Obligations Flashcards
What is an obligation?
- A juridical necessity to give, to do or not to do.
- Juridical relation where a party may demand of the other to perform a behavior and when breached, you can gain the benefit lost from the assets of the debtor
- Legal relation between one party and another where the latter is bound to fulfill the prestation demanded of him by the former
What is juridical necessity?
Courts may be called upon to enforce it. Or, if needed, be liable for damages. Necessity because it is required of him to comply whether he likes it or not and failure to do so will bring consequences
Elements of an obligation
(1) active subject
(2) passive
(3) object of the presentation
(4) efficient cause/juridical tie
Obligation vs. right vs. wrong
Obligation: act/performance to be enforced
Right: power that a person has to demand from another
Wrong (cause of action): act/omission in violation of the rights of another
Formula for cause of action
right + legal tie/obligation + act violative of the right
Characteristics of a prestation
Possible, determinate, has an equivalent in money
When does a cause of action begin?
Time of breach
Injury vs. damage vs. damages
Injury: illegal invasion of a legal right
Damage: loss, hurt or harm resulting from the injury
Damages: sum of money that can be recovered in compensation for the damage sustained
Damnum absque injuria
Damage without injury. Acts must not only be hurtful but wrongful
Kinds of obligations acc to subject matter
Real obligation (to give) — there exists a thing that must be delivered Personal obligation (to do or not to do)
Sources of obligations
(1) Law
(2) Contracts
(3) Quasi-contracts
(4) Acts or omissions punished by law — arise from civil liability that is a consequence of a criminal offense
(5) Quasi-delicts. (1089a) — an act or omission there being fault or negligence but no contractual relation previously existed
Quasi-contractual obligations
A juridical relation resulting from a lawful, voluntary and unilateral acts that are enforced to ensure no one is unjustly enriched or benefited
Kinds of quasi contracts
1) Negotiorum gestio - voluntary management of the property of another without the latter’s consent/knowledge. Does not arise when property/business is NOT neglected/abandoned or when manager is already tacitly authorized
2) Solutio indebiti - something is received when there is no right to demand it and it was unduly delivered
Scope of civil liablity
Restitution, reparation for damage causes and indemnification for consequential damages
Requisites of quasi delicts
1) act or omission
2) Fault or negligence
3) Damage caused
4) Direct relation of cause and effect between the act or omission and the damage
4) Exists no pre-existing contractual relation between the parties
Difference between a quasi-delict and a crime?
1) Crimes are public, quasi-delicts are private.
2) Crimes have criminal and civil liability, quasi delicts only have civil
3) Crimes are for punishment while quasi delicts are for indemnification
4) Quasi delicts can be an object of compromise like other civil lability
5) Quasi delicts need only mere preponderance of evidence
- Delicts are strictly construed by law and not as broad as quasi-delicts. Quasi-delicts may arise from any occasion of fault or negligence.
Generic objects
Only indicated by its kind. The generic never perishes.
Determinate objects
Identified by its individuality. Can’t be substituted with another even though same kind and quality when there is no consent from the creditor
Incidental obligations to delivery
(1) obligation to preserve with due care
(2) obligation to deliver fruits, (3) obligation to deliver accessions and accessories, (4) deliver the thing itself, and (5) to answer for damages in case of non-fulfillment
Standard of care in obligations to take care
Diligence of a good father
Kinds of fruits
1) natural
2) industrial
3) civil
Real vs. personal rights
1) Real: Direct and immediate juridical power over the thing; can be exercised against other persons and the world
2) personal: “power belonging to one person to demand of another”
When does creditor acquire real right over the fruits?
When it has been delivered to him
What are the remedies of a creditor for delivery?
1) Action for specific performance
2) Action to rescind/resolve the obligation
3) Action for damages (exclusively or as add on to the first two)
Mitigating factors for damages in delay
(1) plaintiff contravened contract
(2) was able to gain some benefit from the contract
(3) if there were exemplary damages,
(4) defendant acted upon advice of counsel
(5) loss would have resulted in any event
(6) since filing, defendant had done his best to lessen plaintiff’s loss
Accessories
Destined for embellishment, use or preservation of another thing of more importance. Are for completion
Accession
Everything produced by a thing. Incorporated or attached, whether naturally or artificially
Accession continua
Everything produced by a thing. Incorporated or attached, whether naturally or artificially
Kinds of accession
accesion natural (alluvion), accesion industrial (building, planting or sowing)
When is demand not necessary?
