General Provisions

Question 1

What is obligation?

Answer 1

Art 1156. An obligation is a juridical necessity to give, to do or not to do.

Question 2

Why is obligation an juridical necessity?

Answer 2

Because in case of non-compliance, the courts of justice may be called upon to enforce its fulfillment or, in default thereof, the economic value that it represents.

Question 3

What are the essential requisites of an obligation?

Answer 3

1. A passive subject
2. An active subject
3. Object or prestation
4. Juridical or legal tie

Question 4

What is a wrong?

Answer 4

A wrong (cause of action), according to its legal meaning, is an act or omission of one party in violation of the legal right or rights of another, causing injury to the latter

Question 5

What are the essential elements of cause of action?

Answer 5

(a) a legal right in favor of a person (creditor/plaintiff) by whatever means and under whatever law it arises or is created;
(b) a correlative legal obligation on the part of another (debtor/defendant) to respect or not to violate said right; and
(c) an act or omission in breach or violation of said right by the defendant with consequential injury or damage to the plaintiff for which he may maintain an action for the recovery of damages or other appropriate relief.

Question 6

When does a cause of action based upon a written contract prescribe?

Answer 6

Actions based upon a written contract should be brought within 10
years from the time the right of action accrues.

Accordingly, an action based on a contract
accrues only when an actual breach or violation thereof occurs. The period of prescription commences, not from the
date of execution of the contract but from the occurrence of the breach.

Question 7

Distinguish injury from damage and damages.

Answer 7

(1) Injury is the illegal invasion of a legal right; it is the wrongful act or omission which causes loss or harm to another, while damage is the loss, hurt, or harm which results from the injury. On the other hand, damages denote the sum of money recoverable as amends for the wrongful act or omission; and
(2) Injury is the legal wrong to be redressed, while damages are the recompense or compensation awarded or recoverable for the damage or loss suffered. (Custodio vs. Court of Appeals, 253 SCRA 483 [1996].)

Question 8

What are the kinds of obligation according to subject matter?

Answer 8

(1) Real obligation (obligation to give) or that in which the subject matter is a thing which the obligor must deliver to the obligee; or
(2) Personal obligation (obligation to do or not to do) or that in which the subject matter is an act to be done or not to be done.

Question 9

What are the two kinds of personal obligations?

Answer 9

(a) Positive personal obligation or obligation to do or to render service (see Art. 1167.); and
(b) Negative personal obligation or obligation not to do (which naturally includes obligations “not to give”). (see Art. 1168.)

Question 10

What are the sources of obligations?

Answer 10

ART. 1157. Obligations arise from:
(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Quasi-delicts. (1089a)

Question 11

Are there any other sources of obligation apart from that enumerated in Art 1156?

Answer 11

No. The enumeration by the law is exclusive; hence, there is no obligation as defined in Article 1156, if its source is not any of those
enumerated

Question 12

What is a contract?

Answer 12

A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. (Art. 1305.) It is the formal expression by the parties of their rights and obligations they have agreed upon with respect to each other.

Question 13

What are the requirements of a valid contract?

Answer 13

A contract is
valid (assuming all the essential elements are present, Art. 1318.) if it
is not contrary to law, morals, good customs, public order, and public
policy. It is invalid or void if it is contrary to law, morals, good customs,
public order, or public policy.

Question 14

what is a real obligation?

Answer 14

(Obligation to give) Obligation of the obligor to deliver a thing, movable or immovable, to the creditor or obligee for the purpose of transferring ownership of for the use or possession of the recipient.

Question 15

What are the kinds of real obligation?

Answer 15

1)Determinate or specific real obligation
2) Indeterminate or generic real obligation

Question 16

what are the requisites for a prestation to exist?

Answer 16

1) ,must be legal
2) must be determinate or at least determinable
3) must be of pecuniary value

Question 17

what is a determinate thing?

Answer 17

when it is particularly designated or physically segregated from all others of the same class

Question 18

what is personal obligation?

