CHAPTER 2: Nature and Effects of Obligations
a family (Art.1163); (2) to deliver the accessions
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)
3 kinds of prestations in obligations:
To give real (there is some physical
thing which may be the subject of possession,
the delivery of which completely discharges the
obligation)
To do
Not to do personal (non-fulfillment is
resolved in the end by the payment of an
indemnification of damages)
Obligation to do or not to do
Perfection of the obligation devolves upon the
person himself who is bound
Obligation to give
Intimately connected with the thing that is the
subject matter of relation
Definition: That which has for its object the
delivery of a thing which the obligor must deliver
to the obligee because of whatever right the
latter may have acquired over the same
(Caguioa)
Classification:(distinction lies purely and
exclusively on the will of parties or under the
norms of law)
1. Specific obligation
- an obligation to give a specific or determinate
thing
*specific/determinate thing
- a thing determined individually in such a
manner that it cannot be substituted with
another
- object is particularly designated or physically
segregated from all others of the same class;
object is a concrete, particularized thing,
indicated by its own individuality (Jurado)
- one that is individualized and can be identified
or distinguished from others of its kind
(Tolentino)
- examples: white horse which won the Senior
Grand Derby in 1979, Samsung G600 G-660#1-
1G-6608>PC<
- the very same thing promised must be
delivered by the debtor and he cannot substitute
said thing with another although the substitute is
more valuable than that agreed upon unless the
creditor agrees to the substitution (Art. 1206
par.1)
- 3 accessory obligations (Note: only in
specific obligations): (1) obligation to take care
of it with the proper diligence of a good father of
and accessories although the same may not
have been mentioned (Art.1166); (3) to deliver
the fruits from the moment the obligation to
deliver arises (Art.1164)
2. Generic obligation
- has for its object a genus an object that is
determined only by the class to which it pertains
(incertum corpus)
- delivery of a thing belonging to a specie
stipulated, usually those which are fungible and
those which are determined by amount, number
or measure
- an obligation to give a generic thing
*generic/indeterminate thing
- the object is one whose determination is
confined to that of its nature to the genus to
which it pertains (Jurado)
- one that is indicated only by its kinds, without
being designated and distinguished from others
of the same kind (Tolentino)
- examples: ten white horses, Samsung G600,
Acer laptop
2 Purposes of obligations to give: (Caguioa)
1. To transfer title (e.g. contract of
sale or barter)
2. To transfer merely possessions
(commodatumArt. 1933, by the contract of loan,
one of the parties delivers to another, either
something not consumable so that the latter may
use the same for a certain time and return it, in
which case the contract is called a commodatum )
Other form of classifying obligations in general:
(Caguioa)
a. Positive- obligations which have for their object to
give or to do
b. Negative - restrains the obligor from delivering or
doing something which he could do where it not for the
obligation
Good father of a family (bonus pater familias)
general legal standard of care or degree of diligence
the law requires in obligation to deliver a thing
Circumstances that should be taken into
consideration in determining the degree of
diligence: (Caguioa)
nature of the obligation depending on the
circumstances of the debtor
nature of the obligation depending on the time of the
performance of obligation
1
 nature of the obligation depending on the place of the Reason/justification of the article: found in the
performance of the obligation corresponding liability of the creditor for any loss that
is occasioned to the property, since he bears the
Reason behind Art.1163: the obligation to deliver a same from the moment of the perfection of the
thing would be illusory if the debtor were not also obliged contract.
to preserve it. (Tolentino)
Effect of breach: Debtor who fails to exercise the Distinctions between personal and real rights
diligence of a good father of a family in preserving the Personal Right Real Right
thing can be held liable for damages. (Tolentino) power belonging to one - power belonging to a
person to demand of person over a specific
* Note: Art. 1163 can be read in conjunction with Art. 1173. another, as a definite thing, without a passive
passive subject, the subject individually
Art. 1164. The creditor has a right to the fruits of the fulfillment of a determined, against whom
thing from the time the obligation to deliver it arises. prestation to give, to do, such right may be
However, he shall acquire no real right over it until or not to do (Tolentino) personally exercised
the same has been delivered to him. (1095) jus ad rem right - jus in re right
enforceable only enforceable against the
General rule: The creditor or obligee, in an against a definite whole world (e.g. right of
obligation to deliver a determinate thing, is entitled to person or group of ownership, possession,
the fruits from the time the obligation to deliver persons usufruct, or easement)
arises.
Note:
*When does the obligation to deliver the thing Before delivery, the creditor, in obligations to give,
and the fruits arise? has merely a personal right against the debtor a
Obligations arising from Obligations arising from right to ask for delivery of the thing and the fruits
law, quasi-contracts, contracts
thereof; ownership does not pass to the creditor
criminal offenses, quasi- Once the things and fruits delivered, the creditor
delicts
acquires real right over such which is enforceable
From the time - General rule: from the against the whole world the creditor only acquires
designated by the moment of the perfection the right of ownership over the thing and the fruits
provisions of the Civil of contract (basis: once they are delivered to him.
Code or of special laws Art.15371)
creating or regulating Art. 1165. When what is to be delivered is a
them determinate thing, the creditor, in addition to the
right granted him by Article 1170, may compel the
Exceptions to the general rule: debtor to make the delivery.
1. In case there is a contrary stipulation of the
parties with respect to the time when the thing or If the thing is indeterminate or generic, he may ask
fruits shall be delivered. that the obligation be complied with at the expense
2. If the obligation is subject to a suspensive of the debtor.
condition obligation to deliver the thing as well
as the fruits shall arise only from the moment of If the obligor delays, or has promised to deliver the
the fulfillment of the obligation; otherwise stated, same thing to two or more persons who do not have
from the moment the condition happens the same interest, he shall be responsible for any
(Art.1187) fortuitous event until he has effected the delivery.
suspensive condition the happening or
fulfillment of the condition results in the birth of Rights of the creditor in determinate obligations:
the obligation 1. To compel specific performance
3. If the obligation is subject to a suspensive term Such action when the debtor does not comply
or period obligation to deliver arises only with what he has promised and the creditor
upon the expiration of the designated term or demands that he fulfill the same
period
The debtor may be compelled to make the
delivery of the very thing agreed upon
Complemented by Art. 1244 par.1 which states
1
Art.1537: The vendor is bound to deliver the thing sold and its that the debtor of a thing cannot compel the
accessions and accessories in the condition in which they were upon creditor to receive a different one, although
the perfection of the contract.
the latter may be of the same value as, or more
All the fruits shall pertain to the vendee from the day on
which the contract was perfected. valuable than that which is due.

