OBLIGATIONS AND CONTRACT

- Obligations derived from law can never be

REVIEWER
presumed.
ARTICLE 1156. An obligation is a juridical necessity to - Only those expressly determined in the Civil
give, to do or not to do. (CONCEPT OF OBLIGATION) Code or in special laws are demandable.

Types of Obligation: How can we determine whether an obligation

1. Civil obligation - which has a binding force in law, and arises from law or from some other source,
which gives to the obligee or creditor the right of such as a contract, quasi-contract, criminal
enforcing it against the obligor or debtor in a court of offense or quasi-delict?
justice. (Re Art. 1156)
1. When the law establishes the obligation and
- Based on positive law. the act or condition upon which it is based is
2. Natural obligation - is one which cannot be enforced nothing more than a factor for determining the
by action, but which is binding on the party who makes moment when it becomes demandable, then
it in conscience and according to the natural law. the law itself is the source of the obligation.

- Based on equity and natural law. 2. When the law merely recognizes or
Requisites of Obligation: (J A P Pres) acknowledges the existence of an obligation
generated by an act which may constitute a
1. A juridical or legal tie contract, quasi-contract, criminal offense or
2. active subject known as the obligee or creditor quasi-delict and its only purpose is to regulate
3. A passive subject known as the obligor or debtor such obligation, then the act itself is the source
4. The fact, prestation or service of the obligation and not the law.

Classification of Obligations: Art. 1159. Obligations arising from contracts

(1) Pure and conditional (Arts. 1179-1192). have the force of law between the contracting
(2) With a period (Arts. 1193-1198). parties and should be complied with in good
(3) Alternative and facultative (Arts. 1199-1206). faith. (Obligations Arising from Contracts)
(4) Joint and solidary (Arts. 1207-1222).
(5) Divisible and indivisible (Arts. 1223-1225). Contract - meeting of minds between two
(6) With a penal clause (Arts. 1226-1230). persons whereby one binds himself, with
respect to the other, to give something or to
Art. 1157. Obligations arise from: render some service.
1. Law;
2. Contracts; Contracts are perfected by mere consent, and
3. Quasi-contracts; from that moment the parties are bound not
4. Acts or omissions punished by law; and only to the fulfillment of what has been
5. Quasi-delicts. (SOURCES OF OBLIGATION) expressly stipulated but also to all of the
consequences which according to their nature
Art. 1158. Obligations derived from law are not may be in keeping with good faith, usage and
presumed. Only those expressly determined in this law.
Code or in special laws are demandable, and shall be
regulated by the precepts of the law which establishes Reciprocal obligations – are those where the
them; and as to what has not been foreseen, by the parties are mutually or reciprocally obliged to
provisions of this Book. (Obligations Arising from Law) do or to give something.
Unilateral obligations - are those where only (a) payment is made when there exists no
one of the parties, the obligor, is obliged to do binding relation between the payor, who has no
or to give something. duty to pay, and the person who received the
payment; and
Unlike other kinds of obligations, those arising (b) the payment is made through mistake) and
from contracts are governed primarily by the not through liberality or some other cause.
agreement of the contracting parties.

