 Reverential fear: one party is held in high esteem (in the mind of
the other party, the other is elevated in a pedestal), and the
inferior one does not want to displease that which he holds in
reverence --> most likely, he will not charge a high purchase
price as he may want to --> NOT undue influence
– Fear of displeasing the person you hold in high reverence is
not undue influence AS LONG AS the latter does not take
advantage of his superiority
 The one who was in inferior will was sick/ill when he gave
consent, or mentally weak, or in financial distress (short of
money), and then the superior takes advantage of his superiority
and of the fact that other party is suffering
 Relationship bet fraud and mistake: party defrauded is suffering under a
mistake of fact
◊ Fraud: insidious words or machinations to make the other party give
his consent
 Without this fraud, other party would not have given his consent
 The fraud is SERIOUS fraud --> DOLO CAUSANTE or causal fraud
◊ One who does the fraud should also KNOW abt the true facts --> he
should know the truth
 If he does not know the truth, then he is also suffering from the
mistake
 Here, there is mutual mistake of fact, and hence
◊ If real condition was not revealed to you, then there is fraud
 E.g. principal-agent (confidential) relationship: agent must tell
principal the facts necessary to help principal make decision --> if
agent had only revealed the true facts, the principal would have
been guided accordingly
◊ Not fraudulent
 Expression of an opinion is not fraudulent even if it turns out to
be wrong and even if other party relied on it in giving his consent
UNLESS it was made by an expert and was relied upon by the
contracting party
– If the opinion was given by a gemologist, then there can be
fraud
– If the opinion was given by ordinary gem-er, then opinion
remains an opinion
– BUT if the party to whom the expert opinion was given relied
on A SECOND gemologist, then that will not make the
consent as voidable --> this will not vitiate his consent bec
he did not rely on the opinion on the first expert, and relied

Notes Page 52
 he did not rely on the opinion on the first expert, and relied
on a second opinion
 Usual exaggerations in trade are not fraudulent
– deal's talk --> to induce the other to enter the contract
 Dolo incidente: one defrauded, if he had known the true facts,
will still cont with the contract but would have bargained for
better terms/conditions
 Misrepresentation by a 3rd person does not vitiate consent unless
it is a substantial mistake
– If misrepresentation was made in good faith
(misrepresentation not given w an ulterior motive, then it
may not be tantamount to fraud
– But if the other party who relied on this misrep in good faith
was serious enough, then it may constitute mistake/error in
fact
◊ 2 simulated contracts
 Absolutely simulated or fictitious contract: makes the contract
INEXISTENT (not "void")
– Those contracts where both parties never intended to be
bound at all
– A contract that is for show
 Relatively simulated contract: parties intended to be bound by a
hidden contract
– There are 2 levels of contract here
 Contract that is above-ground: the one that is for
example written down
 "OSTENSIBLE CONTRACT"
 Hidden contract: parties never intended to be bound by
the contract written down, bec there is a hidden true
contract underneath
 "HIDDEN CONTRACT" which is the true contract
– E.g. purported to be absolute sale of property but the parties
never intended to be bound by it bec there is no actual
valuable consideration took place
 Buyer did not pay valuable consideration for what was
delivered to him
 Ostensible contract: contract of sale
 True contract: contract of donation/gratuitous donation
– EFFECT: ostensible contract is VOID, the hidden contract is
VOID but the hidden contract may be VALID PROVIDED
1. Does not prejudice a 3rd person --> 3rd person can be
a, for example, co-owner or a first vendee
2. Purpose of hidden contract is not contrary to law,
morals, good customs, public order, or public policy
3. It must really be supported by the other essential
requisites of a valid contract
1. Object certain or certainable
2. Causa or consideration
3. Consent
□ Real
□ Spontaneous
- Consent they gave must not be vitiated by either (5 ways of vitiating consent)
1) "force or violence"/"intimidation or threats/and undue influence (these 3 go
together) --> goes to the very voluntariness of the consent given --> goes
together bec the make the contract unfree (consent was not freely given)
a) Violence and intimidation
◊ Violence = physical force
 Violence should be a SERIOUS AND IRRESSITIBLE force
 It is such of a degree that other party can't do anything but give
consent
◊ Intimidation = mental violence/force
 Reasonable and well-grounded fear of an IMMINENT and

Notes Page 53
  Reasonable and well-grounded fear of an IMMINENT and
GRAVE evil to his PERSON or PROPERTY of himself or spouse,
descendants, or ascendants (loved ones, whether legitimate or
illegitimate)
– Act of threat must be ILLEGAL or ILLICIT
 If threat is "file a case against you for estafa or sue for
the recovery of the thing" and his claim is just and
legal, then not the threat contemplated here (not
intimidation)
 May have been employed by a 3rd person not privy to the
contract --> somebody else employed the force or intimidation by
one of the contracting parties
 "I'll give him an offer that he can't refuse"
 At the back is the threat of physical force
◊ What usually happens: party employs physical violence, and then the
threat of more violence (intimidation) to get consent of the other
party
 that is why force and intimidation are deemed as one
 in Anglo-Saxon law, violence and intimidation is only called
DURESS
2) Fraud
3) or mistake of FACT(!!!)
- What happens when there is mutual force/intimidation/undue influence or mistake of
fact or fraud?? What is the effect on the contract?
□ Mutual mistake of fact:
□ If both parties perpetrated a fraud upon ea other…
 E.g. A says this is 100% pure substance, while B pays only pays in
counterfeit money
- Parties must have legal capacity to give consent and consent must not be vitiated
- No legal capacity
1) Insanity
 All persons are presumed sane unless judicially presumed insane
 Have to prove that at time you gave consent, you are mad
2) Minority
- RE: OFFER
□ In negotiation stage, there is should be the offer and acceptance before there is
perfection of a consensual contract
 One of the parties makes and initiates the offer (can be the buyer or
seller), the other accepts
◊ There can be an offer to sell or an offer to buy
□ But in a protracted negotiation, there can be a veritable ping-pong match bet
the 2 parties (offeror/offerer who makes the offer vs offeree who accepts the
offer) --> batuhan ng negotiation
 Complicated transaction
◊ There is no acceptance of the offer but a counter-offer is made then
another then another until they agree with ea other OR
◊ Accepts offer in a QUALIFIED SENSE (qualified acceptance) --> I will
accept the sale of the property provided that/if etc etc etc
□ Requisites of a valid offer
a) Offer must be a definite offer
◊ Becomes definite if object (thing/service) of contract is mentioned and
the object is determinate or at least "determinable w/o need of a new
agreement"
◊ Indefinite if the seller for example says "I am thinking of selling this
house" --> offeree says "I accept" --> THERE IS NO DEFINITE OFFER
and hence there is no contract
 SHOULD NOT BE IFFY
 Should not "try my best to give"
◊ NOT YET SURE NOT MAKING AN OFFER = INDEFINITE
b) Offer must be intentional
◊ It must be a true and serious offer
◊ Offer is not made in a joking way

Notes Page 54
 ◊ Offer is not made in a joking way
c) Offer must be complete
◊ Complete if all that is needed is the consent by the offeree
◊ there must be a causa (exists and licit) and object
d) There must be an absolute and unqualified acceptance
◊ ACCEPTED v QUALIFIED ACCEPTANCE
 No ifs and buts on the acceptance bec it will become a counter-
offer w/c in turn must be accepted
 If acceptance is qualified, it becomes a counter-offer
 IF THE NEGOTIATION STOPPED AT A COUNTER-
OFFER/QUALIFIED ACCEPTANCE, then there is NO CONTRACT
◊ But if person really wants to get that cheap offer of rice, he must
□ Offerror can fix the time, place and manner of acceptance
 E.g. you can only accept by going to a hill and at top of lungs shout you
accept at a certain time --> if you accept, they you must follow this to
perfect the contract
□ 4 theories in perfection of consensual contract
1. Manifestation: when offeree or counter-oferee manifests his acceptance of
the offer or counter-offer
- Dati kasi slow mail
- When you write the letter of acceptance, there is already perfection
2. Expedition Theory: seal it then post it by mail
3. Reception theory: when offeree accepts
4. Commission theory: when offerror or counter-offerror LEARNS about the
acceptance of the offeree or counter-offeree, this is only when contract has
been perfected (NOT RECEPTION or MANIFESTATION, but the LEARNING)
- This is what we use now
□ There can be IMPLIED offer even w/o verbal communication if seller accepts the
money from the buyer
□ Option period: offeror may allow offeree time to consider the offer (to reject or
accept the offer)
 There is
- Option contract
- Option period
 Usually, offeree is given a period to accept or reject
 Option period is designed to allow the offeree to investigate the
wherewithal of the things to be sold
- If thing to be sold is a horse, no need too much time to consider that
(just need time to look at the horse if healthy)
- If thing to be sold is a huge parcel of land, then more time is needed
 Know the exact/estimated size of land
 Know the boundary owners and ask the area of the land they
occupy
 Know the docus he has re the land (tax declaration, torrens, etc)
 Know who owns the land (is it the seller or other people?)
 Know the claimants of the land
 Know if there are other people possessing land and by virtue of
what right is he possessing
 If the option was given without the offeree giving valuable consideration
for the option, i.e. he did not promise to give or pay something to the
offeror in return for the granting of the option period, then the rule is:
offeror can withdraw the offer at ANY TIME, and offeree cannot do anything
about it UNLESS the withdrawal was in a CLEAR ABUSE OF RIGHT (e.g.
reason of withdrawal is bec of a HIGHER offer made by a 3rd person)
- But if the option has a valuable consideration, the offerer is not
supposed to withdraw the offer
- But what if on the 15th/30th day, offeror calls up offeree, and there
was already beforehand an option money paid (valuable
consideration), and offeror says I withdraw the offer, and then in
reply, the offeree immediately says POTA I ACCEPT THE OFFER NA!! Is
there a perfected contract of purchase and sale? NO, bec there is
nothing to accept anymore; no offer BUT in breach of the option

Notes Page 55
 nothing to accept anymore; no offer BUT in breach of the option
agreement
 Offeree cannot have an action of rescission or specific
performance
 BUT offeree can still have damages BUT NOT based on breach of
contract; rather, it is based on BREACH OF OPTION
CONTRACT/AGREEMENT
- There are some ppl who are prohibited from contracting
□ administrators cannot dispose properties subject to their adiministration
2. Object
- Must be determinate (certain) or at "least determinable (ascertainable) w/o the need
of a new agreement"
□ Choice of the object of contract can be chosen by a third person, and it does not
make it uncertain, only ascertainable
□ E.g. of ascertainable: I will sell the puppy that my wife chooses
- If there needs to be a new agreement to determine the object, then old agreement is
inexistent and void
3. Causa or cause
- Easiest bec it is presumed (prima fascie and disputable presumption) to exist and
licit (valid and legal)
□ UNLESS there is proof that there is actually no causa (i.e. contract is absolutely
SIMULATED) just like the marriage in movies (these are not real but merely
simulated and fictitious)
- Civil causa (w/c is used by PH) is broader than common law notion of consideration
- 3 causas
1) Gratuitous causa or pure liberality/generosity or unalloyed fondness (no smack
of immorality)
2) Remuneratory causa (still gratuitous but there is a sense of giving a reward in
addition to past services already paid) as expressed in donations as a contract
 Past services that do not amount to a demandable debt --> employee
served company faithfully to a company for # of yrs, he is already paid
services, but in addition, if he is given a gold watch or sports car or
certification as a donation, it is remuneratory (reward!)
3) Onerous or lucrative causa or causa onerosa
 There is an exchange of values
 For one prestation, there is another in exchange
 Burden attached to the obligation
• Classification of contracts
1. Nominate and innominate
- Nominate contracts: named contracts like sale, barter, lease, guarantee, partnership,
etc. --> all special contracts in Civil Code seen in table of contents
□ Contract of LEASING AND HIRING (contract of lease) --> imperfectly reciprocal
 Contract of lease can be of things or services
 You do NOT SELL your services, but only lease it; this includes the second
oldest profession, lawyering
□ Contract of PURCHASE AND SALE (contract of sale) --> perfectly reciprocal
- Innominate contracts: not named contracts, but expressed by a latin clause w/c
translates to "I give that you may give, I give that you may do, I do that you may
give, I do that you may do" but the do here is facio (not in the sense that we usually
mean, but a SERVICE w/c is a prestation to do)
□ Governed by nearest analogous nominate contract (I give that you may give =
barter)
2. Consensual, real, formal
- Consensual contracts are perfected by the 3 essential requisites (object, consent,
causa)
- Real contracts or contracts re (A1316)
□ Examples
1. Simple loan
◊ Until the money borrowed is delivered to borrower, then there is no
contract of loan
◊ Loan of money, goods or credits
2. Commodatum: gratuitous loan for USE (not to own)