2
 Implies that its basis is a contractual relation
between plaintiff and defendant (Tolentino)
2. To recover damages for breach of the obligation
Rights of the creditor in generic obligations:
1. To ask for performance of the obligation
the delivery of a thing belonging to the species
stipulated will be sufficient and hence, it is not
absolutely necessary for the debtor to make the
delivery himself, since the delivery of anything of
the same species will fulfill the obligation. It may
be performed by another, but at the expense of
the debtor. (substitute performance)
Creditor can only ask for the delivery of a thing
or object belonging to the class or genus
stipulated which must be neither of superior nor
inferior quality (Art.1246)
2. To ask that the obligation to be complied with at the
expense of the debtor
The creditor may ask a third person to perform
the obligation and all expenses incurred shall be
charged against him
3. To recover damages for breach of the obligation
Remedies available to Remedies available to
creditor in specific creditor in determinate
obligation obligation
1. to compel specific 1. to ask for the
performance performance of the
2. to recover damages for obligation
breach of the obligation 2. to ask that the obligation
to be complied with at the
expense of the debtor
3. to recover damages for
breach of the obligation
Note:
*Before the thing to be delivered is separated from
others of the same kind (and therefore the obligation
becomes specific), no accessory obligations arise since
the thing has not yet been made determinate; but once
the determination occurs the rules applicable to specific
obligations will immediately follow. (Caguioa)
Liability for fortuitous event
a. The classification of obligations into
specific and generic is of importance in the
determination of the liability of the debtor for
fortuitous event.
i. Specificthe creditors bear the
loss and deterioration of the thing through
fortuitous event so long as the debtor is not in
mora
ii. Genericthe creditor does not
bear the loss until the object of the prestation has
been individualized or made specific in
accordance with the principle genus perire non
censetur and consequently, impossibility of
performance by fortuitous event is not a possible
defense for the debtor.
3
 iii. Even if the thing is determinate,
and the loss occurs by fortuitous event and as a
general rule the creditor should bear the loss, still,
in those cases where the debtor is in mora, or
whose he has promised to deliver the same thing
to two or more persons who do not have the same
interest, which is equivalent to fraud since there is
present the deliberate intent not to deliver to one
of the two, the law, by way of punishment, shifts
the burden of loss to the debtor. (Caguioa)
Art. 1166. The obligation to give a determinate thing
includes that of delivering all its accessions and
accessories, even though they ma y not have been
mentioned. (1097a)
Accessionsthose things incorporated or
attached to the principal either naturally or
artificially (e.g., alluvion, buildings, constructions,
etc.)
Accessoriesthose things which although not
incorporated to the principal are added to the
same for its completeness, use, perfection or
embellishment (e.g., keys to a house, tools of a
car, etc)
Everything that is attached, naturally or artificially,
to the principal thing, as well as that which serves
to complete it, even if not attached to it, must be
delivered together with it.
Exception: When the parties agree to exclude
any accession or accessory of the thing.
Right by accession right corollary to ownership of
property which gives the owner the right to everything
produced by the property or which is incorporated or
attached thereto, either naturally or artificially. (Art.440)
Natural fruits spontaneous products of the soil and
the young and other products of animals (Art.442)
Industrial fruits produced by lands of any kind
through cultivation or labor (Art. 442)
Civil fruits rents of buildings, price of leases of lands
and other property and the amount of perpetual or life
annuities or other similar income (Art.442)
Summary:
Obligations of debtor in determinate obligations:
1. To perform the obligation specifically.
2. To take care of the thing with the proper
diligence of a good father of a family.
3. To deliver all accessions and accessories of the
thing even though they may not have been
mentioned.
4. To be liable for damages in case of breach of the
obligation by reason of delay, fraud, negligence
or contravention of the tenor thereof.
Obligations of debtor in generic obligations:
1. To deliver a thing which is neither of superior nor
inferior quality. (Art. 1246)
2. To be liable for damages in case of breach of the
obligation by reason of delay, fraud, negligence
or contravention of the tenor thereof.
Deducible from Art. 1263 which states that in an
obligation to deliver a generic thing, the loss or
destruction of anything of the same class or genus
as that which constitutes the object thereof shall
not extinguish the obligation (the genus of a thing
can never perish)
Dation in payment property is alienated to the creditor
in satisfaction of a debt in money
can be considered as that exception where
an obligor gives something in exchange of
the specific thing to be given, with the
consent of the obligee
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)
Obligations to do
- those obligations which have for their object a
prestation consisting of performing a certain activity,
physical or intellectual, distinct from that of the
delivery of a thing (Caguioa)
- difference from an obligation to give: obligee or
creditor does not possess the power to compel the
obligor to comply with his obligations
o reason: the law recognizes the
individuals freedom or liberty to choose
between doing that which he has
promised to do and not doing it.
General rule in obligations to do (or not to do): The
debtor must perform the act as promised and cannot
substitute the same with another act of forbearance,
unless of course with the consent of the creditor or in
case the obligation is facultative. (Art.1244, par.2)
Note: (from Caguioa)
The act to be performed is either very personal or
not.
4
 *if very personal - when the qualifications of the
debtor are involved; the debtor is the only one that must
perform it
*if not personal performance by an agent is
permitted (substitute performance)
Effects of breach
1. In positive personal obligations to do, if the
obligor fails to do that which he has obligated
himself to do, the obligee can have the
obligation performed or executed at the expense
of the former. (Art. 1167, par.2)
2. In case the debtor should have performed the
act agreed upon in contravention of the
agreement, or in a manner that is improper or
inappropriate, the same thing shall be ordered
undone and performed by another at the
expense of the debtor should he refuse to do it
all over again.
3. Obligee can also demand for damages by
reason of the breach. (Art. 1170)

In case of non-performance by the debtor, the

right of the creditor to exact fulfillment
encounters two difficulties: (Caguioa)
i. That violence cannot be exercised against
the person of the debtor for the purpose of
compelling him to perform the prestation.
ii. If the prestation is purely personal to the
debtor and consequently, cannot be performed by
any person other than him, execution by another
is not possible and will not lie.
***Hence, the only remedy is one of damage.

