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 The meaning of the phrase “he shall acquire no real right over
parties requires another standard of care. it until the same has been delivered to him,” is that the creditor
does not become the owner until the specific thing has been
Determinate Thing Indeterminate Thing delivered to him. Hence, when there has been no delivery yet,
Identified by its individuality Identified by its specie. the proper action of the creditor is not one for recovery of
The debtor cannot substitute it The debtor can give possession and ownership but one for specific performance or
with another although the anything of the same class rescission of the obligation.
latter is of the same kind and as long as it is of the same
quality without the consent of kind. ART. 1165. When what is to be delivered is a determinate
the creditor. (Art. 1244) thing, the creditor, in addition to the right granted him by
Article 1170, may compel the debtor to make the delivery.
Duties of the Debtor in Obligation to give a Determinate
Thing: If the thing is indeterminate or generic, he may ask that the
1. To preserve or take care of the thing due; obligation be complied with at the expense of the debtor.
2. To deliver the fruits of the thing;
3. To deliver its accessions and accessories; If the obligor delays, or has promised to deliver the same
4. To deliver the thing itself; and thing to two or more persons who do not have the same
5. To answer for damages in case of non-fulfillment or interest, he shall be responsible for any fortuitous event
breach. until he has effected the delivery.

Duties of the Debtor in Obligation to give an Indeterminate Remedies of Creditor in Real Obligation (To GIVE):
Thing:  Specific Real Obligation:
1. To deliver the thing which is of the quality intended
Any of the following:
by the parties taking into consideration the purpose of 1. Demand specific performance or fulfillment of the
the obligation and other circumstances (see Art.
obligation with a right to indemnity for damages;
1246.); 2. Demand recission or cancellation of the obligation
2. To be liable for damages in case of fraud, negligence,
also with a right to recover damages;
or delay, in the performance of his obligation, or 3. Demand the payment of damages only where it is the
contravention of the tenor thereof. (see Art. 1170.)
only feasible remedy.
ART. 1164. The creditor has a right to the fruits of the thing
In an obligation to deliver a determinate thing, the very
from the time the obligation to deliver it arises. However, he thing itself must be delivered. (Art. 1244.) Consequently,
shall acquire no real right over it until the same has been
only the debtor can comply with the obligation. This is the
delivered to him. reason why the creditor is granted the right to compel the
debtor to make the delivery.
Kinds of Fruits:
1. Natural Fruits – are the spontaneous products of the
It should be made clear, however, that the law does not
soil, and the young. (all trees and plants on lands mean that the creditor can use force or violence upon the
produced without the intervention of human labor)
debtor. The creditor must bring the matter to court and the
2. Industrial Fruits – are those produced by lands of court will be the one to order the delivery.
any kind through cultivation or labor (sugar cane,
vegetables, rice, and all products of lands brought
 Generic Real Obligation:
about by reason of human labor)
He may ask the performance of the obligation by the debtor
3. Civil Fruits – are those derived by virtue of a
or by a third person with a right to recover damages in case
juridical relation (rents of buildings, prices of leases
of breach of obligation.
of lands)
Paragraph 3 of Art. 1165 gives two instances when a fortuitous
Personal Right Real Right
event does not exempt the debtor from responsibility. It
Power of a person to Interest of a person over a
likewise refers to a determinate thing. An indeterminate thing
demand from another, as a specific thing without a
definite passive subject, the definite passive subject cannot be the object of destruction by a fortuitous event
fulfillment of the latter’s against whom the right may because genus nunquam perit (genus never perishes)
obligation be personally enforced.
Binding or enforceable Directed against the whole Art. 1166. The obligation to give a determinate thing
against a particular person world includes that of delivering all its accessions and accessories,
 Definite Active Subject  Definite Active Subject even though they may not have been mentioned.
 Definite Passive Subject No Definite Passive Subject
Accessions – are the fruits of, or additions to, or improvements
Rights of the creditor to the fruits: upon a thing/principal.
By law, the creditor is entitled to the fruits of the thing to be
delivered from the time the obligation to make delivery of the Accessories – things joined to or included with the principal
thing arises. The intention of the law is to protect the interest of for the latter’s embellishment, better use or completion.
the obligee should the obligor commit delay, purposely or The general rule is that all accessions and accessories are
otherwise, in the fulfillment of his obligation. considered included in the obligation to deliver a determinate
thing although they may not have been mentioned. This rule is
based on the principle of law that the accessory follows the
principal.