Art. 1160. Obligations derived from quasi- Art. 1161. Civil obligations arising from
contracts shall be subject to the provisions of offenses shall be governed by the penal laws,
Chapter 1, Title XVII, of this Book. (Obligations subject to the provisions of Article 2177, and of
Arising from Quasi-Contracts) the pertinent provisions of Chapter 2,
Preliminary Title, on Human Relations, and of
Quasi contracts - those juridical relations Title XVIII of this Book, regulating damages.
arising from lawful, voluntary and unilateral (Obligations Arising from Criminal Offenses)
acts, by virtue of which the parties become GENERAL RULE: every person liable for a felony is also
bound to each other, based on the principle civilly liable
that no one shall be unjustly enriched or
benefited at the expense of another. Principle: Dual aspect of a crime
1. Criminal Aspect - affects the social order; punish or
In a quasi-contract, there is no consent but the correct the offender.
same is supplied by fiction of law. In other 2. Civil Aspect - affects private rights; to repair the
words, the law considers the parties as having damages suffered by the aggrieved party.
entered into a contract, irrespective of their
intention, to prevent injustice. EXCEPTION: offenses and special crimes
without civil liability.
Kinds of quasi-contracts: Examples: treason, rebellion, illegal possession
of fi rearm and gambling.
1. Negotiorum gestio: juridical relation which
arises whenever a person voluntarily takes But a person who is not criminally liable may still be
charge of the agency or management of the civilly liable.
business or property of another without any
power or authority from the latter. Enforcement of Civil Liability
(1) Institution of criminal and civil actions.
(Thus, if through the efforts of X, a neighbor, - When a criminal action is instituted, the civil
the house of Y was saved from being burned, Y action for recovery of civil liability arising from the
has the obligation to reimburse X for the offense charged is impliedly instituted with the criminal
expenses X incurred although Y did not actually action
give his consent to the act of X in saving his
house on the principle of quasi-contract) (2) Independent civil action.
- In the cases provided in Articles 31, 32, 33, 34
2. Solutio indebiti: is the juridical relation which and 2177 of the Civil Code of the Philippines, an
arises whenever a person unduly delivers a independent civil action entirely separate and distinct
thing through mistake to another who has no from the criminal action, may be brought by the injured
right to demand it.
party during the pendency of the criminal case, Under the present rule, only the civil liability arising
provided the right is reserved. from the offense charged is deemed instituted with the
criminal action unless the offended party waives the
(3) Other civil actions arising from offenses. civil action, reserves his right to institute it separately,
a. after the criminal action has been or institutes the civil action prior to the criminal action.
commenced, the civil action cannot be instituted until
final judgment has been rendered in the criminal action; Effect of acquittal:
1. If the acquittal of the accused is based on the ground
b. If the civil action has been filed ahead of the that his guilt has not been proved beyond reasonable
criminal action, and the criminal action is subsequently doubt, a civil action to recover damages based Art. 1161
commenced, the civil action shall be suspended in 15 on the same act or omission may still be instituted.
whatever stage before final judgment it may be found, REQUIREMENT: MERE PREPONDERANCE OF
until final judgment in criminal action has been EVIDENCE
rendered. However, if no final judgment has been
rendered by the trial court in the civil action, the same 2. if the acquittal is based on the ground that he did not
may be consolidated with the criminal action upon commit the offense charged, or what amounts to the
application with the court trying the criminal action. same thing, if the acquittal proceeds from a declaration
in a final judgment that the fact from which the civil
c. Extinction of the penal action does not carry liability might arise did not exist, the subsequent
with it extinction of the civil, unless the extinction institution of a civil action to recover damages is, as a
proceeds from a declaration in a final judgment that the general rule, no longer possible.
fact from which the civil might arise did not exist.
Reservation of right to recover civil liability. Effect of independent civil actions:
the civil action to recover damages from the
(4) Judgment in civil action not a bar person criminally liable is not independent from the
A final judgment rendered in a civil action criminal action.
absolving the defendant from civil liability is no bar to a
criminal action. EXCEPTION:
(5) Suspension by reason of prejudicial question. 1. Where the civil action is based on an obligation not
A petition for suspension of the criminal action arising from the act or omission complained of as a
based upon the pendency of a prejudicial question in a criminal offense or felony;
