Adamson University

College of Law

Obligations and Contracts

Course Outline*
Atty. Florian Kim P. Dayag
2nd Semester, AY 2019-2010

Course Schedule: Monday, 6:00 p.m. to 9:00 p.m.; Saturday, 2:00 p.m. to 4:00 p.m.
Course Assessment: Recitation 20%
Midterm Exam 30%
Final Exam 50%
Prescribed Textbook: Tolentino, Civil Code of the Philippines, Vol. IV
Contact Information: fpdayag@[Link]

INTRODUCTION

A. CourseOverview
B. CommonLawTraditionandtheCivilLawTradition

Part One: PRESCRIPTION

A. General Provisions

1. Definition (1106)
 Sinaon v. Sorongon, 136 SCRA 407
a. Subject of prescription (1113, 1116)
 Lovina v. Moreno, 9 SCRA 557
 Republic v. CA, 131 SCRA 532
2. Kinds
a. Acquisitive
b. Extinctive
 Morales v. CFI of Misamis Occidental, 97 SCRA 872
3. Vis-à-vis Laches
 Z.E. Lotho, Inc. v. Ice and Cold Storage, 3 SCRA 744
 Catholic Bishop of Balanga v. CA, G.R. No. 112519 November 14, 1996
4. Who may acquire by prescription (1107, 1110, 1111)
a. Persons exempt (1108)
 Vda. De Alberto v. CA, 173 SCRA 436
 Republic v. PNB, 13 SCRA 24
b. Between husband, wife, children and guardian (1109, Family Code 57, 47, 170)
 Pacio v. Billion, 1 SCRA 384
5. Renunciation (1112)
 Development Bank of the Philippines v. Adil, 161 SCRA 307
**
Parts II to IV are heavily based on the course outline of Prof. Eduardo Labitag, UP Law.
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Obligations and Contracts
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a. Effect on creditors and interested third persons (1114)

6. Applicability to specials laws (1115)
 Callanta v. Carnation Philippines, 145 SCRA 268

B. Prescription of Ownership and Other Real Rights

1. Manner; acquisitive prescription

a. Ordinary
 Godinez v. CA, 135 SCRA 351
b. Extraordinary
2. Possession (1118)
 Ramirez v. CA, 144 SCRA 292
 Republic v. CA, 146 SCRA 15
a. Through license or tolerance (1119)
 Coronado v. CA, 191 SCRA 814
b. Interruption (1120)
a. Natural (1121, 1122)
b. Civil (1123, 1124, 1136)
c. Possessor’s recognition of owner’s right (1125)
 Corpus v. Padilla, 5 SCRA 814
 Dinoso v. CA, 7 SCRA 666
c. When property is titled (1126)
 Dimayuga v. CA, 129 SCRA 110
 Reyes v. CA, 48 SCRA 113
3. Good faith (1127, 1128)
 Negrete v. CFI of Marinduque, supra
 Reyes v. CA, 258 SCRA 651
a. Stolen properties (1133)
 Tan v. CA, 195 SCRA 355
4. Just title (1129-1131)
 Doliendo v. Biarnesa, 7 Phil. 232
 Solis v. CA, 176 SCRA 678
5. Period
a. Movables (1132)
b. Immovables (1134, 1135, 1137)
 Parcotilo v. Parcotilo, 12 SCRA 435
 Heirs of Amarante v. CA, 185 SCRA 585
c. Computation (1138)
 South City Homes v. Republic, 185 SCRA 693

C. Prescription of Actions

1. Manner (1139)
 Espanol v. Philippine Veterans Administration, 137 SCRA 314
2. Period (1140-1149)
 Tan v. CA, 195 SCRA 355
 Dira v. Tanega, 33 SCRA 479
 DBP v. Tomeldan, 101 SCRA 171
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 Espanol v. Philippine Veterans Administration, supra

 Municipality of Opon v. Caltex. 22 SCRA 755
 Callanta v. Carnation Philippines, supra
 Kramer v. CA, 178 SCRA 518
 Coca-Cola Bottlers [Link], 227 SCRA 292
 Vda. De Borromeo v. Pogoy, 126 SCRA 217
 Tolentino v. CA, 162 SCRA 66
a. When prescription begins (1150-1153)
 Dira v. Tanega, supra
b. Fortuitous event; effect (1154)
 Provident Savings Bank v. CA, 222 SCRA 125
 Tan v. CA, supra
c. Interruptions (1155)
 Ledesma v. C, 224 SCRA 175
 Cabrera v. Tiano, 8 SCRA 542
 Olympia International v. CA, 180 SCRA 353
 PNB v. Osete, 24 SCRA 63
 Ramos v. Condez, 20 SCRA 1146

Part Two: OBLIGATIONS

A. General Provisions

1. Definition (1156)
2. Elements
a. ActiveSubject
b. PassiveSubject
c. ObjectorPrestation
d. EfficientCauseorJuridicalTie
3. Kinds as to basis and enforceability (1423-1430, 1139-1155)
a. Civil Obligations (1423)
b. Natural Obligations (1423)
i. Examples (1424-1430)
ii. Distinguished from Moral Obligations
 Villaroel v. Estrada, 71 Phil 140
 Ansay v. NDC, 107 Phil 997
 DBP v. Confessor 161 SCRA 307
iii. Conversion to Civil Obligation
4. Sources of Civil Obligations (1157)
a. Law (1158)
b. Contracts (1159, 1305)
c. Quasi-contracts (1160, 2142)
 Cruz v. Tuazon & Co., 76 SCRA 543
i. Negotiorum Gestio (2144)
 Adille v. CA, 157 SCRA 455
ii. Solutio Indebiti (2154)
 Andres v. Mantrust, 177 SCRA 618
iii. Others (2164-2175)
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Obligations and Contracts
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 Puyat & Sons v. Manila, 7 SCRA 970