Art. 1167. If a person obliged to do something fails to do it, ART. 1169. Those obliged to deliver or to do something
the same shall be executed at his cost. incur in delay from the time the oblige judicially or extra-
judicially demands from them the fulfillment of their
This same rule shall be observed if he does it in obligation.
contravention of the tenor of the obligation. Furthermore,
it may be decreed that what has been poorly done be However, the demand by the creditor shall not be
undone. necessary in order that delay may exist:
(1) When the obligation or the law expressly so
Situations contemplated in Remedies declares; or
Art. 1167 (2) When from the nature and the circumstances of
(1) The debtor fails to a. have the obligation the obligation it appears that the designation of the
perform an obligation performed by himself, time when the thing is to be delivered or the
to do; or by another unless service is to be rendered was a controlling motive
personal considerations for the establishment of the contract; or
are involved, at the (3) When demand would be useless, as when the
debtor’s expense;
obligor has rendered it beyond his power to
AND
perform.
b. recover damages
(2) The debtor performs an
In reciprocal obligations, neither party incurs in delay if
obligation to do but
The court may order that it the other does not comply or is not ready to comply in a
contrary to the terms
thereof; be undone if it is still proper manner with what is incumbent upon him. From
possible to undo what was the moment one of the parties fulfills his obligation, delay
(3) The debtor performs an done. by the other begins.
obligation to do but in
a poor manner.
Meaning of Delay:
Can a personal obligation to do be performed by a third 1. Ordinary Delay – merely the failure to perform an
person? YES. obligation on time.
2. Legal Delay – failure to perform an obligation on
When will it not be considered as fulfilled? time which failure, constitutes a breach of the
When the personal qualifications of the debtor are the obligation.
determining motive for the obligation contracted.
Kinds of Delay:
What is the remedy of the creditor in such case? 1. Mora solvendi – delay on the part of the debtor to
Indemnification for damages BUT where the obligation can fulfill his obligation by reason of a cause imputable to
still be performed at the expense of the debtor notwithstanding him.
his failure or refusal to do so, the court is not authorized to 2. Mora accipiendi – delay on the part of the creditor
merely grant damages to the creditor. without justifiable reason to accept the performance
of an obligation; and
Can a debtor be compelled to fulfill an obligation? 3. Compensatio morae – delay of the obligors in
reciprocal obligations.
 Real Obligation to deliver a DETERMINATE THING
– YES (Art. 1165)
Is there a delay in Negative Personal Obligation?
 Positive Personal Obligation – NO. It may amount to
NONE. The debtor fulfills his obligation by not doing what has
involuntary servitude which, as a rule, is prohibited
been forbidden him.
under our Constitution.
Requisites of Delay by the Debtor:
ART. 1168. When the obligation consists in not doing, and
(1) failure of the debtor to perform his (positive)
the obligor does what has been forbidden him, it shall also
obligation on the date agreed upon;
be undone at his expense.
(2) demand made by the creditor upon the debtor to
fulfill, perform, or comply with his obligation which
What is the obligation of the debtor in an obligation not to
demand, may be either judicial (when a complaint is fi
do? To abstain from an act. Here, there is no specific
led in court) or extra-judicial (when made outside of
performance. The very obligation is fulfilled in not doing what
court, orally or in writing); and
is forbidden. Hence, in this kind of obligation the debtor
(3) failure of the debtor to comply with such demand.
cannot be guilty of delay.
There is no delay if the obligation is not yet due and
Remedies of creditor in negative personal obligation
demandable.
Possible to be undone  Undo the Act
 Damages
The creditor has the burden of proving that demand has been
Impossible to undo what was
made.
done either physically or legally Action for damages
or because of the rights of the
third persons It is incumbent upon the debtor, to relieve himself from
liability, to prove that the delay was not caused by his fault,
i.e., there was no fraud or negligence on his part.
 Kind of Delay Effects
deemed extinguished and each shall
bear his own damages. (Art. 1192.)

