II. Nature and Effect of Obligations

·        Specific v. Generic Thing

           1. Specific is designated or physically segregated from

                    others of the same class.

           2. Generic refers to a class or genus and cannot be

                   determined with particularity.

·        Duties of debtor in delivery of generic thing

a.      To delivery a thing which must neither be of superior

                  nor  inferior quality (1246)

b.      To pay damages in case of breach (1170) 

·        Duties of debtor in delivery of specific thing

        a.   To deliver the thing which he has obligated himself to give

        b.   To take care of the thing with the proper diligence of a

                good father of a family

-          The ordinary care that an average or reasonably prudent 

-         person exercises over his property

Another standard of c are may be required by law or by stipulation of the parties

       3. To deliver all the accessions and accessories

       4. To pay damages in case of breach

   Remedies of Creditors in breach of obligation

      1. To Give Determinate Thing

           a. To compel specific performance

          b. To recover damages

      2. To Give Indeterminate Thing

                 a. To ask for performance of the obligation

            b. To ask that obligation be complied with by

                        another at expense of debtor

                 c. To recover damages

     3. To Do

              a. To have the obligation performed at debtor’s expense

              b. To recover damages

    4. Not to Do

              a. Undone at his expense

              b. To recover damages 

  Rules on Fruits

       1. Kinds of fruits

              a. Natural – product of the soil, young and other products

                            of animals

              b. Industrial – produced thru cultivation or labor

              c. Civil – derived by juridical relations 

      2. Creditor has rights to the fruits from the time the obligation

               to deliver arises 

      3. Real rights acquired only when delivered to him

           a. Real rights - right over a specific thing without and  passive

                                       subject, directed against the whole word.

           b. Personal rights – right to demand fromanother 

                                     debtor the fulfillment of the latter’s obligation.

   Accessions and accessories

 Accessions – fruits of a thing or additions to or improvement    upon a thing

 Accessories – joined to or included with the principal thing for better use or completion.

1. Even if not mentioned, accessories follow the principal

2. But obligation to deliver accessions or accessories does not include the principal

    Legal Delay

   1. From the time oblige judicially or extra- judicially demand   fulfillment; not   

            mere notice 

  2. No demand from creditor necessary in following cases:

       a. When obligation or law expressly so declares

       b. Time is of the essence (controlling motive)   

       c .  When demand would be useless 

  3. In reciprocal obligation, from the moment oneparty fulfills 

          his obligation, delay by the other begins.

  4. Kinds of Delay

       a. Mora solvendi – delay on the part of debtor

       b. Mora acccipiendi – delay of creditor

       c. Compensatio more – delay in reciprocal obligation 

5. Effects of Delay

       a. Liable for interest and damages

       b. Liable even for fortuitous event when the obligation is to     

                 delivery a determinate thing

  Fortuitous Events

     1.1. Any event which cannot be foreseen or which though foreseen

             is inevitable, independent of the will or from aggravation of 

             the debtor, render impossible the fulfillment of obligation

      2.2. No person shall be responsible for fortuitous events,

              except:

         a.a. Where expressly specified by law or stipulated in contract

         b.b. When nature of the obligation requires assumption of risk

         c.c. When debtor incurs delay

         d.d. When debtor promises to deliver same thing to two or

                   more persons

         e.e. When obligation to deliver arises from criminal offense

         f.f. When obligation is generic 

 Fraud (deceit or dolo)  Deliberate or intentional evasion of

              the  normal fulfillment of an obligation;