d. Delicts (1167, 2177, RPC 100 and 104)
e. Quasi-delicts (1162, 2176)
 [Link],73Phil607
 [Link],91SCRA113
 Cangco v. MRR, 38 Phil 768
 Air France vs. Carrascoso 18 SCRA 155
5. Classification of Obligations
a. Primary Classification Under the Civil Code
i. Pure and Conditional (1179-1192)
ii. With a period or term (1193-1198)
iii. Alternative and Facultative (1199-1206)
iv. Joint and Solidary (1207-1222)
v. Divisible and Indivisible (1223-1225)
vi. With a penal clause (1226-1230)
b. Secondary Classification
i. Legal (1158); Conventional (1159); Penal (1161)
ii. Real (to give) and Personal (to do or not to do)
iii. Determinate and Generic (as to subject matter of obligation)
iv. Positive (to give, to do) and Negative (not to give, not to do)
v. Unilateral and Bilateral
vi. Individual and Collective
vii. Accessory and Principal
viii. Simple; Multiple; Conjunctive; Distributive; Alternative; Facultative
ix. Possible and Impossible

B. Nature and Effects of Obligations

1. Kinds of Prestations
a. Togive
i. specificthing
• topreservethething(1163)
• to delivertheaccessionsandaccessories(1166)
• todeliverthefruits(1164,par.1)
• todeliverthethingitself(1244)
ii. genericthing(1246)
b. Todo(1244)
c. Nottodo(1244)
2. Breach of Obligation (1170)
a. Concept
 [Link],47Phil.821
 [Link],361SCRA56
 [Link],135SCRA323
 [Link],170SCRA29
 [Link],224SCRA549(1993)
b. Modes of Breach
i. Delay or mora (1169)
• Mora solvendi
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 CetusDevelopmentv.CA176SCRA72
 AerospaceChemicalIndustriesv.CA315SCRA92
 SantosVenturaHocorma [Link],441SCRA472
 [Link],443SCRA231
 [Link],55SCRA447
 [Link],98SCRA43
• Moraaccipiendi(Seealso1268)
 [Link].,104Phil.926
• Compensationmorae
 [Link],139SCRA46
ii. Fraud or dolo (1171)
• dolo incidente v. dolo causante
 [Link],93Phil.526
 Geraldezv.CourtofAppeals230 SCRA 320
• Non-waiver
iii. Negligence (1172-1173)
• culpa v. dolo
• culpa aquiliana v. culpa contractual
 Gutierrez v. Gutierrez, 56 Phil. 177
 Vasquez v. Borja, 74 Phil. 560
• Standard of care required (1173 par. 2)
 De Guia v. Manila Electric Co., 40 Phil. 706
 US v. Barias, 23 Phil. 434
 Sarmiento v. Sps. Cabrido, 401 SCRA 122
 Crisostomo v. CA, 409 SCRA 528
iv. Contraventionofthetenor(1172)
 [Link],32SCRA547
 [Link],158SCRA445
 [Link],10SCRA79
 [Link],206Phil341
c. Principal Remedies
i. Performance
• Specific Performance (1165)
• Substituted Performance (1165 par. 2, 1167)
 [Link],32SCRA547
 [Link],266SCRA78
ii. Rescission (1191‐1192)
iii. Damages (1170)
d. SubsidiaryRemediesofCreditor
i. AccionSubrogatoria(1177)
ii. AccionPauliana(1177;1381,par.3)
 [Link],355SCRA701
 [Link],318SCRA725
iii. OtherSpecificRemedies(1652,1729,1608,1893)
e. Extinguishment of Liability due to Fortuitous Event (1174)
i. Concept
ii. Exceptions (1174,1165par.3,552,1942,1979,2001,2147)
 JuanNakpil&[Link],144SCRA597
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Obligations and Contracts
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 [Link].,21SCRA279
 [Link],33SCRA65
 [Link],39SCRA527
 [Link],161SCRA334
 [Link],281SCRA1
 [Link],182SCRA24
 [Link],430SCRA
f. Interest and Usurious Transactions (1175,1413,1961)
 PD858;
 PD1685
 CentralBankCircular416
 MonetaryBoardCircularNo.905;No.2209
 Nacar v. Gallery Frames, 703 SCRA 439
 Spouses Abella vs. Spouses Abella, GR 195166, July 8, 2015
 [Link],263SCRA453
 [Link],256SCRA292
 [Link],23SCRA19
 [Link],369SCRA
 Spouses Albos v. Spouses Embisan, 743 SCRA 283
 Louh v. BPI, G.R. No. 225562, 2017
3. Transmissibility of Rights (1178)

