Revised By:
Course Outline
PART I – INTRODUCTION TO LAW
AND BUSINESS LAW
1) Definition of Law and Business Law 2) Sources of Business Law
3) Characteristics of Business Law
PART II – OBLIGATIONS
1) In General a) Definition
b) Sources of Obligations
Law; Contracts; Quasi-Contracts; Delicts or Crimes; Quasi-Delicts
a) Essential requisites of obligation
Parties; object; Juridical tie or vinculum juris
PART II – OBLIGATIONS
2) Nature and Effect of Obligation a) According to the Object or Prestation
Obligations to give; Obligations to do; Obligations not to do
a) Liability of Damages
Fraud – Dolo incidente; Dolo causante Neglignce –
Delay – Mora solvendi, accipiendi, compensatio morae
PART III – GENERAL PROVISIONS ON CONTRACT Contracts Defined Elements of Contract: Stages of A Contract Characteristics of Contracts:
Classification of A Contract: (FROM) Contract Binds by Both Parties
Cases Where Third person May Be Affected
By a Contract
Forms of Contracts
Reformation of Instruments Interpretation Of Contracts Cause of Contracts
PART IV – DEFECTIVE CONTRACTS
Rescissible Contracts Voidable Contracts
Unenforceable Contracts Void or inexistent contracts
PART 1
INTRODUCTION TO LAW AND
BUSINESS LAW
1.
Definition of Law and
Business Law
2.
Sources of Business Law
3.
Characteristics of Business
Introduction to Law
Preliminaries
In the preliminaries, the sight of a human being in his everyday undertaking has to follow some.
The instructions that a person will learn, result to that consciousness of following the law. As he learns the law, he can define it, with its characteristics.
In Philosophy, the human mind consists
principally of two faculties:
1. the Intellect – the object of which is the TRUTH.
2. the Will – the object of which is the GOOD.
The infinite truth and infinite good is infinite beauty of God.
The person was created by God and destined for God, the people can attain the final destiny by following the law.
The laws that contained the instructions of God given to us are the COMMANDMENTS.
Law
The most basic, simple and concise
definition of law was defined by Sanchez
Roman, a Spanish Civilist and he defined
Law as:
“A RULE OF CONDUCT , JUST AND OBLIGATORY PROMULGATED BY LEGITIMATE AUTHORITY FOR THE
COMMON OBSERVANCE AND
BENEFIT.”
Edgardo Paras defined Law as “an
ordinance of reason promulgated for the
common good by Him who is in charge.”
Characteristics of
Law
1. A RULE OF CONDUCT
Meaning any action, things, dictate of
reason if regulated or gathered together could become a conglomeration of rules, regulations that can create an orderly, peaceful, harmonious relations among the people concerned so that in the end justice will prevail.
Characteristics of
Law
2.
PROMULGATED
BY
LEGITIMATE AUTHORITY
That is, made known to those who are
expected to follow it. In a Republican State like the Philippines, we have three branches of government – legislative body (like Congress, Sanggunian) is the law-making body; the executive body is the implementing body and the judiciary as the enforcing body.
Characteristics of
Law
3. JUST and OBLIGATORY
Treatment of Law should be equal,
regardless of sex, creed, age and status in life and to follow the law there should be equivalent punishment or penalties to enforce them. The dictum “Justice delayed is Justice denied” is commonly abused term on the relation of a criminally inclined poor person and a moneyed person on the treatment of the application of law. Obligatory means any duty binding parties to perform their agreement. (Black’s dict. P. 1074).
Characteristics of
Law
4.
FOR
THE
COMMON
OBSERVANCE and
BENEFIT
The application of law should not be titled
or favoring an individual but by the observance of all and the benefits that may be derived from it.
Sources of Law
1. LEGISLATIVE
It consists of legal rights by a competent
authority. In the Philippines, being a democratic form of government, the Legislative is the law-making body. For national government, Congress comprising the House of Representatives and the Senate. For provinces, the Sangguniang Panlalawigan for every province. For a town, the Sangguniang Pambayan or the local Municipal council. For a Barangay level, the Sangguniang Pambarangay.
Sources of Law
2. CONSTITUTION
The fundamental law that governs a nation
in its relation to its citizens. All laws must conform and comply with the provisions of the Constitution, otherwise it becomes unconstitutional.
Sources of Law
3.
ADMINISTRATIVE
OR
EXECUTIVE ORDERS,
REGULATIONS AND RULINGS
The fundamental law that governs a nation
in its relation to its citizens. All laws must conform and comply with the provisions of the Constitution, otherwise it becomes unconstitutional.
Sources of Law
4. JUDICIAL DECISIONS OR
JURISPRUDENCE
Judicial decisions or interpreting the laws or
the Constitution shall form a part of the legal system of the Philippines. (Art. 8, New Civil Code) Judicial decisions, though, are part of the legal system in the Philippines still are not laws for if this were so, the Courts exists for stating what the law is, but not for giving it. Judicial decisions, though not law, are evidence of what the law means. This is why they are part of the legal system in the Philippines. So, f an interpretation is placed by the Supreme Court upon a law, it constitute in a way, part of the law since the Courts interpretation merely establishes the legislative intent.
Sources of Law
4.