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)

Obligation not to do
- Negative personal obligations the object of the
obligation is realized or fulfilled so long as that
which is forbidden is not done by the obligor
(Jurado)
- those obligations whose object is the abstention
of the debtor from whatever act which otherwise
he could perform (Caguioa)
- This type of obligation carries with it no
accessory obligation and by its nature is purely
personal to the debtor and consequently, he
himself must abstain or refrain from performing
the conditions prohibited and cannot delegate the
same to an agent, except when there is consent
from the creditor.
- Delay or mora is NOT possible unlike in
positive obligations; obligation is either fulfilled or
not (Jurado)

General rule: The debtor must perform the act as

promised and cannot substitute the same with another
act of forbearance. (Art. 1244, par.2)

5

Effects of breach:
1. In case the debtor breaches the obligation, the
same shall be ordered undone at his expense.
(Art.1168)
2. In those cases where it is not possible to undo
the act done either physically or legally, or
because the rights of third persons are involved,
or for some other reason, the only feasible
remedy on the part of the creditor is an
indemnification for the damage caused.
(Art.1170)
Art. 1169. Those obliged to deliver or to do
something incur in delay from the time the obligee
judicially or extra-judicially 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)
Fulfillment of the obligation
Performance of the obligation or payment,
juridically speaking, presupposes the exact and
complete execution of the prestation on the
part of the debtor. (Caguioa)
Traditionally, performance or fulfillment of the
obligation has been expressed in the term
payment or solutio, which expression has
also the concept of extinction of the juridical
relation.
The Civil Code regulates fulfillment or payment
among the models of extinguishing obligations
Non-fulfillment/Breach of obligation:
Manner of non-fulfillment (Caguioa)
1. non-fulfillment properly speaking
- causes of non-fulfillment affect the very essence of
the obligation thereby rendering it impossible of
performance
2. defects in non-fulfillment
- those which, without fundamentally affecting the
tie of law nor rendering the performance thereof
impossible presupposes a defective or an inexact
performance of what was agreed upon
- example: mora or delay non-fulfillment in point
of time
OR (other classification of non-fulfillment according to
Caguioa)
1. total non-fulfillment no performance
whatsoever
2. partial non-fulfillment when there is partial
performance or irregular non-fulfillment when there is
irregular non-performance.
- non-fulfillment occurs either at the very moment of
the demand (ordinary breach) or before the maturity
of the obligation (anticipatory breach).
2 kinds of Breach of Obligations: (Jurado)
1. Voluntary if the debtor or obligor in the
performance of his obligation is guilty of default,
fraud, negligence, or in any manner contravenes
the tenor thereof; debtor is liable for damages
Voluntary breach through default or mora
(Art.1169)
Voluntary breach through fraud or dolo
(Art. 1171)
Voluntary breach through negligence or
culpa (Art. 1172)
Voluntary breach through contravention
of tenor of the agreement (Art. 1170)
2. Involuntary if the non-fulfillment is brought
about by circumstances foreign to the will of the
debtor (Caguioa); otherwise put, if the debtor is
unable to comply with his obligation because of
some fortuitous event; debtor is NOT liable for
damages (Art. 1174)
Default or Mora (1st kind of voluntarily breaching
obligation, a defect and partial non-fulfillment of
obligation)
covers all non-fulfillment in point of time in its
broadest sense; juridically, however, it pertains only to
culpable delay where fulfillment or compliance with the
obligation, although late, is still possible2 (Caguioa)
signifies the idea of delay in the fulfillment of an
obligation with respect to time (Jurado)
delay in the fulfillment of obligations; it is non-
fulfillment with respect to time (Tolentino)
2
Rationale: since if as a consequence of the delay the
possibility of the performance disappears, there is no more
mora or delay but total non-fulfillment properly speaking
(Caguioa)
6
 Classification of Mora:
Note: There can be delay ONLY in positive obligations (to do 1. Mora solvendi delay on the part of the debtor
and to give); but there can be NO delay in negative obligations a.mora solvendi ex re
- when demand by the creditor is not necessary to
make the debtor in mora (Caguioa)
- refers to obligations to give
b.mora solvendi ex persona
- if demand by the creditor is necessary in order to
make the debtor in mora (Caguioa)
- refers to obligations to do
2. Mora accipiendi delay on the part of the
creditor to accept the delivery of the thing which
is the object of the obligation (Jurado); generally,
delay on the part of the creditor
3. Compensatio morae delay of the parties or
obligors in reciprocal obligations; where mora of
the creditor neutralizes the mora of the debtor
(Caguioa)

3 requisites which should be present in order

that the obligor or debtor may be considered in
default (Jurado)3
o Obligation is demandable and already liquidated
o Obligor or debtor delays performance
o Creditor requires the performance judicially or
extra-judicially

Mora solvendi
the delay, contrary to law, in the fulfillment of the
prestation by reason of a cause imputable to the former
(Tolentino)
presupposes a prestation that is due and demandable
requisites: (Caguioa)4
o Obligation consists of a positive prestation (to do
or to give)
o Obligation should be demandable 5, due6,
determined or liquidated7
o Debtor delays in the performance due to causes
imputable to him
o Creditor should demand performance of the
debtor
When does the obligor incur in delay?
The obligor or debtor incurs in delay from the time the
obligee or creditor demands from him the fulfillment of
the obligation; the demand may be judicial or
extrajudicial