1) Express stipulation (no need for a date of performance), must state that after period lapses, default will commence
2) Law so provides (no need for a date of performance)
3) Period is the controlling motive
4) Demand would be useless
Delay
Equivalent to default. There is only default in positive obligations
Kinds of Mora
1) Mora solvendi — Delay on part of debtor (ex re or ex persona)
2) Mora accipiendi — Delay on part of creditor
3) Compensatio morae — Default of both parties (reciprocal obligations)
Requisites for mora solvendi
(1) Obligation be demandable and already liquidated
(2) debtor delays performance
(3) creditor requires the performance judicially or extrajudicially
When does default begin?
From the time of extra-judicial demand
Culpa aquilina v. culpa contractual
Aquilina: negligence becomes a source of an obligation for those not formally bound by a pre-existing contract.
Contractual: negligence in the performance for contracts resulting in breach.
What is covered in recovery of damages for breach?
1) Expectation interest — his interest in the benefit of the bargain
2) Reliance interest — interest in reimbursement caused by reliance on the contract
3) Restitution interest — interest hin having restored to him any benefit he conferred
Fraud v. negligence
1) Fraud: deliberate intent to cause damage while negligence has no such intention
2) Waiver of liability for future fraud is void; may be allowed for negligence
3) Fraud must be clearly proved while negligence is presumed from the breach
4) Liability for fraud CANNOT be mitigated.
When is negligence equivalent to fraud?
Negligence shows bad faith = gross negligence = want or absence of or failure to exercise even slight care or diligence
When is negligence equivalent to fraud?
Negligence shows bad faith = gross negligence = want or absence of or failure to exercise even slight care or diligence
Kinds of negligence according to source of obligation
1) Contractual negligence
2) Civil negligence (culpa aquiliana)
3) Criminal negligence (culpa criminal)
Test to determine when a person is negligent
Reasonable care and caution expected of a prudent person
Remedies of the creditor
Specific performance
Levy property of debtor
Use all rights of debtor
Rescission or impugn the acts of debtor
Pure vs. conditional obligation
Pure: not subject to a condition/period; immediately demandable
Conditional: Consequences are subject to the fulfillment of a condition
Condition
1) Future and uncertain event
2) Past but unknown
3) Must not be impossible
Suspensive v. resolutory
1) Obligation arises, obligation is extinguished
2) If suspensive, no tie of law if unfulfilled. If resolutory, tie of law is consolidated.
3) Until suspensive, obligation is just a possibility. In resolutory, termination looms.
4) Failure to comply with suspensive –> failure of the contract. Failure to comply with resolutory –> gives party the option to refuse the obligation or waive the condition
Period
future and certain event, arrival of which subjects the obligation to arise/extinguish
Casual condition
Depends on chance
Mixed condition
Depends partly on chance and upon will of a third person
Rights pending fulfillment of suspensive condition
1) Go to court to prevent alienation or concealment of property
2) Have his right annotated in the registry of property
Period v. condition
1) Certainty
2) Time
3) Influence on the obligation
4) Effect when left to debtor’s will
5) Retroactivity
When does debtor lose right to make use of the period?
1) Becomes insolvent
2) Doesn’t furnish guaranties promised
3) Impaired said guaranties
4) Violates any undertaking
5) Attempts to abscond
Facultative obligation
Only one prestation has been agreed upon but obligor may render another
Alternative vs. facultative
1) Number of prestations
2) Right of choice
3) Loss thru fortuitous event
4) Loss thru fault of debtor
Joint obligation
whole obligation is paid or fulfilled proportionately by the diff debtors or creditors
Solidary
each one of the debtors is bound to render and/or each creditors has a right to demand
Passive solidarity vs. solidary guaranty
1) Both answer for a debt
2) Both can demand reimbursement from the debtor
3) Solidary debtor also liable for his debt
4) Extensions granted to one of the debtors doesn’t release other debtors
5) Solidary debtors can claim reimbursements from other debtors; guarantor can only ask it of principal debtor
Joint indivisible obligation
Parties are merely proportionately liable
What happens in a joint indivisible obligation when one is insolvent? When in a solitary obligation?
Others aren’t liable for his share.
Share shall be borne by all his co-debtors in proportion to the debt of each
Indivisibility vs. solidarity
1) Indivisibility refers to the prestation while solidarity refers to the juridical tie (the bind)
2) In indivisible obligation, only debtor guilty of breach is liable for damages. In solidary, all are liable
3) Indivisibility can occur with just 1 C and 1 D. In solidarity, there must be at 2 Cs or Ds
4) In an indivisible, insolvency of one doesn’t make the other liable. In solidary, others are proportionately liable
Prescriptive periods of action
Written contracts: 10 yrs
Oral & quasi contracts: 6 yrs
Injury & quasi delicts: 4 yrs
Effect of remission of the share of one solitary debtor
Doesn’t release him from responsibility towards co-debtors IF payment has already been made.