JUDICIAL
DECISIONS
OR
JURISPRUDENCE
Thus, our country adhere to the Doctrine of
Stare Decisis (Let it Stand), the doctrine which in reality is “adherance to precedents” stated that once a case has been decided, then another case involving the same point at issue, should be decided in the same manner. Therefore, if the Supreme Court being a Court of last resort, has decided that a certain law passed by Congress is constitutional, the law becomes binding and has its full force and effect.
Sources of Law
5. CUSTOM
It consists of those habits and practices
which through long and uninterrupted usage have become acknowledged and approved by society as binding rule of conduct. Thus, it has been a custom for a person to enter and exit a door. Once a person uses the window for his entrance and exit, it runs counter to the custom of use of the door. Even our Lord said as a good shepherd, if a person does not pass the gate, he is a thief for a marauder.
Sources of Law
6. OTHER SOURCES
To add, the principle of justice and equity,
decisions of foreign tribunals, opinions of text writers and even religion may also be sources of law.
Kinds of Law
1. DIVINE LAW
It is formally promulgated by God, revealed or divulged to mankind by means of direct revelation like the Ten Commandments.
Kinds of Law
2. NATURAL LAW
Promulgated impliedly in our conscience and body. It is the divine interpretation in man in the sense of justice, fairness, right and equity by internal dictate of reason on our mind. Like for instance, it is better to do good than to do evil for being a God-fearing person.
Kinds of Law
3. PHYSICAL LAW
Refers to the act of rules governing the action and movement of things like the law on gravity by Newton.
4. HUMAN LAW
Those promulgated by man to regulate human relations.
Classification of
Human Law
A. GENERAL or PUBLIC LAW
Body of rules which regulates the rights and duties arising from the relationship between the State and its inhabitants.
It includes the following:
1. International Law – consists of those rules
and principles which govern the relations and dealing of nations with each other.
2. Constitutional Law It simply governs the
Classification of
Human Law
GENERAL or PUBLIC LAW
3. Administrative Law – it fixes the
organization and determines the competence of the authorities that execute the law and indicates to the individual remedies for the violation of his rights.
4. Political Law – deals with the organization
and operation of the governmental organs of the State and defines the relations of the state with the inhabitants of its territory.
5. Criminal Law – guaranties the coercive
power of the law so that it will be obeyed. Governs the methods of trial and punishment of crimes.
Classification of
Human Law
B. INDIVIDUAL or PRIVATE LAW
Those law which govern the private relation person.
It includes the following:
1. Civil Law – branch of law which has for its
double purpose the organization of the family and the regulation of property. It is defined as the mass of precepts which determines and regulate the relation of assistance, authority and obedience among the members of a society for the protection of private interests.
Classification of
Human Law
INDIVIDUAL or PRIVATE LAW
2. Commercial Law – defined as a whole
body of substantial jurisprudence applicable to the rights, intercourse and relation of persons engaged in commerce, trade or mercantile pursuits. (Black’s law dict. 338)
Classification of
Human Law
INDIVIDUAL or PRIVATE LAW
3. Procedural Law – defined as the branch of
law which prescribes the method of enforcing rights or obtaining redress for their invasion, Procedural law otherwise known as Remedial Law, as distinguished from Substantive law which creates, defines and regulate rights.
Sources of Philippine
Civil Code
1. The New Civil Code of the
Philippines – the collection of laws which
regulates the private relations of the
members of civil society, determining the
defective rights and obligations with
reference to persons, things and civil acts.
A civil code is a compilation of existing Civil Laws, scientifically arranged into books, titles, chapters and subheads and promulgated by legitimate authority. (Black Law Dict. 334).
Sources of Philippine
Civil Code
2. Special laws or statutes, Presidential
decrees and other social legislation.
3. Jurisprudence – there is need to
mention that, jurisprudence in our system
of government, cannot be considered as an
independent source of law; but the Court’s
interpretation of a statute that constitute
part of the law as of the date it was
originally passed since the Court’s
construction
merely
establishes
contemporaneous legislative intent, that
the interpreted law could take into effect.
Sources of Philippine
Civil Code
4. Customs and Traditions – Custom is a
judicial rule which results from a constant
and continuous uniform practice by the
members of a social group.
5. The Code Commission itself – A
Code commission of five members was
created by Pres. Manuel Roxas through
Exec. Order No. 48 dated Mar. 20,1947 in
view of the need of revision in keeping
with progressive modern legislation. The
Civil Code was finished on Dec. 15, 1947
and Congress approved the draft on June,
1949.
Books of the Civil
Code
Book I – Person and Family Relations
This was re-codified as Family Code of the
Philippines embodied in Exec. Order No. 209 as amended by Exec. Order No. 227. The Family Code effectuates the long-felt reforms and changes to the Civil Code provisions on Family relations consistent with Filipino values, customs and traditions vis-à-vis recent developments in the social-cultural scene. (Pineda, Family Code).
Books of the Civil
Code
Book II – Property, Ownership and its
modifications.
Book III – Different Modes of Acquiring
Ownership (Succession)
Book IV – Obligations and Contracts
Book V – Special contracts
The Civil Code begins with preliminary titles and ends up with the repealing clause. This module is taken from the Civil Code of the Philippines from Articles 1156 to 1422 inclusive.