civil action may be fi led in the office of the fiscal 2. Where the law grants to the injured party the right to
(prosecutor) or the court conducting the preliminary institute a civil action which is entirely separate and
investigation. When the criminal action has been fi led distinct from the criminal action.
in court for trial, the petition to suspend shall be fi led in
the same criminal action at any time before the Effect of failure to make reservation:
prosecution rests. “acquittal of the defendant in the criminal case has not
extinguished his liability for quasi-delict under Art. 2176
Elements of a prejudicial question: of the Civil Code; hence, that acquittal is not a bar to the
civil action against him.”
(a) the previously instituted civil action which involves
an issue similar or intimately related to the issue raised Scope of civil liability
in the subsequent criminal action, and (1) Restitution;
(b) the resolution of such issue determines whether or (2) Reparation for the damage caused; and
not the criminal action may proceed. (3) Indemnification for consequential damages. (Art.
104, Revised Penal Code.)
ART. 1162. Obligations derived from quasi-delicts shall (5) The State, when it acts through a special agent; but
be governed by the provisions of Chapter 2, Title XVII not when the damage has been caused by the official to
of this Book, and by special laws. (1093a) (Obligations whom the task done properly pertains; and
arising from quasi-delicts)
(6) Lastly, teachers or heads of establishments of arts
A quasi-delict is an act or omission by a person (tort and trades, with respect to damages caused by their
feasor) which causes damage to another in his person, pupils and students or apprentices, so long as they
property, or rights giving rise to an obligation to pay for remain in their custody.
the damage done, there being fault or negligence but EXCEPTION: IF THEY CAN PROVE THAT THEY
there is no pre-existing contractual relation between HAVE ONSERVED THE DILIGENCE OF A GOOD FATHER
the parties.21 (Art. 2176.)
Requisites of liability:
Requisites of quasi-delict (1) The fault or negligence of the defendant;
(1) There must be an act or omission by the defendant; (2) The damage suffered or incurred by the plaintiff; and
(2) There must be fault or negligence of the defendant; (3) The relation of cause and effect between the fault or
(3) There must be damage caused to the plaintiff; (4) negligence of the defendant and the damage incurred
There must be a direct relation or connection of cause by the plaintiff.
and effect between the act or omission and the
damage; and The two causes of action (ex delicto or ex quasi delicto)
(5) There is no pre-existing contractual relation between may be availed of subject to the caveat that the
the parties. offended party cannot recover damages twice for the
same act or omission or under both causes. Since these
Persons liable: two (2) civil liabilities are distinct and independent of
each other, the failure to recover in one will not
— Obligations arising from quasi delicts are demandable necessarily preclude recovery in the other.
not only from the person directly responsible for the
damage incurred,79 but also against the following:
CHAPTER 2: NATURE AND EFFECT OF OBLIGATIONS
(1) The father and, in case of his death or incapacity, the
mother, with respect to damages caused by the minor
children who live in their company; ART. 1163. Every person obliged to give something is
also obliged to take care of it with the proper diligence
(2) Guardians, with respect to damages caused by the of a good father of a family, unless the law or the
minors or incapacitated persons who are under their stipulation of the parties requires another standard of
authority and who live in their company; care. (1094a) (Meaning of specific or determinate
thing)
(3) The owners and managers of an establishment or
enterprise, with respect to damages caused by their A thing is said to be specific or determinate when it is
employees in the service of the branches in which the particularly designated or physically segregated from all
latter are employed or on the occasion of their others of the same class.
functions;
(4) Employers with respect to damages caused by their Generic or indeterminate – when it refers only to a
employees and household helpers acting within the class or genus to which it pertains and cannot be
scope of their assigned tasks, even though the former pointed out with particularity.
are not engaged in any business or industry;
Determinate thing - is identified by its individuality. The When obligation to deliver arises?
debtor cannot substitute it with another although the
latter is of the same kind and quality without the (1) Generally, the obligation to deliver the thing due
consent of the creditor. (Art. 1244.) and, consequently, the fruits thereof, if any, arises from
Obligation to take care of the thing due the time of the perfection of the contract. Perfection in
(1) Diligence of a good father of a family. this case refers to the birth of the contract or to the
(2) Another standard of care. meeting of the minds between the parties.