Answer 18

obligation to do or not to do

Question 19

what are the kinds of personal obligations?

Answer 19

1) Positive obligation
2) Negative obligation

Question 20

is practice or custom a source of obligation?

Answer 20

As a general rule, it is not a source of a legally demandable or enforceable right

Question 21

What is a law?

Answer 21

a rule of conduct, just obligatory., promulagted by legitimate authority and of common observance and benefit.

Question 22

Facts: X, by virtue of having been sent for by B and C, attended as physician and rendered professional services to a daughter-in-law of B and C during a difficult and laborious childbirth.

Issue: Who is bound to pay the bill: B and C, the parents-in-law of the patient, or the husband of the latter?

Answer 22

The rendering of medical assistance in case of illness is comprised among the mutual obligations to which spouses are bound by way of mutual support. If spouses are mutually bound to support each other, there can be no question that when either of them by reason of illness should be in need of medical assistance, the other is to render the unavoidable obligation to furnish the services of a physician and is liable for all expenses, including the fees for professional services. This liability originates from the above-mentioned mutual obligation which the law has expressly established between the married couple. B and C not having personally bound themselves to pay are not liable. (Pelayo vs. Lauron, 12 Phil. 453 [1909].)

Question 23

X, of legal age, bought two vessels from B, the purchase price thereof being paid by C, X’s father. Subsequently, differences arose between X and C. The latter brought action to recover the vessels, he having paid the purchase price.

Is there any obligation on the part of X to transfer the ownership of the vessel to C?

Answer 23

Held: None. If any such obligation was ever created on the part of X, said obligation must arise from law. But obligations derived from law are not presumed. Only those expressly determined in the Civil Code or in special laws are demandable. Whatever right C may have against X either for the recovery of the money paid or for damages, it is clear that such payment gave him no title, either legal or equitable, to these vessels.

Question 24

what are the stages of a contract?

Answer 24

1)negotiation
2) perfection
3) consummation

Question 25

Facts: X verbally agrees to pay Y the balance of an account in advance, notwithstanding the different stipulation of a prior written agreement. Issue: Is X bound to perform said obligation?

Answer 25

Yes. Since he agreed to pay Y the balance of the account independently of the terms of the written contract, he must perform his obligation to pay according to the tenor of his verbal agreement which has the force of law between them.

Question 26

D borrowed from C money to be paid within a certain period, under the agreement that, if D fails to pay at the expiration of said period, the house and lot described in the contract would be considered sold for the amount of the loan.
D failed to pay as promised. C brought action for the delivery of the house and lot.
Are both contracts valid and, therefore, should be given effect?

Answer 26

Yes. The fact that the parties have agreed at the same time, in such a manner that the fulfillment of the promise of sale would depend upon the non-payment or return of the amount loaned has not produced any change in the nature and legal conditions of either contract, or any essential defect which would nullify them.
As the amount loaned has not been paid and continues in possession of the debtor, it is only just that the promise of sale be carried into effect, and the necessary instruments be executed. That which is agreed to in a contract is law between the parties, and must be enforced. (Alcantara vs. Alinea, 8 Phil. 111 [1907].)
Note: In the above case, the court found that no contract of mortgage, pledge, or antichresis was entered into. (see Arts. 2088, 2137.)

Question 27

Facts: D executed a promissory note in favor of C for the purchase price of a truck sold by the latter. In the note, D bound himself to pay an additional 25% as attorney’s fees in the event of becoming it necessary for C to employ counsel to enforce its collection. Has the court the power to ignore the contract as to attorney’s fees, considering that a contract has the force of law between the contracting parties?

Answer 27

Yes. Where no special agreement is made by the parties with reference thereto, the courts are authorized to determine the amount to be paid to an attorney as reasonable compensation for his professional
services; and even where parties have made a written agreement as to the fee, the courts have the power to ignore their contract, if the amount fixed is unconscionable or unreasonable, and to limit the fee to a reasonable amount.