1.1.         Dolo incidente (Incidental Fraud) – committed in the

        performance of pre-existing obligation, remedy is damages

        2.2.  Dolo causante (Causal Fraud) – Fraud employed at the time

                of the execution of a contract in order to secure consent,

                 remedy is annulment bec of vitiation of consent

        3.3. Demandable in all obligations

        4.4. Waiver of future fraud is void

 Negligence (culpa) Omission of that diligence whichis required by the nature

                       of the obligation, but no malice

1.1. Culpa contractual – Negligence in the performance of contractual obligation,

    a. Pre-existing contract
    b. Liable for damages based on breach of contract

    c. Proof of contract and breach is enough for recovery of damage

    d. Negligence of employee conclusive presumption of employer’s negligence

    e. Proof of due diligence in the selection of employee not a defense 

2. Culpa aquiliana  – Negligence between parties not so related

                          by any pre-existing contract,

     a. Obligation for damages based on quasi delict

     b. No pre existing contract

     c. Negligence must be proved for recovery of damage

     d. Negligence of employee prima facie presumption of

          employer’s  negligence

     e. Due diligence in the selection and supervision of employee

           is a   valid defense
3. Can be regulated by the Court depending on circumstance

4. Waiver of future negligence allowed 

Presumptions

           1. Receipt of principal without reservation as to

           2. Receipt of later installment of debt without reservation

                    of prior ones = presumption that prior ones paid 

 Remedies to satisfy claim

           1. Exhaust property of debtor

           2. Subrogated to rights and actions of debtors,

                    except those inherent to person

           3. Impugn all of acts by debtor done to defraud

                   Creditor

II.Different Kinds of Obligations 

   Pure and Conditional Obligations 

      1.Pure Obligation – One whose effectivity  or extinguishments 
does not depend upon the fulfillment or non fulfillment of a condition or upon the expiration of a term or period. Characterized by Immediate Demandability. 

     .2. Conditional Obligation –  Effectivity is subordinated the fulfillment 

            or non-fulfillment of a future or uncertain fact or event 

            Future and uncertain event or Past event and unknown to the parties

       a.a. Suspensive v. Resolutory

In suspensive condition, fulfillmentgive rise to an obligation –

               acquisition of rights

In resolutory condition, fulfillmentextinguishes obligation – loss of rights

                acquired

 b.b. Casual, Potestative, Mixed 

Casual – Depends on chance or will of third party (Valid)

 Potestative – Depends on the will of one of the contracting parties

 If suspensive condition depends on will of debtor, the

                   obligation is void

 If resolutory condition depend son will of debtor,

                   the obligation is valid

 If depends on will of creditor, it is valid.

Mixed – Depends partly upon the will of a party and partly

upon chance or third party (Valid) 

  

     c.c. Impossible Conditions 

  - - Physically Impossible or legally impossible

  - - If “to do”, whole obligation is void

  - - If “not to do”, obligation is valid, as if not written

  - - If divisible, part not affected by impossible condition is valid.

   d.d. Positive v. Negative

     i.i. Positive Condition (event will happen)extinguished: 

As soon as time expires without the event taking place

As soon as it becomes indubitable that the event will not take place

   ii.ii. Negative Condition (event will not happen) effective: 

As soon as time expired without event taking place

As soon as it becomes evident the event cannot occur 

   e.e. Reciprocal v. Unilateral

 i.i. If reciprocal, the fruits are deemed mutually compensated

 ii.ii. If unilateral, fruits and interest belongs to debtor 

  3.3. Condition deemed fulfilled when obligor prevents its fulfillment

  4.4. Creditor may before the fulfillment of thecondition bring 

           appropriate actions for the preservation of the rights.

  5.5. Debtor may recover what he has paid by mistake before

          the fulfillment of condition.

  6.6. Effects of the fulfillment

          of  a condition retroacts to the day of the constitution of the

          obligation.

  7.7. Rule on loss or deterioration, improvements before the

          fulfillment of condition 

Lost – when perished, go out of commerce, or disappear 

in such a way  that its existence unknown or cannot berecovered 

 a.a. If without the fault of debtor, the obligationis extinguished

       b.b. If  lost  thru fault of debtor, obliged to pay damages      

       c.c. when deteriorate without fault of debtor, creditor

                 bores the impairment

      d.d. When deteriorate with fault of debtor, creditor may rescind

               or  fulfillment with damages

      e.e. When improved by nature, or by time, inure to the benefit

               of creditor

      f.f. When improved by debtor, no right to beindemnified, but may 

               removed such improvement, or set off against damage

 8.8. Remedies in reciprocal obligation

       a.a. Specific Performance or Rescission

       b.b. With damages in either case 

       c.c. Alternative remedy not cumulative – can choose one but

                not  both

       d.d. After action for specific performance impossible,

                option for rescission

       e.e. Injured party must resort to judicial rescission,

               i.i. Except where automatic rescission expressly stipulated

               ii.ii. Or where there is no performance yet

      f.f. Power of the court to fix period 

      g.g. Subject to right of good faith third party

      h.h. Substantial breach not slight breach 

      i.i. Where both parties have breach, liabilityof first infractor

             equitably tempered; where first infractor not know, both

             parties bear own damages

Obligations with a Period 

Demandability or extinguishments subject to expiration of a term or period

 2.2. Term or period – future and certain event 

 3.3. Rules on loss, deterioration, improvements of 

          conditional  obligation applicable

 4.4. If paid or delivered before period arrives, debtor may recover 

          the thing, with fruits and interests.

