Understanding Patrimonial Obligations: Characteristics, Sources, and Types, Essays (high school) of Law

Download Understanding Patrimonial Obligations: Characteristics, Sources, and Types and more Essays (high school) Law in PDF only on Docsity! OBLIGATIONS AND CONTRACTS Chapter 1: General Provisions Art. 1156. An obligation is a juridical necessity to give, to do or not to do. 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. The obligations referred to is 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 as a power to make effective in case of non- fulfillment, the economic equivalent obtained at the patrimony of a debtor. 2. 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. Example: Gaya bought a 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. 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. Juridical Tie Debtor or Obligor > To give, to do or not to do > Creditor or Obligee Example: X enters into a contract of sale with Tito who paid the purchase of a GE refrigerator. X did not deliver the refrigerator. X 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 X and Tito. This is also known as a unilateral obligation, that is, the obligation of the debtor of fulfill or comply his commitment, in this case, the delivery of the refrigerator. On the other hand, if X, delivered the refrigerator and Tito did not pay, then Tito becomes the debtor who is bound to pay while X is the creditor who has the right to demand the prestation. Distinctions between Obligations & 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 are contracts. ART. 1157. Obligations arise from: Law; Contracts; Quasi-contracts; Acts or omissions punished by law; and © ~=Quasi-delicts. (1089a) On the sources of obligation, the main sources are really Law and Contracts. The other sources are also established by law. Source of Obligations 1. LAWasa source of obligations- The provisions of Art. 1158 refer to the legal obligations or obligations imposed by specific provisions of law, which means that obligations arising from law are not presumed and that to be demandable must be clearly provided for, expressly or impliedly in the law. (We are talking about State Law, or that enforced by the State (Constitution, Legislation, Administrative or Executive Orders, Jurisprudences and other sources supplementary). Law is a rule of conduct, just and obligatory, promulgated by legitimate authority, and of common observance and benefit.) 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. e Examples: It is the duty of the Spouses to support each other. (Art.291, New Civil Code) e And under the National Internal Revenue Code, it is the duty of every person having an income to pay taxes. 2. CONTRACT as a source of obligations- Contract as defined in Art. 1305, NCC is the meeting of minds between two persons where by one bind 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. A Contract may be written or oral, except for: ¢ Contracts in consideration of marriage. * — Contracts which cannot be performed within one year. ¢ Contracts for the sale of an interest in land. ¢ Contracts by the executor of a will to pay a debt of the estate with his own money. ¢ Contracts for the sale of goods above a certain value. ¢ Contracts in which one party becomes a surety (acts as guarantor) for another party’s debt or other obligation. * Contract of donations above 5000php (movable property with simultaneous delivery. If not simultaneous, must be written regardless of amount. Donation of ALL immovable properties must be in writing and in a public instrument.) 3. QUASI-CONTRACT 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 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 obligation. ART. 1168. When the obligation consists in not doing, and the obligor does have 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 oblige 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 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 oblige 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 e Ademand 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 deliver 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 _ time of the essence. 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 areciprocal 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 in a reciprocal obligation. ART. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in 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) 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. 1189) 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 with gross negligence. (Art. 2231, NCC) 3. Nominal damages - are adjudicated in order that aright 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 find 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) 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 commercial credit. Liquidated damages - are those agreed upon by parties to a contract to be paid in case of breach thereof. (Art. 2226, NCC) 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 event - 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 majeure 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 b. Accessory - those which are dependent upon another contract. Ex. Contract of mortgage, pledge of guaranty. c. Preparatory - those which is created in order that a future transaction or contract may be entered into by the parties. Ex. Contract of partnership or agency. 3. According to name or designation a. Nominate - one which has particular names 4. According to the nature of obligation a. Unilateral - where only one has an obligation to perform (Ex: Contract od donation) 5. According to risk involved a. Commutative - where there is an exchange of values, such as lease. b. Aleatory - one which the fulfillment of the obligation depends upon chance. (Ex. Contract of insurance.) 6. According to cause a. Onerous - one which imposes valuable consideration such as sale, mortgage. b. Gratuitous - one which one of the parties does not receive any valuable consideration, such as commodatum. 7. According to form a. Oral - by word of mouth of the parties b. Written - the agreement which is reduced in writing which may be public or private or private document ART. 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. (1255a) ART. 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. (1255a) Contract Binds by Both Parties ART. 