Question 28

The contract between the parties (two big real estate corporations) was a contract to sell or conditional with title expressly reserved in S (seller) until the suspensive condition of full and punctual payment of the full price by B (buyer) shall have been met on pain of automatic cancellation of the contract upon failure to pay any of the monthly installments.
B failed to pay the P5,000.00 monthly installments notwithstanding that it was punctually collecting P10,000.00 monthly rentals from the les- see of the property.
Issue: The main issue posed by B is that there has been no breach of contract by it; and assuming there was, S was not entitled to rescind or resolve the contract without recoursing to judicial process.

Answer 28

B only pleads that it be given special treatment and that the cancellation of its contract be somehow rejected notwithstanding S’s clear right under the contract and the law to do so.
The contract between S and B, entered into with the assistance of counsel and with full awareness of the import of its terms and conditions, is the binding law between them and equity cannot be pleaded by one who has not come with clean hands nor complied therewith in good faith but instead willfully breached the contract.
“Its time to put an end to the fiction that corporations are people. The business of big corporations such as the protagonists at bar is business. They are bound by the lawful contracts that they enter into and they do not ask for nor are they entitled to considerations of equity.”

Question 29

By virtue of an agreement between X and Y, X assisted Y in improving a large tract of land which was later declared by the court as belonging to C.
Issue: Has X the right to be reimbursed by Z for X’s services and expenses on the ground that the improvements are being used and enjoyed by Z?

Answer 29

No. From the language of Article 2142, it is obvious that a presumed quasi-contract cannot emerge as against one party when the subject matter thereof is already covered by an existing contract with another party. X’s cause of action should be against Y who, in turn, may seek relief against Z. (Cruz vs. J.M. Tuazon Co., Inc., supra.)

Question 30

X opened with B (bank) a domestic letter of credit (LC) in favor of Y for the purchase from the latter of hydraulic loaders. B paid Y for the equipment after the expiration of the letter of credit. X refused to pay B claiming that there was breach of contract by B which acted in bad faith in paying Y knowing that Y delivered the loaders to X after the expiry date of the subject LC.
X offered to return the loaders to B which refused to take possession three (3) years after X accepted delivery, when B made a demand for payment.B should not have paid the LC which had become invalid upon the lapse of the period fixed therein. Be that as it may, X should pay B the amount B expended for the equipment belatedly delivered by Y and voluntarily received and kept by X. B’s right to seek recovery from X is

Answer 30

anchored, not upon the inefficacious LC, but on Article 2142 of the Civil Code.
X was not without fault in the transactions in view of its unexplained inaction for almost four (4) years with regard to the status of the ownership or possession of the loaders and the fact that it formalized its offer to return the equipment only after B’s demand for payment, which came more than three (3) years after X accepted delivery.
When both parties to a transaction are mutually negligent in the per- formance of their obligations, the fault of one cancels the negligence of the other and as in this case, their rights and obligations may be deter- mined equitably under the law proscribing unjust enrichment. (Rodzssen Supply, Inc. vs. Far East Bank & Trust Co., 357 SCRA 618 [2001].)

B should not have paid the LC which had become invalid upon the lapse of the period fixed therein. Be that as it may, X should pay B the amount B expended for the equipment belatedly delivered by Y and voluntarily received and kept by X. B’s right to seek recovery from X isanchored, not upon the inefficacious LC, but on Article 2142 of the Civil Code.
X was not without fault in the transactions in view of its unexplained inaction for almost four (4) years with regard to the status of the ownership or possession of the loaders and the fact that it formalized its offer to return the equipment only after B’s demand for payment, which came more than three (3) years after X accepted delivery.
When both parties to a transaction are mutually negligent in the per- formance of their obligations, the fault of one cancels the negligence of the other and as in this case, their rights and obligations may be deter- mined equitably under the law proscribing unjust enrichment.

Question 31

what is a quasi-contract?

Answer 31

Certain lawful, voluntary and unilateral acts give
rise to the juridical relation of quasi-contract to the end that no
one shall be unjustly enriched or benefited at the expense of
another.

