re: lecture notes coverage PRELIMS

I. General Provisions, Nature and Effects of Obligations

a. General Provision

- - Juridical Necessity – enforce compliance; seek damages

- - To give, to do, and not to do – Examples

- - Four essential requisites of an obligation
(i) (i) A passive subject (Debtor – to give; Obligor – to do)
(ii) (ii) An active subject (Creditor/Obligee)
(iii) (iii) Object (Prestation) – subject matter
(iv) (iv) Juridical tie (Vinculum) – Source of Obligation

- - Form as a manifestation of intent; but no specific form unless required by law

(b) (b) Kinds of Obligations
1. 1. According to subject matter
a. a. Real Obligation – to give
b. b. Personal Obligation – to do
i. i. Positive – to give or do
ii. ii. Negative - not to do or not to give

A borrower agreed to pay his debt in 60 days, and in case of non-payment to render free service as driver/servant. When due date came, borrower refused to render free service. Decide.

2. 2. According to person obliged
a. a. Unilateral
b. b. Bilateral (Reciprocal or non-reciprocal)

(c) (c) Sources of Obligation
1. 1. LAW – Imposed by law

- - A wife was about to deliver a child. Her neighbor brought her to hospital. Who should pay the hospital bill – Husband or Neighbor?

- - P.D. 1517 grants the right of first refusal to person who has leased for more than 10 years an urban land and who construct his house thereon. Lessee of a Condo in Manila now claims his right of first refusal because he has been living in the unit for almost 15 years. Decide.

Obligations derived from law are not presumed.

- - In a newspaper ad, there was an offer to replace 30 sachets of Tide for one Venetian cut Glass until the end of the year. At the end of the year, you present your tide sachets, but Tide refused to honor it anymore since the ad was posted more than half a year ago. Decide. 657

a. a. Quasi-contracts – Juridical relations based on the principle that no one shall be unjustly enriched or benefited at the expense of another.

i. i. Negotiorum Gestio – When a person voluntarily takes charge of the management of a business or property of another that has been neglected or abandoned, without any power from the latter, as a consequence of which, he is obliged to continue the same until the termination of the affair or to require the owner to substitute him. Ex. NPA infested area Fishpond

ii. ii. Solutio indebiti – When a person unduly delivers a thing through mistake to another who has no right to demand it. (melon bank v. Javier)


b. b. Crimes (acts or omission punished by law)

If you commit a crime, you are liable both criminally and civilly for the consequence of your acts or omissions such as restitution, reparation for damages caused and indemnification for consequential damages.

Ex. Support for impregnated rape victim; loss of earning capacity of murder victim

c. c. Quasi delict or Torts – The fault or negligence of a person who, by his act or omission, independent from any contractual relation, causes damage to another person

  A 3-year-old child was bitten by a dog of her neighbor. As a result, she got infected by rabies and died. Can the neighbor be held liable for the acts of the dog?

  A signboard of hanging out of a building dropped on a car resulting in total wreck of the car. The car owner sues the building owner and demand to replace the car. Building owner cites the strong wind as force majeure condition indicating no fault on his part. Decide.

2. 2. Contracts

  Have the force of law between the contracting parties and should be complied with in good faith.
  Sincerity and Honesty


II. Nature and Effect of Obligations

(a) (a) Specific v. Generic Thing
1. 1. Specific is designated or physically segregated from others of the same class.
2. 2. Generic refers to a class or genus and cannot be determined with particularity.

(b) (b) Duties of debtor in delivery of generic thing
1. 1. To delivery a thing which must neither be of superior nor inferior quality (1246)
2. 2. To pay damages in case of breach (1170)

(c) (c) Duties of debtor in delivery of specific thing
1. 1. To deliver the thing which he has obligated himself to give
2. 2. 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. 3. To deliver all the accessions and accessories
4. 4. To pay damages in case of breach

(d) (d) Remedies of Creditors in breach of obligation
1. 1. To Give Determinate Thing
a. a. To compel specific performance
b. b. To recover damages

2. 2. To Give Indeterminate Thing
a. a. To ask for performance of the obligation
b. b. To ask that obligation be complied with by another at expense of debtor
c. c. To recover damages