Duties of debtor in obligation to deliver a generic (2) If the obligation is subject to a suspensive condition
thing: or period (Arts. 1179, 1189, 1193.), it arises upon
(1) To deliver a thing which is neither of superior nor fulfillment of the condition or arrival of the period.
inferior quality; and However, the parties may make a stipulation to the
contrary as regards the right of the creditor to the fruits
(2) To be liable for damages in case of fraud, negligence, of the thing
or delay, in the performance of his obligation, or
contravention of the tenor thereof. (see Art. 1170.) (3) In a contract of sale, the obligation arises from the
perfection of the contract even if the obligation is
Duties of debtor in obligation to give a determinate subject to a suspensive condition or a suspensive
thing: period where the price has been paid.

(1) To preserve or take care of the thing due; (4) In obligations to give arising from law, quasi-
(2) To deliver the fruits of the thing (see Art. 1164.); contracts, delicts, and quasi-delicts, the time of
(3) To deliver its accessions and accessories (see Art. performance is determined by the specific provisions of
1166.); law applicable.
(4) To deliver the thing itself (see Arts. 1163, 1233,
1244; as to kinds of delivery, Arts. 1497 to 1501.); and Meaning of personal right and real right:
(5) To answer for damages in case of non-fulfillment or (1) Personal right is the right or power of a person
breach. (see Art. 1170.) (creditor) to demand from another (debtor), as a
definite passive subject, the fulfillment of the latter’s
ART. 1164. The creditor has a right to the fruits of the obligation to give, to do, or not to do.
thing from the time the obligation to deliver it arises. - enforceable only against a particular person
However, he shall acquire no real right over it until the
same has been delivered to him. (1095) (Different (2) Real right is the right or interest of a person over a
kinds of fruits) specific thing (like ownership, possession, mortgage,
lease record) without a definite passive subject against
(1) Natural fruits - spontaneous products of the soil, and whom the right may be personally enforced.
the young and other products of animals - directed against the whole world.
(2) Industrial fruits - produced by lands of any kind
through cultivation or labor Ownership acquired by delivery: that the creditor does
(3) Civil fruits - derived by virtue of a juridical relation not become the owner until the specific thing has been
delivered to him. (when there has been no delivery yet,
Right of creditor to the fruits: the proper action of the creditor is not one for recovery
By law, the creditor is entitled to the fruits of the thing of possession and ownership but one for specific
to be delivered from the time the obligation to make performance or rescission of the obligation.)
delivery of the thing arises.
ART. 1165. When what is to be delivered is a ART. 1166. The obligation to give a
determinate thing, the creditor, in addition to the right determinate thing includes that of delivering all its
granted him by Article 1170, may compel the debtor to accessions and accessories, even though they may not
make the delivery. have been mentioned. (1097a)
If the thing is indeterminate or generic, he may
ask that the obligation be complied with at the Meaning of accessions and accessories:
expense of the debtor. (1) Accessions are the fruits of, or additions to, or
If the obligor delays, or has promised to deliver improvements upon, a thing (the principal)
the same thing to two or more persons who do not Ex: air-conditioner in car, trees on a land
have the same interest, he shall be responsible for any
fortuitous event until he has effected the delivery. (2) Accessories are things joined to, or included with,
(1096) (Remedies of creditor in real obligation.) the principal thing for the latter’s embellishment, better
use, or completion
(1) In a specific real obligation (obligation to deliver a Ex: bracelet of a watch
determinate thing):
(a) demand specific performance or fulfillment Note that while accessions are not necessary to the
of the obligation with a right to indemnity for principal thing, the accessory and the principal thing
damages; or must go together but both accessions and accessories
(b) demand rescission or cancellation (in can exist only in relation to the principal.
certain cases) of the obligation also with a right
to recover damages (Art. 1170.); or Right of creditor to accessions and accessories:
(c) demand the payment of damages only (see General rule: all accessions and accessories are
Art. 1170.) where it is the only feasible remedy. considered included in the obligation to deliver a
determinate thing although they may not have been
In an obligation to deliver a determinate thing, the very mentioned. This rule is based on the principle of law
thing itself must be delivered. Consequently, only the that the accessory follows the principal. In order that
debtor can comply with the obligation. they will be excluded, there must be a stipulation to
that effect.
(2) A generic real obligation (obligation to deliver a
generic thing) can be performed by a third person since Accession as a right:
the object is expressed only according to its family or Accession includes the right to the fruits and the right to
genus. It is thus not necessary for the creditor to the accessory. It is one of the rights which go to make
compel the debtor to make the delivery although he up dominion or ownership. (3 Manresa 166.) But it is
may ask for performance of the obligation. not, under the law, a mode of acquiring ownership. (see
Art. 712.)
Where debtor delays or has promised delivery to
separate creditors: ART. 1167. If a person obliged to do something fails to
Paragraph 3 gives two instances when a do it, the same shall be executed at his cost. This same
fortuitous event does not exempt the debtor from rule shall be observed if he does it in contravention of
responsibility. the tenor of the obligation. Furthermore, it may be
It likewise refers to a determinate thing. An decreed that what has been poorly done be undone.
indeterminate thing cannot be the object of destruction (1098)