3
Caguioa and Tolentino specified the requisites according to the kind
of mora
4
Tolentino version: 3 requisites in order that the debtor may be in
default:
1. that the obligation be demandable and already liquidated
2. that the debtor delays performance
3. that the creditor requires the performance judicially or
extrajudicially
5
There is NO mora in natural obligations
6
Either because the obligation is pure or because the term has lapsed
or the condition has been fulfilled
7
Amount is ascertained
7
o judicial: if the creditor files a complaint against 2. when from the nature and the circumstances of
the debtor for the fulfillment of the obligation the obligation it appears that the designation of
o extrajudicial: if the creditor demands from the the time when the thing is to be delivered or the
debtor the fulfillment of the obligation either service is to be rendered was a controlling
orally or in writing (Jurado); sending of a bill or motive for the establishment of the contract
demand letter (Caguioa) basis: the time element for the fulfillment of the
Notes: obligation is of the essence of the contract
A mere reminder or any act which cannot be examples: (1) where a building was to be
qualified as a demand for payment will not be completed on a certain date because it was to be
considered a demand since the code requires opened as a school on a fixed date; (2) where goods
that the tolerance and benevolence of the were to be delivered on a specified date because
creditor has terminated (Castan as cited in they were to be loaded on a boat leaving on such
Caguioa) date
The proof of the demand will be incumbent
upon the creditor (Tolentino) Note: It is essential that the debtor has knowledge of
Demand is generally necessary even if a the fixing of the date of performance as a controlling
periof has been fixed in the obligation motive on the part of the creditor in order that it can
(Tolentino) be said that the debtor has tacitly consented to incur
Where there has been an extrajudicial in delay without the necessity of a demand.
demand before action for performance was (Tolentino)
filed, the effects of default arise from the date
of such extrajudicial demand. But where the 3. when demand would be useless, as when the
evidence does not disclose any particular date obligor has rendered it beyond his power to
on which the creditor made extrajudicial perform
demand upon the debtor, the payment of where performance has become impossible either
interest or damages for the default must through (1) some act or fault of the debtor or (2) as
commence from the filing of the complaint. that caused by fortuitous event but the debtor has
(Tolentino) bound himself to be liable in cases of such events.
The demand must refer to the prestation that
*Note: 4th instance when demand is not necessary
is due and not to another (Tolentino)
according to some authors (acknowledged by
Tolentino) when the debtor expressly recognizes
When demand is NOT necessary
or acknowledges that he has incurred in delay.
1. when the obligation or the law expressly so
There must, however, be an express recognition of
declares
the default and not merely requests for extension to
the obligation or the law itself must expressly
time to perform.
declare that the demand is not necessary in order
that the debtor shall incur in delay
Effects of mora solvendi:
example: in the obligation it is stipulated that, D
1. to indemnify the creditor for damages which his
shall incur in delay if he does not pay the obligation
delay has occasioned in obligations to give and
upon the arrival of the designated date for payment.
to do (Caguioa)
2. to answer for the loss or deterioration of the
*Notes:
thing due even if caused by fortuitous event
In case of doubt, the doubt should be resolved in
(Caguioa)
favor of the debtor, because dispensing with
3. When it has for its object a determinate thing,
demand is an exception to a general rule; unless
the delay places the risks of the thing on the
the exception is clearly proved, the general rule
debtor (Tolentino)
must apply. (Tolentino)
According to Art.1788 of the Civil Code, where
one of the partners who has undertaken to
Mora accipiendi
contribute a sum of money to the common fund
constitutes non-acceptance without reason (Caguioa)
at a specified date fails to do so, he becomes a
delay in the performance based on the omission by
debtor of the partnership not only for the amount
the creditor of the necessary cooperation, especially
which he has promised to contribute but also for
acceptance on his part (Tolentino)
the interest and damages from the time he
requisites: (Caguioa)8
should have complied with his obligation
(Jurado)
8
Tolentino version: 3 requisites in order that there be delay on the part
of the creditor:
1. an offer of performance by the debtor who has the required
capacity
8
 o That there exists an obligation which has
already matured and for whose fulfillment an act
of cooperation on the part of the creditor is
required
o That the debtor has performed al that is
incumbent upon him under the obligation and
made tender of payment to the creditor
o That the creditor refused to accept payment or
to cooperate in the fulfillment of the obligation
without any justifiable reason
When does the creditor incur in delay?
The creditor incurs in delay when the debtor tenders
payment or performance, but the creditor refuses to
accept it without just cause.
Effects of mora accipiendi:
1. it excludes the mora of the debtor and destroys
the effects of the latter (Caguioa)
2. it transfers the risk to the creditor for fortuitous
events which formerly belonged to the debtor
(Caguioa & Tolentino)
3. debtor can obtain his freedom from the
obligation by the consignation of the thing due,
and consequently, after consignation, his
obligation to pay interest is extinguished
(Caguioa & Tolentino)
4. the responsibility of the debtor for the thing is
reduced and limited to fraud and gross
negligence (Tolentino)
5. all expenses incurred by the debtor for the
preservation of the thing after the mora shall be
chargeable to the creditor (Tolentino)
6. creditor becomes liable for damages (Tolentino)
Compensatio morae
Reciprocal obligations those which are created or
established at the same time, out of the same cause,
and which result in mutual relationships of the creditor
and debtor between the parties.
- are conditional in the sense that fulfillment of an
obligation by one party depends upon the fulfillment of
the obligation by the other
General rule in reciprocal obligations: the
fulfillment by the parties should be simultaneous. Where
both are in default, their respective liability for damages
shall be offset equitably.
When does delay or mora begin?
Delay or mora begins from the moment the other
party fulfills or tenders fulfillment of his obligation in a
proper manner (Caguioa)); otherwise put,
delinquency commences when one of the
contracting parties fulfills his obligation and becomes
2. the offer must be to comply with the prestation as it should
be performed
3. the creditor refuses the performance without just cause
invested with power to determine the contract
because of failure on the part of the other to carry
out the agreement. (Tolentino)
How is demand made in reciprocal
obligations?
Demand is made in only one way and that is by
actual performance or tender of performance of the
obligation of the party claiming delay or default by
the other. (Caguioa)
Cessation of Effects of Mora
occurs in the following cases: (Caguioa version)
(1) through the will of the creditor as in the cases of
waiver of the payment of the due
indemnification, remission, extension of time,
