Chapter 2 -Nature and Effect of Obligations

> Deals with the obligations related to giving or delivering a specific or determinate thing. 

SPECIFIC OR DETERMINATE THING 

• Is uniquely identified or physically separated from others of the same class. For example, a specific car model or a particular sum of money. 

• Identified by their individuality, and the debtor cannot substitute them without the creditor's consent. Generic things are identified only by their type, allowing some flexibility in what can be delivered. 

GENERIC OR INDETERMINATE THING 

• Refers to a class or type of item that cannot be pointed out with specificity. For example, any watch of a certain brand or any car from a specific manufacturer.

•  Identified by specie

• Can give anything of the same class as long as it is of the same kind. 

Duties of debtor to give a specific or determinate thing 

> Include preserving the item, delivering its fruits, accessions, and accessories, and ultimately delivering the thing itself, along with potential liability for damages in case of non-fulfillment. 

1. Preserve or take care of the thing

• Incidental duty to take care of the thing with the diligence of a good father of a family.

a.) Diligence of a good father of a family

> An ordinary care

> An average person exercises over his own property.

b.) Another standard of care

> It is slight or more diligence be presented in caring the thing

c.) Factors to be considered

> Depends upon the nature of the obligation and corresponds with the circumstances of the person, of the time and of the place.

> Debtor is not liable if his failure to preserve the thing is not due to his fault or negligence but to fortuitous event or force majeure.

d.) Reason for debtor's obligation

> When someone owes something to another person, they have to make sure it stays in good shape until they give it. If they don't take care of it and it gets lost or broken, they can't just say they're sorry and not give it. They still have to give what they owe.

2. Deliver the fruits of the thing

3. Deliver the accessions and accessories

4. Deliver the thing itself

5. Answer for damages in case of non-fulfillment or breach

Duties of debtor in obligation to deliver generic thing 

The debtor must deliver an item of the quality intended by the parties considering the purpose of the obligation. The debtor is also liable for damages in cases of fraud, negligence, delay, or contravention of the obligation's terms/tenor.

1. To deliver an item necessitates that it meets the mutually agreed-upon quality standards, taking into account the purpose of the commitment and any relevant circumstances.

2. To be legally responsible for compensating someone due to fraud, negligence, delayed performance of an obligation, or breaking the terms of the agreement.

Note:

• When it comes to taking care of the thing due, the general standard is the "diligence of a good father of a family," equivalent to ordinary care. However, other standards may apply by law or agreement, such as extraordinary diligence for common carriers or heightened care for banks. The required diligence depends on the nature of the obligation and the circumstances of the person, time, and place. The debtor is generally not liable if the failure to preserve the thing results from fortuitous events or force majeure.

Case: 

Edith borrows a specific book from a friend, Karina. As the borrower, Edith is obliged to take care of the book with the diligence of a good father of a family. If Edith damages the book due to negligence, she may be responsible for its repair or replacement. However, if Edith borrows a generic item, like a book from a specific genre, her obligation is to return a book of similar quality, and she is still liable for any damage caused by her negligence or failure to meet the agreed-upon quality standard. 

> It discusses the creditor's right to the fruits (products or benefits) of the thing owed from the moment the obligation to deliver the thing arises. However, the creditor does not acquire real ownership over the thing until it is actually delivered.

> The intention behind this provision is to protect the creditor's interest in case the debtor causes delay in fulfilling the obligation.

Different Kind of Fruits 

Fruits mentioned by the law encompass natural, industrial, and civil fruits.

1. Natural fruits

> Are the spontaneous products of the soil, and the young and other products of animals (e.g., crops, grass).

2. Industrial fruits

> Are those produced by lands of any kind through cultivation or labor (e.g., crops grown through farming).

3. Civil fruits

> Are those derived by virtue of a juridical relation (e.g., rents, lease payments).

Right of Creditor to the Fruits 

• The creditor is the one who is entitled to the fruits to be delivered.

• The law aims to safeguard the interests of the person owed something (obligee) in case the person who owes (obligor) intentionally or unintentionally causes a delay in meeting their obligation.