by a fortuitous event because genus nunquam perit
(genus never perishes). Article 1167 refers to an obligation to do, i.e., to
perform an act or render a service. It contemplates
three situations:
(1) The debtor fails to perform an obligation to do; or However, if it is not possible to undo what was
(2) The debtor performs an obligation to do but done, either physically or legally, or because of the
contrary to the terms thereof; or rights acquired by third persons who acted in good
(3) The debtor performs an obligation to do but in a faith, or for some other reason, his remedy is an action
poor manner for damages caused by the debtor’s violation of his
obligation.
Remedies of creditor in positive personal obligation:
(1) If the debtor fails to comply with his obligation to ART. 1169. Those obliged to deliver or to do
do, the creditor has the right: something incur in delay from the time the obligee
(a) to have the obligation performed by himself, judicially or extra-judicially demands from them the
or by another unless personal considerations fulfillment of their obligation.
are involved, at the debtor’s expense; and (b) However, the demand by the creditor shall not
to recover damages. (Art. 1170.) be necessary in order that delay may exist:
(1) When the obligation or the law expressly so
(2) In case the obligation is done in contravention of declares; or
the terms of the same or is poorly done, it may be (2) When from the nature and the
ordered (by the court) that it be undone if it is still circumstances of the obligation it appears that the
possible to undo what was done. designation of the time when the thing is to be
delivered or the service is to be rendered was a
Performance by a third person: controlling motive for the establishment of the
While the debtor can be compelled to make the contract; or
delivery of a specific thing (Art. 1165.), a specific (3) When demand would be useless, as when
performance cannot be ordered in a personal the obligor has rendered it beyond his power to
obligation to do because this may amount to perform.
involuntary servitude which, as a rule, is prohibited In reciprocal obligations, neither party incurs in
under our Constitution. delay if the other does not comply or is not ready to
Where, however, the personal qualifications of comply in a proper manner with what is incumbent
the debtor are the determining motive for the upon him. From the moment one of the parties fulfills
obligation contracted, the remedy of the creditor is his obligation, delay by the other begins. (1100a)
indemnification of damages.
Meaning of delay:
ART. 1168. When the obligation consists in not (1) Ordinary delay is merely the failure to perform an
doing, and the obligor does what has been forbidden obligation on time.
him, it shall also be undone at his expense. (1099a) (2) Legal delay or default or mora is the failure to
perform an obligation on time which failure, constitutes
Remedies of creditor in negative personal obligation a breach of the obligation
(not to do):
Here, there is no specific performance. The
very obligation is fulfilled in not doing what is forbidden. Kinds of delay (mora):
Hence, in this kind of obligation the debtor cannot be (1) Mora solvendi or the delay on the part of the
guilty of delay. (Art. 1169.) debtor to fulfill his obligation (to give or to do; real and
personal obligations) by reason of a cause imputable to
As a rule, the remedy of the obligee is the him;
undoing of the forbidden thing plus damages. (2) Mora accipiendi or the delay on the part of the
(Art. 1170.) creditor without justifiable reason to accept the
performance of the obligation; and
(3) Compensatio morae or the delay on the part of the extrajudicial demand, the interest shall
debtor and creditor in reciprocal obligations (like in commence from the filing of the complaint; and
sale), i.e., the delay of the obligor cancels the delay of
the obligee, and vice versa. (c) He is liable even for a fortuitous event when
the obligation is to deliver a determinate thing.
(Arts. 1165, 1170.) However, if the debtor can
General Rule: No demand no delay! prove that the loss would have resulted just the
same even if he had not been in default, the
The debtor incurs in delay from the time the obligee court may equitably mitigate the damages. (Art.
judicially or extrajudicially demands from them the 2215[4].)
fulfillment of their obligation but the debtor failes to
perform his obligation. Again the general rule apply that *In an obligation to deliver a generic thing, the debtor
if there is no demand there is no delay. Demand is a is not relieved from liability for loss due to a fortuitous
must. event. He can still be compelled to deliver a thing of
the same kind (see Art. 1263.) or held liable for
For delay to exist the following must be present: damages. (Art. 1170; see Lee vs. De Guzman, Jr., 187
SCRA 276 [1990].)
a. The obligation must be due and demandable
(2) Mora accipiendi: (A creditor can be in delay if the
b. The debtor does not perform his obligation
debtor fulfills his obligation but the creditor refuses to
c. The creditor demands for the performance of the
accept the thing due without justifiable reason)
obligation judicially or extra-judicially
d. The debtor fails to comply to such demand
The effects are as follows:
(a) The creditor is guilty of breach of obligation;
Requisites of delay or default by the debtor: (Mora
(b) He is liable for damages suffered, if any, by the
Solvendi)
debtor;
(1) failure of the debtor to perform his (positive)
(c) He bears the risk of loss of the thing due (see Art.
obligation on the date agreed upon;
1162.);
(2) demand (not mere reminder or notice) made by the
(d) Where the obligation is to pay money, the debtor is
creditor upon the debtor to fulfill, perform, or comply
not liable for interest from the time of the creditor’s
with his obligation which demand, may be either
delay; and
judicial (when a complaint is filed in court) or extra-
(e) The debtor may release himself from the obligation
judicial (when made outside of court, orally or in
by the consignation of the thing or sum due. (see Art.
writing); and
1256.)
(3) failure of the debtor to comply with such demand.