and novation;
(2) by concession by the law of a time to fulfill to the
debtor (moratorium)
(3) when the creditor is also guilty of mora, in which
case, there occurs the neutralization of the mora
(compensation morae)
benefits arising from default or delay may cease
upon: (Tolentino version)
(1) renunciation by the creditor
a. express
b. implied when after the delay has been
incurred, the creditor grants an extension of time
to the debtor or agrees to a novation of the
obligation
(2) prescription
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)
enumerated herein are those kinds of voluntary
breaches of obligation: (1) through fraud; (2) negligence;
(3) delay; (4) contravention of the tenor of the obligation.
General rule: in cases where there is voluntary
breach of obligation, one of the rights of the creditor is to
ask for indemnification of damages under this article. 9
Notes:
Damages as used in the above provision
include any and all damages that a human being
may suffer in any and all manifestations of his
life: physical or material, moral or psychological,
mental or spiritual, financial, economic, social,
political and religious. (Tolentino)
9
This right is usually resorted to when other rights are not already
available to the creditor, for instance when a debtor acting in
contravention of the tenor of the obligation cannot physically undo what
he has done.
9
 Breach of contractual obligation entitles the
other party damages even if no penalty for such Distinctions between the deceit and malice:
breach is provided in the contract.
The responsibility for damages arising from non- Deceit Malice
fulfillment of a contractual obligation cannot be As to time Exists ahead of the Present only during
contractual the performance of
divided nor can it be extended to persons who
obligation, or at the a pre-existing
have nothing to do with the obligation (Tolentino) birth of the obligation
obligation
Contravention of the tenor of obligation (also another As to purpose Securing the Evading the normal
kind of voluntary breach of obligation or partial non- consent of the other fulfillment of an
fulfillment of obligation) party to enter into obligation
Any illicit act which impairs the strict and faithful the contract
fulfillment of the obligation or every kind of defective As to result Vitiation of consent Non-fulfillment or
performance. of the party upon breach of the
example: an architect who made plans that contain whom it is obligation
employed for
defects and inadequacies which led to the collapse of
entering into the
the building contract
As to rights that Gives rise to a right Gives rise to a right
arise of the innocent of the creditor or
Art. 1171. Responsibility arising from fraud is party to ask for the obligee to recover
demandable in all obligations. Any waiver of an annulment of the damages from the
action for future fraud is void. (1102a) contract if the fraud debtor or obligor
is causal or to
Fraud or Dolo recover damages if
it is incidental
voluntary execution of a wrongful act, or a willful
omission, knowing and intending the effects which
naturally and necessarily arise from such act or What type of fraud is contemplated under
omission. (Tolentino) Art.1171?
consists in the conscious and intentional proposition The fraud referred to in this article is malice or bad
to evade the normal fulfillment of the obligation (Jurado) faith.
2 kinds:
Malice or bad faith
a. Deceit10 any voluntary and willful act or omission which
- Exists in the celebration of contracts prevents the normal realization of the prestation,
- Can only exist in contracts and precedes knowing and intending the effects which naturally and
or is simultaneous with the celebration of necessarily arise from such act. (Tolentino)
the contract Manresa: deliberate and intentional purpose to evade
- Results in a vitiation of consent and a the normal compliance of an obligation (as cited in
possible annulment of the same Caguioa)
b. Malice or bad faith Castan: an act or omission which with awareness and
- Exists in the fulfillment of obligations will to produce an anti-judicial result, prevents the normal
- Requires that there be a pre-existing compliance of an obligation (as cited in Caguioa)
obligation the fulfillment of which is 2 essential elements: (Caguioa)
tainted with bad faith or malice i. Intellectual awareness (conciencia)
- Since there exists already in obligation, ii. Will (desire to violate a right of credit, voluntad)
there is no question of annulment and the
remedy granted by law is indemnification * Is the intention of the violator determined by the motive
for damages which impelled him to commit the act essential for
malice or bad faith?
Modern doctrine says that the motive or intention is
irrelevant in civil law. As Diaz Pairo says, there is a
distinction between a debtor in good faith and a debtor
because of dolo which consequently makes the latter a
10
debtor in bad faith. For malice or bad faith to exist, it is
This type of fraud is that which is contemplated in Art.1338 which
sufficient to infringe voluntarily the obligation which falls
stipulates: There is fraud when, through insidious words or
machinations of one of the contracting parties, the other is induced to over the debtor consciously, or with his awareness.
enter into a contract which, without them, he would not have agreed (Caguioa)11
to. (Manresa as cited in Tolentino)
11
In other words, the intention or motive of a debtor in malice is always
Deceit is referred to by Jurado as causal or incidental fraud (dolo irrelevant. It always implies some kind of malice or dishonesty. As
causante or dolo incidente such, it cannot cover cases of mistake and errors of judgment made in
10
 c. Most important classification14
Responsibility for malice or bad faith:
For the consequences of his malicious
act, the debtor is liable not only for the results
intended but also for their natural and probable
consequences even though they havent been
foreseen by the debtor or they exceeded its
intention
This responsibility for malice or bad faith
is demandable in all kinds of obligations but it is
necessary that it must be proved and not simply
presumed and results in an aggravation of the
damages that are recoverable
Waiver of action for malice or bad
faith:
o if in advance, i.e. a waiver for a fraud which
has not yet been committed void;
prohibited because it is against law and public
policy
o if past, i.e. a waiver for a fraud already
committed valid; is deemed an act of
generosity on the part of the creditor
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)
i. Culpa contractual
fault or negligence in the performance of a pre-
existing contractual obligation resulting in a breach
of obligation (Caguioa & Tolentino)
fault or negligence of the obligor by virtue of
which he is unable to perform his obligation arising
from a pre-existing contract because of the
omission of the 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 (Jurado)
ii. Culpa extra-contractual or
aquiliana
failure to observe the care required by law with
respect to other persons not connected by
contract or of any juridical relation whatsoever
save the generic one which is common to all men
of not damaging another (Caguioa)
fault or negligence of a person, who, because
of the omission of the diligence which is required
by the nature of the obligation and which must
correspond with the circumstances of the persons,
of the time and of the place, causes damage to
another. (Jurado)
fault or negligence which constitutes an
independent source of obligation between parties
not previously bound. (Tolentino)

Culpa or fault or negligence Distinctions between culpa contractual and culpa

consists in the omission of that diligence which is aquiliana:
required by the nature of the obligation and corresponds
with the circumstances of the persons, of the time and of CULPA CONTRACTUAL CULPA AQUILIANA
the place (Art. 1173) There is pre-existing None.
omission of that diligence required in social relations contractual relation
which if observed would have prevented the contrary The negligence of the The negligence involved is
and undesired result (Caguioa) defendant is merely an substantive and
simply the absence of due care required by the nature incident in the performance independent.
of the obligation (Jurado) of an obligation
Kinds/classes:12 Source of liabilitybreach Source of liability
a. According to form or non-fulfillment of the negligent act or omission
i. Culpa in faciendo (positive act) contract itself
ii. Culpa in non faciendo (omission) There is presumption of Plaintiff must prove the
negligence from the existence of negligence
b. According to degree of culpa / diligence13 breach of the contract
i. Culpa lata (grave which is the omission of The master cannot exempt The master is free from
the most minimum diligence) himself by proving due liability upon proof of such
ii. Culpa leve (omission of the diligence of an diligence in the selection diligence
ordinary layman or bonus pater familias) and supervision of
iii. Culpa levissima (omission of the employee
maximum diligence of a very careful man) Damages may be claimed A stranger may claim
only by the parties, their damages such as the
good faith. (Tolentino & Jurado) The element of intent, and not the
degree of actual harm done is the test. (Tolentino) heirs and privies relatives and dependents
12
This classification is patterned after Caguioas. Negligence referred to in Negligence referred to in
13
The Civil Code follows the modern tendency admitting of no
Art.1173 Art. 217615
degrees of culpa but sets up a standard of diligence in that of a good
father of a family, saving agreement to the contrary, and leaving it to
the courts either to moderate or aggravate the responsibility of a 14
According to Jurado, negligence may either be criminal or civil.
person guilty of culpa depending on the circumstances Culpa aquiliana and culpa contractual are the two kinds of civil
negligence.
11
 Exemptions from liability:
Negligence distinguished from fraud (1) in which a party to a contract is relieved from the
There is malice or dolo when there is effects of his fault or negligence by a third
non-fulfillment due to a cause of which the person
debtor is aware; there is actual knowledge (2) in which one party to a contract renounces in
There is culpa when there is non- advance the right to enforce liability arising from
fulfillment due to a cause which the debtor the fault or negligence of the other.
could or ought to have foreseen; there is
possibility of knowledge Notes:
There is fortuitous event when there is Test of negligence: If the defendant in doing
non-fulfillment for causes which the debtor the alleged negligent act DID NOT use the
could not foresee and could not have reasonable care and caution which an ordinarily
avoided; there is total absence or prudent person would have used in the same
possibility of knowledge situation, he is guilty of negligence.
Distinguishing element of fraud from Waiver of action for negligence:
negligence: INTENTION o Future negligence can be waived, unless
presence of intent to cause damage or the nature of the obligation and public policy
injury dolo should require extraordinary diligence; or if
mere abandonment, inattention, the negligence is so gross that it amounts to
carelessness, lack of diligence culpa malice or bad faith
o Past negligence all the more valid
Effect of good/bad faith
Dolo (malice) Culpa(Fault or o If the obligor has acted
negligence) in good faith, he shall be liable only for
The guilty party is The guilty party is not natural and probable consequences of the
aware that his conduct aware but should have breach of the obligation and which the
will violate another been aware parties have foreseen or could have
right or duty reasonably foreseen at the time the
There is no There is presumption obligation was constituted.
presumption of its because of breach of o If the negligence of the
existence but it must contract obligor shows bad faith, provisions of Arts.
be proved 1171 and 2201, par.216 shall apply. It is in
The guilty party is The guilty party only this case that the boundary line, at least with
responsible for all the answers for the regard to effects, between negligence and
consequences damages which are fraud disappears altogether; otherwise put,
attributable to his act foreseen or could have when negligence shows bad faith the rules
whether intended or been foreseen at the on fraud or dolo shall govern.
not or foreseen or not time the obligation was Effect of contributory negligence: If there was
constituted contributory negligence of the obligee or
Waiver in advance is Allowable unless creditor, the effect is to reduce or mitigate the
not allowed contrary to public damages which he can recover from the obligor
policy or debtor as a result of the breach of the
obligation. BUT, if the negligent act or omission
Responsibility for fault or negligence: of the obligee or creditor was a proximate cause
If the debtor or obligor is unable to comply with of the event which led to the damage or injury
his obligation because of his fault or negligence, complained of, he cannot recover. (Jurado)
the creditor or obligee can hold him liable for
damages.
The liability arising from negligence in the
performance of every kind of obligation may be Art. 1173. The fault or negligence of the obligor
regulated by the courts. The court may increase consists in the omission of that diligence which is
or decrease the liability of the party at fault required by the nature of the obligation and
depending upon the circumstances of each corresponds with the circumstances of the persons,
case. of the time and of the place. When negligence shows
bad faith, the provisions of Articles 1171 and 2201,
15
Art. 2176: Whoever by act or omission causes damage to another,
paragraph 2, shall apply.
there being fault or negligence, is obliged to pay for the damage done.
16
Such fault or negligence, is there is no pre-existing contractual relation Art. 2201, par.2: In case of fraud, bad faith, malice or wanton
between the parties, is called a quasi-delict and is governed by the attitude, the obligor shall be responsible for all damages which may be
provisions of this Chapter. reasonably attributed to the non-performance of the obligation.
12

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)
General degree of diligence required:
When neither the law nor the obligation itself states
the degree of diligence required of the obligor or debtor
in the performance or fulfillment of the obligation, the
standard diligence required is that which would be
observed by a good father of a family.
Exceptions:
1. when the parties stipulated another degree of
diligence required
2. when the law requires a higher degree of diligence
- example: common carriers (Art.1733, par.1)17
good father of a family (bonos paterfamilias)
a person of ordinary or average diligence
Notes from class:
3 quantum of diligence:
1. extraordinary diligence
2. diligence of a good father of a family (DOAGFOAF)
general degree of diligence expected of an owner of a
property
3. simple diligence
Summary of remedies available to the creditor in
cases of non-fulfillment:
Remedies of creditor for non-fulfillment
The creditor may either demand specific performance
and where it is not possible, equivalent or substitute
performance:
a. Remedies in obligations to give:
The creditor could obtain the same through
the exercise of the action known as specific
performance. If the obligation is to deliver a
generic or indeterminate thing and the same
is within the patrimony of the debtor, again
the creditor may demand for specific
performance.
In other cases, the creditor may demand
that the obligation be performed at the
expense of the debtor, which means to say
that the thing will be acquired at the expense
of the debtor if that is possible and later on
17
Art.1733, par.1: Common carriers, from the nature of their business
and for reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all circumstances of
each case.
delivered to the creditor (substitute
performance)
Requisites for substitute performance:
There be non-fulfillment of the obligation either
totally or partially whether non-performance or
mere delay, and the same is imputable to the
debtor
Specific performance is not possible
There exists a compensable damage or injury
There is a casual relation as of cause and
effect between the non-fulfillment of the
obligation and the damage done. The
indemnification for damages covers both the
injury suffered (damnum emergens or dao
emergente) and the loss of profits (lucrum
cesans or lucro cesante)
b. Remedies to obligation to do:
When it treats of obligations that are not of
obligations that are not personal and
therefore can be performed by anybody,
performance in the specific manner can be
demanded not by the debtor himself, but by
other persons at the expense of the debtor
(substitute performance). This same rule will
apply where the debtor has performed the
act in contravention of the obligation in
which case what has been done will be
ordered undone and done according to the
obligation, all at the expense of the debtor.
When it treats of very personal obligations
which only the debtor can perform with utility
to the creditor as for example a work of art, it
is not possible to demand specific
performance and is substituted by
performance by equivalent or
indemnification for damages. Where the
obligation requires the declaration or
performance of a voluntary act by the
debtor, modern doctrine admits of specific
performance in such cases, substituting the
will of the debtor with that of the judge.
c. Remedies in obligations not to do:
The creditor may ask that the same be
undone at the expense of the debtor
Where above is not possible legally or physically, the
only alternative is performance by equivalent or
damages.
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)
13

Fortuitous Event
an event which could not be foreseen, or which,
though foreseen, was inevitable.
includes unavoidable accidents, even if there has
been an intervention of human element, provided fault or
negligence cannot be imputed to the debtor. (Tolentino)
Negative Def: that incident not imputable to the debtor
which impedes the exact fulfillment of the obligation.
(Caguioa)
Positive Def: event not imputable to the debtor which
is unforeseen or although foreseen is inevitable and
which renders impossible to exact fulfillment of the
obligation (Caguioa)
may be:
As to cause
a. fortuitous event proper
or that which is caused by an act of God
examples: earthquakes, floods, storms,
epidemics, fires, etc.
b. force majeure
where there is human intervention
-- examples: armed invasion, attack by robbers,
attack by bandits
*Note: Essentially, there is NO substantial difference
between the two, they both refer to an event or
cause which is independent of the will of the obligor.
As to foreseeability18
a. ordinary fortuitous event
- refers to an event which usually happens
or which could have been reasonably
foreseen
- example: tropical storms, floods
b. extraordinary fortuitous event
- refers to an event which does not usually
happen and which could not have been
reasonably foreseen
- examples: fire, war, pestilence, unusual
flood (Ondoy), locust, earthquake
characteristics/requisites:
(1) the cause of the unforeseen and unexpected
occurrence, or the failure of the debtor to
comply with his obligations, must be
independent of the human will
(2) it must be impossible to foresee the event which
constitute the caso fortuito, or if it can be
foreseen, it must be impossible to avoid
o possibility of foreseeing the event
should be appreciated rationally
according to the circumstances
o inevitableness of the event varies
according to the case and
circumstances and must have a relation
with the means of the debtor and
therefore with the degree of diligence he
should have exercised.
18
According to Caguioa, this classification must be based on the
frequency of the occurrence.
(3) the occurrence must be such as to render it
impossible for the debtor to fulfill his obligation
in a normal manner
(4) the obligor must be free from any participation in
the aggravation of the injury resulting to the
creditor
Effects of fortuitous event on liability:
General rule: The effect of fortuitous event is to
exempt the debtor from liability for the non-
fulfillment of the obligation and to the payment of
damages to the creditor. His obligation is
extinguished.
Exceptions:
b.The law expressly so provides as in the case of
aleatory contracts
example: Arts. 552, par.219
c. The parties expressly so stipulated
d.The nature of the obligation requires the
assumption of risk as in the case of insurance
contracts
Assumption of risk
refers to a situation in which the obligor or
debtor, with full knowledge of the risk voluntarily
enters into some relation with the obligee or
creditor
- ordinarily requires knowledge and the
appreciation of the risk and the voluntary choice to
encounter it.
- doctrinal basis: no wrong is done to one who
consents (volenti non fit injuria)
- based on social justice; it is based on an ethico-
economic sensibility of modern society, which has
noted the injustices which industrial civilization has
created
e.The debtor is guilty of dolo, malice or bad faith
as when he promises to deliver the same thing
to two or more persons who do not have the
same interest (Art. 1165, par.3)20
f. The debtor is already in mora at the time the
fortuitous event happens
g.The liability arises from a criminal act unless the
loss occurs after the debtor tendered the thing to
the creditor and the creditor refused to accept
the same without justifiable cause. (Art. 1268)21
19
Art.552, par.2: A possessor in bad faith shall be liable for
deterioration or loss in every case, even if caused by a fortuitous
event.
20
Art. 1165, par.3: 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 fortuitous event until he has
effected the delivery.
21
Art. 1268: When 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.
14

Notes:
In order that a fortuitous event may exempt a person
from liability, it is necessary that he be free from any
previous negligence or misconduct by reason of
which the loss may have been occasioned.
(Southeastern College Inc. vs. CA); otherwise put,
the fortuitous event must not only be the proximate
cause of the loss or destruction, but that it must be
the SOLE cause.
Basis: If a debt produces interest, payment of the
principal shall not be deemed to have been made until
the interests have been covered. (Art. 1253)
Par. 2 If the debtor is issued a receipt by the creditor
acknowledging payment of a latter installment of a
specified debt without any reservation with respect to
prior installments, there also arises a disputable
presumption that such prior installments have already
been paid. (This rule is in conformity with the rule stated
in Rule 131, Sec.5, subsec. (i) of the New Rules of
Court.)22

Art. 1175. Usurious transactions shall be governed
by special laws. (n)
Usury contracting for or receiving something
excess of the amount allowed by law for the loan
forbearance of money, goods or chattels; the taking
more interest for the use of money, goods or chattels
credit than the law allows.
The special laws referred to are the Usury Law
(Act. No. 2655) and the different laws amending it.
Usury Law provided for a legal rate interest of 6%
per annum and a contractual rate not exceeding
12% per annum if the loan is secured by a duly
registered real estate, and 14% if not so secured.
Usury Law was repealed during the martial law
period, leaving parties free to stipulate higher
rates.
There is now no longer any ceiling in interest rates
on loans pursuant to Central Bank Circular No.
224 issued last Dec.1, 1982.
Estoppel (Art. 1431, Civil Code) a condition or state
by virtue of which an admission or representation is
rendered conclusive upon the person making it and
in cannot be denied or disproved as against the person
or relying thereon.23
of
or
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)
2 distinct aspects/elements of an obligation:
(Caguioa)
Debtor
Guaranty/responsibility duty of the debtor to
answer for his obligation with his entire patrimony

Rights of creditors in satisfying their claims against

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)
The presumptions enunciated in the above provision are
rebuttable and not conclusive
2 presumptions stipulated by Art.1176:
Par. 1 If the debtor is issued a receipt by the creditor
and on the face of the receipt it is shown that the
principal has been paid without any reservation with
respect to the interest, there arises a disputable
presumption that the interest has also been paid.
the debtor:
(1) to levy by attachment and execution upon all the
property of the debtor, except such as are
exempt by law from execution
exhausting the property in possession of the
debtor
For the fulfillment of the obligation of the debtor
responds with all his property present and future.
All the property of the debtor is answerable for the
obligation not only those properties existing at the
time of birth of the obligation but also all those which
later on become or form part of the patrimony of the
debtor.
in conformity with Art. 2236 of the Civil Code
which states that the debtor is liable with all his
property, present and future for the fulfillment of his
obligations subject to the exemptions provided by
law.
22
Sabi ni Jurado
23
Rationale: Estoppel applies perhaps because when one already
benefited from a certain act, he is already precluded to question the
same. (Not so sure of this)
15

