Week 2 Nature and Effect.doc - Page 10 of 110 OBLIGATIONS CONTRACTS | Prof Labitag[2nd Semester A.Y 20082009 9 Possible \u2013 capable of being performed

Week 2 Nature and Effect.doc - Page 10 of 110 OBLIGATIONS...

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Unformatted text preview: Page 10 of 110 OBLIGATIONS & CONTRACTS | Prof. Labitag [2nd Semester, A.Y. 20082009] 9. Possible – capable of being performed, either physically or legally Impossible – physically or legally incapable of being done Chapter II. Nature and Effects of Obligations KINDS OF PRESTATION A. Obligation TO GIVE SPECIFIC THING (determinate) One that is individualized and can be identified or distinguished from others of its kind GENERIC THING (indeterminate) Indicated only by its kind, without being designated and distinguished from others of the same kind Object due becomes determinable from moment of delivery Specific thing (determinate) DUTIES OF THE OBLIGOR (Letters B-D are the accessory/incidental obligations) a. to deliver thing itself Art 1244 Par 1 The debtor of a thing cannOt cOmpel the creditor to receive a different one, although the latter may be of the same value as, or more valuable than which is due. - Though upon agreement or consent of the creditor, the debtor may deliver a different thing or perform a different prestation in lieu of that stipulated □ DATION in payment (Art 1245) or OBJECTIVE NOVATION (Art 1291) - Defects of the thing may be waived by the creditor IF o Expressly declares o fiith knowledge thereof, he accepts the thing without protest or disposes or consumes it □ “waiver of defect" b. to preserve thing with due care 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. - fihy: the obligation to delivery would be illusory. - fihat kind of diligence: DILIGENCE OF GOOD FATHER OF FAMILY; elaborated in Art 11⁄3 o Failure to preserve the thing □ Liability for damages o BUT if due to FORTUITOUS EVENTS or FORCE MAJEURE □ Exempted from responsibility c. to deliver the accessions and accessories Art 1166 Obligation to give a determinate thing includes that of delivering all its accessiOns and accessOries, even though they may not have been mentioned. - May be Qualified by contrary intentions of the parties, e.g. exclude delivery of accession or accessory of the thing. ACCESSIONS Includes everything which is produced by a thing, or which is incorporated or attached thereto, either naturally or artificially. Does not include fruits because Art 1164 mentioned it already Accesion continua which includes: 1. AccesiOn natural– e.g. alluviOn 2. AccesiOn industrial – e.g. building, planting, sOwing ACCESSORIES ThOse things which, destined fOr embellishment, use Or preservatiOn Of anOther thing Or mOre impOrtant, have fOr their Object the cOmpletiOn Of the latter fOr which they are indispensable Or cOnvenient. d. to deliver the fruits Art 1164 Par 1 The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. However, there is no real right until the same has been delivered to him. Karichi E. Santos | UP Law B2012 OBLIGATIONS & CONTRACTS | Prof. Labitag [2nd Semester, A.Y. 2008Page 11 of 2009] - NOn nudis pactis, sed traditiOne dOmina rerum trasferentur □ the ownership of 110 things is transferred not only by mere agreements but by delivery Karichi E. Santos | UP Law B2012 OBLIGATIONS & CONTRACTS | Prof. Labitag [2nd Semester, A.Y. 20082009] Page 12 of 110 REAL RIGHT – power belonging to a person over a specific thing, without a passive subject individually determined, against whom such right may be personally exercised - Gives to a person a direct and immediate power over a thing, which is susceptible of being exercised, not only against a determinate person but against the whole world - E.g. rights of ownership and possession PERSONAL RIGHT – power belonging to one person to demand of another, as a definite passive subject, the fulfillment of a prestation to give, to do or not to do CORRELATIVE RIGHTS OF THE OBLIGEE/CREDITOR (from Sir Labitag´s diagrammatical outline) 1. Right to compel delivery a. Fruits (both industrial and natural from the time obligation to deliver arises), accessions and accessories b. No real right until delivery □ personal action against debtor, no right against the world 2. Right to rescission or resolution 3. Right to damages a. Failure to deliver ▪ Legal excuse for breach of obligation or delay: FORTUITOUS EVENT unless there is o Law e.g. possession in bad faith (Art 552) o Stipulation to the contrary o Nature of obligation reQuires assumption of risk ▪ FE APPLICABLE TO: o Nonperformance o Delay o Loss/deterioration of specific thing Art 1189 Before happening of suspensive condition Art 1190 Before happening of resolutory condition ▪ Debtor still liable despite FE: o Expressly specified by law Art 1942 Bailee liable for loss (commodatum) Art 2001 Act of a thief