Concept of
Commercial Law
The commercial laws, excepting the Code of Commerce are designated by the legislator by any mark or sign, which determines their nature and their commercial function, but they derive their mercantile character from their subject matter or their contents. In order to determine whether a particular law or provision of law is commercial, it is necessary to first inquire if its purpose is to govern a relation pertaining to commercial matters and in this inquiry, the Code of Commerce should be principally considered, because it defines the acts and the person having a mercantile character. Generally, all laws referring to merchants and to commercial transactions are commercial in nature. (Agbayani, Vol. 1 p 2)
Code of Commerce
The Code of Commerce is only one of the
remaining laws in relation to business that has been heavily modified and repealed by subsequent laws which originally divided into four books.
BOOK ONE - Merchants and
Commerce in General
BOOK TWO - Special Commercial
Contracts
BOOK THREE - Maritime Commerce BOOK FOUR - Suspension of
payments,
Bankruptcy and Prescription of Actions.
Subsequent Repealing
Legislation
The following are among the important
special laws which repealed either
expressly or impliedly certain portions of
the Code of Commerce.
1. The Corporation Code – which
repealed principally the provision on
sociedad/anonimas on Book Two and the
Corporation law;
2. The Negotiable Instrument Law
which repealed principally the provisions
of Promissory; Notes and Bill of Exchange
in Book Two
Subsequent Repealing
Legislation
3. The Insolvency law, which repealed
the provisions on Suspension of payments
and Bankruptcy in Book four;
4. Insurance Law, which repealed the
provisions on Fire and Marine Insurance
on books two and three;
5. The Securities Act, which repealed
the provisions on Commercial Houses in
Book Two;
Subsequent Repealing
Legislation
6. The New Civil Code which repealed the
provisions on Partnership, Agency, Sales, Loan, Deposit and Guaranty in Book two.
7. Other legislation, in addition to the
foregoing special laws, there wee other laws and now form part of the Commercial laws of the Philippines: The Warehouse Receipts law; the General Bonded Warehouse Act; the Chattel Mortgage law; the Usury law; the General Banking Act; the Central Bank Act; The Rural Act; The Public Service Act; Carriage of Gods by Sea Act; the Salvage law; the Copyright law; the Patent law; the Trade-mark law; the Law on the Use of Duly Marked Bottles, Boxes, Casks, Kegs, Barrels, and other Similar Containers; the Business Names Law; and the Law on Monopolies and Combinations.
Subsequent Repealing
Legislation
8. Provisions of the Code of Commerce
still in force.
a. Those contained in Book one governing merchants and commerce in general, commercial registries, books and bookkeeping of commerce and general provisions relating to commercial contracts, except such portions thereof as have been repealed or modified by the New Civil Code and other legislation.
b. Those contained in Book Two governing joint accounts, transfers, transfers of non-negotiable credits, commercial contracts on transportation overland; and letters of credits but not those relating to partnership, agency, sales, loans, deposit
Subsequent Repealing
Legislation
8. Provisions of the Code of Commerce
still in force.
c. Those contained in Book Three governing maritime commerce but not those relating to marine insurance which have been repealed. All the provisions in Book four are no longer in force as they have likewise been repealed. (Agbayani, Vol. 1, pp3-4)
Subsequent Repealing
Legislation
9. Some provision of the code of
Commerce which are pertinent in our
study in business in general:
a. MERCHANTS – Merchants may be
natural or juridical person:
In the case of natural person, he is a merchant: a. If he has legal capacity to engage in
commerce; and
Subsequent Repealing
Legislation
A natural person has legal capacity to engage in commerce;
1. If he has reached the age of twenty – one
years;
2. He is not subject to parental authority; and 3. He has free disposition of his property.
In the case of juridical person, it is a merchant:
a. It is a commercial and industrial company; b. It is organized in accordance with existing
legislation and
Subsequent Repealing
Legislation
b. Habituality in engaging in commerce –
Habituality in engaging in commerce is attained when there exists series of acts of commerce or commercial dealings. There must be continuity of repetition of commercial acts. However, a single act may be deemed habituality in engaging in commerce in the way of the following acts:
1. Throwing open to the public a business entity or establishment;
Subsequent Repealing
Legislation
2. Announcement through circulars, newspaper, handbills, posters and similar means of the opening of an establishment for commercial acts or dealings with the public; or
3. Where a foreign corporation appoints an agent as required by law.
4. A series of acts consisting of investigating and preparations of project studies implying an intention to engage in commerce and comes to reality.
Subsequent Repealing
Legislation
c. Absolute Disqualifications – The
following may not engage in commerce nor hold office or have any direct administrative or financial intervention in commercial of industrial companies:
1.Those suffering the penalty of civil interdiction primarily because they are deprived of the right to mange and to dispose of their properties inter-vivos or during their lifetime;
Subsequent Repealing
Legislation
2. Those judicially declared insolent while they have not obtained their discharge;
3. Those who in account of special laws or provisions cannot engage in commerce like incapacitated persons or employees covered by the Civil Service law.
Subsequent Repealing
Legislation
d. Relative Disqualifications – These are
persons who cannot engage in commerce in places where they exercise their functions.
1.Justices, judges, and officials of the Prosecutor’s office in active service, except Municipal Mayors; municipal judge; municipal prosecuting attorney’s and those who temporarily discharge judicial or prosecuting duties;
2.Administrative, economic or military heads of districts, provinces or post;
Subsequent Repealing
Legislation
3. Those employed in the collection and administration of funds of the State appointed by the Government except those who administer and collect under contract and their representative.