Notes Page 56
 2. Commodatum: gratuitous loan for USE (not to own)
3. Real contract of deposit
◊ Different w deposit of money in a bank
 Latter is not a real contract of deposit but a loan
 Depositor in a savings/current acct deposits money by way of a
loan
 Bank becomes owner of money and allows depositor to withdraw
+ pay him interest
◊ You can deposit your goods in a warehouse and the depositary will
keep it safe from theft/robbery and will usually take good care of the
goods with diligence of a good father of a family
 New law allows warehouse man (Warehouse Receipts Act) to ___
the same fungible things
□ In addition to the 3 essential requisites, there is an added requisite: contract is
not perfected until the object of the contract is DELIVERED to the other party
- Formal or solemn contract
□ In addition to the 3 essential requisites, there is an added requisite: need for
the compliance for the PROPER FORMALITY
 Formality: writing or in some cases not only in writing but parties should
also acknowledge to notary that they are the parties and gave to their
contract voluntary act, and must swear to these
 Else, contract is void
 Formality requirement is mandatory
□ Intervivos donation
a) Donation intervivos of a Real property: public docu is req
b) A movable property: private writing is req
◊ Can be orally BUT coupled w immediate physical delivery
◊ Do not accept a donation of a moveable property to be delivered in
another time --> either should be delivered at the same time, or if on
another time, in writing
□ Contributes real property to the partnership: requires a pub docu
 Contribution needs to be made in public docu
 There needs to be inventory and appraisal value of real property
□ Charging of interest for loan or forbearance of money, goods, or credit: in
writing else void (A1956)
□ Contract of antichresis w/c is an accessory contract
 Subject matter is real property
◊ In real estate mortgage, the creditor is not given the possession of the
real property; all that he gets is a deed of real estate mortgage; but
this real estate mortgage is an accessory contract to a principal
contract (e.g. contract of loan)
◊ In an antichresis as an accessory
 Possession of real property is given to the creditor (not owner)
– Creditor has possession of the land
– The creditor is also allowed to use and enjoy it, and gather
the fruits
– BUT creditor has obligation of applying the NET FRUITS
(whatever is produced by the real property; "value of fruits
or gross fruite - expenses for gathering and preserving and
producing those fruits") to the interest and principal charged
on the loan, so that the net fruits shall over a period of time
shall have fully paid the interest and principal charged for
the loan
 Principal amt + interest must be stipulated in writing,
not necessarily in pubdoc, otherwise the antichresis is
void BUT THE CONTRACT IS STILL VALID
 So in order that antichresis be valid, bec it’s a FORMAL
contract, the principal + whatever interest will have to
be put into writing --> w/o that writing, the antichresis
is VOID
– Creditor can be required to make an ACCOUNTING of the
fruits

Notes Page 57
 fruits
◊ The nearest equivalent of an antichresis w/ respect to moveable
property is a pledge
◊ In a pledge (sangla/prenda), subject matter is a MOVEABLE
PROPERTY (e.g. car)
 Possession of moveable property is given to the creditor-pawn
broker (owner of pawnshop) --> pledgee-creditor
 Pledgee-creditor CANNOT USE AND ENJOY the moveable that is
pledged and he DOES NOT OWN whatever fruits of the moveable
 If the moveable that is pledged has moving parts (e.g. car), then
pledgee-creditor must from time to time is obligated to ensure
that moveable object can move so that it wont' be stuck up
– Clock must be wound up
– Car must be used so that the moving parts will not be stuck
up
 Pledge of real property is already PROHIBITED
– Cannot pledge a parcel of land
– Courts will consider this as one of ANTICHRESIS so that
whatever fruits the real property will produce can be applied
towards the payment of the interest and the loan; so that
over a period of time, the anti-chretic-debtor can ask the
creditor to make an accounting of the fruits to find out if net
fruits have already paid for the interest and principal
◊ Real estate mortgage and chattel mortgage are far away from
antichresis
 Possession of the object of the mortgage in both is not w/
mortgagee
 Mortgagor-debtor/owner still retains the possession of the object
mortgaged
 "Mortgagor-debtor fails to pay principal obligation" + "there is a
stipulation in mortgage agreement that in case the mortgagor
debtor fails to pay principal obligation, creditor is given the right
to foreclose the mortgage"
– In extra-judicial foreclusire, mortgagee-creditor is given
power of atty by mortagor-debtor as his agent to make the
extra-judicial foreclusure by virtue of an affidavit of
foreclosure, w/o need of passing through the court
 Can ask sheriff to levy on the property and authorizes
the sheriff to sell property
 Creditor can also bid in the foreclosure sale, and if he
wins, he owns it
 But there is a period of redemption of this foreclosed
property
 If real property, it's a period of 1y to redeem
property by paying the amt of debt as computed
on the date of the foreclusure + cost of the
foreclosure sale
– In judicial foreclusre of real estate mortgage, procedure is
found in RoC
◊ In pledges, mortgages and antichresis
 The one who pledges, mortgages or antichresis must be the
owner of the article ELSE, void
 Required that principal amt given by way of loan and any interest to be
paid for that loan should be in writing bec creditor here will take possession
of real property and can gather the fruits produced by the real property
◊ And it is the fruits that will pay for the interest + principal of the loan
◊ So u need to put the principal and interest charged for the use of the
loan
 w/o writing, loan is valid but the antichresis is not
□ Commission to sell real property: in writing else any contract agent enters into
in selling that property is void
□ Chattel mortgage

Notes Page 58
 □ Chattel mortgage
 Must be in writing and must have an affidavit of good faith
 To buying 3rd persons, these chattel mortgage must be registered in the
chattel mortgage register of deeds in the place where it was constituted,
else it will not bind 3rd person, but will still bind contracting parties
□ Sale of large cattle
 Not only should there be delivery of the large cattle but also the certificate
of registration of large cattle
 There must be the proof of the sale of the large cattle
3. Preparatory, principal and accessory
- Preparatory contract: prepares for the consummation of the real contract
□ Partnership contract: always for profit
□ Agency contract: prepares for the creation of another contract like contract of
sale or of rendering services
- Principal contracts: main contracts
- Accessory contracts
□ Contracts that secure a principal obligation
□ Need a principal contract to exist
4. Contract creating unilateral obligation or
- Unilateral: both parties are bound but obligation only flows from one party
□ Purely gratuitous donation inter vivos
 after perfection of donation inter vivos, only the donor is obligated; donnee
does not perform any obligation
◊ Donnee shuld not perform any ingratuitous act
 UNLESS donnee is subjected to a condition (not purely gratuitous) -->
donnee must do something
- Bilateral
5. Commutative or alleatory
- Commutative
□ There is an exchange of values between the 2 parties
□ The stipulations are indicated in the contract themselves
□ E.g. sale
 Buyer gets a thing of value for him
 Seller gets money w/c has value and is valuable for him
- Alleatory
□ There is a RISK involved
□ E.g. insurance contract: insured against certain risks that may or may not
happen
 Insurance company in consideration of a payment of a premium money,
promises to pay you certain amts of money
 If any other risk is not mentioned in the insurance, then not insured
 Include all risks possible as long as insurance company is willing to insure
you for these
□ E.g. legal gambling contract
• Contracts are always BILATERAL w/ respect to parties (2 or more contracting parties)
○ Cannot be that one person will contract, even if bipolar, w/ himself
○ But one person giving consent for 2 principals is allowed
- Agent of 2 principals where one is seller and other is buyer
- Common agent (one person) representing two parties gives consent to the same
contract
• Stages of perfection of a contract
1. Preparation or negotiation
- Parties make an offer and counter-offer
- Parties make final acceptance
2. Perfection of contracts
- Perfected depending on the kind of contract
□ Consensual
 Meeting of the minds of 2 parties between object and causa of the
contract, w/c is just actually the CONSENT of the 2 parties who have legal
capacity to consent, and consent they gave is not vitiated --> Once the
original offeror learns about the acceptance of his offer by the offeree OR

Notes Page 59
 original offeror learns about the acceptance of his offer by the offeree OR
◊ If consent is vitiated by either of the 5 stated above, then contract can
be ANNULLABLE
◊ Object of the contract should either be a thing/property/service
◊ Object must be certain (determinate) or "ascertainable (determinable)
w/o making a new contract"
 If u cannot make sense of what the object is, even after you have
undergone the process of interpretation of the contract, then the
contract shall be INEXISTENT or VOID
 If complicated negotiation: when counter-offeror (who may iether be the
original offeror or offeree) learns about the acceptance of the counter-offer
- Once perfected, it creates rights and duties between the parties, and parties must
perform their respective reciprocal prestations
3. Consummation of the Contract (extinguishment of the obligation arising from the
contract; NOT DEATH)
• Contract of sale but a 3rd party is an adverse possessor who is also claiming that land
○ There will be a litigation between the 3rd person and the vendor (seller)
• Creditors of the vendor of the property are protected by the law in all cases where contracts
are intended to defraud them --> they can file accion pauliana against trasferee-buyer
○ If transferee-buyer proves he bought property in good faith + paid good money for it
(even if the money given was less that market value), and seller was insolvent, then
contract is perfectly valid and cannot be rescinded under accion pauliana (arms length
transaction and honest to goodness transaction of sale where money was really paid,
then you cannot challenge it as in fraud of creditors)
- Creditor must prove that buyer (3rd person) was in collusion (meaning contract was
simulated; no GOOD money was actually paid) w insolvent debtor for accion pauliana
to prosper
○ In AP, Contract complained of in fraud of creditors, w/c is therefore rescissible, must take
place before the fraud has happened
- Credit must antedate the debt of the creditor's debtor to another debtor

OBJECT
• Object can either be a
○ thing or property,
○ or service or act,
○ or not to do or not to give
• Characteristics of a valid object of a contract
1. Object must be certain or "ascertainable w/o a need of a new agreement"
- Determinable if parties need not a agree again on the object of the contract --> no
need to enter into another contract/agreement to know the object
□ "one of my antique cars in my collection"
□ There must be a stipulation as to who will make the choice of what the specific
object is (either party or even 3rd person)
2. It must be within the commerce of man, i.e. it must be transmissible
3. Object must exist (actually existing) of capable of existing in the future (potentiality to
exist)
4. Object must be lawful/licit: not contrary to law, customs, public morals, public policy
• Object can also be RIGHT that are TRANSMISSIBLE rights
○ Intransmissible
- Purely personal rights
- E.g. right to receive support from someone obligated to give support, right to receive
inheritance
□ Inheritance of son from the intestate of the father can be an object of a contract
for as long as there is already a price
 Heir sells inheritance to another
 BUT THIS IS AN ASCERTAINABLE OBJECT subject to the determination of
the NET ESTATE
• Object should not be an impossible one
○ 2 types
- Legally impossible
□ Legally existing but are not fit subject matters of legal relations bec outside the