Art 214⁄ Negotiorum gestio Art 1993 Loss of deposit o Stipulation e.g. debtor becomes “insurer" of the obligation o Assumption of risk o Fraud or malice (bad faith) Art 1165 Par 3 Delivers to two or more persons having different interest o Debtor in delay already when FE happened (Art 1165 Par 3) o Debtor guilty of concurrent negligence □ in this case, no long FE o Liability arises from criminal act except if debtor tenders thing and creditor unjustifiably refuses to receive (Art 1268) b. Fraud c. Negligence in performance d. Delay or default e. Any manner in contravention of the tenor of obligation Generic thing (indeterminate) Art 1246 fihen the obligation consists in the delivery Of an indeterminate Or generic thing, whose Quality and circumstances have nOt been stated, the creditor cannot demand a thing of superior Quality. Neither can the debtor deliver a thing of inferior Quality. The purpose of the obligation and other circumstances shall be taken into consideration. • Creditor may ask for compliance by 3rd person at debtor´s expense; action for substituted performance (Art 1165) LIMITED GENERIC THING – generic objects confined to a particular class, the class is considered in itself a determinate object Karichi E. Santos | UP Law B2012 OBLIGATIONS & CONTRACTS | Prof. Labitag [2nd Semester, A.Y. 20082009] CORRELATIVE RIGHTS OF THE OBLIGEE/CREDITOR (from Sir Labitag´s diagrammatical outline) Page 13 of 110 1. Right to ask for rescission or damages 2. Right to damages Karichi E. Santos | UP Law B2012 Page 14 of 110 OBLIGATIONS & CONTRACTS | Prof. Labitag [2nd Semester, A.Y. 20082009] a. b. c. d. e. Failure to deliver Fraud (malice or bad faith) Negligence Delay Any matter contravene the tenor of obligation RIGHTS OF A CREDITOR (from BarOps Reviewer 2008) SPECIFIC To compel specific performance To recover damages, in case of breach of the obligation, exclusive or in addition to specific performance Entitlement to fruits, interests from the time obligation to deliver arises GENERIC To ask for the performance of the obligation To ask that the obligation be complied with at the expense of the debtor To recover damages in case of breach of obligation B. Obligation TO DO Art 1244 Par 2 In obligations to do or not to do, an act or forbearance cannot be substituted by another act or forbearance against the obligee´s will. - Exception: FACULTATIVE OBLIGATION wherein the debtor reserves the right to substitute another prestation Art 116⁄ If a person is obliged to do something fails to do it, the same shall be executed at his cost. The same rule may 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. DUTIES OF OBLIGOR (from BarOps Reviewer 2008) 1. To do it (Art 116⁄) 2. To shoulder the cost if someone else does it (Art 116⁄) 3. To undo what has been poorly done (Art 116⁄) 4. To pay damages (Art 11⁄0-11⁄2, 2201-2202) • No action for compliance because that would be involuntary servitude which is prohibited by the constitution. C. Obligation NOT TO DO Art 1244 Par 2 In obligations to do or not to do, an act or forbearance cannot be substituted by another act or forbearance against the obligee´s will. - Performance cannot be by a delegate or an agent - No legal accessory obligations arise (as compared to obligation to give) Art 1268 fihen the obligation consists in not doing, and the obligor does what has been forbidden him, it shall also be undone at his expense. DUTIES OF OBLIGOR (from BarOps Reviewer 2008) 1. Not to do what should not be done 2. To should the cost to undo what should not have been done (Art 1168) 3. To pay damages (Art 11⁄0, 2201-2202) Karichi E. Santos | UP Law B2012 Page 15 of 110 OBLIGATIONS & CONTRACTS | Prof. Labitag [2nd Semester, A.Y. 20082009] BREACH OF OBLIGATION CONCEPT VOLUNTARY arises from the mOdes provided in Art 11/0 INVOLUNTARY arises because of fOrtuitOus events DistinctiOn between SUBSTANTIAL and CASUAL/SLIGHT breach SUBSTANTIAL Total Amounts to non-performance Basis for rescission and payment of damages CASUAL Partial A part is performed Gives rise to liability for damages GENERAL RULE: Rescission will not be permitted for a slight or casual breach of the contract, but only for such breaches as are sO substantial and fundamental as to defeat the object of the parties in making the agreement. Cases: • Song Fo v Hawaiian Phils • Velarde v CA MODES OF BREACH Art 11⁄0 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. 