4. Stock and commercial brokers of whatever class;
5. Those who under special laws and provisions cannot trade in specified territory.
Subsequent Repealing
Legislation
e. Commercial Registry
A commercial registry is a public office that takes charge of the registration of merchants, business associations, vessels and documents of commercial importance. The purpose of a commercial registry is to furnish necessary information and reliable data to any interested party so as to promote and facilitate trade and commercial transaction.
Subsequent Repealing
Legislation
f. Books of Merchants
1. Merchants must keep the following books:
a. Book of inventories and balances; b. A journal;
c. A ledger;
d. Book or books for copies of letters or telegrams; and other books that may be required by special laws.
Subsequent Repealing
Legislation
f. Books of Merchants
2. Corporation are bound to keep:
a. Record of all business transactions; b. Minutes of all meetings of directors; c. Minutes of all meetings of
Registration is
compulsory:
1. In case of vessel of more than three
(3) tons gross
in use in Philippine
waters;
2. In case of partnership whose
immovable property
is contributed by
any partner to a common fund.
3. In case of business names under the
Registration is
compulsory:
4. In case of ship agent;
5. In case of vehicles with the Land
Transportation
Office.
Commercial Registries
in the Philippines
1. Bureau of Domestic Trade – for registration of business names and merchants to avoid duplication of trade names.
2. Securities and Exchange Commission – for registration of partnership and Corporation. 3. Local municipalities, cities or province – for
local permits and licenses.
4. Office of Register of deeds – for registration all transaction affecting lands, as well as shattel mortgage.
Commercial Registries
in the Philippines
5. The MARINA (Marine Industry Authority) – for registration of vessels and other transaction affecting vessels.
6. Intellectual property Office for registration of patents and design as well as trade names; trademarks and service marks;
7. Land Transportation Office for registration of patents and designs as well as trade names; trademarks and service marks;
Commercial Registries
in the Philippines
8. Office
of
Air
Transportation
Administration for registration of
aircrafts.
9. Bureau of Public Library – for
registration of copyrights;
10. Board of investment for registration of
pioneer and registered enterprises and
with corporations having foreign entity
participation.
Kinds of Procedural
Law
1. Public Remedial Law – affords a
remedy in favor of the State against the
individual, like criminal procedure or in
favor of the individual against the
State, like Habeas Corpus.
2. Private Remedial Law – affords a
remedy in favor of an individual against
another individual, like the civil
Philippine Remedial
Law
Principally contained in the Rules of
Court, which is a combination of rules
promulgated by the Supreme Court for the
easy, orderly, adequate and effective
compliance with the law. The Rules of
Court have the force and effect of law.
(Alvero V. dela Rosa, 76 Phil 428).
COURTS DEFINED –
It is the entity, body or tribunal vested with
a portion of the judicial power. (Lontok V. Battung 63 Phil 1054)
JUDICIAL POWER
Includes the duty of the courts of justice to
settle actual controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government. (Const. Art. VIII, Sec. 1, par.2)
Different Courts of
Justice
1.
Supreme Court
2.
Sandigan-bayan
3.
Court of Appeals
4.
Regional Trial Court; and
Lesson 1: General
Provisions on
Obligation
The definition of obligations establishes
the unilateral act of the debtor either to
give, to do or not to do as a patrimonial
obligation. It means that the debtor has the
obligation while the creditor has its rights.
On the sources of obligation, the main
sources are really Law and Contracts. The
other sources are also established by law.
ART. 1156. An obligation is a juridical
necessity to give, to do or not to do.
OBLIGATIONS as defined by ARIAS
RAMOS is a juridical relation whereby a
person (called the creditor) may demand
from another (called the debtor) the
observance of a determinate conduct, and,
in case of breach, may obtain satisfaction
from the assets of the latter. (Approved by
Mr. Justice J. B. L. Reyes)
The obligations referred to in our manual is a
patrimonial obligations that is, those
obligations with pecuniary value or
assessable in terms of money.
1.
Characteristics of patrimonial obligations:
• They represent an exclusively private interest. • They create ties that are by nature transitory. • They exist a power to make effective in case of
non-fulfillment, the economic equivalent obtained at the patrimony of a debtor.
1.
Meaning of Juridical Necessity – it means the
rights and duties arising from obligation are
legally demandable and the courts of justice
may be called upon through proper action to
order the performance.
Action means an ordinary suit in court of justice
by which one party prosecutes another for the enforceable or protection for a right or a
prevention or redress of a wrong ( Sec. 1. Rules of court ).
Example –
Gaya bought refrigerator from Tito but
Gaya did not pay the refrigerator. If after
demand, Gaya still did not pay, Tito can sue
Gaya in Court either to demand payment or
for recovery of the refrigerator.
3.
Essential requisites of an obligation –
a) An active subject, who has the power to demand
the prestation, known as the creditor or oblige;
b) A passive subject, who is bound to perform the
prestation, known as debtor or obligor.
c) An object or the prestation which may consist in
the act of giving, doing or not doing something.
d) The vinculum juris or the juridical tie between
the two subjects by reason of which the debtor is bound in favor of the creditor to perform the prestation. It is the legal tie which constitutes the source of obligation—the coercive force which makes the obligation demandable. It is the legal tie which constitutes the devise of obligation… the coercive force which makes the obligation demandable.
Juridical Tie
Debtor
To give, to do
Creditor Or Obligor
or not to
do
or Obligee
Illustration:
Gaya enters into a contract of sale with
Tito who paid the purchase of a GE
refrigerator. Gaya did not deliver the
refrigerator. Gaya is the passive subject or
debtor and Tito is the active subject or
creditor. The object or prestation is the GE
refrigerator and the obligation to deliver is
the legal tie or the vinculum juris which
binds Gaya and Tito.
