CHAPTER 2

NATURE AND EFFECTS OF OBLIGATIONS

Art. 1163. Every person obliged to give something is also obliged to

take care of it with the proper diligence of a good father of a family,
unless the law or the stipulation of the parties requires another
standard of care. (1094a)

Meaning of SPECIFIC or DETERMINATE thing.

A thing is said to be specific or determinate particularly designated or physically

segregated others of the same class.

A determinate thing is determined by its individuality. The debtor cannot substitute it

with another although the substitute is of the same kind and quality without the consent of the
creditor.

Examples:

1. the car sold by X last August 5, 2020

2. my cat named “Kylie”

3. building located at No. 233, Lacson Street, Bacolod City

Duties of debtor in obligation to give a SPECIFIC (DETERMINATE) THING.

1. PRESERVE THE THING. - In obligation to give (real obligations), the obligor has the incidental
duty to take care of the thing due with the diligence of a good father of a family pending
delivery.

2. DELIVER THE FRUITS OF THE THING. (See discussion under Article 1164)

3. DELIVER THE ACCESSIONS AND ACCESSORIES. (See discussion under Article 1166)

4. DELIVER THE THING ITSELF.

5. ANSWER FOR DAMAGES IN CASE OF NON-FULFILLMENT OR BREACH. (See discussion under

Article 1170)

Meaning of GENERIC or INDETERMINATE thing.

A generic or indeterminate thing is not particularly designated or physically

segregated from all others of the same class. It means that a thing cannot be specifically
determined from things of the same class. The thing can be replaced by another thing that is of
the same quality.
 A generic thing is identified only by its specie. The debtor can give anything of the same
class as long as it is of the same kind.

Examples:

1. a car

2. a horse

3. A Rolex watch

Duties of debtor in obligation to give a GENERIC (INDETERMINATE) THING.

1. To deliver a thing which is of the quality intended by the parties taking into consideration the
purpose of the obligation and other circumstances. (Article 1246)

2. To be liable for damages in case of fraud, negligence, or delay, in the performance of his
obligation, or contravention of the tenor thereof.

Art. 1164. The creditor has a right to the fruits of the thing from the
time the obligation to deliver it arises. However, he shall acquire no
real right over it until the same has been delivered to him. (1095)

Different kinds of fruits.

1. Natural Fruits are spontaneous products of the soil, and the young and other products of
animals.

Examples:

Grass, all trees and plants on lands produced WITHOUT the intervention of human labor.

2. Industrial Fruits are those produced by lands of any kind through cultivation or labor.

Examples:

Sugar cane, vegetables, rice; and all products of lands brought about by reason of human labor.

3. Civil Fruits are those derived by virtue of a juridical relation.

Examples: Rents of buildings, price of leases of lands and other properties

When obligation to deliver fruits arises

1. At the time of “perfection of the contract” - birth of the contract or the meeting of the minds
of the parties
2. If the obligation is subject to a suspensive condition or period, it arises upon the fulfillment of
the condition or arrival of the term. However, the parties may make a stipulation to the contrary
as regards the right of the creditor to the fruits of the thing.

3. In a contract of sale, the obligation arises from the perfection of the contract even if the
obligation is subject to a suspensive condition or period where the price has been paid.

4. In obligations to give arising from law, quasi-contracts, delicts, and quasi-delicts, the time of
performance is determined by the specific provisions of the law applicable.

Meaning of personal and real right

1. Personal right is the right or power of a person (creditor) to demand from another
(debtor), as a definite passive subject, the fulfillment of the latter’s obligation to give, to do,
or not to do. It is binding or enforceable only against a particular person.

2. Real right is the right or interest of a person over a specific thing (like ownership,
possession, mortgage) without a definite passive subject against whom the right may be
personally enforced. It is binding or enforceable against the whole world.

Kinds of Delivery

1. Actual or Constructive delivery (tradition) - the property changes hands physically.

Example: A buys cake from B. The delivery made by B is the actual delivery of the thing due.

2. Constructive Delivery - the physical transfer of the property is implied.

a. Tradition simbolica (symbolical tradition)

Example: When the keys of a house are given to the new owner, the house being the
object of the sale.

b. Traditio longa manu - delivery by mere consent or pointing out the object

Example: When pointing out to a van which is the object of the sale

c. Tradition brevi manu (delivery by short hand)

Example: When a tenant already in possession of a house buys the house he is renting.

d. Traditio constitutum possessorium.