1 FRAUD (Dolo) COncept Fraud is the vOluntary executiOn Of a wrOngful act, or a willful omission, knowing and intending the effects which naturally and necessarily arise from such act or omission. - Deliberate and intentional evasion of the normal fulfillment of obligations - Any voluntary and willful act or omission which prevents the normal realization of the prestation, knowing and intending the effects which naturally and necessarily arise from such act - Fraud in the perfOrmance of a pre-existing ObligatiOn - Cannot cover mistake and errors of judgment made in good faith, ergo synonymous to bad faith (dishonest purpose or some moral obliQuity and conscious doing of wrong) - The element of INTENT and NOT the harm done is the test KINDS OF FRAUD 1. Fraud in the performance (Art 11⁄1) 2. Fraud in the execution/creation/birth of the contract a. DOlO causante (Art 1344) b. DOlO incidente (Art 1338) FRAUD (Art 11/1) DOLO CAUSANTE (Art 1338) DOLO INCIDENTE (Art 1344) fiHEN PRESENT PURPOSE During the performance of a pre- existing obligation Evade the normal fulfillment of obligation During the perfection of a contract Secure the consent of another to enter into contract RESULTS IN Breach of the obligation GIVES RISE TO Right in favor of creditor to recover damages Vitiation of consent; Voidable contract Right of the innocent party to annul the contract During the perfection of a contract Secure the consent of another to enter into contract BUT fraud was not the principal inducement in making the contract Does not result in the vitiation of consent Gives rise to a right of the innocent party to claim for damages Cases: Karichi E. Santos | UP Law B2012 OBLIGATIONS & CONTRACTS | Prof. Labitag [2nd Semester, A.Y. 20082009] • fioodhouse v Halili • Page 16 of 110 Geraldez v CA Karichi E. Santos | UP Law B2012 Page 17 of 110 OBLIGATIONS & CONTRACTS | Prof. Labitag [2nd Semester, A.Y. 20082009] Non-waiver of Future Fraud Art 11⁄1 Responsibility arising from fraud is demandable in ALL OBLIGATIONS. Any waiver of action for future fraud is VOID. - To permit such advance renunciations would practically leave the obligation without effect. - The law does not prohibit the renunciation of the action for damages on the ground of fraud already committed. Effects of Fraud - Liability for damages, a crime or a Quasi-delict (Art 11⁄0) 2 NEGLIGENCE (Culpa contractual) Art 11⁄2 Responsibility arising from negligence in the performance of EVERY KIND OF OBLIGATION is also demandable, but such liability may be REGULATED BY COURTS, according to the circumstances. Concept – absence of due diligence Art 11⁄3 Par 1 The fault or negligence of the obligor consists in the omission of that diligence which is reQuired by the nature of obligation and corresponds with the circumstances of the persons, of the time and the place. fihen negligence shows BAD FAITH, the provisions of Art 11⁄1 (responsibility arising from fraud) and Art 2201 Par 2 (responsible for all damages reasonably attributed to non-performance) shall apply. • Art 2201 Par 2 In case of fraud, bad faith, malice or wanton attitude, the obligor shall be respOnsible fOr all damages which may be REASONABLY ATTRIBUTED to the non-performance of obligation. DistinctiOn between Culpa and DOlO CULPA (Negligence) Mere want of care or diligence, not the voluntariness of act or omission Liability may be mitigated by courts fiaiver for future negligence valid if simple void if gross DOLO (Fraud) fiillfulness or deliberate intent to cause damage or injury to another Liability cannot be mitigated by courts fiaiver for future fraud is void DistinctiOn between Culpa AQuilana and Culpa COntractual • Different provisions that apply to the two concepts, hence different legal effects CULPA AQUILANA (Culpa Extracontractual) Governed by Art 21⁄6 to 2194 Negligence as a source of obligation Fault or negligence which constitutes an independent source of obligation between parties not previously bound CULPA CONTRACTUAL Governed by Art 11⁄9 et seQuel Negligence in the performance of a contract Fault or negligence of the debtor as an incident in the fulfillment of an existing obligation Negligence of defendant should be the proximate cause of damage if liability is to attach. Cases: • Gutierrez v Gutierrez • VasQuez v Borja Standard of care reQuired Art 11⁄3 Par 2 If law or contract does not state diligence which is to be observed in the performance, that which is expected of a GOOD FATHER OF FAMILY is reQuired. • Extra-ordinary diligence reQuired in: o Art 1⁄33 Common carriers o Art 1⁄44 Lesser than extraordinary o Art 1998-2002 Inn keepers, hotel keepers Karichi E. Santos | UP Law B2012 OBLIGATIONS & CONTRACTS | Prof. Labitag [2nd Semester, A.Y. 20082009] Exemption from Liability for Negligence Page 18 of 110 1. INSURANCE: A party to a contract is relieved from the effects of his fault or negligence by a 3rd person Karichi E. Santos | UP Law B2012 Page 19 of 110 OBLIGATIONS & CONTRACTS | Prof. Labitag [2nd Semester, A.Y. 20082009] 2. Party to a contract renounces in advance the right to enforce liability arising from the fault or negligence of the other a. VOID if gross negligence □ Stipulations exempting from liability for that amount to a fraud b. VALID if simple negligence only Cases: • De Guia v