Notes Page 60
 □ Legally existing but are not fit subject matters of legal relations bec outside the
commerce of man, especially prestations to do --> service prohibited by law, or
against public morals, etc.
□ Prohibited object of contracts by law
- Physically impossible
□ I will take you to a tour in the asteroid belt

CAUSA OF CONTRACTS
• Causa vs motive
○ Impelling reason for entering the contract/ essential reason for parties to agree -->
CAUSA
○ Particular reason for a party to the contract to enter the contract --> MOTIVE
- Motive may be different from the causa
- Motive of buying/selling it
○ Sometimes the motive becomes the causa if the motive is, for example,
- Liguez v CA
• 3 causa
1. Usually, in contracts, the causa is onerous
- There is a burden given to the party; burden attached to the donation
- There is a thing of value given to ea especially in resiprocal ones
2. In donations inter vivos, the usual causa is gratuitous causa (lberality/generosity)
- Other party does not need to part or give a consideration
- Out of pure liberality on part of donor
- When donation is perfected, the donee does not need to give anything
- Obligation arises from the donor side only and once the donation is perfected in
compliance w/ the proper form depending on what is donated, the donee can require
the donor to deliver the thing donated if he has not already delivered it
simultaneously w the giving of the consent by the donee
- DONATION IS A CONTRACT
□ especially so if it is an onerous donation which is governed by law on obligations
and contracts
□ Gratuitous donation is governed by donation in civil code
3. Renumenatory donation
• Requisites
1. Causa must exist
2. It must be lawful/licit
- If illegal, it can still be valid if contract is also founded upon another causa w/c is
valid
□ E.g. simulated sale: buyer did not pay for the price --> sale is void but the real
contract is valid bec it is founded upon another causa w/c is liberality or
gratuitousness
 Valid as a donation for as long as donee is not dq from becoming a donee
 Void as a sale
3. It must not be false/simulated/fake
• If contract has no causa, either legally or actually, then the contract is INEXISTENT
• Causa is prima facie presumed to exist, and to be valid/legal/licit
○ It is up to other party who denies that there is no causa to prove that there is no causa or
is illegal
○ "he who alleges a fact, must prove such fact"
• Inadequacy of causa: property sold at 1m valued at 50 is inadequate as to
causa/consideration
○ Inadequacy to consideration does not void contract EXCEPT if you can prove there is
mistake, fraud or undue influence
○ Still valid but subject to rescission through direct action by filing an action for
rescission --> inadequacy of contract results to a Rescissible contract
- Bec rescission in A1191 is not the rescission mentioned in contract
□ 1191 is actually cancellation of oblig and not rescission of a rescissible contract
- Rescissible contract is VALID until rescinded by a direct action
□ Still creates rights and oblig
□ Transfer of properties is valid subject to filing of a direc action by injured party
w/in 4yrs from the consummation of the contract

Notes Page 61
 w/in 4yrs from the consummation of the contract
○ Usually, if the consent given in a contract by one of the contracting parties is vitiated by
mistake, fraud or undue influence, sir thinks even the consent taken through
duress/violence/intimidation, if there is valuable consideration, the one who perpetrates
the act will pay less, bec there is inadequacy of consideration/causa
- However in rescissible contracts, there is inadequacy of
causa/payment/price/consideration through lesion in Civil Law
□ Criminal law
 Lesiones graves
◊ These are serious physical injuries
 Lesiones menos graves
◊ Less serious physical inury
 Lesiones leves
◊ Lesion is slight physical injury
□ Lesion (more than 25% of the value of the property) --> value of the property
sold should be in the vicinity of 50-60% so that there is the required lesion
 2 appraisers of property will not ocme up with the same appreciation
 For court to appreciate inadequcy of cause of 1/4 of the total value, value
must be 50-60%

FORMS OF THE CONTRACT

• Not an essential requirement
• As to forms of contracts, the general rule is in 1356: obligatory to the parties for as long as
the requisites of a contract are met --> EXCEPTION: BUT IF law requires that contract must be
in some form so that it is valid or enforceable, or must be proved in a certain, that form must
be absolute and indispensable
○ Contract is valid even if only entered orally
○ Consensual contract of sale: no need for formality
- Perfected so as long as parties agreed, even orally, to the terms of the contract and
requisites are met
- Consent must not be vitiated
○ Formal or solemn contract
- General rule: valid in whatever form they may have entered into provided all 3
requisites are present, however, when the law requires a certain formality… etc etc
etc.
- Formal requirements are indispensable for its validity
- There are 8 or 9 formal/solemn contracts
1) Gratuitous donations of immoveable/real property: offer is made in a public
docu and the donee should accept it in either the same public docu or a
separate public docu
 Donee can accept in either the same deed of donation or through another
and separate pub docu/instrument
◊ Done in a separate
 Donor must be notified in an authentic form --> you must prove
that you informed the donor of the separate pub docu
 This fact of acceptance should be noted in both pub docus (in the
deed of donation and in the separate pubdoc)
◊ If the donee accepts the donation that is offered by the donor in that
deed of donation, he can accept it in the same public docu; both
should acknowledge and sign the donation
 Donor signs as offeror
 Donee signs as offeree
 Priv writing will become a public instrument when there is
acknowlegdement before a NOTARY PUBLIC
 Deed of donation is the donation, signed and acknowledge by donor before
a notary public
◊ If donee accepts donation in the same pub docu, he will sign his
acceptance on the same deed of donation
2) Gratuitous donation of a moveable property (e.g. car or carabao or horse), the
form depends upon the value of the property donated
 More than 5k: executed in writing but does not need a pub docu
◊ Donation of car registered in LTO: pub docu is needed bec it will be

Notes Page 62
 ◊ Donation of car registered in LTO: pub docu is needed bec it will be
recorded in the LTO
◊ Offer of donation should be made by letter but both donor and donee
must be alive to acknowledge the donation
 But if moveable or personal property donated is worth 5k or less: can be
done in writing or verbally
◊ If verbal, there must be simultaneous delivery: offer of donation at
the same time there should be delivery
 Do not accept donation in this case if donor does not
simultaneously give the donation
 Simultanesous delivery is required
3) Onerous donation is governed as to form and intrinsic validity by law of
obligation and contracts
4) In an articles of partnership, if one of the partners contributes real property
rather than money, then this must appear in a pub instr/pubdoc and there
should be an inventory and valuation of the real property attached to the
articles of partnership
 Inventory must be contained in the pubdoc
◊ Description of property
◊ Valuation of property
 This is req bec partner should have paid in real money
 E.g. partner donates a bdlg where partnership can hold its office
5) Chattel mortgage (chattel or moveable property) w/c is a security for a principal
obligation: affidavit of good faith signed by the parties (chattel mortgagor-
debtor and chattel mortgagee-creditor)
 Statement that they are the parties to the chattel mortgage and the cm is
intended to secure a principal and genuine obligation, and that they
entered into it in good faith
6) Principal commissions an agent to sell real property; agency to real property,
the authority of the agent must be in writing in order that any contract of sale
he enters into will be valid; otherwise, any sale will be VOID especially as
against the principal
 At the very least it must be in writing, but most of the time, what is given
is a SPECIAL POWER OF ATTY
7) Contract of antichresis (w/c is an accessory contract) --> subject matter is a
real and immoveable property
8) Charging of interest: you cannot charge interest for the use of the money,
goods or credit unless the charging of interest is in writing
 "I will pay 1k WITH INTEREST" --> enough to show that there is an
interest charge for the loan of 1k
 Legal rate of interest: 12% --> used if there is no stipulation as to what
the interest is
9) Sale of large cattle: large cattle should be registered in the municipality where
the owner resides
 There is a registration of large cattle
◊ PH: carabao, cows and horse
◊ There is no registration of small cattle/ruminants
 When sell large cattle, seller must also trasnfer the registration of large
cattle to the buyer; nevermind if they don't have evidence of the contract
of sale; so as long as the consensual contract of sale is perfected when
they agreed to the price, and the animal is delivered simultanousy with the
transfer of registration/title in his name, no need for evidence of contract
of sale
◊ Municipality BRANDS the cattle
◊ New owner BRANDS the cattle (hot iron)
• 1358: 4 grps of contract
1. REAL RIGHTS over IMMOVEABLE property
- Most important
- Real right is either transferred, created, modified, or extinguished
- Transmission of real right over the real property
- Contract of sale is perfectly valid but in order that it will bind 3rd persons or the
whole world, or that the contract of sale will transfer the real right of property that is

Notes Page 63
 whole world, or that the contract of sale will transfer the real right of property that is
sold, one needs a PUBDOC in order to transmit the real right of ownership in favor of
vendee buyer; without that, the contract of sale only binds the parties and those
who have relativity (related to orig parties) to the parties
□ w/o pubdoc, real rights cannot be transferred, only the personal rights
- Even in chattel mortgages, the mortgage must be annotated at the back of the title;
otherwise it will not bind the whole world but only the parties and their privies
2. Cession (sale), repudiation of hereditary rights
- Intestate/testate, inheritance
- Once your parents die, you can already sell inheritance or assets of ascendant leaves
behind PROVIDED assets are more than liabilites (i.e. estate is not insolvent)
□ Bec heir is already a co-owner
□ If estate is insolvent but hereditary rights have already been sold, what
happens? There will be a breach of the implied warranty of title
 Buyer can rescind the contract bec there is nothing to be bought
3. Cession, repudiation to conjugal partnership/absolute community
4. Act appearing or…
- In a sale of real property, and then there is an appointment made to another person
to administer the property bought, it is called General Power of Atty (what is granted
are powers of administration hence agent cannot sell principal property)
□ Vs Special Power of Atty: agent is granted rights of ownership, but the rights he
can do or actions he has MUST BE SPECIFIED
- One who bought inheritance also sells it again by way of assignment of credit, it has
to be in a pubdoc
5. 500 pesos, must appear in writing kahit private lang

Reformation of Contract as a Cause of Action

• (n) = new provision imported from Anglo-American Law, along w/ law on Trusts, estoppel,
Statute of Frauds
○ Implication: we are no longer purely civil law legal system
• SOMETHING WAS LOST/ADDED/MODIFIED IN TRANSLATION so that the contract as written
does not express true intention of parties
○ Reformation happens AFTER contract has been consummated/perfected
○ Mistake, fraud, inequitable conduct or accident happens
- AFTER perfection of the contract;
- and DURING the transcribing of the oral contract into writing
○ If it occurs prior then it is not the ground that is being considered bec if the mistake of
fact or the fraud is dolo causante, then the contract is voidable and plaintiff will ask for
the annulment of contract
- Ignorance
- Lack of skill
- Negligence
- Bad faith
○ Consent not vitiated + both parties have legal capacity; what was wrong was not consent
per se but it was in translating/transcribing the oral contract from oral to written that
something went wrong
• CONTRACT IS VALID
○ Contracts that cannot be reformed
1. When the real agreement is void, bec there is nothing to reform
2. Oral contract bec there is nothing to reform except the lips
3. Simple donation inter vivos (no condition imposed; not onerous; truly gratuitous;
pure generosity) --> does not include remuneratory donation
4. Last will and testament (bec it is of pure liberality)
• One of the parties then says that the written contract does not express the true intention of
the parties
○ If that party files an action for specific performance of the obligation arising from the
contract, then he can no longer file an action for reformation of instrument bec when a
party files an action to enforce that obligation, he is in fact admitting that nothing is
wrong w/ contract as written; so cannot now go back and say there was something wrong
in written contract, and it does not now express the intention of the parties
○ E.g. contract became absolute sale but party intended to have power to repurchase the
sale