• The creditor has the right to the fruits starting from the time the obligation to deliver the thing arises, even before actual delivery.

When Obligation to Deliver Fruits Arises 

1. The obligation to deliver arises generally from the time the contract is perfected (when there is an agreement between the parties).

2. If the obligation is subject to conditions or periods, the right to fruits may depend on fulfilling those conditions or the arrival of the period.

3. If it is a sale, the obligation arises upon perfection of the contract, even if it's subject to conditions or periods, provided the price has been paid.

4. For obligations resulting from law, quasi-contracts, delicts, and quasi-delicts, the time of performance depends on specific legal provisions.

Meaning of personal right and real right 

This article distinguishes between personal rights (rights enforceable against a specific person) and real rights (rights related to specific things, such as ownership). 

Personal Right:

• Arise from agreements and are binding on specific parties.

• Personal rights are like having the power to ask someone to do something for you or give you something they owe. It has an enforceable right you have against a specific person.

Real Right:

• Relate to ownership or possession of things and are enforceable against the whole world.

• Real right is when you have a special right or interest in something, like owning it, having it in your possession, or using it as collateral for a loan. This right is connected to a specific thing and doesn't depend on a particular person.

Ownership acquired by delivery

• When you want to own something or have special rights over it (like using it as collateral for a loan), you usually need to do more than just agree with someone about it.

• In a sale, for example, just talking about what you're buying isn't enough. You also need to actually get the thing, either by physically receiving it or having a legal right to it.

• The phrase "he shall acquire no real right over it until the same has been delivered to him" means you don't truly become the owner or get those special rights until you've actually received the specific thing.

• So, if you haven't received the thing yet, and there's a problem, you don't go to court to claim ownership or possession. Instead, you go to court to make sure the other person either gives you the thing (specific performance) or cancels the deal (rescission).

Note: 

• In case of rescission of a contract, both the thing and its fruits must be returned.

Case:

Hannah lent her friend, Jasmin, a car for a year. During that year, Jasmin has the right to use the car and enjoy its benefits, such as driving it and even collecting money if they rent it out. However, Hannah remains the car owner until Jasmin returns it at the end of the agreed-upon period. This article establishes that the creditor (Hannah, as the car owner) has a right to the car's fruits (its use and benefits) from the moment the obligation to lend the car arises (when Hannah made the agreement), but Jasmin does not acquire ownership until the car is actually delivered to them.

> It addresses the remedies available to the creditor in cases of real obligations, which involve the delivery of a specific or generic thing.

If the person who owes you something (debtor) doesn't do what they promised regarding a specific thing, the creditor has several remedies if the debtor fails to fulfill the obligation:

(a) Demand specific performance: The creditor can compel the debtor to deliver the specific thing as agreed upon. The creditor also has the right to seek    indemnity for damages incurred due to the debtor's non-compliance.

(b) Demand rescission or cancellation: In certain cases, the creditor can request the rescission or cancellation of the obligation. This remedy is also     accompanied by the right to claim damages.

(c) Demand payment of damages only: If specific performance or rescission is not feasible, the creditor can opt to demand payment of damages.

• For obligations to deliver a determinate thing, only the debtor can fulfill the obligation. The creditor can legally compel the debtor to make the delivery, but this must be done through the legal process, not by force or violence.

> you can't use force or violence to make them do it. You have to go to court, and the court will decide what should happen.

• In the case of a generic real obligation (where a generic thing is to be delivered), a third party can also fulfill the obligation since the object is defined only according to its genus or category. In this scenario, the creditor may request performance of the obligation but is not required to compel the debtor to deliver.

• The article also mentions that if the debtor delays or promises to deliver the same specific thing to multiple creditors with differing interests, the debtor remains responsible for any fortuitous events (unforeseeable accidents or natural disasters) that may occur until the delivery is made.

> Regardless of whether the obligation is specific or generic, the creditor has the right to seek damages for any breach of the   obligation.