Question 32

UNIALLOY was granted a credit accommodation by
respondent United Coconut Planters Bank (UCPB) in the amount of 50
million, as evidenced by a Credit Agreement. Part of UNIALLOY’s
obligation under the Credit Agreement was secured by a Surety
Agreement, dated December 18, 2000, executed by UNIALLOY
Chairman Van Der Sluis, UNIALLOY President David Chua and his
spouse, Luten Chua (Spouses Chua), and one Yang Kim Eng. Six (6)
Promissory Notes were later executed by UNIALLOY in UCPB’s favor.
UNIALLOY and UCPB also entered into a “lease-purchase” contract
wherein the former assured the latter that it will purchase several real
properties which UCPB co-owns with the DBP. Subsequently,
UNIALLOY failed to pay its loan obligations. The last day of the PNs is
on April 30, 2001. On August 27, 2001, UCPB filed against UNIALLOY,
the spouses Chua, Yang and Van Der Sluis an action for Sum of Money
with Prayer for Preliminary Attachment. Consequently, UCPB also
unilaterally rescinded its lease-purchase contract with UNIALLOY.
On the other hand, UNIALLOY filed against UCPB, UCPB VicePresident Robert Chua and Van Der Sluis a complaint for Annulment
and/or Reformation of Contract with Damages, with Prayer for a Writ of
Preliminary Injunction or Temporary Restraining Order.
that Van Der Sluis, in cahoots with UCPB
Vice-President Robert Chua, committed fraud, manipulation and
misrepresentation to obtain the subject loan for their own benefit.
UNIALLOY prayed, among others, that three (3) of the six (6)
Promissory Notes it executed be annulled or reformed or that it be
released from liability thereon.
8&3%± Based on the Surety Agreement, 81,$//2<¶V
failed to pay their obligation by non-payment of the promissory notes.
ISSUE #1: WON UNIALLOY failed to pay their obligations to UCPB.

Question 33

What are kinds of quasi-contracts?

Answer 33

Negotiorium gestio - quasi-contract of officiius management
solutio indebiti-Quasi-contract of payment by mistake)

Question 34

Negotiorum gestio

Answer 34

Whoever voluntarily takes charge of the agency
or management of the business or property of another,
without any power from the latter, is obliged to continue the
same until the termination of the affair and its incidents, or to
require the person concerned to substitute him, if the owner is
in a position to do so. This juridical relation does not arise in
either of these instances:
(1) When the property or business is not neglected or
abandoned;
(2) If in fact the manager has been tacitly authorized by the
owner.
In the first case, the provisions of Articles 1317, 1403, No. 1,
and 1404 regarding unauthorized contracts shall govern.

Question 35

Article 2154. If something is received when there is no right
to demand it, and it was unduly delivered through mistake, the
obligation to return it arises.

Question 36

what is a quasi-delict?

Answer 36

Article 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for
the damage done. Such fault or negligence, if there is no preexisting contractual relation between the parties, is called a
quasi-delict and is governed by the provisions of this Chapter.

Question 37

ELEMENTS IN ORDER TO RECOVER DAMAGES FROM THE
TORTFEASOR

Answer 37

1. There must be a fault or negligence on the part of the defendant
2. Damage is suffered or incurred by the plaintiff
3. The proximate cause or the relation of cause and effect between the
   fault and negligence of the defendant and the damage incurred by
   the plaintiff

Question 38

X, a tax-exempt cooperative store, paid taxes to the City of Manila, believing that it was liable.May X recover the payment?

Answer 38

Yes, as it was made under a mistake.

Question 39

X, an employee of Cebu City, sued certain officials of the City
for claim of backwages.
Issue: May the City of Cebu successfully recover the payment later made by it to X on the ground that it was not made a party to the case?

Answer 39

Held: No, because a judgment against a municipal officer in his of- ficial capacity binds the city. The city was under obligation to make the payment. It cannot, therefore, be said that the payment was made by rea- son of mistake. (City of Cebu vs. Piccio and Caballero, 110 Phil. 870 [1969].)