       5.5. Established for the benefit of both debtor and creditor,

                unless  otherwise stated 

       6.6. Court may fix period

               a.a. If obligation does not fix a period

               b.b. Depends on will of debtor

“When means permit” not condition, but period

Period fixed by court cannot be changed 

7.7. Debtor loses right to make use of the period 

             a.a. Debtor becomes insolvent, unless he gives guaranty

                         or security

            b.b. When debtor does not furnish guaranties or

                     securities  promised

            c.c. When guaranties or securities impaired or disappear

            d.d. When debtor violates an undertaking

            e.e. When debtor attempts to abscond

  Alternative Obligations 

Alternative – several objects or prestations but performance of

                         one  sufficient

Facultative – One object or prestation but debtor may substitute. 

1.1. Must completely perform one of them 

2.2. Right of choice to debtor, unless expressly granted to creditor

Except those impossible, unlawful, which could not have been the object of the obligation or only one prestation is practicable 

3.3. Choice no effect until communicated, irrevocable

          once communicated 

4.4. Debtor may rescind the contract with damages if thru

         creditor’s  acts debtor cannot make a choice 

5.5. If lost due to fortuitous event,

        a.a. If two or objects remain, the obligation subsists

        b.b. If only one object remain, it becomes simple obligation

        c.c. If none remains, obligation is extinguished 

6.6. If lost due to fault of debtor, 

When right of choice belongs to debtor 

 a.a. If 2 or more objects remain, debtor can choose from

           remaining, not liable for damages

      b.b. If only one remain, simple obligation to deliver remaining

      c.c. If none remains, debtor indemnify damages based on value

               of last object 

When right of choice belongs to creditor 

       a.a. If alternative object still remain, creditor can choose the

                one  lost and ask value of object lost and damages; if

               creditor  choose the  remaining object, debtor cannot be

               liable for  damages

       b.b. If none remains, debtor to indemnify fordamages based on

                the price of the object chosen by the creditor plus

                 consequential damages 

    7.7. Facultative Obligation 

        a.a. Right of choice only to debtor

        b.b. If lost before substitution, debtor not liable.

        c.c. Debtor liable for loss due to his fault once substitution

                 has been made

        d.d. If after substitution, it is lost thru fortuitous event,

                 obligation extinguished, debtor not liable

  Joint and Solitary Obligations 

Joint Obligation – Each of creditor has right to demand, and

 each debtor is bound to rendercompliance, with his proportionate part of the prestation

 a.a. Default rule is obligation is JOINT 

 b.b. Joint creditor cannot act in representationof the

              other creditors 

c.c. Joint debtor cannot be compelled to answer for liability

             of other debtors

 d.d. “Jointly”, “We promise to pay”, “Pro rata”,“proportionately”

   2.2. Solidary Obligation – Each creditor has aright to demand, and 

         each debtor is bound torender compliance, with the  entire

         prestation; butas to co-debtor he is liable only for his share

   a.a. Instances when obligation is solidary:

         i.i. When obligation expressly states so

         ii.ii. When law requires solidarity: 