(3) Compensatio morae: (it is a delay in reciprocal

*The creditor has the burden of proving that demand
obligations. It is therefore the creditor and debtor who
has been made.
are in default. If both is in delay therefor in effect there
is no delay at all.)
Effects of delay:
(1) Mora solvendi. — The following are the effects:
The delay of the obligor cancels out the effects
(a) The debtor is guilty of breach of the
of the delay of the obligee and vice versa. The net
obligation;
result is that there is no actionable default on the part
of both parties, such that as if neither one is guilty of
(b) He is liable for interest in case of obligations
delay.
to pay money (Art. 2209.) or damages in other
If the delay of one party is followed by that of
obligations. (Art. 1170.) In the absence of
the other, the liability of the first infractor shall be
equitably tempered or balanced by the courts. If it Article 1170 gives the four grounds for liability which
cannot be determined which of the parties is guilty of may entitle the injured party to damages (see Art.
delay, the contract shall be deemed extinguished and 2197.) for all kinds of obligations regardless of their
each shall bear his own damages. (Art. 1192.) source, mentioned in Article 1157, whether the
obligations are real or personal. (to give, to do or not to
When demand not necessary to put debtor in delay: do)

General rule: delay begins only from the moment the (1) Fraud (deceit or dolo). — it is the deliberate or
creditor demands, judicially or extrajudicially, the fulfi intentional evasion of the normal fulfillment of an
llment of the obligation. obligation
The demand for performance marks the time (a) As a ground for damages, it implies some
when the obligor incurs mora or delay and is deemed kind of malice or dishonesty and it cannot cover cases
to have violated his obligation. Without such demand, of mistake and errors of judgment made in good faith.
the effect of default will not arise unless any of the (b) Article 1170 refers to incidental fraud (dolo
exceptions mentioned below is clearly proved: incidente) committed in the performance of an
obligation already existing because of contract.
(1) When the obligation or law so provides. (c) Under Article 1170, the fraud is employed
- the law itself must expressly declare that the for the purpose of evading the normal fulfillment of an
demand is not necessary in order that the obligation and its existence merely results in breach
debtor shall incur in delay. thereof giving rise to a right by the innocent party to
(2) When time is of the essence (When from the nature recover damages
and the circumstances of the obligation it appears that
the designation of the time when the thing is to be  Civil Fraud
delivered or the service is to be rendered was a  Criminal Fraud – criminal liability
controlling motive for the establishment of the
contract.) (2) Negligence (fault or culpa). — It is any voluntary act
- it must be established that the designation of or omission, there being no malice, which prevents the
the time when the obligation shall be fulfilled was a normal fulfillment of an obligation. (see Arts. 1173,
controlling motive for the execution of the contract. 1174.)
*subsequent refusal of the defendant to accept (3) Delay (mora) - delay in the performance of the
the delivery is justified. obligation under Article 1170 must be either malicious
(3) When demand would be useless, as when the or negligent.
obligor has rendered it beyond his power to perform. (4) Contravention of the terms of the obligation - is the
* In such case, A will incur in delay without the violation of the terms and conditions stipulated in the
need of any demand from B. obligation.

The  fraud  is  incidental fraud  (dolo incidente) which

is  fraud  incident to the performance of an obligation.
In  fraud, there is an intent to evade the normal
ART. 1170. Those who in the performance of their fulfillment of the obligation and to cause damage.
obligations are guilty of fraud, negligence, or delay, The  fraud  is  causal  (dolo causante) or
and those who in any manner contravene the tenor when  fraud  used to induce a person to agree to a
thereof, are liable for damages. (1101) contract.

Grounds for liability: Recovery of damages for breach of contract or

obligation:
Breach of contract is the failure without justifiable - liability for fraud cannot be mitigated by the
excuse to comply with the terms of a contract. courts
(1) Measure of recoverable damages –
- one injured by a breach of a contract, or by a Negligence - there is no such intention
wrongful or negligent act or omission shall have a fair - Waiver of liability allowed
and just compensation commensurate to the loss - presumed from the breach of a contractual
sustained as a consequence of the defendant’s act. obligation;
(2) Contractual interests of obligee or promisee, - liability for negligence may be reduced
remedy serves to preserve according to the circumstances.
– A breach upon the contract confers upon the
injured party a valid cause for recovering that which When negligence equivalent to fraud:
may have been lost or suffered. negligence shows bad faith or is so gross that it
(3) Excuse from ensuing liability amounts to malice or wanton attitude on the part of the
- to make recompense to the one who has been defendant, the rules on fraud shall apply. Re 1173.
injured by the failure of another to observe his
contractual obligation. Gross negligence is negligence characterized by want or
(4) Duty of obligee to minimize his damages. absence of or failure to exercise even slight care or
- He cannot recover damages for any loss which diligence, or the entire absence of care, acting or
he might have avoided with ordinary care. If his omitting to act on a situation where there is a duty to
negligence was contributory to the loss, the court may act, not inadvertently but willfully and intentionally
equitably mitigate the damages ART. 1171. Responsibility arising from fraud is
demandable in all obligations. Any waiver of an action
Damages recoverable where obligation to pay money: for future fraud is void. (1102a)
(1) Penalty interest for delay or non-performance –
Damages may be recovered under Article 1170 when Responsibility arising from fraud demandable:
the obligation is to do something other than the - Responsibility arising from fraud can be
payment of money demanded with respect to all kinds of obligation
but when the obligation which the debtor and unlike in the case of responsibility arising
failed to perform consists only in the payment of from negligence (Art. 1172.)
money, the rule of damages is that laid down in Article
2209 of the Civil Code Waiver of action for future fraud void:
According to the time of commission, fraud may
(2) Rate of the penalty interest: be past or future. A waiver of an action for
The rate of the penalty interest payable shall be future fraud is void (no effect, as if there is no
that agreed upon. waiver) as being against the law and public
In the absence of stipulation of a particular rate policy. (Art. 1409[1].) A contrary rule would
of penalty interest, then the additional interest shall be encourage the perpetration of fraud because
at a rate equal to the regular monetary interest; and if the obligor knows that even if he should
no regular interest had been agreed upon, then the commit fraud he would not be liable for it thus
legal interest shall be paid. making the obligation illusory.

