Trends in Obligations and Contracts:
• 1. Obligations have been progressively spiritualized
o There is very little requirement as to form. Upon meeting of the minds, in general, there is a K.
• 2. The principle of autonomy of will, which is still the general rule in K law, has been restricted.
o There are prohibited obligations from being entered into
o Art. 1306 – Contracting parties may establish clauses and terms as they may deem convenient
Provided they are not contrary to law, morals, public order, good customs, or public policy
There are five categories of restrictions. They restrict freedom but promote the greater good.
Ex. labor contract with consideration less than the minimum wage.
Ex. Those that violate environmental considerations, social justice, gender issues, etc.
• 3. Mitigation of the principle that the debtor must answer with all his property
o Before: you enter into a K and the creditor can pursue all your properties to exact fulfillment of the obligation
o Now: In the interest of social justice, there are many things that the creditor cannot levy upon, although the principle is still
good – the creditor can pursue the property of the debtor to exact fulfillment of the obligation
o In the Rules of Court, there is a list of properties exempt from attachment, for instance:
1. The Family Home
2. What you receive from support
Etc.
• 4. Weakening of the principle that liability results from responsibility
o In general, under the law, you are only liable if you are responsible. Ex. if you are guilty of driving recklessly.
o Ex. employer can be responsible for employee’s wages if not paid
• 5. Unity in modern legislation
o This is especially important in global commerce
o Ex. Bills of Lading, Trust Receipts, Intellectual Property, etc.
Essential requisites of obligations
• What are the requisites of obligations?
o Four generally accepted requisites : o 1. Active subject
A.K.A. Creditor (to give) or obligee (to do)
Has right to demand that the obligation be performed o 2. Passive subject
A.K.A. Debtor or obligor
Has to perform the obligation (reciprocal obligations)
• Note: In a sale of a thing, both parties are debtors and creditors of each other, with correlative obligations (as to the thing; and as to the money)
o 3. Object o 4. Vinculum juris
• For both the active and passive subject, what is required?
o They must be determined or determinable.
• What are the types of determined/determinable subjects?
o 1. Obligations where subjects are completely and absolutely determined at the birth of the obligation
Most common type
o 2. One of the parties is determined, but one is determinable with a previously-established criterion
Ex. Negotiable instrument: “I promise to pay X or order the amount of P5000, on November 15, 2011.”
One of the parties, i.e., me, is determined. The other is determinable, because X can negotiate it. The instrument lays down the criterion.
o 3. Subject/s is/are determined in accordance with their relation to a thing. (Real contracts)
The subject/s may change at the thing passes from one person to another.
Ex. X borrowed 3M from Y, and placed his house and lot as security. There is a K of loan and a K of mortgage, which is registered. X sold his house and lot to Z, who registered the property in her name. The mortgage in favor of Y is still annotated. X doesn’t pay by the due date. Y sought to foreclose the mortgage, and Z cannot deny the mortgage, because Z is the mortgagor now.
• What is the object of the obligation?
o It’s the prestation. It consists of conduct or an activity to be performed by the debtor or obligor.
o It’s not the physical thing to be delivered in an obligation to give. That is merely the object of the prestation.
o Ex. Y has to deliver a car to X on Feb 15, 2011. The object of the obligation of sale is the act of delivering to X the ownership the car (tradition). The car is the object of the prestation.
o This distinction is, not, however always observed even by the NCC.
o What are the requisites for the prestation?
1. Licit
• Cannot enter into contract of sale for shabu, because the object of the prestation is illicit.
2. Possible
• Cannot deliver Mount Apo
3. Determinate or determinable
• Cannot enter into a K with no defined prestation
4. With pecuniary value
• What is the vinculum juris?
o The compulsive element; the obligatory element in an obligation. It makes an obligation an obligation.
o This is why an obligation dependent solely on one’s will is void.
o Ex. X tells Y, “I will sell my car to you when I feel like it.” Here, there is no obligatory force.
• Yu v. Asuncion: Enumerated requisites of an obligation.
o 1. Vinculum juris, “the efficient cause of the obligation”
o 2. The object (prestation/conduct to be observed) o 3. Subject persons, the active and passive subject
Combined #s 1 and 2 into one.