3. 3. To Do
a. a. To have the obligation performed at debtor’s expense
b. b. To recover damages

4. 4. Not to Do
a. a. Undone at his expense
b. b. To recover damages

(e) (e) Rules on Fruits
1. 1. Kinds of fruits
a. a. Natural – product of the soil, young and other products of animals
b. b. Industrial – produced thru cultivation or labor
c. c. Civil – derived by juridical relations

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

3. 3. Real rights acquired only when delivered to him
a. a. Real rights - right over a specific thing without any passive subject, directed against the whole word.
b. b. Personal rights – right to demand from another debtor the fulfillment of the latter’s obligation

(f) (f) 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. 1. Even if not mentioned, accessories follow the principal
2. 2. But obligation to deliver accessions or accessories does not include the principal

(g) (g) Legal Delay
1. 1. From the time obligee judicially or extra-judicially demand fulfillment; not mere notice

2. 2. No demand from creditor necessary in following cases:
a. a. When obligation or law expressly so declares
b. b. Time is of the essence (controlling motive)
c. c. When demand would be useless

3. 3. In reciprocal obligation, from the moment one party fulfills his obligation, delay by the other begins.

4. 4. Kinds of Delay
a. a. Mora solvendi – delay on the part of debtor
b. b. Mora acccipiendi – delay of creditor
c. c. Compensatio more – delay in reciprocal obligation

5. 5. Effects of Delay
a. a. Liable for interest and damages
b. b. Liable even for fortuitous event when the obligation is to delivery a determinate thing

(h) (h) 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

(i) (i) 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

(j) (j) Negligence (culpa) Omission of that diligence which is required by the nature of the obligation, but no malice
1. 1. Culpa contractual – Negligence in the performance of contractual obligation,
a. a. Pre-existing contract
b. b. Liable for damages based on breach of contract
c. c. Proof of contract and breach is enough for recovery of damage
d. d. Negligence of employee conclusive presumption of employer’s negligence
e. e. Proof of due diligence in the selection of employee not a defense

2. 2. Culpa aquiliana – Negligence between parties not so related by any pre-existing contract,
a. a. Obligation for damages based on quasi delict
b. b. No pre existing contract
c. c. Negligence must be proved for recovery of damage
d. d. Negligence of employee prima facie presumption of employer’s negligence
e. e. Due diligence in the selection and supervision of employee is a valid defense

3. 3. Can be regulated by the Court depending on circumstance
4. 4. Waiver of future negligence allowed

(k) (k) Presumptions
1. 1. Receipt of principal without reservation as to interest = presumption of interest paid
2. 2. Receipt of later installment of debt without reservation of prior ones = presumption that prior ones paid

(l) (l) Remedies to satisfy claim
1. 1. Exhaust property of debtor
2. 2. Subrogated to rights and actions of debtors, except those inherent to person
3. 3. Impugn all of acts by debtor done to defraud creditor


II. Different Kinds of Obligations

(a) (a) Pure and Conditional Obligations

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

2. 2. Conditional Obligation – Effectivity is subordinated to 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, fulfillment give rise to an obligation – acquisition of rights
  In resolutory condition, fulfillment extinguishes 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
(1) (1) If suspensive condition depends on will of debtor, the obligation is void
(2) (2) If resolutory condition depends on will of debtor, the obligation is valid
(3) (3) 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 the condition 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 be recovered

a. a. If without the fault of debtor, the obligation is 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 be indemnified, but may remove 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, liability of first infractor equitably tempered; where first infractor not know, both parties bear own damages

COURSE SYLLABUS

THE LAW ON OBLIGATIONS AND CONTRACTS
CLARENDON COLLEGE
1ST Semester, AY 2009-2010

ATTY. S. C. MADRONA, JR.

COURSE DESCRIPTION

A study of the concepts of law in general. It covers (a) obligations, their nature, elements, sources, classification, effects and modes of extinction; and (b) contracts, their nature, elements, effects, form, interpretation, rescission, nullity, annulment and enforcement.

COURSE OBJECTIVES

At the end of the semester the students are expected:

• To gain knowledge of the legal provisions governing business transactions in general, and the law on obligations and contracts in particular
• To prepare the students for advance studies on business law;
• To develop analytical skills of applying the law on obligations and contracts on certain situations or business transactions.