(2) to exercise all the rights and actions of the
debtor, except such as are inherently personal
to him
creditor being subrogated to all of the rights and
actions of the debtor save those which are inherent
in his person
subrogatory action
Subrogatory action
the remedy granted by law to creditors who cannot in
any other way recover their credit to exercise the rights
and actions not used by the debtor and which are not
inherent in his person. (Caguioa)
the action which the creditor may exercise in the
place of his negligent debtor in order to preserve or
recover the patrimony of the debtor the product of such
action, and then obtain therefrom the satisfaction of his
own credit (Tolentino)
Characteristic: indirect & independent => because
the creditor cannot in his own name file the action but in
the name of the debtor
Requisites/Conditions:
The creditor has a right of credit against the
debtor although at the moment it is not
liquidated
The credit must be due and demandable
Failure of the debtor to collect, or inaction of the
debtor, whether the same be willful or negligent
Insufficiency of the assets in the hands of the
debtor although the creditor need not bring a
separate action to show this exhaustion or
insolvency of the debtor but he can prove the
same in the very action to exercise the
subrogatory action
The right and actions are not purely personal or
inherent in the person of the debtor
rights that are purely
personal or inherent of the debtor:
o right to existence (support)
o rights or relations of a public character
o rights of an honorary character
o rights consisting of powers which have not
been used, including: (a) power to
administer; (b) power to carry out an
agency or deposit; (c) power to accept an
offer for a contract
o non-patrimonial
rights24
o patrimonial
rights not subject to execution25
o patrimonial
rights inherent in the person of the
debtor26
Other actions that cannot be subject of a
subrogatory action:
Mere options and powers of
the debtor such as the power to exercise legal
redemption or to revoke a stipulation pour autri
Properties exempt from
execution such as those mentioned in section
12, Rule 39 of the New Rules of Court, the
family home, etc.
Effects of subrogatory action
The creditor may exercise the subrogatory
action in behalf of the debtor not only up to the
amount of his credit but in its totality. However,
the excess over and above the credit or the
damage must be returned to the debtor
The bringing of the action does not entitle the
creditor to preference; hence, any other creditor
may avail of himself of the credit collected
except when the suing creditor attaches the
debtors credit or the judgment that is obtained.
The debtor of the debtor, may avail himself of all
defenses available against the creditor.
Note: The law in certain cases gives to the creditor a
direct action, an action by the creditor in his own name
but directed against the name of his debtor. (Caguioa)
Examples:
- action of the lessor directly against the sublessee
- action of the laborers of the independent contractor
against the owner
- action of the vendor a retro against the transferees of
the property made by the vendee
- action of the creditor to utilize the defense of
prescription although waived by the debtor either tacitly
or expressly.
(3) to ask for the rescission of the contracts made
by the debtor in fraud of their rights
to impugn all of the acts which the debtor may
have done to defraud the creditor
accion pauliana or action to declare absolute
simulation of transfer
Note: Accion subrogatoria and accion pauliana are
known as acts of preserving the patrimony of the
24
E.g. action to establish the debtors status as a legitimate/illegitimate
child, action for legal separation or annulment of marriage
25
E.g. right to a government gratuity or pension
26
E.g. right to revoke a donation by reason of ingratitude, right to
demand the exclusion of an unworthy heir
16
debtor since the guaranty of the obligation with the
patrimony of the debtor may be rendered useless
simply by omission or inaction on the part of the
debtor by failing to collect his credits or by positive
acts, such as by fraudulently transferring his
property to other persons. (Caguioa)
Rescissory action (action pauliana)
a remedy granted by law to creditors who cannot in
any other way recover their credit to impugn (rescind)
the acts which the debtor may have done to defraud
them (Caguioa)
refers to the right available to the creditor by virtue of
which he can secure the rescission of any act of the
debtor which is in fraud and to the prejudice of his rights
as a creditor. (Jurado)
character: subsidiary
principle from which its based: the property of the
debtor, whether present or future, stands as a guaranty
for the payment of the obligation or credit
can only be availed of in the absence of any other
legal remedy to obtain reparation for the injury.
requisites:
There exists a credit in favor of the plaintiff
The debtor has performed an act or contract
subsequently which is beneficial to a third
person giving him an economic advantage
The creditor is prejudiced by the disposition in
favor of the third person and that the rescission
of the same would benefit the creditor
The creditor has no other legal remedy to obtain
payment of his credit
The act impugned is fraudulent although said
fraudulent intent may be presumed in certain
cases
The one who acquired the property was in
complicity with the fraudulent intent or bad faith
of the debtor.
effects:
The fraudulent transaction is rescinded and
consequently it obliges him who has acquired the
thing to return the same
If the third person who acquired acted in bad faith;
that is, the knowledge of the fraud, and he cannot
return for any reason the things alienated, as for
example, when the same are in the hands legally
of third persons who did not act in bad faith, he is
obliged to indemnify the creditors for the damage
which the alienation may have caused them.
The action can only lie as far as the credit of the
plaintiff-creditor and consequently only those
alienations necessary to satisfy his credit.
Distinctions between subrogatory and rescissory
actions
Rescissory Subrogatory
The credit must exist The credit need not exist
before the fraudulent before the action.
act.
In onerous contracts, Malice or fraudulent intent on
fraudulent intent is the part of the debtor is not
necessary although the necessary.
same may be
presumed.
Must be brought within Has no prescriptive period
4 yrs from discovery
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 Action to declare absolute simulation of transfer
a remedy available on the part of the creditor
against the debtor who, knowing that he cannot pay
his debt, or not wishing to pay his debt and not
wishing his property to answer for the debt, will
simulate a fictitious transfer to a third person in order
to have the property beyond the reach of the
creditors.

Distinctions between rescissory action and

action to declare absolute simulation of transfer

Rescissory Action Action to declare

inexistent a fictitious
transfer of property
(absolute simulation)
The alienation by the The alienation is fictitious
debtor is real and not and apparent
fictitious
Fraud actual or Not necessary
presumed must exist.
Action is subsidiary Action is principal
Only lies as far as is Covers the entire
necessary to cover the alienation
credit of creditor
Prescribes within 4 yrs Does not prescribe

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)

General rule: Rights of obligations or those rights

which are acquired by virtue of an obligation are as a
general rule transmissible in character they may be
alienated or assigned to third persons.
Exceptions:
(1) where they are not transmissible by their very
nature (personal right)
(2) where there is a stipulation of the parties that they
are not transmissible
(3) where they are not transmissible by operation of
law

Note: Intransmissibility by stipulation of the parties,

being exceptional and contrary to the general rule,
should not be easily implied, but must be clearly
established, or at the very least, clearly inferable from
the provisions of the contract itself. (Jurado)

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