This is also known as a unilateral obligation,
that is, the obligation of the debtor to fulfill or comply his commitment, in this case, the
delivery of the refrigerator.
On the other hand, if Gaya, delivered the refrigerator and Tito did not pay, then Tito
becomes the debtor who is bound to pay while Gaya is the creditor who has the right to
demand the prestation.
4. Distinctions between Obligations and Contracts:
Contract is the only one of the sources of obligation,
while obligations have other sources like law, quasi-contracts, delicts or quasi-delicts;
Contract is a bilateral obligation while obligation is a
unilateral obligation;
All contracts are obligations while not all obligations
5.
Civil obligations as distinguished from
Natural obligations –
Civil obligations derive their binding force
from positive law; Natural Obligation
derives their binding effect from equity and natural justice.
Civil can enforced by court action of the
coercive power of public authority;
Natural – the fulfillment cannot be
compelled by court action but depends
on the good conscience of debtor.
ART. 1157. Obligations arise from:
Law;
Contracts;
Quasi-contracts;
Acts or omissions punished by law; and
Quasi-delicts. (1089a)
ART. 1158. Obligations derived from law are not
presumed. Only those expressly determined in this Code or in special laws are demandable, and shall be regulated by the precepts of the law which
establishes them; and as to what has not been foreseen, by the provisions of this Book. (1090)
ART. 1159. Obligations arising from contracts
have the force of law between the contracting
parties and should be complied with in good faith. (1091a)
ART. 1160. Obligations derived from
quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII, of this Book.
ART. 1161. Civil obligations arising from
criminal offenses shall be governed by the penal laws, subject to the provisions of article 2177, and of the pertinent provisions of Chapter 2, Preliminary Title, on Human Relations, and of Title XVIII of this Book, regulating damages. (1092a)
ART. 1162. Obligations derived from
quasi-delicts shall be governed by the provisions of Chapter 2, Title XVIII of this Book, and by special law. (1093a)
Source of Obligations
1.
LAW as a source of obligations –
The provisions of Art. 1158 refers to the
legal obligations or obligations imposed
by specific provisions of law, which
means that obligations arising form law
are not presumed and that to be
demandable must be clearly provided for,
expressly or impliedly in the law.
Examples:
It is the duty of the Spouses to support each
other. (Art. 291, New Civil Code)
And under the National Internal Revenue
Code, it is the duty of every person having an income to pay taxes.
Source of
Obligations
2. CONTRACT as a source of obligations –
Contract as defined in Art. 1305, NCC is the meeting of minds between two person whereby one binds himself with respect to the other,
Obligations arising from contracts have the force of law between the contracting parties because that which is agreed upon in the contract by the parties is the law between them, thus, the agreement should be complied with in good faith. (Art. 1159).
For examples:
A contract of lease was executed between Gaya as the lessee and Tito as the lessor for the rent of an apartment.
Although contracts have the force of law, it does not mean
that contract are over and above the law. Contracts are with the limitations imposed by law in Art. 1306, NCC, it states that the contracting parties may establish such stipulations, clauses terms and conditions as, they may deem convenient, provided that are not contrary to law, morals, good custom, public order or public policy.
Sources of Obligations
3. QUASI-CONTRACTS as a source of obligations
The ‘quasi’ literally means ‘as if’.
Quasi-contract is the juridical relation resulting
from a lawful, voluntary and unilateral act which has for its purpose the payment of indemnity to the end that no one shall unjustly enrich or benefited at the expense of another. (Art. 2142, NCC)
Contracts and quasi-contracts distinguished:
in a contract, consent is essential requirement for its
validity while in quasi-contract, there is no consent as the same is implied by law;
contract is a civil obligation while quasi-contract is
2 Kinds of
Quasi-contracts
1. Solutio Indebiti (Payment by mistake)
It is the juridical relation which arises when a person is obliged to return something received by him through error or mistake.
Example-Arvin owed Ian the sum of P1, 000.00. By mistake, Example-Arvin paid P2, 000.00. Ian has the obligation to return the P1, 000.00 excess
because there was payment by mistake.
2. Negotiorum gestio (management of another’s property)
It is the voluntary management or administration by a person of the abandoned business or property of another without any authority or power from the latter. (Art. 2144, NCC)
Example-Victor, a wealthy landowner suddenly left for abroad leaving his livestock farm unattended. Ramon, a neighbor of Victor managed the farm thereby incurring expenses. When Victor returns, he has the obligation to reimburse Ramon for the expenses incurred by him and to pay him for his services. It is bases on the principle that no one shall enrich himself at the expense of another.
Sources of
Obligations
4. DELICTS or acts or omissions punished by law as a source of obligations
Acts or omission punished by law is known as Delict or Felony or Crime.
While an act or omission is felonious because it is punished
by law, the criminal act gives rise to civil liability as it caused damage to another.
Civil liability arising from delicts:
Restitution – which is the restoration of or returning the object of the crime to the injured party.
Reparation – which is the payment by the offender of the value of the object of the crime, when such object cannot be returned to the
injured party.
Indemnification – the consequential damages which includes the payment of other damages that may have been caused to the injures party.