COURSE OUTLINE

I. Introduction to Law
II. General Provisions on Obligation
III. Nature and Effect of Obligations
IV. Different Kinds of Obligations
V. Extinguishment of Obligations
VI. General Provisions on Contract
VII. Essential Requisites of Contracts
VIII. Forms of Contract
IX. Reformation of Instruments
X. Interpretation of Contracts
XI. Rescissible Contracts
XII. Voidable Contracts
XIII. Unenforceable Contracts
XIV. Void or Inexistent Contracts

REQUIRED TEXT

De Leon, Hector S. The Law on Obligations and Contracts. Latest Edition, Rex Bookstore.


COURSE REQUIREMENTS

Prelim examination: 15% (July 18, 2009)
Midterm examination: 15% (August 29, 2009)
Semi-Final examination: 10%
Class Participation: 40%
Final Exam: 20% (October 10, 2009)
Total 100%

A. READ, TAKE NOTES AND ASK QUESTIONS. This course requires much reading and the student is expected to have read the required materials when coming to class.
B. EXAM. The exam will consists of problem-solving and short answer questions based on the class lectures and the assigned reading materials.
C. FINAL EXAM. Comprehensive of all lectures and selected required reading materials.
D. There will be GRADED RECITATION (50% of final grade) based on the required reading materials and assigned cases.

CLASSROOM POLICIES

1. Students must submit a 3x5 index card with their names, courses, contact numbers, 1x1 ID color or BW picture by the second-class meeting.
2. A student is considered absent from class if s/he is not present within the first third fraction (30 minutes) of the scheduled class time. The students should be responsible for keeping tracks of their absences.
3. As a courtesy of the entire class, smoking and eating inside the classroom shall be strictly prohibited. All electronic devices must be either deactivated or at least silent.

CONSULTATION HOURS

If you wish to consult with me on matters relating to the course, please set an appointment with me.
E-mail: scmadrona@gmail.com
Website: http://obliconmadrona.blogspot.com

COURSE SCHEDULE AND READING MATERIALS

SESSION 2
JULY 4, 2009

Topics to be discussed:
Introduction to Law
a. Concepts and Definition
b. Kinds, Classification and Divisions
c. State Law
d. Definition: Law on Obligations and Contracts

General provisions on Obligations
1. Definition of Obligation (Art. 1156, NCC)
2. Essential Requisites of Obligation
3. Natural Obligations (Arts. 1423-1430, NCC)
4. Concepts and Sources of Obligations (Arts. 1157-1162, NCC)
4.1 Law (Art. 1158)
4.2 Contracts (Art. 1159)
4.3. Quasi-contracts (Art. 1160, NCC) – Definition; kinds
4.4. Crimes or delict (Art.1161, NCC) – Scope of liability
4.5. Quasi-delict (Art. 1162, NCC)—Definition; Crimes vs. Quasi delict
5. Concepts of obligor and obligee


SESSION 3
JULY 11, 2009

Nature and Effect of Obligations
a. Rights of Creditor and Duties of Debtor
a.1 Obligation to give (Arts. 1163-1166, NCC)
a.2 Obligation to Do (Art. 1167, NCC)
a.3 Obligations not to do (Arts. 1168)
b. Grounds for liability for damages (art.1170, NCC)
b.1 Delay (Art. 1169, NCC) – Definition; Kinds; Effects; Rule and Exceptions (When demand is not necessary to put debtor in delay)
b.2 Fraud (Art. 1171) – Definition; Kinds
b.3 Negligence (Arts. 1172-1173, NCC) – Definition; kinds; Negligence vs. Diligence; Kinds of diligence
b.4 Contravention of the tenor of the obligation (Art. 1170, NCC) – Meaning
b.5 Fortuitous event (Art. 1174, NCC) – Definition; kinds; requisites; rule and Exceptions
c. Usurious transactions (Art. 1175, NCC) – Meaning of Loan or Mutuum
d. Presumptions (Art. 1176, NCC) – Definition; Kinds; When not applicable
e. Remedies available to creditors for the satisfaction of their claims (Art. 1177, NCC)
f. Transmissibility of rights (Art. 1178, NCC) – Rule and Exceptions