• What is the fifth element, according to Castan?
o The causa. It is the “why” of the contract.
o Ex. Why is Y bound to deliver the car to X? Because X will deliver P400000 to Y. Why is X bound to give P400000 to X?
Because Y will deliver the car to X.
o What is the causa for a gratuitous contract?
Liberality.
o What is the causa for a quasi-delict?
Causing an injury to the other.
• What is the sixth requisite?
o The form. But it does not refer to a specific form, like putting it in writing. It refers to the outward or external manifestation of the obligation.
Sources of obligations
• Art 1157 – Obligations arise from:
o 1. Law o 2. Contracts o 3. Quasi-contracts o 4. Crimes
o 5. Quasi-delicts
• Arts. 1158-62 regulate these five sources
• Is this list exclusive?
o Sagrada Orden v. NACOCO: The Japanese during the war seized the Sagrada Orden’s property during the war. Upon liberation, the US seized enemy property, which included Sagrada’s property. The US entered into a custodianship agreement with NACOCO. Sagrada Orden wanted to collect rentals from NACOCO. Issue: is there an obligation to pay rentals to Sagrada? HELD: No obligation to pay rentals. The court, to arrive at this answer, the court looked at the five sources of obligations – there was no contract, quasi-delict, no provision of law that requires payment of rental, crime, or quasi-contract. The implication the court forwarded is that this is a closed list.
• But is it, really? Or should it, really?
o Many commentators believe it is not exclusive.
• What are the other obligations?
o Public offer is a sixth source of obligation, for instance (auslobung in the German code – or the unaccepted offer). A person who by public notice advertises an award in exchange for a particular result is bound to grant this award.
Ex. Proctor and Gamble announces on TV: “For 30 wrappers of Tide, you get a glass imported from Switzerland. Offer good until Feb 28, 2011 only!” X saw this advertisement, and on Feb 27, 2011, presents 30 wrappers to the P&G office. Issue: is there an obligation here? Held: yes. There is a public offer here.
Ex. X left his important papers inside a cab. X advertised that whoever returns his papers will get a P20000 reward. – There is a public offer here.
• Some commentators say there are only two sources: law and contract.
Some say: laws and acts of persons (whether voluntary or involuntary).
• What is the nature of a contract as a source of obligation?
o What the contracting parties establish has the force of law between them, and must be complied with in GF. They are free to enter into any contract, provided the stipulations do not violate Art. 1306. In general, there is no specific form needed.
o How must compliance be done?
1. It must be complied with according to its terms (ius civile – pacta sunt servanda)
2. And according to good faith (ius gentium – bona fide).
• [ABSENT ONE SESSION]
• Got into a car accident with a bus. Who do you sue? What are your options?
o 1. Bus driver o 2. Bus company
o 3. Sue both – because they’re joint tortfeasors, and thus solidarily liable
• Do you have to prove negligence when you sue under quasi-delict?
o Yes, you have to prove negligence of the bus driver. It is not presumed.
• Do you also have to prove the negligence of the bus company?
o Yes, in the selection and supervision of the bus driver. (Culpa in eligiendo, culpa in vigilando)
o This is a rebuttable/disputable presumption.
As opposed to conclusive and quasi-conclusive presumptions
• In a situation where damage or injury is caused to a party, and there is a contract between him and the person who caused the damage, there is no question he can sue under contract. But can he also sue under quasi-delict?
o There is an old line of SC decisions in this country which says that you cannot sue under quasi-delict if there is a contract.
There is some basis for this, because Art. 2176 says that the act or omission must occur “when there is no pre-existing contractual relation between the parties.”
o There is, however, the theory of concentric circles (the smaller circle of contract is always within the bigger circle of quasi-delict). So if you sue under quasi-delict, you are disregarding the contract between the parties. This is valid.
o You can sue under quasi-delict if it is the tort breaches the contract. If an act that constitutes breach of contract would in itself constitute the source of a quasi-delictual liability had there been no contract, then there is breach of contract through tort.
o So you can choose to sue under quasi-delict or contract .
• Theory of vicarious liability:
o If you sue under quasi-delict and you choose to sue the company and not the employee, you are really suing under Art.
2180.
o This is actually a wrong term because vicarious means you are answering for the liability of someone else.
o But the theory under 2180 is that the company/employer itself is negligent as well.
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