              1.1. If 2 or more heirs take possession of estate 

              2.2. Partners in partnership

              3.3. If principal allowed agent to act as though he has full power

              4.4. If 2 or more appointed an agent for common undertaking

                       or transaction

              5.5.  2 or more bailees to whom a thing is loaned

              6.6. 2 or more officious managers, unless management was 

                          assumed  to save thing from imminent danger

              7.7. 2 or more persons liable for quasidelict

              8.8. 2 or more payees when there has been payment of

                          what is not due

              9.9. Principal, accomplices, and accessories of a felony.

    

       iii.iii. When nature of obligation requires solidarity

               1.1. Ex. Accident fr “Kabit” system

b.b. “Solidarily”, “Jointly and severally”, insolidum, together

         and/or separately, “I promise to pay”

 c.c. Creditors and debtors need not be bound in the same manner

         and by the same periods and conditions

d.d. Not same as indivisible obligation 

       i.i. Solidary refers to vinculum; Indivisibility refers to prestation

       ii.ii. Solidary requires plurality of subjects

       iii.iii. In solidary, all debtors liable for breach of obligation; In

                indivisibility, only debtorguilty of breach of obligation is 

                liable for damage

   

        iv.iv. In indivisible obligation, other debtors not liable for

                insolvency; if solidary debtor becomes insolvent, the 

                 co-  debtors bore his debt in proportion 

e.e. Solidary creditors may do whatever may be useful to others,

        but not anything which may be prejudicial to the others

 f.f. A solidary creditor cannot assign his rights without the consent

        of the others, except if toco-creditors

 g.g. Debtor must pay to the creditor who made demand, if none 

         demanded, then he may pay any one of the solidary creditor

 h.h. Novation, compensation, confusion or remission of a solidary

         creditor shall extinguish the obligation but the creditor who

          did these acts shall be liable to the other creditors

 i.i. No re-imbursement if payment made after obligation prescribed

         or illegal 

 j.j. Remission of the whole obligation obtainedby a solidary debtor 

         does not entitle him to reimbursement from his co-debtors

 k.k. Defenses available to solidary debtors 

          i.i. Derived from nature of obligation

          -- Payment, fraud, prescription ,remission, illegality, non performance of condition

    ii.ii. Personal to t he debtor

      -- Insanity, incapacity, mistake, violence, minority

    iii.iii. Personal to the other solidary debtors

                --  Partial defense

  Obligations with a Penal Cause 

With accessory undertaking in case of breach of obligation

         a.a. To insure performance

         b.b. To liquidate the amount of damage to be awarded

         c.c. To punish the obligor in case of breach

 2.2. No need to prove actual damage 

3.3. Shall substitute for damages and interest, except

        a.a. When there is stipulation to the contrary

        b.b. When obligor is sued for refusal to payagreed penalty

        c.c. When obligor is guilty of fraud 

4.4. When court may reduce penalty 

        a.a. If principal obligation partly complied with

        b.b. If principal obligation irregularly complied with

        c.c. If penalty is iniquitous or unconscionable

 Modes of Extinguishing Obligations

          1.Payment or performance

          2.Loss of the thing due

          3.Condonation or remission

          4.Confusion or merger of the rights of creditor and debtor

          5.Compensation

          6.Novation

          7.Death of a party in personal obligation

          8.Annulment or Rescission of contract

          9.Arrival of Resolutory period or fulfillment of

              resolutory  condition

         10.Impossibility of fulfillment

         11.Prescription

I.Payment

   General Provisions Payment

            (i) Complete Delivery of money, performance of obligation

        

            (ii) If substantially performed in good faith, obligor may

                     recover as thoughthere had been complete fulfillment

                     less  damages 

            (iii) Third party cannot compel creditor to accept payment or

                              performance, except

                     a.a. When there is stipulation to the contrary

                     b.b. When third person has aninterest in the fulfillment 

                              of obligation

            (iv) Rights available to third party who pays:

                     a.a. If payment made with the consent of the debtor

                              i.i. Recover from debtor the entire amount

                              ii.ii. Subrogated to all the rights of creditor

                     b.b. If payment made without the knowledge or against

                              the willof debtor, he can recover only insofar as

                               payment has been beneficial to the debtor

       

            (v) To whom payment must be made(1240)

                      a.a. To the person in whose  favor obligation has 

                               been constituted

                      b.b. His Successor in interest

                      c.c. Any person authorized to receive it

                      d.d. Third person provided it has redounded to benefit

                              of creditor. (1241, 1242)Presumption of benefit in

                              the following case:

