Understanding Obligations & Responsibility in Philippine Law: Fraud, Negligence & Events, Summaries of Economics

Download Understanding Obligations & Responsibility in Philippine Law: Fraud, Negligence & Events and more Summaries Economics in PDF only on Docsity! Stephen A. Woods, Michael A. West, Nature and effect of obligations 6 – NATURE AND EFFECT OF OBLIGATIONS (4) Article 1171. Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void. Responsibility arising from fraud demandable Responsibility arising from fraud can be demanded with respect to all kinds of obligation and unlike in the case of responsibility arising from negligence, the court is not given the power to mitigate or reduce the damages to be awarded. This is because fraud is deemed serious and evil that its employment to avoid the fulfillment of one’s obligation should be discouraged. Waiver of action for future fraud void According to the time of commission, fraud may be past or future. A waiver of an action for future fraud is void (no effect) as being against the law and public policy. A contrary rule would encourage the perpetration of fraud because the obligor knows that even if he should commit fraud, he would not be liable for it, thus making the obligation illusory (i.e. not real) Waiver of action for past fraud valid What the law prohibits is waiver anterior (i.e. coming before) to the fraud and to the knowledge thereof by the aggrieved party. A past fraud can be the subject of a valid waiver because the waiver can be considered as an act of generosity and magnanimity on the part of the party who is the victim of the fraud. Here, what is renounced is the effect of the fraud, that is, the right to indemnity of the party entitled thereto. The waiver must be expressed in clear language which leaves no doubt as to the intention of the obligee to give up his right against the obligor. Example: S promised to deliver 120 cavans of rice of a particular brand and quality to B at the rate of 10 cavans a month. S cannot make an agreement with B, whereby B will not file an action in court against S, should commit fraud in the performance of his obligation. This waiver of an action for future fraud is void. Hence, B can still bring an action against S for damages arising from the fraud. But once fraud is committed, B, with full knowledge thereof, can waive his right to indemnity as an act of forgiveness on his part. 6 – Nature and Effect of Obligations (4) Philippine Electronics Engineering (ECE) Law, Contracts, & Ethics A. R. Sombilla Page 1 (3) Circumstances of time Example: Driving a car without headlights at night is gross negligence but it does not by itself constitute negligence when driving during the day. (4) Circumstances of the place Example: Driving at 100 kph on the superhighway is permissible but driving at the same rate of speed in Ayala Ave. Makati is gross recklessness. Article 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. Meaning of fortuitous event A fortuitous event is any event which cannot be foreseen, or which, though foreseen, is inevitable. Stated otherwise, it is an event which is either impossible to foresee or impossible to avoid. The essence of a fortuitous event consists of being a happening independent of the will of the debtor and which happening, makes the normal fulfillment of the obligation impossible. Fortuitous event distinguished from force majeure A fortuitous event may either be an act of man or an act of God. (1) Acts of man – Strictly speaking, fortuitous event is an event independent of the will of the obligor but not of other human wills. Examples: War, fire, robbery, murder, insurrection, etc. (2) Acts of God – They refer to what is called majeure or those events which are totally independent from the will of every human being. 6 – Nature and Effect of Obligations (4) Philippine Electronics Engineering (ECE) Law, Contracts, & Ethics A. R. Sombilla Page 4 Examples: Earthquake, flood, rain, shipwreck, lightning, eruption of volcano, etc. In our law, fortuitous events and force majeure are identical in so far as they exempt an obligor from liability. Both are independent of the will of the obligor. Kinds of fortuitous events (1) Ordinary fortuitous events or those events which are common and which the contracting parties could reasonably foresee (e.g., rain) (2) Extra-ordinary fortuitous events of those events which are uncommon and which the contracting parties could not have reasonably foreseen (e.g., earthquake, fire, war, pestilence, unusual flood). Article 1175. Usurious transactions shall be governed by special laws. Meaning of simple loan or mutuum Simple loan or mutuum is a contract whereby one of the parties delivers to another, money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid. It may be gratuitous (i.e. given or done free of charge) or with a stipulation to pay interest. Meaning of usury Usury is contracting for or receiving interest in excess of the amount allowed by law for the loan or use of money, goods, chattels (an item or property other than real estate) or credits. Requisites for recovery of interest In order that interest may be recovered, the following requisites must be present: (1) The payment of interest must be expressly stipulated (2) The agreement must be in writing; and (3) The interest must be lawful Article 1176. The receipt of the principal by the creditor, without reservation with respect to the interest, shall give rise to the presumption that said interest has been paid. 6 – Nature and Effect of Obligations (4) Philippine Electronics Engineering (ECE) Law, Contracts, & Ethics A. R. Sombilla Page 5 The receipt of a later installment of a debt without reservation as to prior installments, shall likewise raise the presumption that such installments have been paid. Meaning of presumption By presumption is meant the inference of a fact not actually known arising from its usual connection with another which is known or proved. Example: D borrowed Php 1,000.00 from C. Later, D shows a receipt signed by C. The fact not actually known is the payment of D. The fact known is the possession by D of a receipt signed by C. The presumption is that the obligation has been paid unless proved otherwise by C as, for example, that D forced C to sign the receipt. Article 1177. The creditors, after having pursued the property in possession of the debtor to satisfy their claims, may exercise all the rights and bring all the actions of the latter for the same purpose, save those which are inherent in his person; they may also impugn the acts which the debtor may have done to defraud them. (impugn – dispute the truth, honesty, validity of a statement or motive) (defraud – illegally obtain money from someone by deception) Remedies available to creditors for the satisfaction of their claims In case the debtor does not comply with his obligation, the creditor may avail himself of the following remedies to satisfy his claim: (1) exact fulfillment of (specific performance) with the right to damages (2) pursue the leviable (not exempt from attachment under the law property of the debtor); (levy – to seize or attach property by judicial order) (3) “after having pursued the property in possession of the debtor,” exercise all the rights (like the right to redeem) and bring all the actions of the debtor (like the right to collect from the debtor of his debtor) except those inherent in or personal to the person of the latter (such as the right to vote, to hold office, to receive legal support, to revoke a donation on the ground of ingratitude, etc.); and (4) ask the court to rescind or impugn acts or contracts which the debtor may have done to defraud him when he cannot in any other manner recover his claim. 6 – Nature and Effect of Obligations (4) Philippine Electronics Engineering (ECE) Law, Contracts, & Ethics A. R. Sombilla Page 6