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them. (1256a) Contracts entered by and between the parties must bind both parties in order that it can be enforced against each other. This is also known as “mutuality of contract”. Hence, its validity or compliance cannot be left to the will of one of them. This principle is based on the essential equality of the parties. It is elementary rule that no party can renounce or violate the law of the contract without the consent of the other. Example, Gaya and Laura entered into a contract to sell whereby Gaya binds herself to sell her only parcel of land to Laura if Gaya decides to leave for States. The contract is void because the fulfillment of the condition depends on the will of Gaya. ART. 1309. The determination of the performance may be left to a third person, whose decision shall not be binding until it has been made known to both contracting parties. ART. 1310. The determination shall not be obligatory if it is evidently inequitable. In such case, the courts shall decide what is equitable under the circumstances. Determination of Performance by Third Person As arule, compliance with a contract cannot be left to the will of one of the contracting parties. However, the determination of its performance may be left to a third person after it has been made known to both contracting parties. Provided, further, the parties are not bound by the determination if it is evidently inequitable or unjust when the third person acted in bad faith or by mistake, the courts shall decide what is equitable under the circumstances. Example: Gaya sold her parcel of land to Laura. It was agreed that Maya, a real estate appraiser would be the one to determine the reasonable price of the land. Maya, then, fixed the price after considering the factors affecting the value of the land, and informing both contracting party that the decision is just and suitable. If the decision made by Maya is manifestly inequitable, the court may be called upon to decide what is equitable ART. 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation, or by provision of law. The heir is not liable beyond the value of the property he perceived from the decedent. If a contact should contain some stipulation in favor of third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person. (1257a) ART. 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation, or by provision of law. The heir is not liable beyond the value of the property he perceived from the decedent. If a contact should contain some stipulation in favor of third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person. (1257a) Art. 1312. In contracts creating real rights, third persons who come into possession of the object of the contract are bound thereby, subject to the provisions of the Mortgage Law and the Land Registration Laws. Art. 1313. Creditors are protected in cases of contracts intended to defraud them. Art. 1314. Any third person who induces another to violate his contract shall be liable for damages to the other contracting party. Cases Where Third Person May Be Affected by a Contract 1. In determining the performance of both parties (Art. 1309). 2. In contracts containing a stipulation in favor of a third person (Art. 1311) 3. In contracts creating real rights (Art. 1312). 4. In contracts entered into to defraud creditor (Art. 1313). 5. In contracts which have been violated at the inducement of the third person (Art. 314). Example: Gaya mortgaged her parcel of land in favor of Laura as collateral for her debt. The mortgage is duly registered. Later on, Gaya sold the same land to Tito. In this case, Tito bought the land subject to the mortgage constituted thereon. Tito, although a stranger in the mortgage, being a real right follows the property on the right of Laura to the mortgage Art. 1317. No one may contract in the name of another without being authorized by the latter, or unless he has by law a right to represent him. A contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his powers , shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the other contracting party. (1259a) Chapter 2: Essential Requisites of Contracts Art. 1318. There is no contract unless the following requisites occur: 1. Consent of the contracting parties; Object certain which is the subject matter of the contract; 3. Cause of the obligation which is established. (1261) Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer. Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. The contract in such a case, is presumed to have been entered into the place where the offer was made. (1262a) Art. 1320. An acceptance may be express or implied. Art. 1321. The person making the offer may fix the time, place, and manner of acceptance, all of which must be complied with. Art. 1322. An offer made through an agent is accepted from the time acceptance is communicated to him. Art. 1323. An offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of either party before acceptance is conveyed. Art. 1324. When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is rounded upon a consideration, as something paid or promised. Art.1325. Unless it appears otherwise, business advertisements of things for sale are not definite offers, but mere invitations to make an offer. Art. 1326. Advertisement for bidders are simply invitations to make proposals, and the advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears. Art. 1327. The following cannot give consent to a contract: 1.) Unemancipated minors; 2.) Insane or demented persons, and deaf- mutes who do not know how to write. (1263a) Art. 1328. Contracts entered into during a lucid interval are valid, contracts agreed to in a state of drunkenness or during a hypnotic spell are voidable. Art. 1329. The incapacity declared in article 1327 is subject to the modifications determined by law, and is understood to be without prejudice to special disqualifications established in the laws. Art. 1330. A contract where consent is given through mistake, violence, intimidation, undue influence or fraud is voidable. Art. 1331. In order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract, or to those conditions which have principally moved one or both parties to enter into the contract. Mistake as to the identity or qualifications of one of the parties will vitiate consent only when such identity or qualifications have been the principal cause of contract. A simple mistake of account shall give rise to its correction. (1226a) Art. 1332. When one of the parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must