Fortuitous events- acts of god

Force majeure- acts of man

Fortuitous events as general rule- the debtor is not liable

Non-fulfillment of debtor due to delay, fraud, negligence, contravention - liable

Article 1170
1.Fraud- deliberate intention to cause damage or prejudice. It is the voluntary execution of a wrongful act,
or a willful omission, knowing and intending the effects which naturally arise from such an act or
omission.

Malice, dishonesty, intentional. Synonymous to bad faith. Mislead & Deceive others. Conscious doing of
wrong.

2.Negligence- any voluntary act or omission, which prevents the normal fulfillment of an obligation.

No malice. Failure to observe degree care of precaution vigilance. - May kakulangan

3.Delay- delay in the performance of an obligation means default or mora in its fulfillment, which ordinarily
occurs from the time the obligee judicially or extrajudicially demands its fulfillment.

Applied only if the prestation is to give or to do

Non-fulfillment will take place but delay is impossible (not to do)

 Mora Solvendi- delay on the part of the debtor to fulfill his obligation to give or to do) by reason
of a cause imputable to him
Requisites in Mora Solvendi
 Failure of the debtor to perform his obligations on the date agreed upon
 Demand made by the creditor upon the debtor to fulfill, perform or comply with
his obligation, may either judicial or extrajudicial; and – not notice or reminder,
through judicial(through court) or extrajudicial (outside of court) if there is no date
demand, the law will presume that they are giving extension of time
 Failure of the debtor to comply with such demand

Demand is necessary - could be judicial or extrajudicial demand. No demand - no delay

Demand is not necessary in the following cases:

1. When the obligation or law expressly so declares. – ex. tax . pay immediately; demand not
required
2. When the time is of the essence in a particular contract
3. When the demand would be useless, as when the obligor has rendered it beyond his power to
perform.

 Mora Accipiendi- delay on the part of the creditor without justifiable reason to accept
the performance of the obligation.
Requisites of Mora Accipiendi
 An offer of performance by the debtor who has the required capacity
 The offer must be to comply with the prestation as it should be performed
 The creditor refuses the performance without just cause

No consignation from creditor- Debtor must consign to court to produce legal payment
  Compensatio Morae- delay of the obligor in reciprocal obligations

If the complaining party have complied with in good faith

Mutual delay- no one is guilty of delay

4. Contravention to the tenor of obligation- the violation of the terms and conditions stipulated in
the obligation. The contravention must not be due to a fortuitous event or force majeure. (Article
1174. )

Requisites of Fortuitous Event

1. The cause of the breach of the obligation must be independent of the will of the debtor.
2. The event must be either unforeseeable or unavoidable
3. The event must be such as to render it impossible for the debtor to fulfill his obligation in
a normal manner
4. The debtor must be free from any participation in, or aggravation of the injury to the
creditor.

Article 1231. Obligations are extinguished:

1. By payment or performance
Article 1232. Payment means not only delivery of money but also the performance, in any other
matter, of an obligation.
A debt shall not be considered paid unless the thing or service in which the obligation consists
has been completely delivered or rendered as the case may be.

Article 1236. The creditor is not bound to accept payment or performance by the third person
who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.

Who may make payment?

1. The debtor, his heirs, assignees, or duly authorized representative
2. The person authorized by stipulation to make payment
3. A third person interested in the fulfillment of the obligation
Effect of the payment by a third person

If made without the knowledge The payer can recover from the debtor only in so far as the payment
or against the will of the debtor has been beneficial to debtor

If made with the knowledge of The payer shall have the rights of reimbursement and subrogation,
the debtor that is, to recover what he has paid and to acquire all the rights of the
creditor

If the debtor’s obligation is paid by another person, the third person is generally entitled to recover from
the debtor what he has paid. (Article 1236)

Article 1238. Payment made by a third person who does not intend to be reimbursed by the debtor is
deemed to be a donation, which requires debtor’s consent. But the payment is in any case valid as to the
creditor who has accepted it.

To whom must payment be made?

  The person in whose favor the obligation has been constituted
 His successor in interest
 Any person authorized to receive it

Article 1233. A debt shall not be understood to have been paid unless the thing or service in which the
obligation consists has been completely delivered or rendered, as the case may be.