Notes Page 64
 ○
sale
• Grounds for reformation does not make contract void; contract is still valid
1. Mistake
- Should not be tantamount to mutual mistake of fact of the object of the contract
2. Fraud
3. Inequitable Conduct
- Other party knew abt mistake that was to his advantage, and he does not mention
this to the other party knowing that it will change the contract as written
- Party complaining will ask for reformation so that contract as written will now
express true intention of parties
4. Accident
- Your fingers when typing the contract pressed the wrong keys or pressed 0 too long

Interpretation of Contracts
• You interpret something that is written
• RoC: provision on interpretation of docus
• General rule: if the stipulations of the parties to a contract are clear and unequivocal [leave no
doubt as to the intention of the parties (i.e. parties said what they meant and meant what
they said)], then there is no need for interpretation
○ Terms should be applied and interpreted LITERALLY
• Exception: if the terms of the contract are unclear, unequivocal or unambiguous, then engage
in interpretation
○ Look for the CONTRACTUAL INTENT: what did party intend to accomplish by its
stipulation
○ Holistic Approach: one who interprets should interpret WHOLE CONTRACT by taking all
provisions as a whole
○ Use either
- Strict/Literal Rules of Interpretation
□ Principle Associated Words
□ Principle of Ejudsem Generis
 E.g. defamation, fraud or physical injuries
□ Last antecedent rule: last word should be situated near the word it modifies;
word modifies the word that precedes it --> Principle of Redendo Singula
Singulis (Taking ea to ea)
 Adjective should be near a noun
 Adverb should be near an adjective
 So much so that in the interpretation of words and phrases, the modifying
word does not seek to modify a word that is situated far from it
 Classic Example: Money or other consideration paid or given
◊ Money --> paid
◊ Consideration --> given
□ Rule of Inclusio oneus exclusio arteus: express mention of one (thing) means
the exclusion of others
- Liberal Rules of Interpretation
□ Contemporaneous interpretation
 How did seller interpret provisions of the contract
 How did buyer interpret provisions of the contract
□ Usage of the custom of the place where the contract was entered into
 There may be words that could best be interpreted by finding or looking for
the usage of custom of the place where the contract was contracted
 There may be certain words or phrases that can only be understood when
taken into context where the contract was made
 Did the parties use technical words? Then go into the technical mng of that
word or phrase. Use engineering mng of an engineering term.
- A1377, A1378: cannot be applied to legislative interpretation
• Court has undertaken interpretation of the contract, but later on it concludes that the
stipulation of the parties is un-understandable (cannot be understood) as to what really is the
object of the contract; that means the judge who is interpreting concludes that he cannot
interpret the intent of the parties, HENCE CONTRACT IS INEXISTENT
○ Even after going through process of interpretation, judge cannot still ascertain object of
the contract

Notes Page 65
Defective Contracts
• Questions
○ What is the nature of the defectiveness of these contracts: are they valid or void?
○ How can you attach these defective contracts? Can you attack it directly or
indirectly/collaterally/by way of affirmative defense in an action for enforcement of
obligation arising from a contract?
○ What is the period for challenging the filing of the action?
○ When is a contract unenforceable?
○ Can these contracts be convalidated/ratified (ratification is a generic term but there are
defective contracts that can be affirmed/acknowledge, convalidated, or ratified)
○ Can these defective contracts be cured? How? What is the period for curing a defective
contract?
• 4 defective contracts (from least defective to most defective)
1. Rescissible contracts
- One of the parties suffered (usually party-litigant, owner, lessor)
- Can there be partial rescission? YES, pursuant to A1384
□ If creditor is damages only partially be transfer of ownership bec the price paid
for it was grossly insufficient, then up to the extent that he was prejudiced
economically by that sale w/c was partly sale and donation, then only the
donation part will be rescinded while the paid part is valid; so as long as
contract is not contrary to custom, public policy, morals
- Rescissible contract is VALID until declared rescinded by a court
□ Until the rescissible contract is rescinded, it creates rights and obligations
□ Rescissible contract under defective contracts is different from rescission of a
valid contract under 1191 (resolution of the resciprocal obligation bec there is a
resolutory condition attached to the reciprocal obligation; what is this resolutory
condition? What is the statement of this resolutory condition? What is the actual
resolutory condition)
- How to attack rescissible contracts:
□ DIRECT attack, meaning, file an action for rescission; but nature of this action is
that it is SUBSIDIARY and REMEDIAL
 It is a remedy but merely subsidiary --> no other way for plaintiff as
creditor to collect the debt bec the debtor is insolvent or in a state of
insolvency; if there is another way, use that remedy
 But if creditor's credit is secured by mortgage/pledge/antichresis, he need
not file action for rescission but relies on these by foreclosing these
□ Cannot be challenged by a collateral attack, that is, the other party files action
for specific performance, then you interpose rescission as an affirmative defense
- In general, defectiveness of rescissble contracts is either in owner of property or a
plaintiff in a litigation over property
- He who files action for rescission (in effect contract will be rescinded/cancelled in
effect), parties will be brought back to status quo BEFORE filing of the rescission -->
so the one filing must be ready to restore what he is ordered to give back to the
defendant
- Rescission proper is really 1381, not 1191
□ Are there 5 rescissible contracts? No. There are 6 --> 1381 enumerates all the
5; the other one is 1382
1. Guardian who enters into contract in behalf of ward who lacks legal
capacity to give consent (insane, spend-thrift, convict suffering under civil
interdiction, minor) --> a case where law on contract interfaces with law on
property
◊ Guardian takes possession and administration of the properties the
ward owns
◊ Guardian over the property or representative of absentee can only
exercise powers of ADMINISTRATION, not powers of OWNERSHIP;
those that are rescissible under this provision are those
contracts done under his power of administration
 Usually refers to FRUITS of the property of the ward
 3 kinds of fruits
– Natural
Industrial

Notes Page 66
 – Industrial
– Civil: periodic income like periodic rentals (rental value of
properties)
 2 powers w/ respect to alienation of property
– Power of administration
– Power of ownership
 Anything that refers to transfer of real rights over immoveable
property, these rights are power of ownership and not power of
administration
 Contracts rescissible are contracts entered by guardian in behalf
of ward UNDER POWERS OF ADMIN, not power of ownership
– If power of ownership, then he has exceeded his authority,
and hence contract is unenforceable
– E.g. gather fruits and sell them, then if sold at less than
75% of the value, then rescissible
– E.g. leasing property (civil fruits) and guardian charges
rental of less then 75%, but under power of admin (period
of lease should be exactly or less than a yr, else if
more than a yr then it is an exercise of power of
ownership) --> rescissible at the instance of the ward
– PERIOD TO ATTACK is WITHIN 4YRS starting from the
time that the
 Ward GAINS legal capacity (reaches 18)
 If judicially declared insane, then WHEN HE REGAINS
CAPACITY (judicially declared sane)
 Even during the legal incapacity of the ward
 Relative of ward will ask court to appoint him as
GUARDIAN AD LITEM (for purposes of litigation
only)
 Guardian ad litem can be the one to file action for
rescission IF he can't get damages from the
property of the regular guardian
 If there is a way to get damages from the separate
property of the regular guardian, do it, rather than
rescission
 if later on the ward now is of legal age, w/in that
period of 4yrs, since an action for rescission is
subsidiary, then go for DAMAGES bec of
MALADMINISTRATION of the guardian
 You don't expect guardian to sue himself in behalf of
ward
◊ Guardian sells property belonging to the ward but sells it under his
power of administration --> contract entered into by guardian in the
name of his ward under his power of administration
 To sell for and in behalf of ward, need authorization by
guardianship court; w/o this, that contract (where, for example,
price received is less than 75% of the value of the property) is
NOT RESCISSIBLE [even if there is the required economic
prejudice (of more the 1/4th)] bec contract is unenforceable
against the ward under 1403(1) --> unenforceable bec IN
EXCESS of authority
– Unenforceability is a DEFENSE against creditor's demand of
enforcing the obligation
– There is no action to call a contract unenforceable
 Any act of guardian w/c uses power of ownership becomes
unenforceable against the ward, even if price paid for it was less
than 75% (or that ward suffered more than 25% lesion, where
lesion means econ prejudice or inadequate consideration)
– Guardian leases the house and lot for exactly a year: rental
value was 20k but leased it only for 15k --> there is the
required economic prejudice or lesion hence rescissible
More than 1/4 or 25% 'yung economic prejudice para

Notes Page 67
 – More than 1/4 or 25% 'yung economic prejudice para
maging rescissible
 Property belonging to ward should only be executed under
guardian's power of admin, but if guard leases it for more than a
yr, this is liable to create a real right over the property leased -->
unenforceable, not rescissible
– Can register and will burden the property w/ a real right -->
any buyer of the same house and lot can be bound by the
real right and must recgnize the previous lessee
– If one creates a real right in favor of another party over a
property owned by ward, then that is power of ownership
already
◊ If transferee (buyer) is in good faith and in good value from what was
sold by guardian, then one cannot question that contract (USUALLY)
2. Almost similar to 1: rep of absentee --> when person is judicially declared
absent (cannot be found), a rep will
◊ If rep enters a contract in behalf of absentee, and suffers the required
economic prejudice, this contract is rescissible
3. Accion pauliana
◊ Subsidiary and remedial action
◊ Situation required: debtor is already insolvent (properties are less
than liabilities), then was still able to sell or transfer property para
mas lalong maging insolvent kunwa
◊ Action for rescission against an insolvent debtor who transferred his
property to another fraudulently or gratuitously, thus depriving his
own creditors a way to be paid
 If w/ onerous causa
– Creditor who files action pauliana should prove that 3rd
person transferee is in collusion w/ insolvent debtor to hide
properties from creditors, else accion will not lie
– BARGAINED-FOR-EXCHANGE-OF-VALUES transaction is
always perfectly valid even if price is less than value of
property (even if 50% lang or 40% lang 'yung pagbenta)
 If transferee can prove that contract was a true and
honest arm-length transaction and paid good money for
it, action will not lie and court cannot rescind that
contract --> there was a real bargain, i.e. true offer,
counter-offer, etc and acceptance
 If cause is gratuitous (e.g. gratuitous donation in effect)
– Contract can be rescinded
– Does not matter if the transferee is in good or bad faith
4. Property being subject of litigation
◊ E.g. action to recover real property
 Plaintiff claiming to be owner: I inherited this parcel of land
 Defendant as possessor: I am in possession bec I bought it from
plaintiff's fellow who is a seller
– But turns out seller is not the real owner and hence has no
right to transfer ownership, hence what defendant has is
only real right of possession in the concept of the owner
– Seller is not owner or merely a possessor; so if he sells
property, he only transfer real right of possession, and not
ownership through registration in a LEASE PENDENCE (lease
subject to a pending litigation)
◊ Once plaintiff could prove that that land was owned by his ascendants,
and now an owner through inheritance but not in possession of it -->
and he wins the case, then the buyer who is a possessor in concept of
owner needs to give up the property
 But if the buyer who bought it from a tenant/overseer/lessee, has
been in possession of that property in the concept of owner for
period of more than 10y, AND that parcel of land is unregistered
land, (buyer took possession in concept of owner + has just title
in form of deed of sale executed by not-true-owner + in good