What happens if thing has been lost by/in delay a solitary debtor?
All debtors shall be responsible but they can pursue action against the guilty debtor
Obligations with a penal clause
Obligation contains an accessory undertaking to pay a previously stipulated indemnity in case of breach
Purpose of penal clause
1) Security - ensure their performance by providing an effective deterrent
2) Compensatory - Substitute a penalty for indemnity for damages and payment of interest
3) Punitive - Punish debtor for non fulfillment or violation
Penal clause vs. condition
1) Penal c. is an obligation while condition is not
2) penal c. is demandable
Ways of extinguishment
1) Payment
2) Loss of thing due
3) Condonation/ remission of debt
4) Confusion/merger
5) Compensation
6) Novation
Other causes of extinguishment
1) Death, if personal
2) mutual desistance
3) Arrival of resolutory period
4) COmpromise
5) Impossibility
6) Fortuitous event
What is payment
Performance
Elements of payment
1) Persons; who may pay and to whom payment is made
2) Thing or object which payment must consist of
3) Cause thereof
4) Mode or form
5) Place and time where it will be made
6) Imputation of expenses
7) Special party that modify the same and the effects they produce
When is debt considered paid?
1) Integrity
2) Identity
Requisites for application of Art. 1234
1) Substantial performance
2) Obligor must be in good faith
To whom do you accept payment from?
1) Debtor
2) Any person who has an interest in obligation
3) Third person who has no interest when there is stipulation
What is the effect of payment by a third person?
1) If w/ knowledge of debtor - entitled to reimbursement and subrogation
2) If w/o knowledge of debtor - can recovery only insofar as debtor was benefitted
Subrogation v. reimbursement
Subrogation
1) person who pays for debtor —> creditor
2) Payer acquires not just right to be reimbursed but all other rights that creditor had
Reimbursement
1) Payer merely has right to be refunded
2) No right to guarantees, securities, etc.
Payment in obligations to give need:
1) Free disposal of thing due
2) Capacity to alienate
Who can accept payment
1) Creditor
2) Successor in interest
3) Any person authorized to receive it
When is payment to an incapacitated person valid?
1) Kept the thing edlivered
2) Has been beneficial to him
When does benefit need not be proved when payment is to a third person, not an incapacitated one?
Subrogation
Ratification
Estoppel on part of creditor
Garnishment
Process of subjecting a debtor’s credit to the payment of his creditor’s debt. A proceeding in rem, the property attached is an indebt thing.
In the nature of an involuntary novation
Special forms of payment
1) Dacion in payment
2) Application of payment
3) Payment by concession
4) Tender and consignation
Requisites of dacion in payment
Performance of prestation in lieu of payment (animo solvendi)
Must be some difference between prestation due and that which is given
Must be an agreement between creditor-debtor that the obligation is immediately extinguished by reason of the performance
Sale v. dacion in payment
1) existence of credit
2) Effect on efficacy of obligations
3) Cause
4) Freedom in price-fixing
5) What goes first
6) Relationship
Rule of medium quality
If the obligation consists in the delivery of a specific thing, the very thing due must be delivered
Who bears extrajudicial costs in payment?
Debtor
When is partial performance allowed?
- When there is an express stipulation to that effect (par. 1).
- When the debt is in part liquidated (i.e. definitely determined or determinable) and in part
unliquidated (par. 2). - When the different prestations in which the obligation consists are subject to different terms or
conditions which affect some of them. - When the parties know that the obligation reasonably cannot be expected to be performed
completely at one time. - When there is abuse of right or if good faith requires acceptance.
When does payment by mercantile documents extinguish the obligation?
1) Until they have been cashed
2) Unless they have been impaired thru the fault of the creditor
Application of impairment clause
Only for instruments executed by third persons
Inflation
sharp sudden increase of money or credit or both without a corresponding increase in
business transactions
Devaluation v. depreciation
Devaluation - reduction in value of one currency as judged by monetary authorities
Depreciation - downward change in value of one currency compared to other currencies
Place where obligation shall be paid
1) Place stipulated; or
2) place where thing was at the time of perfection
3) generic thing: domicile of debtor
Application of payments
Designation of the debt to which should be applied the payment made by a debtor who has various debts of the same kind in favor of the same creditor.
Payment by cession
the assignment or abandonment of all the properties of the debtor for the benefit of his creditors in order that the latter may sell the same and apply the proceeds thereof to the satisfaction of their credits.
Requisites of payment by cession
- Two or more creditors.
- Debtor must be (partially) insolvent.
- Assignment must involve all the properties of the debtor.
- Cession must be accepted by the creditors.