If after payment, third person acquires creditor’s rights

If creditor ratifies payment to third party

If creditor’s conduct let debtor tobelieve that the third

          person had authority to receive payment 

                      e.e. Possessor of the credit 

           (vi) Payment must be in Legal Tender

                    a.a. Foreign currency may be used as currency of contract

                    b.b. Promissory notes, bills of exchange, checks not legal

                            tender. They produce effect of legal tender only

                            when encashed or impaired thru the fault of creditor 

                   c.c. In case of extraordinary inflation or deflation, the basis

                           is the value of currency at the time obligation is

                           established. (1250)

  Applications of Payments

The right belongs to the debtor, but if he does not

 exercise   it ,creditor may do it

        2.2. If creditor issues a receipt designating the debt to be applied,  

                 debtor can accept or reject

        3.3. Where neither debtor nor creditor made a choice, it shall  

                         be applied on the debt which is most onerous

                 a.a. Older debts more onerous than newer ones

                 b.b. One bearing interest more onerous than one that is not

                 c.c. Secured debt more onerous than unsecured

                d.d. Debt as principal more onerous than debt as guarantor

                e.e. Solidary obligation more onerous than sole debtor

        4.4. If similar nature and burden, payment shall be applied 

                    Proportionately. 

 Payment by Cession

Assignment or abandonment of all the properties of the debtor for the benefit of his credit or sin order that the latter may sell

 same and apply proceeds thereof to

1.1. Cession does not make the creditors owners of the property

2.2. Unless stipulation to contrary, debtor still required to pay

         balance 

3.3. Requires two or morecreditors, debtors insolvent, cessionaccepted by creditors 

 Dacion en pago

Dation in payment is the transmission of the ownership of a

      thing by the debtor to the creditor as an accepted equivalent of the

      performance of an obligation.

Governed by law on sales 

        1.1. Difference between Dacionand Cession

                a.a. Dacion usually only one creditor

                b.b. Dacion does not require insolvency

                c.c. Dacion does not involve all the property of debtor

               d.d. Dacion makes creditorowner of the property

               e.e. Dacion is a novation

  Tender of Payment and Consignation

Tender of payment – The act of the debtor of offering to the  

                                        creditor the thing or amount due

Consignation – Deposit of the object or the amount due with the

                                  proper court after refusal or inability of the

                                  creditor to accept the tender of payment

             1. Requisites of Consignation

                     a.a. Debt Due

                     b.b. Tender of payment bydebtor and refusal by creditor                    

                              to accept it without justifiable reason

                     c.c. Previous notice of the consignation had been given 

                             to persons  interested in fulfillment of obligation

                     d.d. Thing or amount due hasbeen deposited with 

                               judicial authority.

                    e.e. Subsequent notice of consignation to interested parties 

          

          2. Exception to requirement for tender of payment:

                  a.a. When creditor is absent or unknown or does not

                          appear at place of payment

                  b.b. When he is incapacitated to receive payment

                  c.c. When he refuses to give receipt, without just cause

                  d.d. When two or more persons claim same right to collect

                  e.e. When title of the obligation has been lost

         3. Expenses of consignation for Creditor’s account 

a. If creditor allows debtor to withdraw the consignation, creditor lose preference over the thing. Co-debtor, guarantors, sureties shallbe released.

     II.Loss of the Thing Due

       (a) Lost – when perished, go out of commerce, or disappear in    

        such a way that its existence unknown or cannot be recovered

       Or becomes legally or physically impossible to perform, orso  

       difficult as to be manifestly beyond the contemplation of the

        parties

      (b) The obligation to deliver specific thing is extinguished if

                1.1. Without the fault of debtor, and

                2.2. Debtor not in delay

      (c)No person shall be responsible for fortuitous events, except:

                1. Where expressly specified by law or stipulated in contract

                2. When nature of the obligation requires assumption of risk

                3. When debtor is at fault, partly

                4. When debtor incurs delay

                5. When debtor promises to deliver same thing to two

                        or more persons

                6. When obligation to deliver arises from criminal offense

                7. When obligation is generic 

     (d) In case of partial loss the court shall determine whether it is

                so important as to extinguish the obligation 

     (e) In case lost when the thing is in the possession of debtor,  

                presumption is it is his fault

               --  Except earthquake, flood, storm or other natural calamity 

     (f) Creditor shall have right to go against any third person

                  responsible for the loss.