C. Kinds of Civil Obligations

1. Pure Obligations (1179 par. 1)

2. Conditional Obligations (1181)
a. Concept
 [Link],2SCRA830
 [Link],314SCRA585
b. Kinds; as to effect on obligation (1181)
i. Suspensive or condition precedent
 [Link],supra
 [Link],263SCRA15
• Retroactiveeffectwhenconditionisfulfilled(1187)
• Rightsofthecreditoranddebtorbeforefulfillmentofthe condition
(1188)
ii. Resolutory or condition subsequent
 [Link],49Phil.142
 [Link],245SCRA511
 [Link],299SCRA695
c. Kinds; as to cause or origin (1182)
i. Potestative
 [Link],191SCRA150
ii. Casual
 [Link],230SCRA351
iii. Mixed
 [Link],14Phil.99
 [Link],93Phil.971
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 [Link],43Phil.873
 [Link],44Phil.875
 RustanPulpandPaperMills,214SCRA665
 [Link],250SCRA223
d. Kinds; astopossibility(1183)
 [Link], 198SCRA300
e. Kinds; astomode (1184‐1185)
i. Positive
ii. Negative
f. Rulesincaseofloss,deteriorationorimprovementpendingthehappeningof the
condition(1189–1190)
 Heirsof [Link],413SCRA502
i. Definitionofloss,deteriorationandimprovement
ii. Effectoflossordeterioration
• Withoutdebtor’sfault
• Withdebtor’sfault
iii. Effectofimprovement
• Bynatureortime
• Duetodebtor’seffortandexpense
g. Effectofpreventionofthefulfillmentoftheconditionbytheobligor (1186)
 [Link],supra.
 [Link],135SCRA129(1985)
3. Obligations with a Period(1193,1180)
a. ComparePeriod/[Link]
b. KindsofPeriod
i. Astoeffect
• Suspensive(1193,par.1)
• Resolutory(1193,par.2)
ii. Astoexpression
• Express
• Implied
iii. Astodefiniteness
• Definite
• Indefinite
iv. Astosource
• Voluntary
• Legal
• Judicial
c. Rulesincaseofloss,deteriorationorimprovementbeforearrivalofthe
period(1194,1189)
d. EffectofPaymentinAdvance(1195;1197,par.3)
e. BenefitofPeriod(1196)
i. Forwhosebenefit
• Creditor
• Debtor
• Both
ii. Effects
iii. Presumption(1196)
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 [Link],47OfficialGazetteNo.11,5699
 [Link],90Phil311
 [Link],332SCRA151
iv. Whendebtorlosesrighttomakeuseofperiod(1198)
f. WhenCourtMayFixAPeriod
i. Periodisimplied
ii. Perioddependsonsolewillofthedebtor
 [Link],20SCRA330
 [Link],supra.
 [Link],2SCRA129
4. ReciprocalObligations(1191‐1192)
a. Concept
b. Alternativeremediesofinjuredpartiesoncaseofbreach
i. actionforspecificperformance
•effectwhenfulfillmentnolongerpossible
ii. actionforrescission
• requisites
• howmade
• effects
 [Link],47Phil.821
 [Link],148SCRA365
 [Link],35SCRA365
 [Link],178SCRA1
 [Link],135SCRA323
 [Link],310SCRA1
 [Link],366SCRA41
 [Link],219SCRA378
 [Link],221SCRA503
 [Link],107SCRA266
 [Link],96SCRA741
 [Link],151SCRA661
 Read:Art1786,1788,1484‐86,RepublicActNo.6552
5. AlternativeObligations
a. Concept(1199)
b. RightofChoice(1200)
c. EffectofNoticeofChoice
d. WhenNoticeProducesEffect(1201)
e. Effectoflossorimpossibilityofoneorallprestations(1202-1205)
6. FacultativeObligations(1206)
a. Concept
b. DistinguishedfromAlternativeObligations
c. EffectofSubstitution
7. JointObligations
a. Concept
i. Requisites
ii. Wordsusedtoindicatejointobligations
b. Presumption(1207,1208)
c. Effects(1207,1208)
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• Extentofliabilityofdebtor
• Extentofrightofcreditor
• Incaseofnovations,compensation,confusion,orremission
8. SolidaryObligations
a. Concept
i. Requisites
ii. Wordsusedtoindicatesolidaryobligations
 [Link],34Phil.978
 [Link],257SCRA578
 [Link],178SCRA739
 [Link],443SCRA522
b. Kinds
i. Astosource(1208)
•Legal(1915,1945,2194,RPC 119)
•Conventional
•Real
ii. Astopartiesbound
•Active
•Passive
•Mixed
iii. Astouniformity
•Uniform
•Varied/non‐uniform(1211)
c. Effects
i. Solidarycreditorinrelationto:
•commondebtor
- righttodemand(1214‐1216;1217,par.1)
- incaseofnovation,compensation,confusion,remissionbya
creditor(1215,par.1)
•solidaryco-creditors
- incaseofnovation,compensation,confusion, remissionbya
co‐creditor(1215,par.2)
- prejudicialactsprohibited(1212)
- assignmentofrightsnotallowed(1213)
ii. Solidarydebtorinrelationto:
•commoncreditor
- obligationtoperform(1207)
- incaseofnovation,compensation,confusion,
remissionbyacreditor
• solidaryco‐debtor
- incaseofpaymentbyaco‐debtor(1217‐1220)
- incaseoffortuitousevent(1221)
 [Link],38Phil.718
 [Link], Official
GazetteNo.6,p.2467 [Link],189SCRA325
 [Link],257SCRA578
d. DefensesAvailabletoaSolidaryDebtorAgainsttheCreditor(1222)
i. Types
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• thosederivedfromthenatureoftheobligations
•personaldefenses
•defensespertainingtohisshares
•thosepersonallybelongingtotheotherco‐debtors
ii. Effects
 [Link],supra.
 [Link],341SCRA441
9. DivisibleObligations
a. Concept
b. Effects(1223,1233)
10. IndivisibleObligations
a. Concept:distinguishedfromsolidaryobligations
b. Kinds
i. Natural(1225,par.1)
ii. Legal(1225,par.3)
iii. Conventional(1225,par.3)
c. Presumptionsofdivisibilityandindivisibility(1225)
[Link](1225par.3)
e. Effects(1223,1223,1224)
f. CessationofIndivisibility
11. JointIndivisibleObligations
a. Concept
i. Distinguishedfromjointobligations
ii. Distinguishedfromsolidaryobligations
b. Indivisibilitydistinguishedfromsolidarity(1210)
c. Effects(1209,1224)
12. ObligationswithaPenalClause
a. Concept
i. [Link]
ii. Distinguishedfromconditionalobligations
iii. Distinguishedfromalternativeobligations
iv. Distinguishedfromfacultativeobligations
v. Distinguishedfromguaranty
b. KindsofPenalClause
i. Astoeffect
•Subsidiary
•Complimentary
ii. Astosource
•Conventional
•Legal
iii. Astopurpose
•Punitive
•Reparatory
c. DemandabilityofPenalty(1226,par.2)
d. EffectsofPenalClause
i. Substituteforindemnityfordamagesandpaymentofinterest(1226)
 [Link].20SCRA557
 [Link],367SCRA571
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 [Link],201SCRA458
ii. Notexemptdebtorfromperformance(1227)
iii. Creditorcannotdemandbothperformanceandpenaltyatthesametime
(1227)
iv. Creditorcannotcollectotherdamagesinadditiontopenalty (1226)
e. Whenpenaltyshallbeequitablyreduced(1229)
f. NullityofPrincipalObligationofPenalClause(1230)