Illustration:
Mario was convicted and sentenced to imprisonment by the
Court for the crime of theft, the gold wrist watch, of Rito. In addition to whatever penalty that the Court may impose, Mario may also be ordered to return (restitution) the gold wrist watch to Rito. If restitution is no longer possible, for Mario to pay the value (reparation) of the gold wrist watch. In addition to either restitution or reparation, Mario shall also pay for damages (indemnification) suffered by Rito.
Sources of
Obligations
5. QUASI-DELICTS as a source of
obligations
Concepts of Quasi-Delict –
Quasi-delict is one where whoever by act or omission causes damage to another, there being fault of negligence, is obliged to pay for the damage done. Such fault of
negligence, if there is no pre-existing
contractual relation between the parties. (Art. 2176)
Example-If Pedro drives his car negligently and
because of his negligence hits Jose, who is walking on the sidewalk of the street,
inflicting upon him physical injuries. Then Pedro becomes liable for damages based on quasi-delict.
Sources of Obligations
6.
DELICTS or acts or omissions
punished by law as a source of
obligations
Acts or omission punished by law is known
as Delict or Felony or Crime.
While an act or omission is felonious because it is punished by law, the criminal act gives rise to
civil liability as it caused damage to another. Civil liability arising from delicts:
Restitution – which is the restoration of or
returning the object of the crime to the injured party.
Reparation – which is the payment by the
offender of the value of the object of the crime, when such object cannot be returned to the injured party.
Requisites of a
quasidelicts
-
There must be fault of negligence
attributable to the offended;
There must be damage or injury caused to
another;
Negligence Defined –
is the failure to observe for the protection of the interests of another person, that degree of care, precaution and vigilance which the circumstances justly demand, whereby such other person suffers injury. (Judge Cooley)
Test of Negligence –
For the existence of negligence, the
following are necessary:
a duty on a party of the defendant to protect the
plaintiff from the injury of which the letter complains;
a failure to perform that duty; and
Kinds of Negligence
Culpa Aquiliana, also known as
quasi-delict or negligence as a source of
obligation.
Culpa contractual or negligence in the
An illustration showing this difference is
founding Gutierrez vs. Gutierrez, 56 Phil
177-While trying to pass each other on a narrow bridge, a
passenger truck and private automobile collided, and the plaintiff, a passenger in the truck, was injured.
The owner of the passenger truck was made a
defendant, although a driver was driving the truck and the owner of the car was also made a defendant,
although he was not in the car but which was being driven by his 18 year old son and in which members of his family were then riding. The court found both drivers negligent, basing basing the liability of the owner of the truck to the plaintiff on the contract of carriage; while the liability of the owner of the car was based on Quasi-delict of the Civil Code. As against the owner of the truck, there was Culpa
contractual, while as against the owner of the car there was culpa Aquiliana.
LESSON 2: NATURE
AND EFFECT
OF
OBLIGATIONS
ART. 1163. Every person obliged to givesomething is also obliged to take care of it with the proper diligence of a good father of a family, unless the law or the stipulation of the parties requires another standard of care. (1904a)
ART. 1664. The creditor has a right to the
fruits of the thing from the time the obligation to deliver it arises. However, he shall acquire no real right over it until the same has been
delivered to him. (1905)
ART. 1165. When what is to be delivered is a
determinate thing, the creditor, in addition to the right granted him by article 1170, may compel the debtor to make the delivery.
If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor.
If the obligor delays, or has promised to deliver the same thing to two or more
persons who do not have the same interest, he shall be responsible for any fortuitous event until he has effected the deliver. (1906) ART. 1166. The obligation to give a
determinate thing includes that of delivering all its accessions and accessories, even
though they may not have been mentioned. (1097a)
Obligations of the
Debtor To Give a
determinate
thing-1.
To preserve or take care of the thing with
the proper diligence of a good father of a
family. It means the ordinary diligence that
a prudent man would exercise in taking care
of his own property taking into
consideration the nature of the obligation,
of the time and of the place, like a person
who is obliged to deliver a determinate
horse to another should, pending its
delivery, preserve it by taking care of the
same as if the horse is his own.
Obligations of the
Debtor To Give a
determinate
thing-
To deliver the object or thing when the
obligation to deliver arises, including:
1. Fruits of the thing if any. Kinds of fruits: Natural; industrial or civil.
Natural - spontaneous product of the soil; the
young and other products of animal. E.g. tress, plants on lands without he intervention of man.
Industrial - produced by lands of any king
through cultivation and labor. E.g. sugar cane, vegetables, rice.
Civil - derived by virtue of juridical
relations. E.g. rents of a building; prices of leases of lands and other similar income.
Obligations of the
Debtor To Give a
determinate
thing-2. Accessions and accessories.
Accession – is the right pertaining to the owner
of a thing over its products and whatever is attached thereto either naturally or artificially.
Example-Accretion which refers to the gradual and
addition of sediment to the shore by action of water.
Accessories – are those things which are joined
attached to the principal object as ornament or to render it perfect.
Obligations of the
Debtor To Give a
determinate
thing-3. To be liable for damages in case of breach of obligation (Art. 1170, NCC)
When creditor acquire a right to the thing to be delivered and its
fruits-The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises.
However, he shall acquire no real right over it until the same have been delivered to him. (Art. 1164, NCC)
Example – a binds himself to sell his horse to B for fro P10, 000. No date nor condition is stipulated for delivery of the horse. Later, the horse gave birth to a colt. A has right to the colt, if B has not paid the
horse. Before delivery, B does not acquire ownership over it.