When debt considered paid

 Integrity of the prestation- this requisite means that the prestation be fulfilled completely.
Partial or irregular performance will not produce extinguishment of an obligation as a
general rule.
 Identity of the prestation- this means that the very prestation due must be delivered or
performed

EXCEPTION
 Substantial Performance in Good Faith (Article 1234)
 The obligee accepts the performance, knowing its incompleteness or irregularity and without
expressing any protest of objection (Article 1235)

Dation in payment (dacion en pago)- the conveyance to creditor as an accepted equivalent or

performance of a monetary obligation.

When prestation may be substituted:

Article 1245. Dation in payment whereby property is alienated to the creditor in satisfaction of a debt in
money shall be governed by the law of sales.

2. By the loss of the thing due

Article 1262. An obligation which consists in the delivery of a determinate thing shall be
extinguished if it should be lost or destroyed without the fault of the debtor, and before he has
incurred delay. (It is essential that the loss be without the fault of the debtor. The loss may either
be by reason of a fortuitous event or due to the fault of a third person.)

TAKE NOTE:
Loss as Mode of Extinguishment of Obligation is only applicable to OBLIGATION TO DELIVER A
DETERMINATE THING.

Requisites
 The loss occurs without the fault of the debtor
 The loss occurs prior to the debtor incurring delay
 There is no law holding the debtor liable even in case of a fortuitous event.

3. By the condonation or remission of the debt

Article 1270. Condonation or remission is essentially gratuitous, and requires the acceptance by
the obligor. It may be made expressly or impliedly.

Condonation or remission is the gratuitous renunciation by creditor of his right against the debtor
resulting in the extinguishing of the latters obligation. It is thus a form of donation.
- The abandonment of payment
- the creditor gives up his right to collect from the debtor
Requisites
 It must be gratuitous
 It must be accepted by the obligor
  The parties must have capacity
 It must not be inofficious

4. By the confusion or merger of the rights of creditor and debtor

Article 1275. The obligation is extinguished from the time the characters of creditor and debtor
are merged in the same person. (Rights are said to be merged when the same person who is
bound to pay is also entitled to receive)

Effects of Merger and Confusion

 Obligation is extinguished
 If there is guarantor and the merger is in the principal debtor, the obligation is extinguished and
the guarantor is released.
 It there is a guarantor and the merger is not on the principal debtor but only on the guarantor, the
principal obligation is not extinguished but the accessory is extinguished.

5. By compensation
Article 1278. Compensation shall take place when two persons, in their own right, are creditors
and debtors of each other.
Compensation is a mode of extinguishing to the concurrent amount the obligation of persons
who in their own right as principal are reciprocally debtors and creditors of each other.

6. By Novation
Article 1291. Obligations may be modified by:
 Changing their object or principal conditions;
 Substituting the person of the debtor
 Subrogating a third person in the rights of the creditor

Novation- is the extinguishment of obligation by the substitution or change of the obligation by a

subsequent one which extinguishes or modifies the first.

Requisites
 The existence of a previous valid obligation
 The intention and capacity of the parties to extinguish or modify the obligation
 The extinguishment of the obligation
 The creation or birth of a valid new obligation

Article 1305. A Contract is a meeting of minds between two persons whereby one binds himself, with
respect to the other, to give something or to render some service.

Characteristics of Contracts
1. Obligatory Force of Contract
- courts must enforce them between the contracting parties
- Obligations arising from contracts have the force of law between the contracting parties and
should be complied with in good faith
- Obligations either arise from law or contracts and they are juridical necessities
- from the word OBLIGATORY/OBLIGATE,

2. Autonomy of Contracts
- constitutive element of an individual's freedom to make any contractual transaction and
beetitled to the enforcement of the rights and duties in such transaction.

3. Mutuality of Contracts
- contracting parties had “a meeting of the minds” regarding the agreement.
- his means the parties understood and agreed to the basic substance and terms of the contract.
 4. Relativity of Contracts
- means that a contract can generate rights and obligations only in favor of, or regarding the
obligation of the contracting parties, as well as of persons who became parties after closing the
contract or assimilated to the parties.
- yung isang contract ay pwedeng makabuild ng rights and obligation na in favor o patungkol sa
obligation of contracting parties, gayundin ng mga taong naging partido pagkatapos isara ang
kontrata o asimilasyon sa mga partido.