D. ExtinguishmentofObligations1231)

1. PaymentorPerformance(1232)
a. Concept(1232)
b. Requisites
i. Whocanpay
• GeneralRule
• Exceptions:
- thirdpersonwhoisaninterestedparty(1302[3])
- thirdpersonwhoisnotaninterestedpartybutwiththeconsent
ofdebtor(1302[2],1236,par.1)
- thirdpersonwhoisnotaninterestedpartyandwithoutthe
consentofthedebtor,withouttheknowledgeoragainstthewill
of thedebtor(1236,par.2; 1237,1236,par.1)
- thirdpersonwhodoesnotintendtobereimbursed (1238)

• inanobligationtogive(1239,1427)
• incaseofactivesolidarity(1214)
ii. Towhompaymentcanbemade
• Generalrule(1240)
• Exceptions:
- incapacitatedperson(1241,par.1)
- thirdperson(1241,par.2)
• whenproofofbenefitnotrequired(1241,par.3;1242)
• incaseofactivesolidarity(1214)
iii. Whatistobepaid(Identity)
• GeneralRule
• Specificcases:
- Togiveaspecificthing(1244)
- Togiveagenericthing(1246)
- Topaymoney(1249,1250;R.A.529,R.A.4100,R.A.8183)
 [Link],supra
 [Link],34SCRA377
 [Link],70SCRA122
 [Link],284SCRA643
 [Link],181SCRA557
• PaymentofInterest(1956)
iv. Howpaymentistobemade(Integrity)
• GeneralRule(1233)
- Partialpaymentisnotallowed;exceptions(1248)
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• Substantialperformanceingoodfaith(1234)
• Estoppel(1235)
• Presumptionsinpaymentofinterests/installments(1176)
v. Whenispaymenttobemade
• GeneralRule(1169)
• Nodemand,nodelay;Exceptions
vi. Wherepaymentistomade
• Placeexpresslydesignated(1251,par.1)
• Whenplaceofpaymentisnotexpresslydesignated(1251,par.2to4)
vii. Whopaysforexpensesformakingpayment(1247)
c. ApplicationofPayments
i. Concept(1252)
 [Link],83SCRA764
 [Link],345SCRA134
ii. Requisites
iii. RulesinApplicationofPayments(1252‐1253)
• Ifrulesarenotapplicableorcannotbeinferred(1254)
• Meaningofthe“mostonerousdebtor”
d. PaymentbyCession
i. Concept(1255)
ii. Requisites
iii. Effects
iv. ComparedtoAssignmentofReceivables
e. DationinPayment
i. Concept(1245)
• DistinguishedfromPaymentbyCession
 [Link],284SCRA
14
ii. Requisites
iii. Effects
 [Link],111SCRA421
f. TenderofPaymentandConsignation
i. TenderofPayment
• Concept
• Requisites
ii. Consignation
• ConceptandPurpose
• Requisites
- Whentenderandrefusalnotrequired(1256,par.2) - Two
noticerequirement(1257,par.1;1258,par.2);Effectsofnon‐
compliance
• Effects(1260,par1)
- Withdrawalbydebtorbeforeacceptancebycreditoror
approvalofcourt(1260,par.2)
- Withdrawalbydebtorafterproperconsignation(1261)
 Withcreditorapproval
 Withoutcreditorapproval
• ExpensesofConsignation
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 [Link],137SCRA730
 TLGInternationalContinentalEnterprising,[Link],47SCRA437
 [Link],144SCRA693
 [Link],123SCRA160
 [Link],28SCRA17
 [Link],209SCRA657
 [Link],104SCRA151
 [Link],175SCRA530
 [Link],230SCRA685
 [Link],359SCRA409
2. LossorImpossibility
a. LossoftheThingDue
i. Concept(1189,par.2)
ii. Kinds
• Total
• Partial
iii. Requisites(1262)
iv. Presumption(1266,1267)
v. Effects
• Inanobligationtogiveaspecificthing(1262,1268)
• Inanobligationtogiveagenericthing(1263)
• Incaseofpartialloss(1264)
• Actionagainstthirdpersons(1269)
b. ImpossibilityofPerformance
i. Concept(1266,1267)
ii. Kinds
• Total
• Partial
iii. Requisites(1266)
iv. Effects
• Inobligationstodo(1266‐1267;1262,par.2)
• Impossibilitydistinguishedfromdifficulty
• Incaseofpartialimpossibility(1264)
 Occeñ[Link],73SCRA637
 [Link],230SCRA351
 [Link],272SCRA183
3. CondonationorRemission
a. Concept
b. Kinds
• Totalorpartial
• Expressorimplied(1270,par.1)
c. Requisites(1270,par.2)
 [Link],303SCRA1
d. Presumptions(1271‐1272;1274)
e. Effects
i. Ingeneral
ii. Incaseofjointorsolidaryobligations
f. GoverningRules(1270)
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g. RenunciationofPrincipalorAccessoryObligation(1273)
4. Confusion or Merger
a. Concept
b. Requisites
c. Effects
i. Ingeneral(1275)
ii. Incaseofjointorsolidaryobligations(1277)
d. ConfusioninPrincipalorAccessoryObligations(1276)
5. Compensation
a. Concept(1278);distinguishedfromConfusion
b. Kinds
i. TotalorPartial
ii. Legal
• Requisites(1279‐1280):Duedistinguishedfromdemandable
 [Link],28SCRA235
 [Link],255SCRA571
 [Link],259SCRA174
 [Link],272SCRA333
 [Link],351SCRA44
 [Link],446SCRA282
 [Link],182SCRA263
 [Link],127SCRA636
 [Link],180SCRA
21
 [Link],255SCRA___
• Effects(1290,1289)
iii. Conventional(1279,1282)
iv. Judicial(1283)
v. Facultative
d. WhenCompensationisnotallowed(1287‐1288)
e. CompensationofDebtsPayableinDifferentPlaces(1268)
f. EffectofNullityofDebtstobeCompensated(1284)
g. EffectsofAssignmentofCredit
i. withconsentofdebtor(1285,par.1)
ii. withknowledgebutwithoutconsentofdebtor(1285,par.2)
iii. withoutknowledgeofdebtor(1285,par.3)
6. Novation
a. Concept(1291)
i. Changeindebtor
ii. Changeinobject
iii. Changeinthirdpersonwhoissubrogated
iv. Changeincreditorwithitsconsentoratitsinstanceisnotnovation
b. Kinds
i. Astoform:expressorimplied
ii. Astoorigin:conventionalorlegal
iii. Astoobject
• objectiveorreal
• subjectiveorpersonal
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Obligations and Contracts
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• mixed
c. Requisites(1292)
 [Link],38SCRA642
 [Link],72SCRA388
 [Link],18SCRA967
 [Link],264SCRA35
 [Link],151SCRA339
 [Link],224SCRA302
 [Link],363SCRA358
 [Link],417SCRA292
 [Link],418SCRA297
 [Link],350SCRA341
d. Effects(1296)
e. EffectsoftheStatusoftheOriginalandNewObligation
i. nullityorvoidabilityoforiginalobligation(1298)
ii. nullityorvoidabilityofnewobligation(1297)
iii. suspensiveorresolutoryconditionororiginalobligation(1299)
f. ObjectiveNovation
g. SubjectiveNovation
i. Bychangeofdebtor
• Expromision
- Requisites(1293)
- Effects(1294)
• Delegacion
- Requisites(1293)
- Effects(1295)
 [Link],417SCRA292(2003)
 [Link],305SCRA709(1999)
ii. Bychangeofcreditor–subrogationofathirdpersonintherightsofthe
creditor(1300)
• Conventionalsubrogation
- Requisites(1301)
- Distinguishedfromassignmentofcredit
- Effects(1303‐1304)
 [Link], G.R. No. 142838. August 9, 2001
• LegalSubrogation
- Requisites
- Whenpresumed(1302)
- Effects(1303‐1304)
 [Link]
Guarantee Corp., G.R. No. 136729. September 23, 2003
7. Other modes