Definition of terms:
1.
Determinate thing – a thing is
determinate when it is particularly
designated or physically segregated from
all others from the same class. (Art.
1460, NCC)
2.
Indeterminate or generic thing – A thing
is generic when it refers to a class or
thing or genus and cannot be designated
with particularity. (Art. 1460, NCC)
3.
Fortuitous Events – those events which
could not be foreseen or which though
foreseen were inevitable. (Art. 1174,
NCC)
Art. 1167. If a person obliged to do
something fails to do it, the same shall be
executed at his cost.
This same rule shall be observed if he does
it in contravention of the tenor of the
obligation. Furthermore, it may be decreed
that what has been poorly done be undone.
( 1098 )
Obligation of the debtor
To Do
Being a personal positive obligation,
The creditor has the right to secure the
services of third person to perform the
obligation at the expense of the debtor
under the following instances:
When the debtor fails to do the obligation; When the debtor performs the obligation
but contrary to the tenor; or
When the obligor poorly performs the
ART. 1168. When the obligation consists in not
doing, and the obligor does has been forbidden him, it shall also be undone at his expense, (1099a)
Obligation of the Debtor NOT To Do –
This is negative personal obligation which is consisting of an obligation, of not doing something. If the debtor does what has been forbidden him to do, the obligee can ask the debtor to have it undone. If it is impossible to undo what was done, the remedy of the injured party is for an action of damages.
Example-A bought a land from B. It was stipulated that Example-A
would not construct a fence in a certain portion of his land adjoining that land sold by B. Should A
construct a fence in violation of the agreement, B. can bring an action to have the fence remove at the expense of A.
ART. 1169. Those oblige to deliver or to do something
incur in
delay from the time the obligee judicially or extra - judicially demands from theme the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in order that delay may exist:
( 1 ) When the obligation or the law expressly declares; or
( 2 ) When from the nature and the circumstances of the obligation it appears that the destination of the time when the thing is to be delivered or the service is to rendered was controlling motive for the
establishment of the contract; or
( 3 ) When demand would be useless, as when the obligor has rendered it beyond his power to perform. In reciprocal obligations, neither party incurs in delay if the other does not comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins. ( 1100a )
Delay ( Mora )
means a legal delay or default and it
consists of failure discharge a duty resulting to one’s own disadvantaged.
The debtor incurred delay if:
The debtor fails to perform his obligation when it
falls due; and
A demand has been made by the creditor judicially
or extra judicially.
Example –
Gaya obliged herself to deliver a determinate
horse to Tito on June 20. this year. Gaya failed to delivered on the agreed date, Is Gaya already on delay on June 20, only when Tito makes a
judicial or extra-judicial demand and from such date of demand when Gaya is on default or delay.
However, there are instances when the
demand by the Creditor is not necessary to
place the debtor on delay:
1. When the obligation expressly so provides
The mere fixing of the period is not
sufficient to
constitute a delay. An
agreement to the effect that
fulfillment or
performance is not made when the
obligation becomes due, default or delay by
the debtor will automatically arise.
2. When the law so provides
The express provision of law that a debtor is in default. For instance, taxes
must be paid on the date prescribed by law, and demand is not necessary in order that the taxpayer is liable for penalties.
3. When time is of the essence
Because time is the essential factor in the fulfillment of the obligation.
Example, Gaya binds herself to sew the wedding gown of Maya to be used by the latter on her wedding date.
Gaya did not deliver the wedding gown on the date agreed upon. Even without demand, Gaya will be in delay because
4. When demand would be useless
When the debtor cannot comply his obligation as when it is beyond his power to perform. Like when the object of the obligation is lost or
destroyed through the fault of the debtor, demand is not necessary.
5. In a reciprocal obligation, from the moment one of the parties fulfills his obligation, delay to the other begins
For instance, in a contract of sale, if the seller
delivers the object to the buyer and the buyer does not pay, then delay by the buyer begins and vice versa, if the buyer pays and the seller did not deliver the object, then the seller is on delay.
Kinds of delay –
Mora solvendi – delay on the part of the
debtor.
Mora accipiendi – delay on the part of the
creditor, like when the creditor
unjustifiably refused to accept payment at
the time it was due, is in delay.
Compensatio morae – delay both parties
ART. 1170. Those who in the
performance of their obligations are guilty
of fraud, negligence, or delay, and those
whoin any manner contravene the tenor
thereof, are liable for damages. (1101)
ART. 1171. Responsibility arising
from fraud is demandable in all
obligations. Any waiver of an action for
future fraud is void. (1120a)
ART. 1172. Responsibility arising
from negligence in the performance of
every king of obligation is also
demandable, but such liability may be
regulated by the courts, according to the
circumstances. (1130)
ART. 1173. The fault or negligence of
the obligor consists in the omission of that
diligence which is required by the nature of
the obligation and corresponds with the
circumstances of the persons, of the time
and of the place. When negligence shows
bad faith, the provisions of articles 1171
and 2201, paragraph 2, shall apply.
If the law or contract does not state
the diligence of which is to be observed in
the performance, that which is expected of
a good father of a family shall be required.
(1104a)
Sources of liability for
damages:
1.
Fraud (dolo) – is the intentional deception
made by one person resulting in the injury
of another.
The fraud referred to is incidental fraud, that
is, fraud incident to the performance of a pre-existing obligation.
2.