Manila Electric Co • US v Barias • Sarmiento v Sps Cabrido • Crisostomo v CA Effects of Negligence 1. Damages are demandable, which the courts may regulate according to circumstances 2. Invalidates defense of fortuitous event 3 DELAY (mOra) Concept – nOn-fulfillment Of ObligatiOn with respect tO time 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 ObligatiOns. HOwever, the DEMAND by the creditOr shall NOT be necessary in Order that delay may exist: 1. fihen the OBLIGATION or LAfi expressly so declares 2. fihen from the nature and the circumstances of the obligation it appears that the DESIGNATION OF THE TIME when the thing to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract 3. fihen 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. • There can only be delay in pOsitive ObligatiOns (to give and to do) and not in negative obligations (not to give and not to do). Kinds Of MOra a. MOra sOlvendi – default on the part of the debtor • EX RE referring to obligations to give • EX PERSONA referring to obligations to do REQUISITES OF MORA SOLVENDI 1. PRESTATION is demandable and already liQuidated - There can be no delay if the obligation is not yet due. There is no mora in natural obligations because performance is optional and voluntary 2. That the debtor delays performance - Effects of mora only arise when the delay is due to the causes imputable to the debtor; hence there is legally no delay if this is caused by factors not imputable to the debtor (e.g. fortuitous events) 3. That the creditor reQuires or demands the performance extrajudicially or judicially - Mere reminder is not a demand because it must appear that the benevolence and tolerance of the creditor has ended. GENERAL RULE: Creditor should make demand before debtor incurs delay • Default begins from the moment creditor demands the performance of obligation. o If extrajudicial: date of demand o If uncertain: date of filing of complaint (for purposes of computing payment of interests or Karichi E. Santos | UP Law B2012 OBLIGATIONS & CONTRACTS | Prof. Labitag [2nd Semester, A.Y. 20082009] damages) Page 20 of 110 Karichi E. Santos | UP Law B2012 OBLIGATIONS & CONTRACTS | Prof. Labitag [2nd Semester, A.Y. 20082009] • • • Page 21 of 110 Demand may be in any form, provided it can be proved. It is also generally necessary even if a period has been fixed in the obligation. Burden of proof of demand on the creditor. Demand must refer to the prestation that is due and not another. But even if without demand, debtor incurs in delay if he acknowledges his delay. ReQuest for extension of time for payment is not sufficient though, the acknowledgement must be express. Cases: • Cetus Devt Corp v CA • Santos Ventura Hocorma Foundation v Santos • VasQuez v Ayala Corporation EXCEPTION: Phen demand is not reQuired 1. Express stipulation – Insertion of the clause “without further notice" 2. Law so provides - Not enough to merely fix date for performance, but also that default will commence after the period lapses 3. Period is the controlling motive or the principal inducement for the creation of the obligation – in cases where it appears that the obligation would not have been created for a date other than that fixed (Abella v. Francisco) 4. Demand would be useless – performance has become impossible a. Caused by some act or fault of the debtor, e.g. hiding or disposed of the thing to be delivered b. Impossibility caused by fortuitous event but debtor bound himself liable in cases of such events Case: • Abella v Francisco b. MOra accipiendi – default on the part of the creditor • Delay in the performance based on the omission by the creditor of the necessary cooperation, especially acceptance on his part. • Generally, debtor can perform at any time after the obligation has been created, even before the date of maturity. • It is necessary however that it be lawful for the debtor to perform, and that he can perform (e.g. when the period is established for the benefit of the creditor or both of the parties). REQUISITES OF MORA ACCIPIENDI 1. Offer of performance by the debtor who has the reQuired capacity 2. Offer must be to comply with the prestation as it should be performed 3. Creditor refuses the performance without just cause See also Art 1268 fihen the debt of a thing certain and determinate proceeds from a criminal offense, the debtor shall not be exempted from the payment of its price, whatever may be the cause for the loss, UNLESS the thing having been offered by him to the person who should receive it, the latter refused without justification to accept it. Cases: • Vda de Villaruel v Manila Motor Co • Tengco v CA c. COmpensatiO mOrae – parties in a bilateral contract can regulate the order in which they shall comply with their reciprocal prestations. Otherwise, the f...
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