Notes Page 68
 in form of deed of sale executed by not-true-owner + in good
faith where he did not know that seller was not owner), then he
becomes the OWNER of that land
 But if land is REGISTERED in the name of the ascendant, then
buyer CANNOT have ownership and hence must return it
◊ To complicate matters, if that buyer who took possession more than
10yrs was industrious (built, planted, and sold), but also unaware that
his seller was not true owner hence in good faith, then he will be
deemed to be an in-good-faith buyer-planter-seller
◊ if a parcel of land is being contested bet plaintiff and defendant,
usually defendant is in possession of land, and since in possession of
land, and plaintiff is saying that plaintiff is true owner of land bec he
inherited it from his grandparent; then if the possessor-defendant,
unbeknownst to plaintiff, sells property to 3rd person, and if he sells it
to a 3rd person w/o knowledge or consent of the plaintiff/s, or sold
w/o authority of court, then that contract is rescissible at the instance
of the plaintiff; but if the property is the same subject matter of 2 civil
cases w/ 2 separate plaintiffs, if the defendant in both cases sells this
property to 3rd perosn, any of the plaintiffs in those separate actions
can file action of rescission --> IF LAND CANNOT BE RECOVERED bec
3rd person in good faith already owns the property, the debtor must
pay the purchase price of the land
5. All other contracts subjected by law to be rescissible
◊ Best ex is A1098, which is actually lesion also
 There is partition
 There is lesion, and in the lesion
– Partition can be done judicially or extrajudicially
– Note the difference of the 1/4th, what is it? It can be
EXACTLY 25%! (not need MORE THAN)
◊ 1191 IS NOT a rescissible contract bec it is a genre under resolution of
reciprocal obligation with an implied resolutory condition
 Resolution of the resciprocal obligation bec there is a resolutory
condition attached to the reciprocal obligation; what is this
resolutory condition? What is the statement of this resolutory
condition? What is the actual resolutory condition
 Contract is perfectly valid, not "rescissible proper", but then there
was a breach
 In a reciprocal obligation, if one party has already performed his
prestation (e.g. buyer already paid purchase price), that is the
start of delay of the other party
– injured party has 2 choices:
 specific performance + damages bec of default; OR
 rescission + damages bec of default --> rescission here
is not rescission proper but CANCELLATION OF
OBLIGATION arising from contract of sale but subject to
contestation by the seller (i.e. delay is merely slight,
hence entitled to specific performance for a period set
by the court)
 "rescission of a sale on the ground of breach of the
implied/express warranties" is the same genre as 1191 (contract
of sale creates reciprocal obligation; implied resolutory condition
attached to reciprocal obligations) --> but this is not rescission
proper bec actions for rescission proper are the actions to rescind
a rescissible contract
 Same with Contract of sale/lease on ground that other party has
violated the prestation/in breach of prestation arising from the
contract
 Action for rescission against implied warranties of eviction,
hidden defects as well
6. 1382: insolvent debtor unduly preferred one creditor over the other -->
undue preference: paying a creditor his credit that is not yet due and
hence not yet required to pay, or worse, the obligation is actually

Notes Page 69
 hence not yet required to pay, or worse, the obligation is actually
unenforceable and he favors him still by paying the obligation
◊ Obligation not yet due or he could not be compelled to pay the
obligation (e.g. contract is unenforceable against him)
□ Action for rescission (1383)
2. Voidable
- 2 kinds that have something to do abt consent
1) No legal capacity to give consent
A. Minor
◊ If he signs a contract saying he's of legal age but in fact is minor -->
active misrepresentation
 Effect: minor really misrepresented himself to be of legal age
 Minor here is the one who can annul the contract; not the one of
legal capacity
– If he does so, defendant can interpose this fact of active
misrepresentation by way of ESTOPPEL --> can ask court to
apply estoppel by misrepresentation
– Estoppel is only used as a SHIELD; as a DEFENSE
– Estoppel arises out of EQUITY jurisdiction of the court and is
not a question of law
◊ Minor just looks older that what he actually is but does not say he's
not 18; the other party is mistaken --> active misrepresentation
 Effect: other party is at fault for mistaking him of legal age
B. Insane
2) Consent of one is taken by violence, intimidation, fraud, undue influence,
mistake
 One who gives violence, intimidation, fraud, undue influence CANNOT
annul the obligation
 Law will not allow a person to benefit from his own wrong
- 4 yrs for period of filing the annullment
□ No legal capacity: counted from time he gains his legal capacity, or if in case he
lost it, then it is 4yrs from time he regains his legal capaicty when a court finally
declares him to be sane
□ Mistake or fraud: from time of discovery of mistake of fact or fraud
□ Intimidation, undue influence, violence: from time that violence/undue
intimidation/influence stopped/ceases --> court calls this
- Ratification
□ Tacit --> e.g. minor gains legal capacity or one who lost it regains it, then he
files an action for specific performance --> implied ratification bec knwing that
he can file action for annullment, he files rather specific performance
□ Express
- Viodable at the instance of the party who has no legal capacity to give consent or
whose consent was taken by duress, fraud --> not the one who has legal capacity
□ Can be filed by those principally or subsidiarily bound
- Action is one for annulment
□ Do not file action to annul a void contract
□ If file an action, it's an action for declaration of nullity
3. Unenforceable
- Kinds
1) If both parties do not have the legal capacity to give consent; if only 1, then
annullable at instance of party who has no legal capacity to act
2) Statute of Frauds
 Statute to Prevent Frauds and Perjury: man's memory is presumed acute;
hence statute of frauds helps prevent person claiming under oath he knows
the stipulations in the contract (when in fact he only said it to benefit him),
to the prejudice of the other party
 Exactly 500 pesos and above is covered by statute of frauds hence must
have a contract of memorandum (have agreement written; so that no one
will be defrauded or none of the parties will have to revaluate himself or
tell a lie in court w/c is perjury), else unenforceable
◊ Proof is parties affixing their signatures (not just the names)
◊ Can only be memorialized in writing

Notes Page 70
 ◊ Can only be memorialized in writing
 But in two of these contracts under statute of frauds, u need a RECKONING
DATE for the performance of the obligation
1. 2A
2. 2E
 Statute of frauds applies only to Fully executory contracts
◊ If obligation created by contract of sale has been either
 fully executed by only one of the parties (seller has fully delivered
the goods; the buyer has not paid for the purchase price)
 Both parties have performed partially their respective prestations
(part of goods have been delivered and part was paid by buyer)
 Contract is taken out of coverage of statute of frauds
 There are SEVEN frauds in the statute of frauds; not six
◊ Letter A needs a reckoning date
◊ B
 Miscarriage here should be used in a RESTRICTED meaning
◊ C
 What is required here are antenuptial agreements coupled with
donation propter nuptias; donations in considerations of marriage
must be memorialized in writing
◊ D: there's an exception and an exception to the exception
 Original version is not things in action but CHOSES in action
– You look for examples of CHOSES/THINGS in action
– Why are they called things-in-action
 Word chattel here means this came from COMMON LAW
 Price is NOT LESS THAN 500 Pesos; so if exactly 500, then
covered by statute of frauds
◊ Letter E has 2 contracts!!!
 Sale of real property requires real memorandum but this is not enough to
transfer ownership of the real property sold --> must couple this w/ 1358
(public document!!)
◊ Gratuituous donation (simple or remunaratory) is a contract, but a
formal or solemn contract; you need to perfect the simple donation of
an immoveable property through a public document
◊ So if just made in a priv doc/priv writing, then not enough to transfer
the ownership of the property donated
 Contracts covered by statute of frauds cannot be enforced by one of the
parties to the contract if it is objected to
 1357 and 1358
○ Sale of INTEREST over a real property, and sale of a parcel of land are
covered by statute of fraud
 Unless it is a formal contract, only needed is written
memorandum
○ Delivery of public doc is considered by law as CONSTRUCTIVE
DELIVERY OF TITLE OF OWNERSHIP over the public land
3) Contract entered into in the name of another (of the person who owns the
property); but one who gives consent is not authorized at all to enter into the
contract/sell but contracted or sold the property
 Either OUT OF authority or IN EXCESS of authority
 If guardian applies for authority before the court to sell property what was
inherited by ward, court will usually ask him: what is your intent? Why
selling this?
- At the instance of either of the two parties
- There is no action for declaration of unenforceability of a contract --> it is a defense
- As soon as contract is covered by statute of frauds, if other party ORALLY argues
against/for the contract, you should present the written memorandum and declare
the contract unenforceable
□ Written memorandum is not the one that will transfer the ownership despite
seller has delivered it and buyer has paid full purchase price
 It only means that buyer can compel seller to execute the proper form so
that it will bind third persons and create the real right or transfer the real
right of ownership to the buyer

Notes Page 71
 right of ownership to the buyer
 1358(1): real rights over immoveable property will only be transferred by
issuance of a public doc UNLESS land is unregistered land, and the physical
possession of land is given to vendee and vendee continues to possess it in
concept of owner for required period of acquisitive prescription of real
property (ordinary: 10y; extraordinary: 30y)
 Normally, purchase of sale of land is done orally, unless done by letter or
e-mail; but once consensual contract d purchase and sale is perfected by
acceptance of offer; but if contract is covered by statute of frauds, parties
should memorialized it in writing; else, UNENFORCEABLE at the instance of
one of the parties
□ Written memo is only the written memorial of the contract that was entered into
that is covered in statute of frauds
- Parties and privies and interest can only assail the contract covered under the
statute of frauds
- Unenforceable contracts are VALID contracts
□ Cannot ratify a void contract
□ To ratify: it can be implied or express
 To make unenforceable contract in # 3 perfectly valid, the parents of minor
or guardian of incapacitated party, or both parties when gain their legal
capacity, must expressly ratify the contract
4. Void and inexistent contracts
- It is void and inexistent that cannot be convalidated/ratified
- Period for filing nullity is IMPRESCRIPTIBLE
□ Can attack ANYTIME and ANYWHERE you meet it
□ File action for declaration of NULLITY
- One who challenges action for declaration of nullity can persuade the court to apply
ESTOPPEL (estoppel of stale demands or estoppel by laches) AKA SLEEPING ON
ONE'S RIGHTS
□ Any 3rd person affected by the void contract
□ Any of the parties
□ Privies of the parties
- Can apply estoppel where court acts as Court of Equity
- Void vs inexistent
□ Void: 1409(1&7)
□ Inexistent: 1409(2-6)
 One of the essential requisites of a valid contract, namely the object, causa
or consent, are absent
- In pari delicto non noretur actio may apply
□ Both parties are guilty --> criminal offense
□ Court will not hear any action involving these acts
□ 1411 and 1412
 1411: when nullity proceeds from the illegality of the cause or object…
□ When only one is guilty, there is no in pari delicto
- Kinds
1) Contrary to law, morals, custom, public policy
2) Consent here is not real or true consent but merely fictitious
 Badges of fraud = badges of simulation
3) Contracts whose causes did not exist at time of creation of contract
 Cause does not exist in fact or in law
4) Objects out of commerce of man
 Lands of the public domain
○ Riverbed, riverbanks, shores, river water
5) Rendering impossible service
 Legal
 Physical
6) After court tried its best to interpret the contract and used all the tools, but still
court does not know object of contract
7) Law expressly states that it is void
 Mandatory (opposite: directory) or prohibitory (opposite: permissive) laws
are void