Negligence (culpa) – consists in the
omission by the obligor of that diligence
which is required by the nature of the
obligation and corresponds with the
circumstances of the person, of the time
and of the place. (Art. 1173, NCC)
Sources of liability for
damages:
3.
Delay (Mora) – like when there has been
judicial or extra-judicial demand and the
debtor does not comply his obligation, delay
will occur.
4.
In contravention of the tenor of the
obligation – refers to the violation of the
terms and conditions or defects in the
performance of the obligation, like when a
landlord fails to maintain a legal and
peaceful possession of a tenant being leased
by the latter because the landlord was not
the owner and the real owner wants to
occupy the land, there is contravention of
the tenor of the obligation.
Sources of liability for
damages:
3.
Delay (Mora) – like when there has been
judicial or extra-judicial demand and the
debtor does not comply his obligation, delay
will occur.
4.
In contravention of the tenor of the
obligation – refers to the violation of the
terms and conditions or defects in the
performance of the obligation, like when a
landlord fails to maintain a legal and
peaceful possession of a tenant being leased
by the latter because the landlord was not
the owner and the real owner wants to
occupy the land, there is contravention of
the tenor of the obligation.
Other sources of
liability for damages –
Loss of the thing with the fault of debtor.
Deterioration with the fault of debtor. (Art.
Kinds of Damages
1.
Moral damages – include physical
sufferings, mental anguish, fright,
serious anxiety, besmirched reputation,
wounded feeling, moral shock, social
humiliation and similar injury.
2.
Exemplary damages – imposed by way
of example or correction for the public
good.
Like in quasi-delicts, if the defendant acted
Kinds of Damages
3.
Nominal damages – are adjudicated in
order that a right of the plaintiff, which has
been violated by the defendant, may be
vindicated or recognized and not for the
purpose of indemnifying the plaintiff for
any loss suffered by him. (Art. 2221, NCC)
4.
Temperate or moderate damages – are
more than nominal but less than
compensatory damages may be recovered
when the courts finds that its amount
cannot, from the nature of the case, be
proved with certainty. Pecuniary loss
means loss of money, or of something by
which money or something of money value
may be acquired. (Black Law Dict. P. 1131)
Kinds of Damages
5.
Actual or compensatory damages – except
as provided by law, or a stipulation, one is
entitled to an adequate compensation only
for such pecuniary loss suffered by him as
he has duly proved. (Art. 2199, NCC)
Damages may be recovered:
For loss or impairment of earning capacity in cases of temporary or permanent personal injury; For injury, to the plaintiff’s business standing or
Kinds of Damages
6.
Liquidated damages – are those agreed
upon by parties to a contract to be paid
in case of breach thereof. (Art. 2226,
NCC)
Distinguish Fraud
(Dolo) from
Negligence (culpa)
1. Dolo – there is deliberate intent to cause damage or injury.
Culpa – ther is no deliberate intent to cause damage.
2. Dolo – waiver of liability of future fraud is void.
Culpa – waiver may in some cases be allowed.
3. Dolo – fraud must be clearly proved.
Culpa – presumed from breach of contractual obligation.
4. Dolo – liability cannot mitigated by the courts. Culpa – may be reduced according to
ART. 1174. Except in cases
expressly specified by the law, or when it
is otherwise declared by stipulation, or
when the nature of the obligation
requires the assumption of risk, no
person shall be responsible for those
events which could not be foreseen, or
which, though foreseen, were inevitable
(1105a)
Fortuitous even – is an event which cannot be
foreseen which though foreseen is inevitable. Fortuitous event proper are acts of God such as volcanic eruption, earthquake, lightning, etc. is now similar with force majuere or acts of man such as conflagration, war, robbery, etc.
1.
Requisite necessary to constitute fortuitous
event
The failure of the debtor to comply with the
obligation must be independent from the human will;
The occurrence makes it impossible for the debtor
to fulfill the obligation on a normal manner, and the obligor did not take part as to aggravate the injury of the creditor. (Vasquez v.C.A. G.R. 42926)
2.
As a general rule, no person shall be held
responsible for fortuitous events
Example – Gaya obliged herself to deliver a
determine car to Tito on Dec. 30, 1998.
Before the arrival of the period, the car was struck by lightning and was totally
destroyed. Gaya cannot be held responsible for the destruction of the car, hence her
Exceptions (when the person is responsible
despite the fortuitous even).
a. When the law expressly so provides, such as:
The debtor is guilty of fraud, negligence or in
contravention of the tenor of the obligation. (Art, 1170, NCC)
The debtor has proved to deliver the same thing to two
or more persons who do not have the same interest. ( Art. 1165,NCC )
The thing to delivered is generic.
The debtor is guilty of default or delay. ( Art.
1169,NCC )
The debtor is guilty of concurrent negligence. b. When declared by stipulation;
c. When the nature of obligation requires the assumption of risk. An example of this is a contract of insurance.
ART. 1175. Usurious transaction shall be
governed by special laws.
Note: C.B. Circular No. 905 suspends the ceilings in
the usury law. Hence, parties can agree as to the rate of interest.
Kinds of interest
1. Conventional *The rate which is agreed upon by the
parties.
2. Legal Interest *The rate which is prescribed by law.
3. Lawful Interest *The rate which is agreed upon by the
parties but which rate is within the
rate authorized by law.
4. Usurious Interest *The rate which is in excess of the
maximum rate of interest allowed by law.