Effects of Delay:
Kind of Delay Effects
Mora Solvendi (1) The debtor is guilty of breach
of the obligation;
When demand is NOT necessary to put debtor in delay:
(2) He is liable for interest in case (1) When the obligation so provides;
of obligations to pay money or * The mere fixing of the period is not enough. The
damages in other obligations. In arrival of the period merely makes the obligation
the absence of extrajudicial demandable. Before its arrival, the
demand, the interest shall creditor cannot demand performance. The obligation
commence from the filing of must expressly so declare that demand is not
the complaint; and
necessary or must use words to that effect, as for
instance, “the debtor will be in default” or “I will be
(3) He is liable even for a
liable for damages.”
fortuitous event when the
obligation is to deliver a
determinate thing. (Arts. 1165, (2) When the law so provides;
1170.)
(3) When the time is of the essence;
However, if the debtor can *The debtor is fully aware that the performance of the
prove that the loss would have obligation after the designated time would no longer
resulted just the same even if he benefit the creditor.
had not been in default, the
court may equitably mitigate When the time of delivery is not fixed or is stated in
the damages. (Art. 2215[4].) general and indefinite terms, time is not of the essence
of the contract. In such cases, the delivery must be
In an obligation to deliver a made within a reasonable time, in the absence of
generic thing, the debtor is not anything to show that an immediate delivery was
relieved from liability for loss
intended.
due to a fortuitous event. He
can still
It is not necessary for the contract to categorically
Mora Accipiendi (1) The creditor is guilty of breach
of obligation; state that time is of the essence; intent is sufficient.

(2) He is liable for damages (4) When demand would be useless;

suffered, if any, by the debtor;
(5) When there is performance by a party in reciprocal
(3) He bears the risk of loss of the obligations.
thing due (see Art. 1162.); * The performance of one is conditioned upon the
simultaneous fulfillment on the part of the
(4) Where the obligation is to pay other.
money, the debtor is not liable
for interest from the time of the Neither party incurs in delay if the other does not
creditor’s delay; and comply or is not ready to comply in a proper manner
with what is incumbent upon him.
(5) The debtor may release himself
from the obligation by the From the moment a party in reciprocal obligations
consignation of the thing or fulfills or is ready to fulfill his obligation, delay by the
sum due. (see Art. 1256.)
other begins. Where
Compensatio The delay of the obligor cancels out the parties fix a period for the performance of their
Morae the effects of the delay of the reciprocal obligations, neither party can demand
obligee and vice versa. The net performance nor incur in delay before the expiration
result is that of the period. The parties may provide different dates
there is no actionable default on the for performance of their respective obligations.
part of both parties, such that as if
neither one is guilty of delay. ART. 1170. Those who in the performance of their
obligations are guilty of fraud, negligence, or delay, and
If the delay of one party is followed those who in any manner contravene the tenor thereof, are
by that of the other, the liability of liable for damages.
the first infractor shall be equitably
tempered or balanced Breach of contract – failure without justifiable excuse to
by the courts. comply with the terms of the contract.

If it cannot be determined which of Grounds for liability for voluntary breach of obligation:
the parties is guilty 1. Fraud – deliberate or intentional evasion of the normal
of delay, the contract shall be fulfillment of an obligation.
 The reason is because negligence is a question which must
As a ground for damages, it implies some kind of necessarily depend upon the circumstances of each particular
malice or dishonesty and it cannot cover cases of case. Moreover, negligence is not as serious as fraud because
mistake and errors of judgment made in good faith. It is in the case of the former, there is no bad faith or deliberate
synonymous to bad faith in that it involves a design to intention to cause injury or damages. The courts, however,
mislead or deceive another. may increase the damages.