Part Three: CONTRACTS

A. General Provisions
16
Obligations and Contracts
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1. Definition (1305)
a. Auto-contract (1491, 1646, 1890)
2. Classification
a. Accordingtosubjectmatter
i. Things
ii. Services
b. Accordingtoname
i. Nominate
ii. Innominatecontracts(1307)
c. Accordingtoperfection
i. Consensual (1315, 1475)
ii. Real (1316, 1934)
iii. Formal (1356)
d. Accordingtoitsrelationtoothercontracts:
i. Preparatory (1479, 1767, 1868)
ii. Principal (1458, 1638, 1642, 1933, 1962)
iii. Accessory (2047, 2085)
e. Accordingtoform
i. Informal
ii. Formal(1356)
f. Accordingtopurpose
i. Transfer of ownership (725, 1458, 1638)
ii. Conveyance of use (561, 1642, 1933)
iii. Rendition of service (1642, 1868)
g. Accordingtonatureoflegaltiecreated
i. Unilateral (2047, 2093)
ii. Bilateral (1642, 1458)
h. Accordingtocause
i. Onerous(1458, 1638, 1642)
ii. Gratuitous (725, 1933)
iii. Remuneratory
i. Accordingtorisk
i. Commutative
ii. Aleatory(2010)
 [Link],83SCRA688
3. Characteristics
a. Consensuality of Contracts (1305, 1317)
i. Contracts of Adhesion
 Republic v. PLDT, 26 SCRA 620
 Corpus v. CA, 98 SCRA 424
b. Autonomy of Contracts (1306, 1799, 2088, 2130)
 Cui v. Arellano 2 SCRA 205
 Saura v. Sandico 107 Phil 336
 Leal v. IAC, 155 SCRA 394
c. ObligatoryForcebetweentheParties(1308)
i. GeneralRule:FreedomtoContract(1306)
 [Link],71Phil.497
 [Link],190SCRA90
17
Obligations and Contracts
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ii. Exceptions:
• Whenitisinequitable(1310)
• Specialdisqualifications(1490, 1491, 1782,FamilyCode 87)
iii. Whatmaynotbestipulated
•ContrarytoLaw
- pactumcommisorium(2088)
- pactumleonina(1799)
- pactumdenonalienado(2130)
- otherlimitations:LaborCode,CorporationCode
• Contrarytomorals
• Contrarytogoodcustoms
• Contrarytopublicorder
• Contrarytopublicpolicy
 [Link],supra
 [Link],36Phil386
 FilipinasCompañ[Link],17SCRA391
 [Link],319SCRA413
iv. Effectofcontractastothirdparties
• Performancemaybedeterminedbythirdparties(1309)
• Whenpossessionoftheobjectofthecontractiswithathirdperson
(1312)
• Creditorsofcontractingparties(1313,1177,1381)
• Interferencebythirdparties(1314)
 [Link]́ndelosPadresAgustinosRecoletos, 39
Phil.587
 [Link],314SCRA751
 [Link],453SCRA616
d. Mutuality(1308-1310;1473)
 [Link],228SCRA183
 ProfessionalAcademicPlans,[Link],453SCRA342
e. RelativityorPrivityofContracts(1311)
i. Contractstakeeffectonlybetweenparties,theirassignsandheirs
 [Link],38Phil.875
 [Link],329SCRA666
ii. Noonemaycontractinthenameofanother(1317)
 [Link],28Phil.571(1914)
iii. Stipulationsinfavorofthirdpersons(1311,par.2)
 [Link],79SCRA192
 [Link].,26SCRA178
 [Link],39SCRA178
 [Link],169SCRA213
 [Link],168SCRA373
 [Link],257SCRA538
4. Stages of Contracts
 C.F. Sharp & Co. v. Pioneer Insurance & Surety Corporation, G.R. No. 179469,
February 15, 2012
a. Negotiation
b. Perfection
18
Obligations and Contracts
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c. Performance or Consummation

B. EssentialRequisitesofContracts

1. Consent:Requisites(1319)
a. PerfectionofContract:OfferandAcceptance
i. Offer
• mustbecertain(1319)
• whatmaybefixedbytheofferor(1321)