Case:

Suppose Mark entered into an agreement with someone to purchase a specific piece of art. If the seller fails to deliver the artwork as agreed, Mark, as the creditor, have the following options:

a. Mark can demand specific performance, compelling the seller to deliver the artwork, and you can seek indemnity for any damages you may   have suffered due to the delay.

b. Alternatively, Mark can request the rescission of the agreement if specific performance is not feasible (e.g., the artwork has been   irreparably damaged).  In this case, Mark would also have the right to claim damages.

c. If neither specific performance nor rescission is possible, Mark can simply demand payment of damages from the seller for their breach of   the obligation.

> This article deals with the obligation to give a determinate thing, which includes delivering all its accessions and accessories, even if they are not specifically mentioned in the agreement. 

Accessions and Accessories

Accessions refer to the fruits, additions, or improvements made to a thing, while accessories are items joined to the principal thing for enhancement, better use, or completion.

Accessions:

Accessions are like the extra things you get from something or improvements made to it. Accessions include both natural growth (e.g., trees growing on land) and artificial improvements (e.g., building a house on land).

Accessories:

Accessories are extra things that you join or include with the main thing to make it look better, work better, or be complete. Accessories are items that complement the principal thing (e.g., a key for a house).

Right of Creditor to Accessions and Accessories

General Rule:

By default, all accessions and accessories are considered part of the obligation to deliver a determinate thing, even if they are not specifically mentioned in the agreement. Based on the legal principle that the accessory follows the principal.

Exception:

However, if there's an agreement that says you're only giving the extra things (like improvements to a house) and not the main thing (the land it's on), then that's what the deal covers.

For example, if you sell a house on land, but the agreement only mentions the house, then you're not transferring ownership of the land. But if you lease a building, it's understood that you're also leasing the land it's on unless there's a clear agreement saying otherwise.

Case:

Leda owns a piece of land (the principal thing) on which later builds a house (an accession). In this context, Article 1166 dictates that if Leda have an obligation to deliver the land to someone, that obligation inherently includes the house on it, even if the agreement only mentions the land. The law assumes that the accessory (the house) follows the principal (the land) in the obligation to deliver.

> It deals with situations where a person, who is obligated to perform a specific act or service, either fails to do it, performs it against the terms of the obligation, or does it poorly.

Situations contemplated in Article 1167

Article 1167 refers to an obligation to do, ie, to perform an act or render a service. It contemplates three (3) situations: 

1. The debtor fails to perform an obligation to do;

2. The debtor performs an obligation to do but contrary to the terms thereof, or manner

3. The debtor performs an obligation to do but in poor Performance by a third person Compelling Performance:

Remedies of the Creditor:

If the debtor fails to fulfill the obligation, the creditor has the following rights:

(a) The creditor can have the obligation performed by themselves or by another person, at the expense of the debtor. However, this is subject to the condition that personal considerations are not a significant factor in the performance.

> The creditor can seek to recover damages from the debtor for their failure to perform the obligation.

(b) If the debtor performs the obligation in contravention of its terms or poorly, the court may order the undoing of the action if it is still possible to reverse what was done.

Performance by a Third Person:

Unlike real obligations to deliver a specific thing, positive personal obligations can be fulfilled by a third person. However, in cases where the debtor's personal qualifications were a crucial factor in the agreement (e.g., hiring a singer for a specific event), having another person perform the obligation may not be feasible or may significantly alter the nature of the obligation.

In such cases, the creditor's primary remedy would be to seek indemnification for damages. However, when the debtor's failure or refusal to perform does not prevent the obligation from being fulfilled at the debtor's expense, the court is not authorized to grant damages alone.

Case:

Suppose Christian hires a professional photographer to capture important moments at his wedding. If the photographer fails to show up or performs inadequately, as the creditor, Christian have the following options:

(a) He can hire another photographer to fulfill the obligation, and the original photographer would be responsible for covering the costs incurred by the replacement.

(b) Christian can also seek damages from the original photographer for any losses or inconveniences he experienced due to their failure to perform as agreed.

(c) If the original photographer delivered photos that significantly deviated from his agreement or were of poor quality, he could   potentially request that they correct or undo the work if it is still feasible.