Example: A house owner, who sells his house, but remains in possession as tenant of
the same house.

e. Tradition by execution of legal forms.

Example: The execution of public instrument in selling real properties.

Art. 1165. When what is to be delivered is a determinate thing, the
creditor, in addition to the right granted him by Article 1170, may
compel the debtor to make the delivery.

If the thing is indeterminate or generic, he may ask that the obligation

be complied with at the expense of the debtor.

If the obligor delays, or has promised to deliver the same thing to two
or more persons who do not have the same interest, he shall be
responsible for any fortuitous event until he has effected the delivery.
(1096)

Rights of Creditor if Debtor Failed to Deliver

1. If the thing is SPECIFIC or DETERMINATE:

a. An action for Specific Performance with a right to indemnity for damages if the debtor
is guilty of fraud, negligence, delay, or contravention in the performance of the obligation. The
Creditor can compel the debtor to make the delivery. OR

b. Demand for Rescission or Cancellation of the obligation with a right to indemnity for
damages if the debtor is guilty of fraud, negligence, delay, or contravention in the performance
of the obligation. OR

c. Demand payment for damages only, where it is the only feasible remedy.

2. If the thing is GENERIC or INDETERMINATE:

a. Ask for compliance of the obligation by the debtor himself or by third person at the
debtor’s expense.

b. b. Demand damages from the debtor if the debtor is guilty of fraud, negligence,
delay, or contravention in the performance of the obligation. (Article 1170)

Where the debtor delays or has promised delivery to separate creditors, he shall be
responsible even in fortuitous events.

1. Delay (See discussion under Article 1169)

2. Fortuitous Events (See discussion under Article 1174)

Art. 1166. The obligation to give a determinate thing includes that

of delivering all its accessions and accessories, even though they
may not have been mentioned. (1097a)
Meaning of Accessions and Accessories

1. Accessions are the fruits of a thing or additions to or improvements upon a thing (the
principal). Accessions are not necessary to the principal thing.

Examples:

House or trees on a land; rents of a building; air-conditioner in a car; profits or

dividends accruing from shares of stocks

2. Accessories are things joined to or included with the principal thing for the latter’s
embellishment, better use or completion. Accessories always go together with the principal.

Examples:

Key of a house, frame of a picture; bracelet of a watch; bow of a violin

Rights of creditor to Accessions and Accessories

General Rule: All accessions and accessories are considered included in the obligation to deliver
a determinate thing although they may not have been mentioned. Accessory follows the
principal.

Exception: It is stipulated otherwise.

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)

Three (3) instances contemplated under Art. 1167:

1. The debtor fails to perform an obligation to do;

2. The debtor performs an obligation to do but contrary to the terms thereof; or

3. The debtor performs an obligation to do but in poor manner.

Remedies of creditor in positive personal obligation

1. The debtor fails to perform an obligation to do;

 a. To have the obligation performed by himself, or by another, unless personal
considerations are involved, at the expense of the debtor; and

b. To recover damages.

2. In case the obligation is done in contravention of the terms of the same or is poorly done, it
may be ordered (by the court upon proper filing of Complaint) that it be undone if it is still
possible to do what was done.

Art. 1168. When the obligation consists in not doing, and the
obligor does what has been forbidden him, it shall also be undone
at his expense. (1099a)

In an obligation not to do, the duty of the obligor (debtor) is to abstain from an act.
Here, there is no specific performance. The very obligation is fulfilled in not doing what is
forbidden. Hence, in this kind of obligation, the debtor cannot be guilty of delay.

As a rules, the remedy of the obligee is the undoing of the forbidden thing plus
damages. However, if it is not possible to undo what was done, either physically or legally, or
because of the rights acquired by third persons who acted in good faith, or for some other
reason, his remedy is an action for damages caused by the debtor’s violation of his obligation.

Example:

B bought a land from S. It was stipulated that S would not construct a fence on a certain
portion of his land adjoining that sold to B.

Should S construct a fence in violation of the agreement, B can bring an action to have
the fence removed at the expense of S.