2. Negligence – any voluntary act or omission, there being

no malice, which prevents the normal fulfillment of an When BOTH parties to a transaction are mutually
obligation. negligent in the performance of their obligations:
3. Delay The fault of one cancels the negligence of the other. Thus, their
4. Contravention of the terms of the obligation – rights and obligations may be determined equitably under the
violation of the terms and conditions of stipulated in the law prescribing unjust enrichment - No one shall enrich
obligation.
himself at the expense of another.
Fraud vs. Negligence
An action for future negligence may be renounced EXCEPT
Particulars Fraud Negligence where the nature of the obligation requires the exercise of
As to presence There is There is NO extraordinary diligence.
of intent to deliberate intent such intent
cause damage to cause damage Kinds of Diligence according to source of obligation:
or injury 1. Contractual Negligence (Culpa Contractual)
As to waiver of Waiver for future Waiver may be - negligence in contracts resulting in their breach. This
liability for void is VOID allowed in kind of negligence is not a source of obligation. (Art.
future acts negligence 1157.) It merely makes the debtor liable for damages
Evidence Must be clearly Presumed from in view of his negligence in the fulfi llment of a pre-
proved, mere the breach of existing obligation resulting in its breach or non-
preponderance of contractual fulfillment. (Arts. 1170-1174, 2201.) It is a kind of
evidence is not obligation. civil negligence if it does not amount to a crime;
sufficient.
Mitigation of Cannot be May be reduced 2. Civil Negligence (Culpa Aquilana)
liability mitigated by the according to the - negligence which by itself is the source of an
courts circumstances. obligation between the parties not formally bound
before by any pre-existing contract. It is also called
“tort” or “quasidelict.”
When negligence is equivalent to fraud:
Where the negligence shows bad faith or is so gross that it 3. Criminal Negligence (Culpa Criminal)
amounts to malice or wanton attitude on the part of the - Negligence resulting in the commission of a crime.
defendant.
Can a creditor recover damages if he is also guilty of
Gross negligence is negligence characterized by want or negligence? It depends if the plaintiff’s own negligence was:
absence of or failure to exercise even slight care or diligence,  Immediate and proximate cause of injury – he cannot
or the entire absence of care, acting or omitting to act on a recover the damages
situation where there is a duty to act, not inadvertently but  Only contributory and the immediate and proximate
willfully and intentionally. cause of the injury being the defendant’s lack of due
ART. 1171. Responsibility arising from fraud is care – the plaintiff may recover damages but the
demandable in all obligations. Any waiver of an action for courts shall mitigate the damages to be awarded.
future fraud is void.
ART. 1173. The fault or negligence of the obligor consists
Waiver of action for future fraud is VOID: in the omission of that diligence which is required by the
A contrary rule would encourage the perpetration of fraud nature of the obligation and corresponds with the
because the obligor knows that even if he should commit fraud circumstances of the persons, of the time and of the place.
he would not be liable for it thus making the obligation When negligence shows bad faith, the provisions of Articles
illusory. 1171 and 2201, paragraph 2, shall apply.

Waiver of action for past fraud is VALID: If the law or contract does not state the diligence which is
The waiver can be considered as an act of generosity on the to be observed in the performance, that which is expected
part of the party who is the victim of the fraud. Here, what is of a good father of a family shall be required.
renounced is the effects of the fraud, that is, the right to
indemnity of the party entitled thereto. Negligence - is conduct that creates undue risk or harm to
ART. 1172. Responsibility arising from negligence in the another. It is the failure to observe for the protection of the
performance of every kind of obligation is also interests of another person, that degree of care, precaution and
demandable, but such liability may be regulated by the vigilance which the circumstances justly demand, whereby
courts, according to the such other person suffers injury.
circumstances.
Negligence is a question of fact, its existence being dependent
Courts are given wide discretion in fixing the measure of upon the particular circumstances of each case.
damages in cases of responsibility arising from negligence:
Diligence – is the attention and care required of a person in a obligation must be the direct consequence of the event. If
given situation. notwithstanding its occurrence, the obligation can be fulfilled,
it will subsist even if only in part. In order to see whether or
Kinds of Diligence required: not the fortuitous event produces the impossibility of fulfilling
1. That agreed upon by the parties; the obligation, the nature of the obligation must be considered,
2. That required by law in the particular case; and and according to whether it be specific or general, etc., it will
3. The diligence of a good father of a family or ordinary or will not be extinguished.
diligence.
ART. 1174. Except in cases expressly specifi ed by the law,
or when it is otherwise declared by stipulation, or when the Rules as to liability in case of fortuitous event:
nature of the obligation requires the assumption of risk, no General Rule: A person is not responsible for loss or damage
person shall be responsible for those events which could not resulting from fortuitous events. Hence, the obligation is
be foreseen, or which, though foreseen, were inevitable. extinguished.