Notes Page 72
 are void

OTHERS
• 2 maxims in sale
○ No one can give what one does not have
○ One cannot be unjustly enriched at the expense of another.
• EXAM ?: Ward inherited diamond from mother; now under properties adminstered by
guardian; guardian sold this diamond in behalf and for the ward; pretends to be owner and
sells it for 50% --> what is the defectiveness of the contract
• ROC r130 s17-19: rules on interpretation of docus/contracts
• Memorize 1409, 1356, 1357, 1358, ALL THE DEFECTIVE CONTRACTS (statute of
frauds; especially the main grounds)
○ Statute of frauds: piece of legislation passed by english parliament by 1670s during the
reign of King James I or when the monarchy was restored after the era of the lord
chancellor oliver cromwell whose title is Lord Protector of England
- Statute to prevent frauds and perjuries
- Now incorporated into our Civil Law
○ GIVE SIR AN EXAMPLE OF A CHOSE IN ACTION OR A THING IN ACTION (Chattel)
- Does it move? Is it in motion?
- Originally it is in 500pounds, but then it became 500dollars as adopted by
US, then it became 500pesos as adopted by PH (now only 10dollars)
□ Coverage of statute of frauds has lower threshold in PH
• Donation is a CONTRACT, not an act of liberality
• Automatic acceleration clause (interest automatically goes up if this that those happen) is
contrary to mutuality of contracts principle
○ Positive suspensive condition that depends solely on the will of debtor
- Violates this principle
- And obligation becomes illusory
• No one can give what one does not have; one can only give what one has
○ Seller cannot sell what he owns
○ If not owner of property, you cannot transfer ownership of property; even if u sold it but
you're not owner, what you transferred is not ownership but the possession
- Buyer gets only possession (possession in the concept of owner) as a REAL RIGHT
- Buyer cannot get the ownership even if he paid the value of the property bec
transferor is not the true owner
- Seller can only give whatever right he has, w/c is possession in the concept of owner
- Buyer is either in good faith or bad faith w/n seller is real owner
□ If knows seller is not true owner, buyer will not become true owner --> buyer
can only have possession in the concept of owner --> BUT, eventually he can
get ownership through ACQUISITIVE PRESCRIPTION (possession in the concept
of owner is enough to apply acquisitive prescription)
□ As long as there is no registered title in the name of somebody else (through
mortgage or something), or is an unregistered private land, or patrimonial
property (property owned by State in its proprietary/private character)
 2 characters in w/c State owns property
◊ Property devoted to public use (forest lands, mineral lands) -->
cannot be sold and bought, and cannot be subject matter of contracts
bec outside the commerce of man
 Even if u occupy it; no matter how long you possess it; no matter
how developed they are by cutting the trees and planting
coconuts etc; for as long as that parcel of land is classified as
forest lands, as long as not taken out of the coverage of
inalienable lands of the public domain, one cannot acqire it
through acquisitive prescription; UNLESS taken out of
classification and reverted or reclassified as alienable lands of the
public domain
◊ Property essentially patrimonial
 e.g. friar lands: lands given as by way of grant from King of
Spain from the religious Orders so that they will have source of
income
• Ramirez Case

Notes Page 73
• Ramirez Case
• FORMS of contract: A1356-58
○ General rule is 1356 while "however" is the EXCEPTION (see 1357)
○ Need these pub docus so that real right will be transferred to the vendee-buyer
- Public docu: contract is written then notarized
- Real rights over immoveable or real property
- E.g. ownership of parcel of land will not transfer if there is no public docu duly
notarized and delivered to buyer
- Need this NOT FOR THE VALIDITY of the contract, but so that whole world or 3rd
person can be bound (not only the persons privy in the contract)
○ Or that 3rd persons will bound by such contract bec usually only administrators, asignees,
heirs, executors are bound by the contract
- In order that a stranger will be bound by the contract
○ Contract will create an obligation but will only give a PERSONAL RIGHT, not a real right
- Purely personal right will die w/ debtor while all other rights will inure to the
asignees, heirs, executors, administrators, etc
• Testate: left a last will that is probated
• Intestate: does not leave a last will or last will he executed failed to probate --> properties will
be distributed accdg to the law on intestate succession
• DE LOS PADRES AGOSTINOS case
• Memorize GROUNDS for the defective contracts
○ Know
- General Nature of the Defectinveness of the contract
□ Annullable
□ Voidable
□ Void and inexistent
- If the defect can be cured
□ If it can, how can it be cure and who can cure it
- Can it be attacked? Who can attack it? And what is the timeframe for attacking it?
• There is a connection between Obligation and Property --> credit is property bec it can exist
separately from any other real right
○ Classification of credit is incorporeal or intangible moveable property --> right to collect a
debt from a particular debtor is intangible and incorporeal but since It refers to money
that is moveable, then a moveable property
○ Property bec it can exist alone in the legal mind as a legal construct: we can visualize it
but cannot touch it
- Cannot touch a credit hence incorporeal

Notes Page 74
Natural Obligations
Thursday, 3 May 2018 2:43 PM

Grounds for revocation of donation

• Ingratitude committed by donee against donor
○ One of the grounds of ingratitude: donee later on refuses to give support to donor in
cases where he is legally or morally bound to give the donor support
▪ The morally bound part is a "moral obligation"
▪ E.g. When donee becomes millionaire and donor becomes a beggar, then donor
asks him for lunch money, but donee refuses --> act of ingratitude --> can revoke
the donation
▪ Period for revocation: 1yr from time donor learns act of ingratitude
□ This action is personal to the donor
□ Cannot be filed by donor's heirs

Natural obligations
• Obligation has prescribed through extinctive prescription
○ Cause of action to enforce civil obligation has already prescribed
○ No more legal obligation
• But if in conscience, the debtor voluntary pays or performs the obligation, then he cannot
recoverd what he has paid by claiming defense of solutio indebitii or that debt was not
demandable
○ Payment is still valid
• The examples of the natural obligations are not exclusive in the civil code
○ A1424 is most important article and most common natural obligation
○ 1423 last sentence
○ Think about other examples other than those in the civil code
▪ Think of another example under A1425: payment of the 3rd person (interested or
not interested)
▪ 3rd person pays a natural obligation already --> debtor not legally bound to
reimburse him even if he proves the payment redounded to the benefit of the
creditor
• Legal heir is liable for the debts of the decedent that survives debt
○ Only legally liable up to the extent of the value of the properties which he took
possession of and inherited; not more than that
○ Legal heir is not liable with his own personal and separate property
○ If that compulsory heir voluntary pays a creditor for more than the value of the property
he inherited, that is a valid payment of a natural obligation
• If the last will and testament fails to probate, his estate will be distributed in accordance with
laws of intestacy
○ If they honor the wishes of the testator (person from whom they inherited) by paying
the legacy or giving the device to its voluntary heirs (honored the last will and testament
that failed to probate)
▪ This is performance of a natural obligation
▪ This is to preserve the good name of the decedent (dead)

The debtor shall lose every right to make use of the period:
When after the obligation has been constructed, he becomes insolvent, unless he gives a guarantee
or security for the debt
When he does not furnish to the creditor the guaranties or securities which he has promised
When he by his own acts, he has impaired said guaranties or securities after their establishment, and
when through a fortuitous event they disappears

Notes Page 75
Estoppel
Thursday, 3 May 2018 3:02 PM

2 courts in English law dispensing 2 different causes of action

1. King's Court: dispenses justice according to law/statute --> legal remedies
2. Court of the Chancery: dispenses equity jurisdiction --> equitable remedies

Our courts of law here have 2 jurisdictions

1. Court of law
2. Court of equity
- That is why in civil complaints, they include in their last prayer, "The Court gives the
plaintiff such other remedies as may be just and equitable under the premises"
- To promote right and justice
- Law intends that justice and equity shall prevail

Estoppel
○ To declare other party in estoppel or estopped
- Can only be used as a shield (defense) and not a spear or sword (cause of action)
- Cannot file an action on the basis of estoppel
- Other party files an action, and you interpose this as a defense
- LAST DEFENSE
○ Estoppel is exceptionally used only in certain situations when it is a question of law; usually
estoppel is used in questions of fact
○ 1431: definition of estoppel
a. Estoppel in pais (equitable estoppel): by conduct
▪ Positive conduct: to act/action
□ Promissory estoppel: promise to do or not to do something in the future
does not amount to estoppel unless...
 Contract was written --> creditor promises verbally, and was not
written in contract --> cannot prove by parole evidence that creditor
promised this thing which was said verbally --> if it will be an injustice
and extremely prejudices the debtor, can invoke promissory estoppel
□ Estoppel by acceptance of benefits (1438)
 Agent to be given a commission from the sale of a diamond
pendant --> cannot sell --> goes to Villarica pawnshop --> pawns it -->
VOID bec the thing pledged or mortgaged should be that of the owner
(A2085)
◊ Even if contract is void, he cannot or is estopped from
recovering diamond pendant until he pays the loan and
whatever interest, bec he has benefitted from the loan from
which the pledge was constituted
□ Most important positive conduct: estoppel by representation or
misrepresentation (1437)
 Can be broadened to include other positive acts
 Active misrepresentation
◊ when a party to a contract states to a contract he is of legal age
(close to 18yrs), that representation, when it turns out to be
false, when the other party is of legal age, the minor can file for
action of annulment (the one of legal age cannot file)
◊ The party should know the true facts when he does the
misrepresentation, which turns out to be false; but the other
party should not have known these true facts
◊ Knowingly, party misrepresents facts, and that the other party
will act accordingly with the misrepresented facts
◊ Court will declare the minor as estopped bec of active

Notes Page 76
 ◊ Court will declare the minor as estopped bec of active
misrepresentation; other party is using estoppel as a defense
against the minor who has filed an action for annulment
◊ Should not be passive misrepresentation
▪ Negative conduct: failure to act (omission)/inaction
□ Most important: estoppel by laches/estoppel of stale demands
 "Sleeping on one's rights"
◊ You know you have right to file an action
◊ But you don't
 Delay in enforcing an obligation in court
 Failure to file the action
 Not tantamount to extinctive prescription; bec if it becomes more
than prescription, base the action not on estoppel but extinctive
prescription
 E.g.
◊ Plaintiff, knowing that he could file the action based on quasi-
delict, did not file it for a long time that has not made the cause
of action prescribe (3yrs/4yrs)
◊ Defendant may interpose against plaintiff estoppel
◊ Reliance on defendant that plaintiff will no longer file action,
and this filing causes extreme prejudice to the defendant if
Court allows plaintiff to maintain the action
 Estoppel by laches requisites:
i) Knowledge of the true facts
ii) Reliance on defendant that plaintiff will not file
iii) Plaintiff changes his conduct
iv) Proof of prejudice to the defendant by the filing of action
□ Estoppel by silence
 Party not allowed to disavow a fact (i.e. Estopped), is he who had the
duty to speak
◊ No duty to speak, silence is still golden --> less you speak, less
mistakes
 He now wants to talk, whereas on the time he should've talked, he
didn't --> estoppel by silence
 Element of turpitude or negligence
b. Estoppel by deed (technical estoppel): estoppel by something written
▪ What is stated in written docu cannot be belied by parties; they are bound by the
declarations there
▪ E.g.
□ Judgement
□ Record: registration of live birth with the CSO
□ Written Contract: stipulations
□ Document
 Not by deed of sale
○ Extinctive prescription is a matter of law vs estoppel is a matter of equity
- Court has discretion to appreciate matters of equity --> must prove that there will be
injustice, so use equity jurisdiction
○ Requisites
a. Action or inaction by plaintiff
b. Knowledge on the part of person estopped of the true facts
c. Party claiming estoppel relied on that inaction
d. Defendant was prejudiced
○ See De Leon book on Estoppel

OTHERS
○ Memorize prescriptive action
- What actions prescribe in
▪ 1yr

Notes Page 77
 ▪ 1yr
▪ 4yrs: action based on a quasi-delict
▪ 5yrs
▪ 6yrs: action based on an oral contract
▪ 10yrs: action based on contracts
- What actions are imprescriptible: declaration of nullity
- When to start counting the period
▪ Generally: when did this cause of action accrue, which depends on law
○ When did Monetary Board Circular 799 (Jul 03 2013) become effective, and other previous
circulars --> know the date bec it will determine as to what the interest will be charged