• whenmadethroughanagent(1322)
• whenofferbecomesineffective(1323)
• businessadvertisementsofthingsforsale(1325)
• advertisementsforbidders(1326)
ii. Acceptance
• mustbeabsolute(1319)
• kinds:
- express(1320)
- implied(1320)
- qualified(1319)
• periodofacceptance(1324)
• optioncontract(1324)
 [Link],45SCRA368
. iii. Termination of Offer
iv. PerfectionofContract
• Manifestationtheory
• Expeditiontheory
• Receptiontheory
• Cognitiontheory(1319[2])
 [Link],46Phil.217
 [Link],402SCRA168
 [Link],449
SCRA99
 [Link], 375 SCRA 320
b. LegalCapacityoftheParties
i. Minors,insaneordementedpersons,anddeaf‐muteswhodonotknow how
towrite(1327)
ii. Whenofferoracceptanceismadeduringalucidinterval,intoxication,
duringhypnoticspell(1328)
iii. Corporations(Sections22and35,Revised CorporationCode)
c. VicesofConsent
i. Rule: ConsentmustbeIntelligent,Free,Spontaneous,Real (1330)
ii. MistakeorError
• MistakeofFact
- Astosubstanceoftheobject
- Astoprincipalconditions
- Astoidentityorqualificationsoftheparties
- Astoquantity,asdistinguishedfromsimplemistakeof
account
19
Obligations and Contracts
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 [Link],45Phil296
 [Link],402SCRA501
 [Link],177SCRA618
 [Link],268SCRA167
• MistakeorErrorofLaw
- GeneralRule:Ignoranceofthelawexcusesno one(3)
- Exception:MutualErrorofLaw(1334)
• Mistakewhenonepartyisunabletoread(1332)
 [Link],34Phil252
 [Link],316SCRA347
 [Link],266SCRA663
 [Link],375SCRA199
 [Link],438SCRA201
• Inexcusablemistake(1333)
iii. ViolenceorIntimidation(1335)
 [Link],15Phil.252
 [Link],201SCRA405
iv. UndueInfluence(1337)
v. FraudorDolo(1338)
• Dolocausante(1338) v. Doloincidente(1344[2])
 [Link],31Phil.161
 [Link],supra.
 [Link],230SCRA320
 [Link],211SCRA785
• FailuretoDiscloseFactswhenthereisadutytorevealthem(1339)
 [Link],45Phil381
 [Link],314SCRA255
• Usualexaggerationsintrade:opportunitytoknowthefacts(1340)
 [Link],52Phil.599
 [Link],204SCRA524
• Mereexpressionofopinion(1341);Effects(1344)
 [Link],37Phil.254
vi. Misrepresentation
• byathirdperson(1342)
• madeingoodfaith(1343)
• activeorpassive
 [Link],37Phil.215
 [Link],105Phil.456
d. SimulationofContracts
i. Kinds:AbsoluteandRelative(1345)
ii. Effects(1346)
 [Link],28SCRA229
 [Link],251SCRA430
 [Link],[Link].L32437,August31,1982
 [Link], 189 SCRA 529
2. Object
a. Mustbedeterminateastoitskind(1379)
b. WhatmayNOTbeobjectsofcontracts(1347)
20
Obligations and Contracts
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i. Allthingsoutsidethecommerceofman
ii. Allintransmissiblerights
iii. Thoseserviceswhicharecontrarytolaw,morals,goodcustoms,public
order,orpublic policy
iv. Futureinheritance,exceptwhenauthorizedbylaw
v. Impossiblethingsorservices(1348)
 [Link],1SCRA899
 JLTAgro,[Link], 453 SCRA 211
3. Cause
a. MeaningofCause(1350)
i. inonerouscontracts
ii. inremuneratorycontracts
iii. incontractsofpurebeneficence
b. DistinguishedfromMotive (1351)
c. Presumption:ExistenceandLawfulnessofCause(1354)
d. DefectiveCausesandEffects:
i. AbsenceofCauseorUnlawfulCause(1352)
ii. StatementofFalseCause(1355)
iii. InadequacyofCauseorLesion(1355)
 [Link],102Phil.577
 [Link],76SCRA514
 [Link],416SCRA263