Fortuitous event – an extraordinary event which cannot be Exceptions:

foreseen, or which, though foreseen, is inevitable. In other (1) When expressly specified by law:
words, it is an event which is either impossible to foresee or to (a) The debtor is guilty of fraud, negligence, or delay,
avoid. or contravention of the tenor of the obligation.
(Arts. 1170, 1165, par. 3.)
The essence of a fortuitous event consists of being a happening (b) The debtor has promised to deliver the same
independent of the will of the obligor and which happening, (specific) thing to two or more persons who do not
makes the normal fulfillment of the obligation impossible. have the same interest for it would be impossible
for the debtor to comply with his obligation to two
or more creditors even without any fortuitous
Fortuitous Event Force Majeure
Acts of Man Acts of God event taking place.
Event independent of the Events which are totally (c) The debt of a thing certain and determinate
will of the obligor but not independent of the will of proceeds from a criminal offense, unless the thing
of other human wills every human being having been offered by the debtor to the person
War, fire, robbery, murder Earthquake, flood, rain, who should receive it, the latter refused without
or insurrection shipwreck, lighting, justification to accept it. (Art. 1268.)
eruption of a volcano (d) The thing to be delivered is generic (Art. 1263.)
*In our law, fortuitous evet and force majeure are identical in for the debtor can still comply with his obligation
so far as they exempt an obligor from liability. Both are by delivering another thing of the same kind in
independent of the will of the obligor. accordance with the principle that “genus never
perishes” (genus nunquam perit).
Kinds of fortuitous events: (2) When declared by stipulation
1. Ordinary fortuitous events – those events which are (3) When the nature of the obligation requires the assumption
common and which the contracting parties could of risk.
reasonably foresee; and
2. Extraordinary fortuitous events – those events which are Art. 1175. Usurious transactions shall be governed by
uncommon and which the contracting parties could not special laws.
have reasonably foreseen.
Simple loan or mutuum – is a contract whereby one of the
Requisites of fortuitous events: parties delivers to another money or other consumable thing,
1. The event must be independent of the human will or at upon the condition that the same amount of the same kind and
least of the obligor’s will; quality shall be paid.
2. The event could not be foreseen (unforeseeable), or if it
could be foreseen, must have been impossible to avoid Usury - is contracting for or receiving interest in excess of the
(unavoidable); amount allowed by law for the loan or use of money, goods,
3. The event must be of such a character as to render it chattels, or credits.
impossible for the obligor to comply with his obligation
in a normal manner; and Kinds of interest:
4. The obligor must be free from any participation in, or 1. Simple interest – when the rate of interest is stipulated by
the aggravation of the injury to the obligee. the parties.
2. Compound interest – when the interest earned is upon the
There must be no concurrent or previous negligence or interest due.
imprudence on the part of the obligor by which the loss or 3. Legal interest – when the rate of interest intended by the
injury may have been occasioned. parties is presumed by law, as when the law mentions
interest but does not specify the rate thereof.
The loss or injury could have been avoided by human
4. Lawful interest – when the rate of interest is within the
precaution, the defense of fortuitous event cannot be
maximum allowed by law.
successfully invoked. In other words, in order to be exempt
5. Unlawful interest – when the rate of interest is beyond the
from liability arising from a fortuitous event, there should have
maximum fixed by law.
been no human participation amounting to a negligent act.

It should be pointed out that for the purpose of releasing the

debtor from his obligation, the occurrence of the fortuitous
event does not suffice. The impossibility of fulfilling the
 (b) For other than loan or forbearance of money, the
interest shall be 6% as indemnity at the discretion of the
court. When the amount of the obligation is reasonably
established, the interest shall run from judicial or extra-
judicial demand; otherwise, from the time the amount is
finally adjudged.
(c) Where a judgment awarding a sum of money under (a)
or (b) above, has become fi nal and executory, the legal
rate of interest shall be 12% from such fi nality, based
Interest Rules under the Usury Law: on the adjudged principal and unpaid interest, until full
(1) Legal Rate – 12% per annum satisfaction.