Notes Page 78
Trust
Tuesday, 8 May 2018 2:47 PM

• PH Law on trusts was incorporated from Anglo-American and European law on trusts
- Europe: Competition Law
- US: Sherman Act
• Law on trusts is a way of creating a legal personality to take care of property
• Set-up by a trustor/settlor who is the owner of the property or a huge fortune usually from business dealings,
naming another as a trustee
- Trust is to maintain this fortune and fund
○ Set-up by founder of trustor so that fortune will not be dissipated
○ Bec founder or trustor does not trust his children to maintain the wealth of the estate, or the fortune
intact
○ If fortune intact, it has economic clout
- Also set-up for taxation purposes --> prevent inheritance and estate taxes
○ To prevent State from having big bite from the fortune of the estate, a trust is made
○ Enjoys tax privileges and tax exemptions
○ Can even accept donations to further increase it
- Trust fund becomes an artificial person separate from the person of the trustor
- Trustor should be full owner of the property
- Trustee
○ Not owner but just someone on whom the trust is reposed by trustor to administer the property, but
he will not benefit from the fruits of the property
○ The fruits will benefit the beneficiary, usually the children
- Can a trustor be also the trustee? NO, because you will be acting as a full owner who has all the bundle of
rights
- Can the trustee be the beneficiary of the trust? NO, because he is not supposed to profit from the trust
○ Although, a trustee may be entitled to fees for his services
 Not profiting from the trust property
 Just being remunerated for his services
- Can the trustor also be the beneficiary? YES
○ Trustor who has property and funds has been diagnosed with the early onset of Alzheimer's
• When an ascendant dies, all compulsory heirs become co-heirs and co-owners even without distributing his estate,
so much so if 2nd generation also dies and do not distribute shares of the original owner, the 3rd generation will
also become co-heirs and co-owners
- You inherited 2000sq m residential land that is situated right outside the poblacion of a town
▪ After 25yrs, there may be 100 co-owers of that 2000sqm parcel of land
▪ If physically divide and partition the land, ea has 20sqm
• How long can a trust last; can it last forever or only until the lifetime; or only for 50yrs?
• 2 kinds of trusts
- Express
▪ In order that this be created, the one who sets up the trust is the owner, the formal instrument needed
is a Deed of Trust
 This Trust Document must be in the form of a public document
 Immoveable property
 Real estate
 Money (may prejudice 3rd persons; #3) --> if notarized, the notary public can back him up
that they are the same persons that executed the public document and that this is their
free and voluntary act, hence has 3 witnesses in addition to yourself (2 instrumental
witnesses, and the notary public before whom you acknowledge the document)
 Rental property (several condo units, apartments, etc.) that is going to be leased bec of #1:
to bind 3rd persons or to create or transfer the real right
 In the form of a private document, will the Trust Document be valid? YES, but the party can
compel that it be made public
- Implied
▪ Resulting trust
 There is an intention to create an express trust but there is a failure to create it
 Resulting trust is the result of the failure to create an express trust
 Somehow, something is lacking like the proper formality
 e.g. Title was only being given in the name of the lender as a security for the payment of the loan;
hence, there is an intention to create a trust --> but Tolentino puts this in the constructive trust
▪ Constructive trust
 Trustee never intended to be a trustee of a trust
 But that obligation is thrust on him or forced on him by law; hence he becomes a trustee w/n he
intended to become a trustee
 Period is also constructive notice
 What is the meaning of constructive? Even if there is no actual knowledge or actual notice
(i.e. he does not really know or was not really notified), he is presumed to know
 1456: most famous
 Registered owner not true owner but a trustee of a constructive trust
 Often used in property, and lands, titles and deeds
◊ Fabian v Fabian
◊ SC: if the title to the property to a parcel of land is registered through fraud to a
person not the owner, after a period of 1 yr of the registration of the title, the
torrens title can no longer be attacked by the true owner bec it has been already
rendered conclusive against the whole world; but since titling of land is not designed
to perpetrate a fraud or prevent the recovery of the property titled by mistake, there
is a way of reconveyance instead of cancelling the title --> execute a deed of
reconveyance included in the title which the person does not own
◊ Prescriptive period for action of reconveyance on basis of constructive trust
 Action for reconveyance is an obligation created by law and imposed by law on
the registered owner
 Since created by law, the prescriptive period is 10years, according to the
provision on extinctive prescription
 Route: you count the 10yr period not from the actual discovery of the fraud or
mistake (as is usual) but from the inscription or registration of title in the
registry of deeds bec the registration of a parcel of land in the registry of deeds
is a constructive knowledge to the whole world even though there is no
publication
• Chapter on implied trust are only examples, hence is not exhaustive, just like in natural obligations

Others
• Mistakes of fact or fraud, prescribes normally in 10years
• Constructive notice of a parcel of land registered through fraud or mistake; and true owner found out of this fact,
and files action for reconveyance; and SC said ruling has been consistent that date of registration should be
followed bec registration in , question it in a MFR --> use HAMMER ON DUE PROCESS as your basis
- True owner not given due process because he did not actually know --> there is no publication of the registers

Notes Page 79
- True owner not given due process because he did not actually know --> there is no publication of the registers
- Constructive notice is actually an absolute presumption, even if it is not true
▪ Trust is constructive trust even if trustee does not intend to be a trustee
▪ Constructive notice as absolute presumption can be questioned as well --> failure to afford owner due
process of law
- Olviga v CA
▪ SC indirectly attacked this doctrine: Action on reconveyance based on constructive trust must be filed
w/in 10 yrs from the registration in the register of deeds
▪ SC was liberal in applying the action to quiet title
▪ Since the widow and children are still in possession then as now, the Court can consider the action as
action to quiet title bec they have a real right and interest in the real property; since they are still in real
possession, the action to quiet title shall be imprescriptible
 But what if widow no longer in possession? Then the action will prescribe in the nearest
analogous cause of action which is the recovery of possession, not recovery of ownership, which
prescribes in 10yrs
- HOWEVER, now, make sure ALL elements of the cause of action are present else it can run the danger of
being dismissed --> presume that SC will not interpret the cause of action liberally --> cannot rely so much
now on Olviga Case
- POINT: you can still question the 10yr prescriptive period --> start of prescriptive should be on the actual
knowledge of the fraud or mistake; but bolster it with enough authority to show the present doctrine violated
due process clause
▪ Substantive due process: being deprived of property without due process of law

Notes Page 80
Last Day
Thursday, 10 May 2018 3:15 PM

OBLIGATION
• Personal right lodged on the creditor to demand from a particular passive subject, the debtor, a
particular conduct, which is either positive (to give, to do) or negative (not to give, not to do)
○ Should be viewed on the point of view of creditor unlike what the Civil Law provides
▪ Debtor is just passive subject
▪ Creditor is one who can demand a definite conduct, and if debtor does not comply,
he can choose either:
□ Action for specific performance
□ Rescission/Cancellation
○ Personal right in favor of the creditor
○ Can enforce the right against debtor, heirs, administrators, assigns in cases where the
obligation is not purely personal (pay sum of money, deliver goods, deliver real property)
▪ If dies, estate of deceased debtor will be made liable for the obligation
□ Testate estate: left a last will and testament which probated
□ Interstate estate
▪ Heirs of the debtor are liable only to the extent of the value of their inheritance;
cannot be made liable for more than the value of the estate which they inherited
▪ If they do pay more than the value of the obligation, then the excess will be a
natural obligation
▪ If purely personal, obligation cannot be inherited but dies --> like obligation of
painter to paint portrait of creditor (lease of services)
• #1 defense in all cases: DENIAL
○ Deny the negligence
○ Deny the employer-employee relationship
○ Deny the facts of the case
• 5 sources
1. Law
2. Contracts
3. Quasi-contracts
▪ Underlying principle: no one shall be unjustly enriched at the expense of another
▪ Groups of quasi-contracts
1) Negotiorum hestio
2) Solutio indebitii
3) Other quasi-contracts (can be subsumed under "acts of good samaritans")
4. Crimes
▪ Most crimes/felonies make the guilty accused liable for civil liabilities arising from
the crime
▪ Although there are certain felonies that do not carry civil liability at all
5. Quasi-delicts
▪ Tort is broader than quasi-delict
▪ A vehicular mishap can result to 3 causes of action depending on who is injured
1) Civil liability arising from reckless imprudence resulting in homicide, physical
injuries or damage to property
2) Quasi-delict
3) Civil action for breach of the contract of transportation or carriage
▪ Injured party can file all 3 causes of actions but if he succeeds in proving all 3, he
will be entitled only to damages to one of them; usually his choice and the highest
possible damages
□ Plaintiff should choose a defendant who can pay
□ If defendant can't pay, why bother sue him for damages; it will be counter-
productive
□ If common carrier, easier to prove damages (breach of contract of carriage)

Notes Page 81
 □ If common carrier, easier to prove damages (breach of contract of carriage)
(1) Defendant is common carrier
(2) There is a contract of carriage between injured and common carrier
□ Quasi-delict: must prove that the injury or damage suffered by plaintiff was
the proximate cause of the negligent act or omission to act by the employer;
if there is a break in the series of event, then cannot prove that damages
resulted from the negligent act or omission to act
• Nature and effects of the obligation
○ An obligation is born by one of the 5 sources of the obligation
○ Once born, it creates rights and obligations depending upon what kind of obligation it is,
and binds the parties
○ Later, the obligation is extinguished or figuratively dies by one of the modes of
extinguishing the obligation
• Prestations
1. To Give
1) Specific or Determinate
□ Has accessory obligations
2) Generic or Indeterminate
□ Do not have accessory obligations
3) Delimited Generic Thing
2. To Do
▪ Do not have accessory obligations
3. Not to Do (where not to give is a specie)
▪ Do not have accessory obligations
• Options open to the creditor
○ When the obligation becomes due and demandable, the debtor may be required by the
debtor to
▪ Perform the prestation
▪ Rescission or cancellation, plus damages in either case, because of default
• No default until
1. Obligation becomes pure obligation
2. There is a demand made on him to perform
3. He does not perform
• 5 kinds of breaches (A1117)
1. Worst: total non-performance or absolute refusal to perform the obligation
2. Delay
3. Fraud
4. Contravention of the Tenor
5. Negligence
• R29, S10 of Rules of Court
• Legal excuse for total non-performance or default/delay: no one shall be liable for the
happening of a fortuitous event
○ Cannot apply to negligence, fraud, and contravention of the tenor
○ Bec of the requisites that…
▪ The debtor is not guilty of concurrent negligence
▪ Fortuitous event is outside the will of the debtor
○ 2 types
1) Act of God
□ Natural calamities
□ Anything that happens outside the realm of the will of man (e.g. slipped on a
banana peel)
2) Act of Man
• Classifications of Obligation (*presumption is prima facie only)
○ Most important: pure obligation
▪ Definition: obligation not dependent upon a condition or a period
▪ Demandable at once
○ Conditional Obligations
▪ Condition: made to depend upon future AND uncertain event, or a past even

Notes Page 82
 ▪ Condition: made to depend upon future AND uncertain event, or a past even
unknown to the parties
□ Provision in CC is defining a pure obligation, so made a shortcut definition
that will include both conditional obligation and condition with a period;
that's why they used the conjunction "or"
▪ Kinds, where the effect are opposite
□ Suspensive
 When future and certain event occurs, the effect retroacts
□ Resolutory
 When future and certain event occurs, it does not retroact
▪ In reciprocal, there is an implied resolutory condition
□ What is that condition? What is that future and uncertain event in a
reciprocal obligation?
▪ In a sale of right with repurchase, this sale is subject to a resolutory condition, and
not a suspensive condition
□ Seller transfers the thing but on a resolutory condition
□ Vendee aretro becomes the owner of the thing, and may sell it to another
□ But, original vendee aretro can still get back that land so long as the period to
repurchase has not yet lapsed
 If period is agreed upon, follow this
 Without the period, within 4yrs (1606)
○ Obligation with a Period
▪ Future event that is sure to arrive
▪ Presumption: benefit of period is to both
▪ Promissory note: on or before a definite date --> suspensive period is for the
benefit of the debtor
▪ Kinds
□ Suspensive period
□ Resolutory period
□ Definite
□ Indefinite
▪ Court is usually authorized to fix the period
○ Alternative or Facultative Obligations: there is more than one prestation in one obligation
▪ Alternative
□ Must perform some but not all the obligations
□ Choice is presumptively given to the debtor
□ If creditor is given expressly the right to choose, the debtor should in no way
restrict the choices open to the creditor
 If through fault of debtor, he somehow limits the choices
◊ He will be liable for damages
◊ The creditor who has the right to choose can "choose from the
remaining + damages" or the "value of what was lost + damages"
▪ Facultative
□ Principal Prestations + Substitute Prestations
□ Choice is only given to the debtor; never to the creditor
□ If the principal prestation is lost through fortuitous event, then the entire
obligation is extinguished
□ If the substitute is lost through the fault of the debtor, he will not say its lost
but rather just choose to deliver the principal, so he won't be liable for the
loss of the substitute
○ Joint or Solidary Obligations: multiple creditors or multiple debtors where the tie that
binds these is either joint or solidary
▪ Presumption: obligation is joint divisible obligation because solidary obligations is
not preferred
□ Obligation is divided into as many debtors or creditors as there are
□ [Value of the Obligation/(Multiple debtors * multiple creditors)]
▪ Solidarity will exist only if…
□ There is a stipulation providing for it