Art. 1169. Those obliged to deliver or to do something incur in

delay from the time the obligee judicially or extrajudicially
demands from them 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 so declare; or

(2) When from the nature and the circumstances of the obligation
it appears that the designation of the time when the thing is to be
delivered or the service is to be rendered was a 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 or is not ready to 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)

Meaning of DELAY

Before we define “delay”, please note already that it is not the same as how it is used in
our common language. (Delayed period? No, it’s different. That is not like it. But you can
demand “support” from your partner tho. 😉 )

1. Ordinary delay is merely the failure to perform an obligation on time.

2. Legal delay or default or mora is the failure to perform an obligation on time which failure
constitutes a breach of the obligation.

Kinds of Delay or Default

1. Mora solvendi or the delay on the part of the debtor to fulfill his obligation (to give or to do);

2. Mora accipiendi or the delay on the part of the creditor to accept the performance of the
obligation; and

3. Compensatio morae or the delay of the obligors in reciprocal obligations (like in sale), teh
delay of the obligor cancels the delay of the obligee, and vice versa. The net result is that
there is no actionable default on the part of both parties.

Requisites of delay or default by the debtor (mora solvendi)

1. Failure of the debtor to perform his (positive) obligation on the date agreed upon;

2. Demand (not mere reminder or notice) made by the creditor upon the debtor to comply with
his obligation which demand may be either judicial (when a complaint is filed in court) or
extrajudicial (when made outside of court, orally or in writing); and

3. Failure of the debtor to comply with such demand.

Effects of delay

1. Mora solvendi

a. The debtor is guilty of breach or violation of the obligation;

b. He is liable to creditor for interest;

 c. He is liable even for a fortuitous event when the obligation is to deliver a determinate
thing.

2. Mora accipiendi

a. The debtor is guilty of breach or violation of the obligation;

b. He is liable for damages suffered, if any, by the debtor;

c. He bears the risk of loss of the thing due;

d. Where the obligation is to pay money, the debtor is not liable for interest from the
time of creditor’s delay;

e. The debtor may release himself from the obligation by the consignation or deposit in
court of the thing or sum due.

3. Compensatio morae - The delay of the debtor cancels the delay of the creditor and vice
versa. Legally speaking, there is no default or delay of both parties.

When demand is not necessary to put debtor in delay

As a general rule, delay by the debtor begins only from the moment a demand, judicial
or extra-judicial, for the fulfillment of the former’s obligation is made by the creditor. Without
such amount, the effect of default will not arise. The following are the exceptions:

1. When the obligation so provides -

Example:

D promised to pay C the sum of P20,000.00 on or before November 30, 2020, without
the need of any demand. Therefore, if D fails to pay on November 30, 2020, he is
automatically in default.

2. When the law so provides -

Example:

Under the law, taxes should be paid to the government on or before a specific date;
otherwise penalties and surcharges are imposed without the need of demand for payment

3. When time is of the essence -

Example:

The making of a wedding dress and the obligation to deliver it on a specific time to be
used by the bride on her wedding. Failure to comply with the obligation on a specific date will no
longer benefit the creditor. In this example, time element is important as performance itself.

4. When demand would be useless -

Example:

S obliged himself to deliver specific horse to B on September 5, 2019. Through S’

negligence or deliberate act, the horse died on September 02, 2019.

Under this situation, any demand for the delivery of the horse on September 2 would be
useless as S has made it impossible for him to perform his obligation,

Demand is also unnecessary where it is apparent that it would be unavailing, as where

there has been a prior absolute refusal by S.

5. When there is performance by a party in reciprocal obligations -

In case of reciprocal obligations, the performance of one is conditioned upon the

simultaneous fulfillment on the part of the other. So neither party incurs in delay if the other does
not comply or is not ready to comply in a proper manner with what is incumbent upon him. This
is compensatio morae.

From the moment, however, a party fulfills or is ready to fulfill his obligation, delay by the
other begins.

Example:

S agreed to sell to B his television set for P10,000.00. The obligation of S is to deliver
the television set while that of B, to pay P10,000.00.

Since no date is set for performance of their respective obligations, it is understood that
it must be simultaneous. S cannot demand payment if he himself cannot deliver the television
set. From the moment S delivers the television set, B is in default if he does not pay S without
the need of any demand.