> The article refers to a negative personal obligation, that is, not to do a certain thing or act. The thing done or act performed shall be undone at the expense of the obligor. Damages may be claimed against him. 

> The article emphasizes the right of the aggrieved party to choose between specific performance and rescission. However if the fulfillment of the obligation has become impossible the court may only allow the rescission of the contract with damages awarded. In such cases the court will take into consideration the circumstances surrounding the breach and the interests of both parties involved. 

Example: (CASE SCENARIO)

Suppose John enters into a contract with ABC Construction Company to build a house within six months at an agreed cost of ₱ 100,000. The contract stipulates that John will make a down payment of ₱20,000 before the construction begins and additional progress payments in installments as the work progresses.

If John fails to make the down payment as agreed and does not provide any valid reason for non-payment he would be in default. This means he has omitted or failed to fulfill his obligation to provide the down payment within the specified timeframe leading to default.

In this scenario the consequences of default may include legal actions by ABC Construction Company such as issuing a notice of default terminating the contract or seeking damages for the financial losses incurred due to John's non-compliance with the contractual terms.

Article 1169 of the law on obligations and contracts deals with the concept of delay or default. It states that when the obligation consists in the payment of a sum of money and the debtor incurs in delay the indemnity for damages if there is no stipulation to the contrary shall be the payment of the interest agreed upon and in case of the absence of a stipulation the legal interest rate shall be applicable.

ORDINARY DELAY - mere failure to perform an obligation at the appointed time.

LEGAL DELAY (DEFAULT) – tantamount to non-fulfillment of the obligation and arises after an extrajudicial or judicial demand was made upon the debtor.

KINDS OF DEFAULT or DELAY

(a) MORA SOLVENDI – delay on the part of the debtor to fulfill his obligation;

REQUISITES:

1. Failure of the obligor to perform obligation on the DATE agreed upon;

2. Demand (judicially or extra-judicially) by the creditor;

3. Failure to comply with such demand

EFFECTS:

1. Debtor – liable for damages and interests

2. Debtor - liable for the loss of a thing due to a fortuitous event

KINDS:

1. Mora solvendi ex re – default in real obligations (to give)

2. Mora solvendi ex persona - default in personal obligations (to do)

(b) MORA ACCIPIENDE – delay on the part of creditor to accept the performance of the obligation;

EFFECTS:

1. Creditor – liable for damages

2. Creditor – bears the risk of loss of the thing 

3. Debtor – not liable for interest from the time of creditor’s delay

4. Debtor – release himself from the obligation

(c) COMPENSATIO MORAE – delay of the obligors in reciprocal obligation.

EFFECTS:

The default of one compensates the default of another; their respective liabilities shall be offset equitable.

Note: default/delay in negative obligation is not possible. (In negative obligation, only fulfillment and violation are possible)

General Rule: To put an obligor in default (or mora), there must be a demand made upon him for the performance of the obligation either                       judicially or extra-judicially.

Exception to the Rule: Demand is not necessary to place the obligor in default under the following circumstances:

1. When the obligation or the law expressly so declares; 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.

4. When the debtors admits he is in default

5. In reciprocal obligations, from the moment one of the parties fulfills his obligation.

The article clarifies that those who in the performance of their obligations are guilty of fraud, negligence or delay are liable for damages. This means that if a party fails to fulfill their obligations properly they may be held accountable for any resulting harm or losses suffered by the other party.

Grounds for Liability.

1. Fraud (Deceit   or   dolo) -   deliberate  or intentional evasion  of  the normal fulfillment of an obligation.

Example: (CASE SCENARIO)

Ana orders 10 sacks of Sinandomeng rice to Jerry but Jerry delivers 10 sacks of NFA rice.

2. Negligence   (fault   or   culpa) -   Not   intentional:   It   is   any   voluntary   act   or omission, there being no malice, which prevents the normal fulfillment of obligation.

 Example: (CASE SCENARIO)

Taehyung is driving a car through a red light that has resulted in crashing into another vehicle.

3. Delay   (mora) - the   failure   to   perform   an   obligation   on   time   which constitutes a breach of the obligation.

Example: (CASE SCENARIO)

       Sun obliged himself to deliver to Bea a specific refrigerator on December 10

 If Sun does not deliver the refrigerator on December 10, he is only in ordinary delay in the absence of any demand from Bea although a period has been fixed for the fulfillment of the obligation.

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

Example: (CASE SCENARIO)

Contract between a Maku (a landlord) and Lit (a room boarder). Lit failed to follow what is stated in the contract which states. Only the family of Lit (father, mother and 2 children) will occupy the room. Lit had committed the violation when he/she added a maid for his children

DISTINCTION OF FRAUD AND NEGLIGENCE

(1)  In fraud, there is deliberate intention, while in negligence, there is no intention.

(2)  Waiver of the liability for future fraud is void. While such waiver be allowed in negligence.

(3)  Fraud must be clearly proved, negligence is presumed from the violation of a contractual obligation.

(4)  Liability for fraud cannot be reduced by the courts, while liability for negligence may be reduced according to the circumstances.

What this means is that if an obligation is specifically defined or can be clearly identified and the debtor is not fulfilling the obligation as agreed the creditor has the right to demand immediate performance. In other words the creditor can demand that the debtor fulfill their obligation immediately and without delay.

The article states that the responsibility arising from fraud is demandable in all obligations while negligence can only be held accountable for cases where there is a specific provision or stipulation to that effect. In essence fraud carries more weight in terms of liability compared to negligence.

Note: Any waiver for future fraud is void as being against the law and public policy

Example: (CASE SCENARIO)

John and Sarah enter into a contract where John agrees to deliver 100 boxes of apples to Sarah's grocery store within two weeks. They both agree on the price quantity and delivery date. However when the agreed-upon date arrives John fails to deliver the apples as he had promised.

In this scenario the contract clearly states the delivery of 100 boxes of apples. John fails to perform the obligation: He does not deliver the apples within the specified period. Meaning, John is in default: By failing to deliver the goods John is in breach of the contract.

Considering these factors Sarah as the creditor can demand immediate performance of the obligation. She has the right to ask John to deliver the 100 boxes of apples immediately rather than waiting further.

It is important to note that Article 1171 does not automatically cancel the contract. It simply gives the creditor the right to demand immediate performance. The parties can also negotiate and agree upon reasonable alternatives to fulfill the obligation. 

Responsibility arising from negligence demandable

• the debtor is also liable for damages resulting from his negligence

• courts, however, are given wide discretion in fixing the measure of damages

• negligence is not as serious as fraud because in the case of the former, there is no deliberate intention to cause injury or damages.

• both parties to a contract are negligent in the performance of their respective obligations, the fault of one may cancel or neutralize the negligence of the other.

Validity of waiver of action arising from negligence

1.  An action for future negligence (not fraud) may be renounced except where the nature of the obligation requires the exercise of extraordinary diligence as in the case of common carriers. (see Art.1733.)

2.  Where negligence shows bad faith (ie., deliberately committed), it is considered equivalent to fraud. (Art. 2201, 2nd par) Any waiver of reaction for future negligence of this kind is, therefore, void.

In determining the liability of a party for damages resulting from his negligence in the fulfillment of a contractual obligation, the courts have discretionary power to moderate the liability according to the circumstances of the case.

When both parties to a transaction are mutually negligent in the performance of their obligations, the fault of one cancels the negligence of the other.

Court’s discretion because:

(a) Negligence depends upon the circumstances of a  case - good or bad faith of the obligor may be considered as well as the conduct or misconduct of the   obligee;

(b) It is not as serious as fraud.

Kinds of Negligence

1. Contractual negligence (culpa contractual) or negligence in contracts resulting in their breach.

• is not a source of obligation. (Art. 1157.)

• merely makes the debtor liable for damages in view of his negligence in the fulfillment of a pre-existing obligation 

Example: (CASE SCENARIO)

If Mary entered into a contract of sale with Josh to deliver a specific car on a certain day and the car was stolen through Mary’s negligence before delivery, Mary is liable for damages to Josh for having failed  to fulfill the pre-existing obligation.

2. Civil negligence (culpa aquiliana) or negligence which by itself

•  the source of an obligation between the parties not so related before by any pre existing contract.

• also called tort or quasi-delict 

Example: (CASE SCENARIO)

A restaurant owner who mops the slippery floor and forgets to put up a "wet floor" sign.

3. Criminal negligence (culpa criminal) or negligence resulting in the commission of a crime.

• The same negligent act causing damages may produce civil liability arising from a crime under Article 100 of the Revised Penal Code, or create an action for quasi-delict under Article 2176, et seq., of the Civil Code.

Example: (CASE SCENARIO)

From the first example, a crime can be committed by negligence. If Josh wants, he can bring an action for damaging property through simple or reckless imprudence. Here, the crime is the source of the obligation of Mary to pay damages.

Distinction between culpa contractual and culpa aquiliana 

Culpa Contractual (Breach of Contract) 

DEFINITION: Negligence in the performance of contractual obligation.

NATURE OF NEGLIGENCE: Incidental to the performance of the obligation.

GOOD FATHER OF THE FAMILY DEFENSE: Not complete and proper defense in the selection of employees.

PRESUMPTION OF NEGLIGENCE: There is presumption; Defendant must prove that there was no negligence in the carrying out of the terms of the contract.

Culpa Aquiliana (Quasi-delicts) 

DEFINITION: Negligence between parties not so related by pre-existing contract 

NATURE OF NEGLIGENCE: Direct, substantive and independent 

GOOD FATHER OF THE FAMILY DEFENSE: Complete and proper defense (parents, guardian, employers) 

PRESUMPTION OF NEGLIGENCE: No presumption; Injured party must prove negligence of the dependant

Meaning of Fault or Negligence

• It is the failure to observe for the protection of the interests of another person, that degree of care, precaution and vigilance which the circumstances justly demand, whereby such another person suffers injury." (United States vs. Barrias, 23 Phil. 434.)

• a question of fact, that is, its existence being dependent upon the particular circumstances of each case.

• In determining the issue of negligence, the following factors must be considered:

1. Nature of the obligation

2. Circumstances of the person

3. Circumstances of time.

4. Circumstances of the place

Measure of liability for damages

• damages signify the money compensation awarded to a party for loss or injury resulting from breach of contract or obligation by the other.

• the purpose of awarding damages is to place the innocent party in the same (not better) position he would have occupied if the contract or obligation had been performed according to its terms.

• 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 the obligation.

Diligence - the attention and care required of a person in a given situation and is opposite of negligence.

Negligence - consists in the omission of that diligence which is required by the nature of the particular obligation and corresponds with the circumstances of the persons, of the time, and of the place.

Kinds of Diligence

1. Agreed upon by the parties (orally or in writing)

2. In the absence of stipulation, that required by law in the particular case (like the extraordinary diligence required of common carriers); and

1. If both the contract and law are silent, then the diligence expected of a good father of a family.

An event which;

• Anything that happens that cannot be predicted or which, regardless of

anticipated, is unavoidable

• The essence of a fortunate event is that it is a spontaneous occurrence. according to the debtor's will

• Force majeure the occurrences that result from legal or unauthorized actions committed by a person other than the obligee

Classification of Fortuitous Events:

• Distinguished from force majeure

1. Act of Man - An individual action that will result from not fulfilling the obligations like fire, bombing and murder. Etc

2. Act of God - An event caused by nature and totally independent, such as rain,volcanic and flooding.

• Civil Code Distinguished 

1. Ordinary Fortuitous event - previously taken into consideration in the conditions for fulfilling this obligation.

2. Extraordinary Fortuitous Event - instances that the parties to the contract did not foresee, even if they may have been aware of them.

CHARACTERISTICS

1. Unforeseen and unanticipated events, or the debtor's failure to fulfill his obligation, must not have been caused by the debtor's free will.

2. The incident that constitutes a "caso fortuitous" must be impossible to predict, or if it is predictable, it must be impossible to avoid.