Notes Page 83
 □ There is a stipulation providing for it
□ Or a law requires solidarity
 Tort-feasors
 2 baileys/borrowers in commodatum of the same thing --> liability of
the multiple baleys are solidary
▪ Joint-indivisble obligaiton
□ Liability of multiple is joint
□ But joint co-debtors must contribute all respective shares so that the
obligation may be performed; else, without all contributions, others cannot
perform their obligation
□ E.g. delivery of a customized car, where there are many parts
○ Divisible or indivisible: w/n obligation can be performed partially or only as whole
▪ Presumption: if the obligation calls for the delivery of a specific thing (especially a
live thing) by several debtors or even by one debtor, it is an indivisible obligation
▪ Reverse presumption: if obligation can be performed in a certain number of days,
or in measurements, then they are considered as divisible obligations unless made
indivisible
▪ Delivery of a divisible thing can be made by stipulation as an indivisible obligation
□ Delivery of 1000 sacks of rice can be made an indivisible to be delivered on or
before a definite date
○ Obligation with a penal clause
▪ An accessory stipulation
▪ Can have either one of the 2 purposes:
(1) Punitive: punishment for breach of the obligation
(2) Reparatory: standard now for damages in case debtor fails to perform
 Not designed to terrorize debtor to perform
 Pre-agreed measure of the damages exactly equivalent to liquidated
damages
 Effect: creditor does not need to prove the items of damages and how
much he was damages
▪ Debtor cannot choose to pay the penalty instead of performing the principal
obligation unless this is expressly granted to him
□ If expressly granted to the debtor, then the obligation becomes facultative
• 6 grounds for extinguishing obligation + last paragraph that adds 5 more specific grounds
○ Most natural way of extinguishing an obligation is payment
○ The rest are unnatural ways of extinguishing an obligation, especially confusion as merger
of rights (no one can be his own creditor and debtor at the same time)
• 2 Characteristics
○ Identity: what is to be paid?
○ Integrity: how should payment be made? Usually full payment unless divisible obligation
or is partially liquidated and partially unliquidated
○ Who may pay an obligation? Can anybody pay? Yes if:
1) The payment has identity and integrity; and
2) The creditor accepts the payment; but creditor is not legally required to accept
legally tendered payment of a 3rd person-not-interested in the obligation, even if
that 3rd person is doing so with the knowledge and consent of the debtor; unless
that 3rd person is given special power of atty and hence becomes agent of the
person legally authorized to make the payment --> creditor is that strict because in
the matter of payment, he wants the debtor to "bow down" as a form of obeisance
• 4 payors who may pay
1. Debtor himself
2. His heirs, administrators, executors, assigns, agent
3. By a 3rd person-interested or "3rd person-not-interested but with the knowledge and
consent of the debtor"
4. 3rd person (whether interested or not interest) who pays with consent of creditor and
debtor but does not intend to be reimbursed (offering an inter vivos donation)
▪ w/o consent of debtor, debtor can sue the creditor: interfering with contractual
relations with another by ruining business reputation

Notes Page 84
 relations with another by ruining business reputation
▪ If 3rd person-not-interested: consent is required by the creditor
▪ If 3rd person not interested pays but intends to be reimbursed, must prove that the
payment redounded to the benefit of the creditor
▪ If 3rd person interested pays, legal subrogation occurs

Novation
• Active-subjective: changing the person of the creditor: subrogation of creditors
○ Depends upon whose initiative the changes occurs:
▪ Expromisyon: initiative of the new debtor himself
▪ Delegasyon: initiative of the old debtor to present new debtor
○ Most important element: release of the old debtor
○ Not prudent for creditor to accept new without releasing the old
▪ If did not release old, make sure that new is bound solidarily with the old debtor -->
expressly state this
○ Kinds
▪ Legal subrogation (A1302) w/ 3 instances: by operation of the law
▪ Conventional Subrogation: by agreement
○ What is the difference between conventional subrogation of creditors and assignment of
credit
▪ Assignment of credit is also found after the law on sales
• Passive-subjective: changing the person of the debtor: substitution of debtors

Compensation
• Most intractable kind of extinguishment of obligation because there are 4 types of
compensation
○ A1279: 5 requisites of legal compensation
○ All 5 essential requisites must be present
1) Scenario: 2 parties, A and B are mutually creditors and debtors of ea other in at
least 2 different obligation
▪ A is creditor in one obligation and B is debtor
▪ In another obligation, their roles are reversed
2) For the payment of sum of money, or payment of the same fungible thing
3) Both obligations must be due, demandable and liquidated
4) There is no controversy in any of the obligations
• Judicial compensation: set-off or counter-claim
• Facultative compensation: one of the parties, either A or B, can facultatively claim the
compensation of these 2 obligations even if one of the essential requisites of legal
compensation is not present
○ What essential element that is lacking is:
▪ One of the obligation is for the payment of the sum of money, the other for the
delivery of the specific thing
▪ Or one is for the delivery of a specific thing (Arabian horse), the other obligation is
for the delivery of a more inferior specific thing --> creditor of the superior
obligation, w/c is for the specific thing, is the one who can claim the compensation
of these 2 obligations --> superior can waive his right to demand Arabian horse, and
accept the inferior kind from the debtor
○ Another scenario: one obligation is still subject to a suspensive condition --> debtor of
this obligation subject to a suspensive condition that has not yet occurred cannot be
required to pay bec not yet been created yet (inchoate), and can waive his right not to be
required to pay the obligation subject to suspensive condition (w/c makes this obligation
already due)
▪ One obligation due demandable liquidated
▪ Other is subject to a suspensive period w/c is for the benefit of the debtor
▪ That debtor for whose benefit the suspensive period is given is the one who
can claim the facultative compensation bec he is not the one who is required
to pay yet
▪ Debtor here waives the period that is for his benefit; make the obligation be

Notes Page 85
 ▪ Debtor here waives the period that is for his benefit; make the obligation be
due already; and compensate the two obligations

OTHERS
• Obligation created by the Constitution: citizens in times of war or national emergency, State can
require its citizens to render mandatory military or civil service
○ Every citizen should be loyal to the republic in keeping with their oath of allegiance
• In case the law does not provide for the prescriptive period, in any other special law and the
Civil Code, the prescriptive period is 5yrs
○ Reduction of inter vivos donation (innofficious inter vivos donation)
• Memorize
○ 1279: requisites of legal compensation --> master this (mapera to remember bec you can
reduce the amt of debt/obligation your client can have)
○ Further reduce it: if you knew the obligation has been reduced by 2/3s five years ago, and
it's been earning a total of 60%/annum

Notes Page 86
Cases, Questions, Memorize
Thursday, 17 May 2018 3:20 PM

Cases
• PSBA
• Woodhouse v Halili
• Gonzales (typewriter case) --> contemplates all breaches of a contract/obligation
• Arrieta vs Larry
• Telefast v Castro --> best example of contravention
• Eastern Shipping Lines
• Roque case -- for antichresis
• De Ruth Angeles case --> 1169 vis-a-vis 1191
• Song Fo vs Hawaiian
• Taylor vs Uy vis-a-vis Rustan Mill --> on suspensive conditions
• Gaite v Fonacier --> indefinite period vs suspensive condition
• Osmena v Rama; Longara case --> purely potestative condition
• Taylor v Uy Tien Piao
– Resolutory condition
– What are the exigencies at that time that may have resulted to the cancellation of the
order?
• Parks vs Province of Tarlac --> what is the principle of the local government that is included?
• UP v de los Angeles --> reciprocal obligations and automatic rescission
• Ponce de Leon
• Inchausti v Yulo
• Lopez v Plaza Theatre Incorporated --> Government's credit is always the top preference
• Ponce v de Leon --> only time when the provision concerning inflation or deflation was applied
• NagaTelCo v CASURECO --> according to sir, the SC misapplied A1267
• Liguez v CA --> when motive becomes a valid causa for a contract
• Ramirez case
• De los Padres Agostinos
• Olviga

Questions
• What actions are imprescriptible?
• What crimes do not carry civil liability?
• What are the contracts included in an issuance of a letter of credit?
• What is a letter of credit?
• What is forbearance of money goods or credit
• Scenario: there is an obligation with a resolutory condition over many generic things (e.g. 10
pigs), and then the resolutory condition happens
– Must the deliverer send the same 10 pigs which has already become old?
– Or must he deliver pigs that are of the same quality and condition 10 years earlier?
• If the happening of the future and uncertain event depends upon the will of both the debtor
and creditor only (not upon chance or will of a 3rd person), it is void, and not a potestative
condition
– Why is it void?
– Note: the condition cannot be made to depend upon both the will of both the creditor
and debtor only
• If there was a pre-existing obligation, and then, subsequently, the debtor says "I will pay only if I
want to", will it make the entire obligation void? Or only the second obligation, and not
including the pre-existing obligation?
• Difference of the effect of impossible conditions in onerous vs gratuitous contracts
• What is the implied resolutory condition in reciprocal obligations? What is that which will cause
the extinguishment of the obligation?
• What is the smallest amount that can be remitted? The smallest remission possible?
• There is nothing to prevent the parties from agreeing to enter into a compensation; however,
what is the barest minimum in order that there be conventional compensation?

Notes Page 87
 what is the barest minimum in order that there be conventional compensation?
– Is "the agreement" the minimum requirement of having a conventional compensation or
are there other requisites?
• In a joint obligation, d1 is not legally required to, but may pay d2's share, which cannot be
refused by the creditor. What is d1's interest in d2's share? Why does he want to pay d2's
share?
• An obligation to deliver the specific thing can be converted into a payment for damages
through the filing of an action for rescission or specific performance, with damages in either
case. Once the decision has been final and executory, there is now liquidated damages that can
be the subject of judicial compensation.
– This is a case of a facultative compensation where one debt is a payment of a sum of
money, while the other is for a specific thing
– However, who of the 2 creditors can claim the compensation?
• If the suspensive period is given for the benefit of the creditor, and the creditor is given the
privilege of waiving this period in order that facultative compensation may take place, what has
the obligation become?
• What happens when there is mutual…
– Mistake of fact?
– Fraud, violence or intimidation?
– Undue influence?
• What are choses in action? Give examples. Why are the called choses or things in action?
• The ward inherited a diamond from her mother. It is now under the properties administered by
the guardian. The guardian then sold this diamond in behalf and for the ward. He pretends to
be an owner and sells it for 50% of its value. What is the defectiveness of the contract?
• What are other examples of a natural obligation besides those under the civil code
– Think of another example under A1425 regarding the payment of a 3rd person
(interested or not interested)
• How long can a trust last? Can it last forever or only until the lifetime of the trustor? O only for
50 years?

Memorize
• Defective contracts
• Periods of prescription
○ When does the action accrue?
○ When do you start counting the period?
• A1279
• Master facultative compensation
• 1409
• 1356
• 1357
• 1358
• All defective contracts

Notes Page 88