Dacion in payment vs. payment by cession
1) Number of creditors
2) Supposition of insolvency
3) Extent of property involved
4) Rights acquired by creditor
5) As an act of novation
Tender of payment
Act of debtor of offering to the creditor the thing or amount due.
Consignation
Act of depositing the thing or amount due with the proper court or judicial authorities when the creditor does no desire, or refuses to accept payment, or cannot receive it, after complying with the formalities required by law
Requisites for valid tender of payment
Tender of payment must comply with the rules on payment (Arts. 1256-1258)
- It must be unconditional and for the whole amount.
- It must be actually made. Mere manifestation of a desire or intention to pay is insufficient.
When is consignation alone alright?
1) When creditor is absent or unknown or is not at the place of payment
2) incapacitated to receive the payment at the time it was due
3) Without just cause, refused to give a receipt
4) Two or more persons claim the same right to collect
5) Title of the obligation has been lost
Requisites for valid consignation
1) Existence of a valid debt that is due
2) Valid prior tender of payment by debtor and refusal without justifiable reason by creditor to accept
3) Previous notice of consignation to persons interested in the fulfillment of the obligation
4) Consignation of the thing or sum due w/ the proper court
5) Subsequent notice of consignation to interested parties
When is consignation deemed properly made
1) When creditor accepts the thing deposited w/o objection as payment
2) When creditor questions the consignation’s validity and the court affirms such validity
3) Creditor neither accepts/questions and court after hearing, orders cancellation of the obligation
Requisites for loss of thing due
1) Obligation to deliver a specific thing
2) loss occurs w/o fault of debtor
3) Debtor isn’t in delay
Doctrine of unforeseen events
1) Event/change in circumstances couldnt have been foreseeable
2) makes performance extremely difficult but not impossible
3) Musn’t be due to any act of the parties
4) Contract is for a future prestation
Condonation
gratuitous renunciation by the creditor of his right against the debtor resulting in the extinguishment of the latter’s obligation in its entirety or partly; it is thus a form of donation.
Requisites for condonation
- It is gratuitous
- It is accepted by the obligor
- The parties have capacity.
- It is not inofficious (i.e. he cannot give more than that which he can give, otherwise the excess shall
be inofficious and shall be reduced by the court). - If made expressly, it must comply with the forms of donation
Confusion
the meeting in one person of the qualities of creditor and debtor with respect to the same obligation.
Requisites for valid confusion
1) Must take place between creditor and debtor
2) Must be complete and definite
Compensation
The extinguishment to the concurrent amount of the debts or obligations of two persons who, in their own right, are reciprocally or mutually principal debtors and creditors of each other.
Compensation vs. Confusion
1) Number of persons involved
2) Number of obligations
3) Presence of payment
Compensation vs. Payment
1) How it takes effect
2) Need for capacity
3) WON partial extinguishment is allowed
Commodatum
A gratuitous loan of a movable property which is to be returned undamaged to the lender
Depositum
A naked bailment, without reward, of goods to be kept for the bailor, by one who is usually called a depositary.
Requisites for compensation by operation of law
1) Each obligor be bound principally and be aprincipal creditor of the other
2) Both obligations are of a sum of money or if they are things, they be of the same kind and quality
3) Both debts be due
4) Both are liquidated and demandable
5) Over neither of them there be any retention or controversy
Ways of novating
1) Changing the object or principal conditions
2) Substituting the person of the debtor
3) Subrogating a third person in the rights of the creditor
Novation
The total or partial extinction of an obligation through the creation of a new one which substitutes it. It is the substitution or change of an obligation by another, which extinguishes or modifies the first.
Dual function of novation
1) To extinguish or modify an existing obligation
2) To create and substitute a new one in its place
Requisites of novation
- The existence of a previous valid obligation.
- The intention or agreement and capacity of the parties to extinguish or modify the obligation.
- The extinguishment or modification of the obligation.
- The creation or birth of a new valid obligation.
Points of incompatibility for novation
1) juridical tie
2) object or principal conditions
3) Subjects
Kinds of personal novation
1) Substitution
2) Subrogation
Kinds of substitution
1) expromision - a third person, of his own initiative and without the knowledge or against the
will of the original debtor, assumes the latter’s obligation with the consent of the creditor.
2) Delegacion - creditor accepts a third person to take the place of the debtor at the instance of the latter.
Subrogation v. Assignment of credit
1) Extinguishment of credit
2) Requirement of consent of debtor
3) Start time of effects
4) Effects on defects of the previous obligation
Presumption of legal subrogation
1) Creditor pays another creditor who is preferred even w/o debtor’s knowledge
2) Third person, not interested, pays w/ approval of debtor
3) Even w/o knowledge of debtor, person interested in the fulfillment, pays, without prejudice to the effects of confusion as to the latter’s share