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)

Grounds for liability

1. Fraud (deceit or dolo)

As a ground for damages, it implies some kind of malice or dishonesty and it cannot
cover cases of mistake and errors of judgment made in good faith. It is synonymous to bad faith
in that, it involves a design to mislead or deceive another.

Example:

S obliged himself to deliver to B 20 bottles of wine, of a particular brand. Subsequently,

S delivered 20 bottles knowing that they contain cheaper wine. S is guilty of fraud and is liable
for damages to B.

2. Negligence (fault or culpa)

 It is any voluntary act or omission, there being no bad faith or malice, which prevents the
normal fulfillment of an obligation.

Example:

P is a passenger in a taxi. Here, there is considered a contract of carriage between P

and the owner of the taxi company. In consideration of the fare to be paid by P, the owner of the
taxi company, through the driver, agrees to safely bring P to his destination.

If, through the recklessness of the driver, as a result of which P is injured, there is
negligence which would make the owner liable for damages. If the taxi contained defective
parts, the failure to repair the same constitutes also negligence on the part of the owner.

Fraud and negligence distinguished.

Fraud Negligence
1 Deliberate intention to cause damage or injury There is no such intention

2 Waiver of the liability for future fraud is VOID Waiver may be allowed

3 Fraud must be clearly proved Negligence is presumed from the violation of a contractu

4 Liability for fraud cannot be mitigated Liability may be reduced according to the circumstances

3. Delay (see discussion under Article 1169)

4. Contravention of the terms of the obligation

This is the violation of the terms and conditions stipulated in the obligation. The
contravention must not be due to a fortuitous event or force majeure.

Example:

E leased the apartment of R for P10,000 a month to be paid in advance during the first
week of every month. The obligation of E, as lessee, is to pay the stipulated rent. The obligation
of R, as lessor, is to maintain E in the peaceful possession of the apartment leased.

If E violates his obligation, R is entitled to eject him from the premise and recover
damages. If R does not maintain E in the peaceful possession of the apartment (as when R is
not the owner), and E is ejected, R may be held liable for damages for violation of the terms of
his obligation.

The measure of damages to be awarded to E or to R, as the case may be, is left to the
sound discretion of the court in accordance with the provisions of the Civil Code on Damages.

Art. 1171. Responsibility arising from fraud is demandable in all

obligations. Any waiver of an action for future fraud is void.
(1102a)
Art. 1172. Responsibility arising from negligence in the
performance of every kind of obligation is also demandable, but
such liability may be regulated by the courts, according to the
circumstances. (1103)

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 which is to be

observed in the performance, that which is expected of a good
father of a family shall be required. (1104a)

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)

Meaning of fortuitous events

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

1. Act of man - Strictly speaking, a fortuitous event is an event independent of the will of the
obligor but not of the other human wills

Example:

War, robbery, murder, insurrection

2. Act of God - they refer to what is called as force majeure or those events which are totally
independent of the will of every human being
Examples:

Earthquake, flood, rain, shipwreck, lightning, eruption of volcano

Requisites of a fortuitous event

1. the event must be independent of the human will;

2. The event could not be foreseen, or if foreseen, is inevitable;

3. the occurrence must render it impossible for the debtor to fulfill the obligation in a normal
manner; and

4. the obligor must be free of participation in, or aggravation of, the injury to the creditor

Rules as to liability in case of fortuitous event

A person is not, as a rule, responsible for loss or damages caused to another resulting
from the non-performance of his obligation due to a fortuitous events. In other words, his
obligation is extinguished. The exceptions are as follows:

1. When expressly specified by law

2. When declared by stipulation

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

Art. 1175. Usurious transactions shall be governed by special laws. (n)

Requisites for recovery of interest

1. The payment of interest must be expressly stipulated; and

2. The agreement must be in writing

Art. 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.

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. (1110a)

Art. 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. (1111)
Remedies available to creditors for the satisfaction of their claims

1. Specific performance with the right to damages;

2. Pursue the leviable property of the debtor;

3. Exercise all the rights and bring all the actions of the debtor (subrogation); or

4. Rescission

Art. 1178. Subject to the laws, all rights acquired in virtue of an

obligation are transmissible, if there has been no stipulation to
the contrary. (1112)