Fraud and negligence distinguished: Waiver of action for past fraud valid: A past
Fraud – deliberate intention to cause damage fraud can be the subject of a valid waiver
- Waiver of liability for future fraud is void because the waiver can be considered as an act
- Must be clearly proved, mere preponderance of of generosity and magnanimity on the part of
evidence not being sufficient the party who is the victim of the fraud.
 - The same negligent act causing damages may
produce civil liability arising from a crime under Article
ART. 1172. Responsibility arising from negligence in 100 of the Revised Penal Code (supra.), or create an
the performance of every kind of obligation is also action for quasi-delict under Article 2176
demandable, but such liability may be regulated by the
courts, according to the circumstances. (1103) In negligence cases, the aggrieved party may
choose between a criminal action under Article 100 of
Responsibility arising from negligence demandable: the Revised Penal Code or a civil action for damages
1. The courts, however, are given wide discretion in under Article 2176 of the Civil Code. What is prohibited
fixing the measure of damages. The reason is because under Article 2177 of the Civil Code is to recover twice
negligence is a question which must necessarily depend for the same negligent act
upon the circumstances of each particular case.
2. When both parties to a transaction are mutually
negligent in the performance of their obligations, the
fault of one cancels the negligence of the other. Thus, Importance of distinction between culpa contractual
their rights and obligations may be determined and culpa aquiliana:
equitably under the law prescribing unjust enrichment.
(No one shall enrich himself at the expense of another.) Where liability arises from a mere tort (culpa
Validity of waiver of action arising from negligence: aquiliana; civil negligence), not involving a breach of
(1) An action for future negligence (not fraud) may be positive obligation, an employer or master may excuse
renounced except where the nature of the obligation himself under the last paragraph of Article 2180 by
requires the exercise of extraordinary diligence as in the proving that he had exercised “all the diligence of a
case of common carriers. good father of a family to prevent the damage.” It is a
(2) Where negligence is gross or shows bad faith, it is complete defense.
considered equivalent to fraud.
This defense is not available if the liability of the
Kinds of negligence according to source of obligation: employer or master arises from a breach of contractual
(1) Contractual negligence (culpa contractual) or duty (culpa contractual; contractual negligence) though
negligence in contracts resulting in their breach Article this may mitigate damages.
1172
- not source of obligation Effect of negligence on the part of the injured party:
- It merely makes the debtor liable for damages in view Article 2179 of the Civil Code provides: “When
of his negligence in the fulfillment of a pre-existing the plaintiff’s own negligence was the immediate and
obligation resulting in its breach or non-fulfillment. proximate cause of his injury, he cannot recover
Ex: The developer, though, has limited experience damages. But if his negligence was only contributory,
writing code in that language. And that was never the immediate and proximate cause of the injury being
disclosed to the client. the defendant’s lack of due care, the plaintiff may
recover damages, but the courts shall mitigate the
(2) Civil negligence (culpa aquiliana) - source of an damages to be awarded.” (see Arts. 2214, 2215.)
obligation between the parties not formally bound
before by any pre-existing contract. It is also called *To be entitled to damages, the law does not require
“tort” or “quasidelict” (1162) that the negligence of the defendant should be the
sole cause of the damage.
(3) Criminal negligence (culpa criminal) or negligence
resulting in the commission of a crime. (Arts. 3, 365, Presumption of contractual negligence:
Revised Penal Code.)
(1) In an action for quasi-delict or tort, the negligence (2) Circumstances of the person.
or fault should be clearly established because it is the (3) Circumstances of time.
basis of the action, (4) Circumstances of the place.
- whereas in a breach of contract, the action
can be pursued by proving the existence of the contract, When the source of an obligation is derived
and the fact that the obligor failed to comply with the from a contract, the mere breach or non-fulfillment of
same the prestation gives rise to the presumption of fault on
the part of the obligor.
(2) When the action is based on a contract of carriage,
and the obligor, in this case the carrier, failed to
transport the passenger to his destination, the fault or Measure of liability for damages:
negligence of the carrier is presumed. (1) Civil Code provisions: Art 2201, 2220,2232, Art 21
It is sufficient for the plaintiff to prove the (2) Contractual breach committed in good faith/bad
existence of the contract of carriage and the damages faith.
or injuries suffered by him. It is the obligation of the - Where in breaching the contract, the
carrier to transport its passengers or goods safely. defendant is not shown to have acted fraudulently or in
bad faith (see Art. 2220.), liability for damages is limited
ART. 1173. The fault or negligence of the obligor to the natural and probable consequences of the
consists in the omission of that diligence which is breach of the obligation and which the parties had
required by the nature of the obligation and foreseen or could have reasonably foreseen; and in that
corresponds with the circumstances of the persons, of case, such liability would not include liability for moral
the time and of the place. When negligence shows bad and exemplary damages.
faith, the provisions of Articles 1171 and 2201, (3) With respect to moral damages - such damages
paragraph 2, shall apply. If the law or contract does must somehow be proportional to and in
not state the diligence which is to be observed in the approximation of the suffering inflicted, the factual
performance, that which is expected of a good father basis for which must be satisfactorily established by the
of a family shall be required. (1104a) aggrieved party.
(4) Code of Commerce provisions.
Test for determining whether a person is negligent:
(1) Reasonable care and caution expected of an Diligence is “the attention and care required of a person
ordinary prudent person. — in a given situation and is the opposite of negligence.’’
(2) No hard and fast rule for measuring degree of care.
— It is dependent upon the circumstances in which a Kinds of diligence required:
person fi nds himself situated. All that the law requires (1) that agreed upon by the parties, orally or in writing;
is that it is always incumbent upon a person to use that (2) in the absence of stipulation, that required by law in
care and diligence expected of prudent and reasonable the particular case (like the extraordinary diligence18
men under similar circumstances. required of common carriers); and
(3) if both the contract and law are silent, then the
Factors to be considered: diligence expected of a good father of a family (par. 2.)
Negligence is a question of fact, its existence or ordinary diligence
being dependent upon the particular circumstances of
each case. It is never presumed but must be proven by ART. 1174. Except in cases expressly specified by the
the party who alleges it. In determining the issue of law, or when it is otherwise declared by stipulation, or
negligence where loss or damage occurs, the following when the nature of the obligation requires the
factors must be considered: assumption of risk, no person shall be responsible for
(1) Nature of the obligation.
those events which could not be foreseen, or which, (2) The event could not be foreseen (unforeseeable), or
though foreseen, were inevitable. (1105a) if it could be foreseen, must have been impossible to
avoid (unavoidable);
Fortuitous event is any extraordinary event which (3) The event must be of such a character as to render it
cannot be foreseen, or which, though foreseen, is impossible for the obligor to comply with his
inevitable. In other words, it is an event which is either obligation in a normal manner; and
impossible to foresee or impossible to avoid. (4) The obligor must be free from any participation in,
or the aggravation of the injury to the obligee.
Essence of a fortuitous event consists of being a
happening independent of the will of the obligor and *The absence of any of the above requisites (all of
which happening, makes the normal fulfillment of the which must be proved) would prevent the obligor from
obligation impossible. being exempt from liability.