C. Form of Contracts

1. General Rule: Obligatory in whatever form (1356)

2. Exception: When required by law (1356)
a. Kindofformalitiesrequiredbylaw:
i. Forvalidity(748,749,1874,2134,1771,1773, 1744, 1874, 1956)
ii. Tomakeiteffectiveastothirdparties(1357,1358)
iii. Forpurposesofprovingexistenceofcontract(1403)
 [Link],27SCRA1276
 [Link], 454 SCRA 42

D. Interpretation of Contracts

1. Vis-à-vis rules on statutory construction

2. PrimacyofIntention(1370,1372)
 [Link],47SCRA65
 [Link],69Phil.217
 [Link],[Link].93625,227SCRA54
a. How intention is determined (1371)
 [Link],246SCRA323(1995)
3. Rules of Interpretation
a. Under Civil Code
i. When stipulations admitofseveralmeanings (1373)
 [Link], 293 SCRA 26
ii. Whenitcontainsvariousstipulations,someofwhicharedoubtful(1374)
21
Obligations and Contracts
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 [Link], 387
SCRA 437
iii. Whenitcontainswordswithdifferentmeanings(1375)
iv. Whenitcontainsambiguitiesandomissionofstipulations(1376)
 [Link], 401 SCRA 54
v. Withrespecttothepartywhocausedtheobscurity(1377)
 [Link], 305 SCRA 449
vi. Whenitisimpossibletosettledoubtsusingtheabove‐citedrules(1378)
• Ingratuitouscontracts
 [Link],[Link].8596263,August3,1992
• Inonerouscontracts
vii. Whendoubtsarecastupontheprincipalobjectsothatthetrueintention
cannotbeknown(1378)
b. UndertheRulesofCourt(Rule130,Sections10to19)

E. Reformation of Contracts

1. Requisites(1359)
a. Meetingoftheminds
b. Trueintentionofthepartiesarenotexpressedintheinstrument
c. Failuretoexpresstrueintentionduetomistake,fraud,inequitableconduct,or
accident
 [Link],97Phil.609
 [Link],330SCRA591
 [Link], 425 SCRA 57
2. WhenReformationisnotallowed(1366)
3. ImpliedRatification(1367)
4. Whomayaskforreformation(1368)
5. Procedureforreformation(1369)
 [Link],28SCRA2232
 [Link],76SCRA514
 [Link],383SCRA131

F. Defective Contracts

1. Rescissible Contracts
a. Definition(1380)
b. Kinds(1381)
c. Characteristics
i. Thedefectconsistsininjuryordamageeithertooneofthecontractingparties
oftoathirdperson
ii. Contractisvalidbeforerescission
iii Attackmayonlybedirecton,notcollaterally
iv. Attackmaybedonebycontractingpartyorbyathirdpersonwhoisinjuredor
defrauded
v. Validatedonlybyprescriptionandnotbyratification
d. Requisites
i. Contractisrescissible
22
Obligations and Contracts
Course Outline