Stages of Contract
1. Negotiation or preparation
- taking plenty of time to analyze what you want, your bargaining position, and the other side's
likely wants and alternatives

2. Perfection
- when the parties have come to a definite agreement or meeting of the minds regarding the
subject matter and cause of the contract (Art. 1319). At this stage, there is already a concurrence
of all the essential elements or requisites of a contract.

3. Consummation
- occurs when the parties "fulfill or perform the terms agreed upon in the contract, culminating in
the extinguishment thereof."

Essential Requisites

Article 1318. There is no contract unless the following requisites concur:

1. Consent of the contracting parties
2. Object certain which is the subject matter of the contract
3. Cause of the obligation which is established

Form of Contract

Article 1356. Contracts shall be obligatory, in whatever form they may have entered into, provided all the
essential requisites for their validity is present.

Reformation of Instruments

Article 1359. When there having been a meeting of the minds of the parties to a contract, their true
intention is not expressed in the instrument purporting to embody the agreement, by reason of mistake,
fraud, inequitable conduct or accident, one of the parties may ask for the reformation of the instrument to
the end that such true intention may be expressed.

Requisites
 There is a valid contract
 The written instrument does not express/conform to the true agreement or intention of the
parties;
 The failure to express the true intention is due to mistake, fraud, inequitable conduct, or accident;
 The facts upon which relief by way of reformation of the instrument is sought are put in issue by
the pleadings; and
 There is clear and convincing evidence of the mistake, fraud, inequitable conduct, or accident.

Interpretation of Contracts
Article. 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of its stipulation shall control. If the words appear to be contrary to the evident
intention of the parties, the latter shall prevail over the farmer.

Interpretation and Reformation distinguished

Interpretation is the act of making intelligible that was not before understood, ambiguous, or not obvious.

Reformation of Instrument is the remedy in equity by means of which a written instrument is made or
constructed so as to express or conform the real intention of the parties.

Interpretation of Contracts
Article 1370. If the terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall control. If the words appear to be
contrary to the evident intention of the parties, the latter shall prevail over the former.

Defective Contracts
1. Rescissible Contracts
Article 1380. Contracts validly agreed upon may be rescinded in the cases established by law. \
Why Defective?
(But, it can be ratified) It causes damage to one of the parties or 3rd persons.

 Those which are entered into by guardians whenever the wards whom they represent
suffer lesion by more than one-fourth of the value of the things which are the object
thereof;
 Those agreed upon in representation of absentees, if the latter suffer the lesion stated in
the preceding number
 Those undertaken in fraud of creditors when the latter cannot in any other manner collect
the claim due them;
 Those which refer to things under litigation if they have been entered into by the
defendant without the knowledge and approval of the litigants or of competent judicial
authority;
 All other contracts specially declared by law to be subject to rescission.

2. Voidable Contracts
Article 1390. The following contracts are voidable or annullable, even though there may have been no
damage to the contracting parties.
 Those where one of the parties is incapable of giving consent to a contract
 Those where the consent is vitiated by mistake, violence, intimidation, undue influence of
fraud.

Why defective?
(But, it can be ratified) Consent is defective.

3. Unenforceable Contracts
Article 1403 to 1408. Unenforceable contracts are those that cannot be enforced in court or sued upon
by reason of defects provided by law until and unless they are ratified according to law.

Why defective?
(But, it can be ratified) Lack of authority or form

Kinds of Unenforceable Contracts

1. Those entered into in the name of another by one without or acting in excess of authority
2. Those that do not comply with the Statue of Frauds
3. Those where both parties are incapable of giving consent.
 4. Void or Inexistent Contracts
Void or Inexistent Contracts- They are absolutely null and void. They have no legal effect at all and
cannot be ratified.

Why Defective?
(It cannot be ratified) Missing essential element(s)

Void or Inexistent Contracts

1. Those whose cause, object or purpose is contrary to law, morals, good customs, public
order or public policy
2. Those which are absolutely simulated or fictitious
3. Those whose cause or object did not exist at the time of the transaction
4. Those whose object is outside the commerce of men
5. Those which contemplate an impossible service
6. Those where the intention of the parties cannot be ascertained
7. Those expressly prohibited or declared void by law.

Rescissible Contract- Valid; Binding; Enforceable

Voidable Contract- Valid; Binding; Enforceable
Unenforceable Contract- Valid; Not Binding; Not Enforceable
Void or inexistent contract- Not Valid; Not Binding; Not Enforceable