SESSION 4
PRELIMINARY EXAM – JULY 18, 2009

SESSION 5
JULY 25, 2009

NATURE AND EFFECTS OF OBLIGATION
Different kinds of obligations
a. Secondary Classifications under the Civil Code
a.1 Unilateral vs. bilateral (Arts. 1168-1169, NCC)
a.2 Real vs. Personal (Arts. 1163-1168, NCC)
a.3 Determinate vs. Generic (art. 1165, NCC)
a.4 Civil vs. Natural (Art. 1423, NCC)
a.5 Legal, Conventional and Penal (Arts. 1157, 1159, 1161, NCC
b. Primary Classifications under the New Civil Code
b.1 Pure and Conditional (Arts. 1179-1192)
b.2. Obligations with a period (Arts. 1180, 1193-1198, NCC)
b.3. Alternative vs. Facultative Obligations (Arts. 1199-1206, NCC)
b.4. Joint and Solidary Obligations (Art. 1207-1222, NCC)
b.5. Divisible vs. Divisible Obligations (Arts. 1223-1225, NCC)
b.6 Obligations with a Penal Clause (Arts. 1126-1304, NCC)


SESSION 6
AUGUST 1, 2009

Extinguishment of Obligations (Art. 1231, NCC)—Cause of Extinguishment not under Art. 1231.
1. Payment or performance (Art. 1232-1254)
1.a. Payment by Cession (Art. 1255)
1.b. Tender of payment and consignation (Arts. 1256-1261, NCC)
2. Loss of the thing due (arts. 1262-1269, NCC)
3. Condonation or remission of debt (Arts. 1270-1274)
4. Confusion or merger of rights (Arts. 1275-1277, NCC)
5. Compensation (Arts. 1278-1304, NCC)
6. Novation (Arts. 1291-1304, NCC)


SESSION 7
AUGUST 8, 2009

Contracts
1. Definition (Art. 1305, NCC), Nature and Concepts
2. General Provisions (Arts. 1306-1317, NCC)
3. Essential requisites of Contracts (Art. 1318, NCC)
a. Consent (Arts. 1319-1346)
b. Object (Arts. 1347-1349, NCC)
c. Cause (Arts. 1350-1355,NCC)

SESSION 8
AUGUST 15, 2009

4. Form of Contracts (Arts. 1356-1358)
5. Reformation of Instruments (Arts. 1359-1369)
6. Interpretation of Contracts (Arts. 1370-1379)

SESSION 9
AUGUST 22, 2009

Defective Contracts under the Civil Code:
Rescissible Contracts (Arts. 1380-1389, NCC)
Meaning: Rescissible Contract
Rescission: Definition, requisites, nature and extent, period for filing, persons entitled to bring action
Payments made in state of insolvency
When alienation presumed in fraud of creditors (Art. 1387, NCC)

SESSION 10
AUGUST 29, 2009
MIDTERM EXAM

SESSION 11
SEPTEMBER 5, 2009

Voidable Contracts (Arts. 1390-1402, NCC)
Definition, nature and effects
Annulment: Meaning and the period for filing action for annulment; persons entitled and those not entitled to filing such actions; extinguishment of action for annulment
Ratification: definition; requisites; effects; persons who can ratify

SESSION 12
SEPTEMBER 12, 2009

Unenforceable Contracts (Art. 1403-1408, NCC)
Meaning; kinds
Unauthorized contracts: definition
Agreements within the scope of the statute of frauds
Modes of ratification under the statute of frauds
When unenforceable contract becomes a voidable contract
When unenforceable contract becomes a valid contract
Right of third persons to assail an unenforceable contract


SESSION 13
SEPTEMBER 19, 2009

Void or Inexistent Contracts (Arts. 1409-1422, NCC)
Meaning, characteristics
Instances of void or inexistent contracts
Rules where contract is illegal and the act constitutes a criminal offense
Rules where contract is illegal but the act does not constitute a criminal offense
Persons entitled to raise defense or illegality or nullity.
Definition of in pari delicto

SESSION 14
FINAL EXAM