The legal rate is 12% (from default until fully paid) if Requisites for recovery of monetary interest:
the transaction is a loan or forbearance of money, 1. The payment of interest must be expressly stipulated;
goods, or credits or the judgment involves a loan or 2. The agreement must be in writing; and
forbearance of money, goods or credits, as prescribed 3. The interest must be lawful.
in Central Bank Circular No. 416 (infra.); otherwise
(e.g., indemnity for damages occasioned by an injury A stipulation for the payment of usurious interest is void, that
to person or loss of property), it is only 6% as is, as if there is no stipulation as to interest.
provided in Article 2209 of the Civil Code.
ART. 1176. The receipt of the principal by the creditor,
(2) Maximum Rate without reservation with respect to the interest, shall give
 12% - if the loan is secured in whole or in rise to the presumption that said interest has been paid.
part by a mortgage upon real estate with a
Torrens Title or by any agreement conveying The receipt of a later installment of a debt without
such real estate or an interest therein. reservation as to prior installments, shall likewise raise the
presumption that such installments have been paid.
 14% - if the loan is not secured.
 The rate prescribed by the Monetary Board of Presumption – inference of a fact not actually known arising
the Central Bank. from its usual connection with another which is known or
proved.
Under Section 2 (secured loan) of the Usury Law, the taking or
receiving (not mere agreeing) of usurious interest is the act Two Kinds of Presumption:
penalized. Under Section 3 (unsecured loan), the mere 1. Conclusive Presumption – one which cannot be
demanding or agreeing to charge excessive interest is also contradicted;
punishable. In either case, it is only the creditor who is 2. Disputable Presumption – one which can be
criminally liable. contradicted or rebutted by presenting proof to the
contrary.
NOTE: By virtue of Central Bank Circular No. 905 (Dec. 10,
When presumptions under Art. 1176 do not apply:
1982, effective Jan. 1, 1983.) issued by the Monetary Board
1. With reservation as to interest;
under the authority granted to it by the Usury Law (Secs. 1-a, 2. Receipt for a part of principal;
4-9, and 4-b thereof.), the rate of interest and other charges on 3. Receipt without indication of a particular installment
a loan or forbearance of money, goods, or credit, regardless of paid;
maturity and whether secured and unsecured, that may be 4. Payment of taxes; and
charged or collected shall not be subject to any ceiling 5. Non-payment proven.
prescribed under the Usury Law. Usury is now legally non-
existent. Interest can be charged as lender and borrower may ART. 1177. The creditors, after having pursued the
agree upon. property in possession of the debtor to satisfy their claims,
may exercise all the rights and bring all the actions of the
According to the Supreme Court, the circular did not repeal or latter for the same purpose, save those which are inherent
in any way amend the Usury Law but simply suspended the in his person; they may also impugn the acts which the
latter’s effectivity. Only a law can repeal or amend another debtor may have done to defraud them.
law.
Remedies available for the creditors for the satisfaction of
their claims: E P E A
While the Usury Law ceiling on interest rates was lifted by 1. Exact fulfillment with the right to damages;
C.B. 2. Pursue the leviable – those not exempt from
Circular No. 905, nothing in said circular grants lenders carte attachment under the law – property of the debtor;
blanche authority to raise interest rates to levels which will 3. Exercise all the rights and bring all the actions of the
either enslave their borrowers or lead to a hemorrhaging of debtor except those inherent in or personal to the
their assets. person of the latter;
4. Ask the court to rescind or impugn the acts or
Liability for legal interests: contracts which the debtor may have done to defraud
(a) For loan or forbearance of money, the rate of interest him when he cannot in any other manner recover his
due is that stipulated; otherwise, 12% per annum claim.
computed from judicial or extrajudicial demand until
ART. 1178. Subject to the laws, all rights acquired in virtue
fully paid. In addition, interest due shall earn legal
of an obligation are transmissible, if there has been no
interest (compound interest) from the time it is stipulation to the contrary.
judicially demanded.
General Rule: All rights acquired by virtue of an obligation
are transmissible.

Exceptions:
 Those prohibited by law like the rights in partnership,
agency and commodatum
 Those prohibited by the stipulation of the parties.