Fortuitous event distinguished from force majeure: Concurrent or previous negligence of obligor:
(1) Acts of man. — Strictly speaking, fortuitous event is - There must be no concurrent or previous
an event independent of the will of the obligor but not negligence or imprudence on the part of the
of other human wills, e.g., war, fi re, robbery, murder, obligor by which the loss or injury may have
insurrection, etc. been occasioned.
(In other words, in order to be exempt from liability
(2) Acts of God. — They are those events which are arising from a fortuitous event, there should have
totally independent of the will of every human being, been no human participation amounting to a
e.g., earthquake, flood, rain, shipwreck, lightning, negligent act.)
eruption of volcano, etc. They are also called force
majeure. The term generally applies to a natural Rules as to liability in case of fortuitous event:
accident. A person is not, as a rule, responsible for loss or
damage resulting from fortuitous events. In other
In our law, fortuitous events and force majeure are words, his obligation is extinguished.
identical in so far as they exempt an obligor from Except:
liability. Both are independent of the will of the (1) When expressly specified by law
obligor. (2) When declared by stipulation - The basis for this
exception rests upon the freedom of contract.
Kinds of fortuitous events: (3) When the nature of the obligation requires the
(1) Ordinary fortuitous events or those events which assumption of risk
are common and which the contracting parties could
reasonably foresee (e.g., rain); Effect where risk not one impossible to foresee:
(1) Where the risk is quite evident such that the
(2) Extraordinary fortuitous events or those events possibility of danger is not only foreseeable, but actually
which are uncommon and which the contracting foreseen, then it could be said that the nature of the
parties could not have reasonably foreseen (e.g., obligation is such that a party could rightfully be
earthquake, fire, war, pestilence, unusual flood). (see deemed to have assumed it.
Art. 1680, par. 2.)
(2) Mere difficulty to foresee the happening of an event
Requisites of a fortuitous event: is different from impossibility to foresee or anticipate
(1) The event must be independent of the human will the same.
or at least of the obligor’s will;
Impossibility of performance must result from
occurrence of fortuitous event:
- The impossibility of fulfilling the obligation must
be the direct consequence of the event. If
notwithstanding its occurrence, the obligation
can be fulfilled, it will subsist even if only in
part.

Effect of obligor’s negligence upon his liability.

(1) Negligence contributed to the loss or damage - it is
necessary that he be free from previous negligence or
misconduct by which the loss or damage may have been
occasioned.

(2) Negligence not contributory to the loss or damage: