THE LAWS ON

OBLIGATIONS
AND CONTRACTS

PRESENTER: GROUP 2
 THE LAWS
THE LAWS ON
ON OBLIGATIONS
OBLIGATIONS AND
AND CONTRACTS
CONTRACTS

Obligations and Contracts are among the subjects of the Civil

Code of the Philippines. This subject is very important
considering that entering into different contracts is almost a
part and parcel of the operation of the tourism and hospitality
business. In the same manner, one should understand that there
are obligations that must be faithfully observed as there are
obligations other than those arising from contract which if
violated may lead to a legal controversy.
APPLICABLE PROVISIONS OF THE LAW
ON OBLIGATIONS AND CONTRACTS

OBLIGATION
•is a juridical necessity, to give, to do, or not to do.

CIVIL OBLIGATION

• meaning, only those obligations which if not performed by

one party, the other party may go to court to enforce the
obligation or simply to hold such person to pay for damages
 ELEMENTS OF OBLIGATION
1. PASSIVE SUBJECT
is the person or party who has the duty to fulfil the obligation or the
prestation (see #3 for definition). Passive subject is sometimes called the
obligor or debtor.

2. ACTIVE SUBJECT
is the person who has the power to demand the fulfilment of the
obligation; he is sometimes called the creditor or obligee.
3. PRESTATION
Is the object of the obligation either to give, to do, or
not to do.
4. JURIDICAL TIE
Is the vinculum (pl. vincula, a unifying bond) or that which
binds the debtor and creditor.

It is that which binds or connects the parties to the obligation.

In other words, it is the legal relation between the debtor and
the creditor (or obligor and obligee).
SOURCES OF OBLIGATION
1. LAW
Obligations arising from law are not presumed
only those obligations expressly determined by
law are demandable.
EXAMPLES:
•Obligation to pay tax.
•Obligation to secure a license to operate business from the local
government unit.

•Obligation to register the corporation before the Securities and

Exchange Commission.
 2. CONTRACTS
Under article 1305, contract is a meeting of the minds
whereby one binds himself with respect to other to give
something or render some services.
Example:
If a person entered into a contract, an obligation will arise. For example:
in a contract of sale, one of the parties has the obligation to transfer
ownership; in a contract of loan one of the parties has the obligation to
pay the indebtedness;

IN CASE OF NON-FULFILMENT OF THESE OBLIGATIONS, THE

INJURED PARTY CAN SUE THE OTHER BEFORE THE COURT
FOR BREACH OF CONTRACT.
 3. QUASI - CONTRACT
This source of obligation is based on the principle of unjust
enrichment, meaning no one shall benefit at the expense of the other.
Unlike in contracts, there is no meeting of the minds between parties
in this source of obligation; however, equity and law dictates that
the person benefited from the act of the other has the obligation to
reimburse or pay whatever expenses incurred by the latter.
Example :
When through an accident or other cause a person is injured or becomes
seriously ill, and he is treated or helped while he is not in a condition to give
consent to a contract, he shall be liable to pay for the services of the
physician or other person aiding him, unless the service has been rendered out
of pure generosity.
4. ACTS OR OMISSION PUNISHABLE BY
LAW ( DELICTS)
Under the Revised Penal Code of the Philippines, any person criminally
liable is also civilly liable. The civil liability pertains to the damages
that must be paid arising from the offense/crime committed.
Example:
Mr. X was employed as executive chef in XYZ Restaurant. One day, Mr. X had
a heated argument with one of the partners in the restaurant business,
Mr. Z. Thereafter, Mr. X fired his gun towards Mr. Z which caused the
latter's death.

Here, Mr. X is liable criminally. However, aside from imprisonment (the

criminal liability) he is also liable civilly, meaning Mr. X has the
obligation to pay for damages suffered by the family such as, funeral
expenses, medical expenses, and other applicable damage tos.
 5. QUASI-DELICTS (Culpa Aquiliana)
Under Article 2176 the Civil Code, whoever by
act or omission causes damage to another,
there being fault or negligence, is obliged to
pay for the damage done. Such fault or
negligence, if there is no pre-existing
contractual relation between the parties, is
called a quasi-delicts.
 Requisites of Quasi-Delicts

To sustain a claim based on quasi-delicts, the

following requisites must concur:
a. Damage suffered by the plaintiff (the injured party);
b. Fault or negligence of defendant (the party at
fault); and
c. Connection of cause and effect between the fault
or negligence of defendant and the damage incurred
by the plaintiff;
d. There is no pre-existing contractual relation.
Owners and Managers of an establishment or Employer are
liable for the negligent act of their Employee based on
Quasi -Delicts.
As a general rule, one is only responsible for his own act or
omission. Thus, a person will generally be held liable only for
the wrong doings committed by him and not by another.
However, one of the exceptions of the above rule is found in
Article 2180 (4) and (5) of the Civil Code.

Article 2180 paragraph (4) states that, "The owners and managers of
an establishment or enterprises are responsible for damages caused
by their employees in the service of the branches in which the
employee is employed or on the occasion of their functions."
Article 2180 paragraph (5) stipulates that, "Employers shall be liable for
the damages caused by their employees and household helpers acting
within the scope of their assigned tasks, even though the former are
not engaged in any business or industry."
In the last paragraph of Article 2180 of the Civil Code, the
employer may invoke the defense that they observed all the
diligence of a good father of a family to prevent damage.
The liability of the owner or manager or the employer, however, is relieved on
a showing that he exercised the diligence of a good father of the family in the
selection and supervision of its employees. Once evidence is introduced
showing that the employer exercised the required amount of care in selecting
his employees; half of the employer's burden is overcome. The question of
diligent supervision, however, depends on the circumstances of employment.
Sources of Damages (Liability)
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.
The sources of damages under article 1170 of the New
Civil Code

•Contravention of the Tenor of the Obligation.

•NEGLIGENCE •DELAY •Fraud

SOURCES OF DAMAGES (LIABILITY)

Fraud
- Fraud, in a general sense, is
purposeful deceit designed to provide
the perpetrator with unlawful gain
or to deny a right to a victim.
 Two Kinds of Fraud
a. Incidental Fraud (Dolo Incidente)
The fraud is committed during the performance
of the obligation and the remedy for this kind
of fraud is to demand for damages.
Example:
Mr. X is the owner of XXX Restaurant. He ordered 5 sacks of Jasmine
Rice (First Class) from Mr. Y. On the day of the delivery of the sacks of
rice, Mr. Y mingled NFA rice to each sacks of rice.

Here, Mr. Y committed incidental fraud against Mr. X. The remedy of the
latter is to ask for damages.
B. Casual Fraud (Dolo Causante).

The fraud is committed at the very beginning

of the transaction in order to induce or
convince the other person to enter into a
contract. The remedy in this kind of fraud is
to annul the contract plus damages.
 2. Negligence.
It is the omission of that diligence
required by nature of an the the
circumstances of obligation and
corresponds to the person, time and place.
One of the obligations of the Obligor is to
observe due diligence in the performance of
his obligation. Hence, if the diligence
required was not observed there maybe
liability .
TWO KINDS OF DILIGENCE
A. DILIGENCE OF A GOOD
FATHER OF A FAMILY
- Or the Ordinary Diligence .
This is the kind of diligence that
must be observed by the obligor
in general.
B. Utmost diligence or extraordinary diligence,
This is the highest degree of care. This must be observed only
when the law so provides or when the parties so agree.

Under the law, a common carrier must observe extraordinary

diligence in vigilance over the goods and for the safety of the
passenger transported by them.
 3. DELAY
The delay referred herein is legal delay. This means
that when the maturity date within which to
perform the obligation was not performed, the
creditor should demand its fulfilment in order for
the debtor to be considered in delay

The general rule therefore is that "NO DEMAND, NO

DELAY." As a consequence, if the creditor did not
demand forthe performance of the obligation, the
creditor cannot go to court to sue the debtor.
Hence, demand is necessary.
 Ways to Demand Fulfilment of the Obligation

A. Judicial Demand - The creditor goes to court to fix the

period within which the debtor
performs the obligation.

B. Extra judicial - The creditor writes a demand letter

Demand or demand orally.
 CONTRAVENTION TO THE TENOR OF THE
OBLIGATION
It is the failure to perform that which is incumbent
upon him. The non- performance or failure of the
party to fulfil his duty is liable for damages.
Example:
Facts:
On July 28, 2001, spouses Mario and Anna Guanio booked one of the function
halls of XXX Hotel in Makati to be used as a reception for their wedding on
August 5, 2014. It was agreed that the foods to be delivered on the said event
are black cod, king prawns, and angel hair pasta with wild mushroom sauce
for the main course for 250 guests. On August 5, 2014, only 150 persons were
given foods.
CONTRAVENTION TO THE TENOR OF THE
OBLIGATION
Issue: Is there a contravention of the tenor of the
obligation?

Ruling: Yes, because the hotel failed to serve foods

for 250 guests as earlier agreed upon. This act
constitutes contravention of the tenor of the
obligation, hence the hotel may be held liable for
damages.
 Exceptions to the Rule
"No Demand No Delay"
There are instances however where demand is not necessary
to consider the debtor in delay. Thus, in any of the
following instances, the creditor may sue right away the
debtor in case of none fulfilment of the obligation on the
due date:
A.When the law so provides;
B. When the obligation so provides;
C. When time is of the essence; and
D. When demand would be useless.
DIFFERENT KINDS OF DAMAGES
If there are injuries committed either due to wrongful
or negligent act or if a certain obligation or
contract has been violated, the party so injured
shall be entitled to any of the following damages.

1. Actual Damages or 4. Temperate or Moderate

Compensatory Damages Damages
2. Moral Damages 5. Liquidated Damages
3. Nominal Damages 6. Exemplary or
corrective Damages
 KINDS
KINDS OF
OF OBLIGATION
OBLIGATION
1. Pure Obligation
The obligation is not subject to a
period or condition and is demandable
at once.
Example:
Robie promised to give a chef hat to Anthony. The
obligation of Robie in this example is immediately
demandable because his obligation is not subject to
any condition or period.
 KINDS
KINDS OF
OF OBLIGATION
OBLIGATION
2. CONDITIONAL OBLIGATION
The obligation is subject to a condition. It
is demandable upon the happening of the
condition.
Example:
Morris will give a set of kitchen utensils to Alphonse if the latter
will be able to finish his culinary course. This is a suspensive
conditional obligation. If Alphonse is able to finish his course, he
can now demand from Morris the set of kitchen utensils.
 KINDS OF
KINDS OF OBLIGATION
OBLIGATION
3. OBLIGATION WITH A PERIOD
Is an event which will certainly happen. Thus, the
happening or the arrival of the period gives rise
to an obligation or extinguishment of it.

Example:
Leonard promised to give Lizel a roundtrip ticket
for Hongkong on December 25,2016. Lizel may demand
the ticket on December 25, 2016.
 KINDS
KINDS OF
OF OBLIGATION
OBLIGATION
4. JOINT OBLIGATION
There are several debtors and one or more creditors, but each
debtor is only liable for his share of the debt and each of the
creditors to his share of credit. It is always presumed that the
obligation is JOINT.
Example:
X,Y, and Z need 90,000.00 pesos for their business. Hence, they
entered into a contract of loan with their friends A, B, and C. In
the contract of loan, X, Y, and Z agree that their obligation is
Joint, to be paid on April 15, 2014
 KINDS OF
KINDS OF OBLIGATION
OBLIGATION
5. SOLIDARY OBLIGATION
In this type of obligation, each of the debtors is liable for
the entire obligation and each of the creditors is entitled
to demand the satisfaction of the whole obligation from
any or all of the debtors.
The liability is SOLIDARY only when;
1. the obligation expressly so states,
2. the law so provides or when
3. the nature of the obligation so requires.
 CONTRACT
CONTRACT
Article 1305 states that "Contract is a meeting of
the minds between two persons, whereby one binds
himself, with respect to the other, to give something
or render some service."
contract is one of the sources of obligation; hence, if
the obligation in the contract was not performed, one
of the parties may have the right to sue the other.
 CONTRACT
CONTRACT
From the moment the parties concur or agree to the object,
price or the terms and conditions, the contract is perfected
except real contracts.

Contrary to some beliefs, the contract is not the paper.

The contract as stated is the meeting of the minds, while
the paper where the contract was written is called
instrument. The instrument is as a general rule the
evidence of the contract.
ESSENTIAL REQUISITES OF CONTRACT
Art. 1318. There is no contract
unless the following requisites
concur.
CONSENT
is manifested by the meeting of
the offer and the acceptance of
the thing and the cause, which
are to constitute the contract.
ESSENTIAL REQUISITES
ESSENTIAL REQUISITES OF
OF CONTRACT
CONTRACT

OBJECT
The object of the contract may be:

1. Things; or
2. Rights; or
3. Service
 RULES REGARDING
RULES REGARDING THE
THE OBJECT
OBJECT

1. The object of the contract must be within the commerce of

man. This means that the object is capable of appropriation.

2. The object must be lawful. (Thus, shabu, marijuana and other

contrabands cannot be the object of the contract).

3. Services as an object should not be contrary to law,

morals, good customs, public order, or public policy.

4. Intransmissible rights cannot be the object of the contract.

 CAUSE OR
CAUSE OR CONSIDERATION
CONSIDERATION

is an essential requisite of a contract;

the cause or consideration is the
reason why the parties entered into a
contract.
 FORMALITIES OF CONTRACT

As to the formalities, generally contracts

shall be obligatory in whatever form.
Contract may be made orally or in
writing as long the three essential
requisites are present.
 EXCEPTIONS OF THE RULE:
a. When the law itself requires that they be in some
particular form (writing) in order to make them valid
and enforceable (the so-called solemn contracts);

b. When the law requires to be proved by some

writing (memorandum) of its terms, as in those
covered by the Statute of Frauds, in Article 1403 (2)
of the Civil Code.
 STAGES OF
STAGES OF CONTRACT
CONTRACT
If the contract is in writing, the parties may use their
vernacular language. Any dialect can be used as long as
both parties understand the same.

1. Negotiation Stage or the Generation Stage

It begins from the time the prospective contracting
parties manifest their interest in the contract and
ends at the moment of agreement of the parties.
 STAGES OF
STAGES OF CONTRACT
CONTRACT
2. Perfection or Birth of the Contract
takes place when the parties agree upon the
essential elements of the contract.
3. After the bargaining or negotiation, the parties shall
determine whether to accept, the terms and conditions.
Once it is accepted then there is a contract (there is
already meeting of the minds). This is the stage where
the contract is perfected, and therefore, both parties
must comply.
 STAGES OF
STAGES OF CONTRACT
CONTRACT
4. Consummation/ Termination.

This is the stage where the contract is ended

because the parties have fulfilled with their
obligations.
CHARACTERISTICS OF
CHARACTERISTICS OF CONTRACT
CONTRACT
1. Mutuality of Contract.
The validity or performance or compliance of which
cannot be left to the will of only one of the parties.

2. Autonomy of Contract..
The contracting parties may establish such stipulations,
clauses, terms, and conditions as they may deem
convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy.
CHARACTERISTICS OF
CHARACTERISTICS OF CONTRACT
CONTRACT
3. OBLIGATORY FORCE
Contracts are perfected by mere consent, and from that moment the
parties are bound not only to the fulfilment of what has been
expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good faith, usage
and law."

Once the contract is perfected, the parties must faithfully observe

the terms and conditions established. Otherwise, a cause of action
for breach of contract will arise.
CHARACTERISTICS OF
CHARACTERISTICS OF CONTRACT
CONTRACT
4. Relativity of Contract.

This means that the contract entered into by the parties

are binding only between them, their heirs and assigns,
except in case where the rights and obligations arising
from the contract are not transmissible by their
nature, or by stipulation or by provision of law. The
heir is not liable beyond the value of the property he
received from the decedent.
DEFECTIVE CONTRACTS
DEFECTIVE CONTRACTS AND
AND THEIR
THEIR EFFECTS
EFFECTS

1. Rescissible Contracts.
Contracts which are rescissible are valid
contracts having all the essential requisites of
a contract, but by reason of injury or damage
caused to either of the parties therein or to
third persons are considered defective and, thus,
may be rescinded.
DEFECTIVE CONTRACTS
DEFECTIVE CONTRACTS AND
AND THEIR
THEIR EFFECTS
EFFECTS
2. Voidable Contracts.
Voidable means those contracts which are valid until
annulled.
Art. 1390. "The following contracts are voidable or annullable,
even though there may have been no damage to the contracting
parties:"
(1) Those where one of the parties is incapable of giving
consent to a contract;
(2) Those where the consent is vitiated by mistake,
violence, intimidation, undue influence or fraud.
DEFECTIVE CONTRACTS
DEFECTIVE CONTRACTS AND
AND THEIR
THEIR EFFECTS
EFFECTS
3. Unenforceable Contract.
A contract which cannot be enforced unless ratified, due to
any of the following reasons:
a. The contract was entered into in the name of another
person by one who has been given no authority or legal
representation, or who has acted beyond his powers.
b. The Contract did not comply with the Statute of Frauds. In
the Statute of Frauds, some transactions must be in writing to
effect its enforceability.
DEFECTIVE CONTRACTS
DEFECTIVE CONTRACTS AND
AND THEIR
THEIR EFFECTS
EFFECTS
3. UNenfORCEABLE CONTRACT

If these contracts were not in writing, the other

party may not sue the one who violated it before the
court.

c. Both parties are incapable of giving consent.20

DEFECTIVE CONTRACTS
DEFECTIVE CONTRACTS AND
AND THEIR
THEIR EFFECTS
EFFECTS

4. Void and Inexistent Contract.

It is equivalent to nothing and is absolutely wanting in

civil effects. It cannot be validated either by ratification
or prescription. But, although a void contract has no
legal effects even if no action is taken to set it aside,
when any of its terms have been performed, an action to
declare its inexistence is necessary to allow restitution
of what has been given under it.
DEFECTIVE CONTRACTS
DEFECTIVE CONTRACTS AND
AND THEIR
THEIR EFFECTS
EFFECTS
The following contracts are inexistent and void from the
beginning:
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;

DEFECTIVE CONTRACTS
DEFECTIVE CONTRACTS AND
AND THEIR
THEIR EFFECTS
EFFECTS
The following contracts are inexistent and void from
the beginning:
5. Those which contemplate an impossible service;
6. Those where the intention of the parties relative
to the principal object of the contract cannot be
ascertained; and
7. Those expressly prohibited or declared void by
law.
THANK YOOOOOOOUUUUUU !!!
Group 2
Abay-abay, jimberlyn
Magnanao, Judelysa
solis, me Rechelle
Tingal, Irish maeb
tubias, Gabriel