ii. Partyaskingforrescissionhasnootherlegalmeanstoobtainreparation
(1383)
 [Link], 260 SCRA 431
iii. Heisabletoreturnwhathemaybeobligedtorestoreifrescissionisgranted
(1385)
 [Link], 419 SCRA 626
e. Rescission; distinguishedfromRescissionin1191
 [Link],33SCRA1
 [Link], 459 SCRA 80
 [Link], 366 SCRA 41
 [Link], 419 SCRA 626
 [Link], 370 SCRA 56
f. EffectofRescission(1385)
a. Astothirdpersonswhoacquiredthingingoodfaith(1385par [2]and[3])
b. Astothirdpersonswhoacquiredthingsinbadfaith,whenalienationwasin
fraudofcreditors(1388)
g. ExtentofRescission(1387)
 [Link],318SCRA725(1999)
h. BadgesofFraud(1387)
 [Link],21Phil,243
 [Link],318SCRA725
 [Link],251SCRA430
 [Link], 327 SCRA 378
 [Link], 380 SCRA 617
2. Voidable or Annullable Contracts
a. Kinds(1390)
b. Characteristics
i. Thereisadefectinconsentofoneofthecontractingparties
ii. Bindinguntilannulledbyacompetentcourt
iii. Maybevalidatedbyratificationorprescription
 [Link],120SCRA628(1983)
c. Annulment
i. DistinguishedfromRescission
ii. Grounds(1390)
iii. WhoMayorMayNotInstituteActionforAnnulment(1397)
 [Link],88SCRA623
 [Link],430SCRA629
 [Link],181SCRA84
 [Link],18SCRA1253
iv. Prescription(1391)
 [Link],76SCRA514
v. Effect:MutualRestitution(1398and1402)
 Cadwallader&[Link],Bell&Co.,7Phil.461
 [Link],361SCRA56
 [Link],247SCRA312
 [Link],438SCRA
441
23
Obligations and Contracts
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• Whenonethepartiesisincapacitated(1399)
 [Link],375SCRA199
• Whenthethingislostthroughthefaultofthepartyobligedtoreturn
the same(1400)
vi. ExtinguishmentofActionforAnnulment
i. byratification(1392)
ii. Whenthethingislostthroughthefaultofthepersonwhohastherighttofile
theaction(1401)
d. Ratification
i. Requisites
• Contractisvoidable
• Ratificationismadewithknowledgethatcontractisvoidable
• Atthetimeofratification,thecausefornullityhasalreadyceasedto
exist
ii. Forms
• Expressortacit(1393)
• Bythepartiesthemselvesorbytheguardianinbehalfofan
incapacitatedparty(1394)
iii. Effects
• actiontoannulisextinguished(1392)
 [Link],38Phil.552(1918)
• contractiscleansedretroactivelyfromallitsdefects(1396)
3. UnenforceableContracts
a. Characteristics
i. Validbutcannotbeenforcesbyaproperactionincourt
ii. Canberatified
iii. Cannotbeassailedbythirdpersons
b. Kinds(1403)
i. Unauthorizedcontracts(1404)
ii. ContractscoveredbyStatuteofFrauds
• PurposeofStatuteofFrauds
 [Link],205SCRA458
 [Link],79SCRA703
 Limketkai&[Link],250SCRA523
 [Link],102Phil.756
 [Link],15Phil.350
 [Link],267SCRA89
• HowRatified(1405)
 [Link].49Phil.857
 [Link],103Phil.655
 [Link],252SCRA
259
• RightofthePartieswhenaContractisenforceablebutapublic
document isnecessaryforitsregistration(1406)
iii. Contractsexecutedbyparties bothincapableofgivingconsent
• Effectofratificationbytheparentsorguardianofoneoftheparties
(1407)
• Effectofratificationbytheparentsorguardianofbothparties(1407)
24
Obligations and Contracts
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4. Void or Inexistent Contracts

a. Characteristics
i. Voidfromthebeginning
ii. Producesnoeffectwhatsoever
iii. Cannotberatified(1409)
 [Link],123SCRA99
 [Link],2SCRA205
 [Link],307SCRA372
 [Link],291SCRA372
 [Link],85SCRA526
b. Void Contracts
i. Thosewhosecause,objectorpurposeiscontrarytolaw,morals,good
customs,publicorderorpublicpolicy
• Whentheactconstitutesacriminaloffense(1411)
• Whentheactisunlawfulbutdoesnotconstituteacriminaloffense
(1412)
- Inparidelictorule
 [Link],449SCRA380
 [Link],420SCRA645
• Whenthepurposeisillegalandmoneyispaidorproperty
deliveredtherefore(1414)
• Whenthecontractisillegalandoneofthepartiesisincapableof giving
consent(1415)
 [Link],102Phil.577
 [Link],93Phil827
• Whentheagreementisnotperseillegalbutprohibited(1416)
 [Link],21SCRA52
 [Link],406SCRA55
 [Link],454SCRA555
• Whentheamountpaidexceedsthemaximumfixedbylaw(1417)
• Whenbyvirtueofacontractalaborerundertakestoworklonger than
themaximumnumberofhoursofworkfixedbylaw(1418)
• Whenthecontractisdivisible(1420)
• Whenthecontractisthedirectresultofapreviouslyillegalcontract
(1422)
ii. Thosewhoseobjectisoutsidethecommerceofman
iii. Thosewhichcontemplateanimpossibleservice
iv. Thosewheretheintentionofthepartiesrelativetotheprincipal
objectofthecontractcannotbeascertained
v. Thoseexpresslyprohibitedbylaw
c. InexistentContracts
i. thosewhichareabsolutelysimulatedorfictitious(1345-1346)
ii. thosewhosecauseorobjectdidnotexistatthetimeofthetransaction
d. NoWaiverofDefenseofIllegality(1409)
e. ActionorDefensefortheDeclarationoftheInexistenceofaContract
i. Noprescriptionperiod(1410)
ii. Notavailabletothirdpersonsnotdirectlyaffected(1421)
Part Four: SPECIFIC EXAMPLES OF OBLIGATIONS
25
Obligations and Contracts
Course Outline

A. Estoppel

1. Definition(1431)
 [Link],34SCRA337
2. Kinds
a. Technicalestoppel
i. byrecord
ii. bydeed(1433)
b. Equitableestoppelorestoppelinpais(1433)
3. PersonsBound(1439)
 [Link],73SCRA
168
4. Application(1434-1438)
 [Link],26SCRA234
 Read:Annotation32SCRA542
 [Link],[Link].L31618,August17,1983

B. Trusts

1. Definition(1442)
2. Parties(1440)
a. Trustor
b. Trustee
c. Beneficiaryorcestuiquetrust
 [Link],70SCRA168(1976)
3. Kinds(1441)
a. Expresstrusts
i. Proofrequired(1443)
ii. Form(1444)
iii. Wantoftrustee(1445)
iv. Acceptancebythebeneficiary(1441)
b. ImpliedTrusts
i. Howestablished(1441)
ii. Howproved(1457)
iii. Specificcases(1448to1456)
 [Link],22SCRA231
 [Link],27SCRA1179
 [Link],46SCRA27
 [Link], 449 SCRA 15
 [Link], 458 SCRA 496

- end -