3. The event must be such that it prevents the debtor from completing his obligation in an ordinary manner. 

4. The obligor must be free from any participation in the aggravation of the injury resulting to the creditor.

EXCEPTIONS:

1. Expressly specified by law

2. Declared by stipulation of the parties

3. The nature of the obligation requires the assumption of risk

IMPORTANT POINT:

• With full knowledge of the risk, the debtor or obligee freely enters into an obligation with the obligee or creditor.  Based on the doctrine volenti non fit injuria – no wrong is done to one who consents

SCENARIO:

• A business named XYZ Electronics has an agreement with ABC Retailers to provide 1,000 high-end smartphones. According to the agreement, ABC Retailers will pay XYZ Electronics when the cellphones are delivered to them, and XYZ Electronics must provide them by a specific deadline.

FORTUITOUS EVENT OCCURRENCE:

A sudden, unforeseen event takes place just before the delivery deadline. 

• a significant earthquake near the area where XYZ Electronics is situated. As a result of the earthquake, XYZ Electronics is unable to create and deliver the cellphones on schedule, and their manufacturing facilities are damaged.

> In this case, XYZ Electronics may assert Article 1174 in order to counteract any claims of contract violation made by ABC Retailers. Since the earthquake was unforeseeable, out of their control, and prevented them from meeting their contractual responsibilities on time, it is regarded as a fortunate occurrence.

Summary:

• Govern by special Law.

• Paying in interest an expenditure for the right to borrow money or interest earned from lending the borrower money. A penalty or indemnity for damages imposed by law or the courts, providing money or its equivalent in exchange for something, can either be MORATORY, one that results from the failure to pay or complete a duty, or COMPENSATORY.

• establishing unethical or unlawful financial loans that unfairly advantage the lender is known as usury.

IMPORTANT POINT:

• The Act, commonly known as the Usury Law. 2655, which went into effect on May 1, 1916. This law established a 6% legal annual interest rate and a contractual rate of no more than 12% for secured loans and 14% for unsecured ones. Under the Res, the Usury Law was ineffectual during the Martial Law. No. 224 on December 3, 1982, and the Central Bank Circular that supported it. Number 905, dated January 1st, 1983.

Summary;

• Inference of an unknown fact resulting from its consistent interaction with another that is established or proven

• To be sure – write the interest and the dates covered by such payment in the receipt

• Conclusive presumption and Disputable presumption are two kinds of presumption. In Conclusive must be accepted to be true without any opportunity for rebuttal while in Disputable are rejected if proven to be false or at least thrown into sufficient doubt by the evidence.

• With reservation as to interest; reservation may be expressed verbally or in writing.

• Receiving a certain amount of the principal refers to receiving the final payment of the entire capital, not just a portion of it.

• Receipt without indication of particular installment paid - If the receipt does not state that it was provided for a specific payment due, such as when it is just dated, the Article is not applicable.

• Payment of Taxes does not apply to the payment of taxes

• Non-payment proven - the prior obligations have been proven.

Summary:

• The remedies of the creditor is to Exhaust the debtor's possessions of property.

• To be subrogated to all of the rights and actions of the debtor save those which are inherent in his persons; 

• Accion Subrogatoria an action where the creditor whose claims had not been fully satisfied, may go after the debtors (3rd person) of the defendant debtor.

• The debtor may defeat the right of the creditor by mere omission or inaction; hence, this remedy

• Conditions should be met availing the remedy;(a) Debtor has to pay the creditor money if they are the party to whom the right or action actually belongs. (b) creditor must be prejudiced by the inaction or failure of the debtor to proceed against the third person. (c) creditor must have first pursued or exhausted all of the properties of the debtor which are not exempted from execution.

• impugn all of the acts which the debtor may have done to defraud him

• Accion pauliana is an event where the creditor brings a legal claim against the cancellation of any agreements made by the debtor with the intention of defrauding them.

• The debtor's assets, whether they are current or future, serve as a guarantee for the payment of the debt or credit.

• Therefore, it is the option available to the creditor by which he can get the cancellation of any agreement made by the debtor in deceit and to the detriment of his rights as a creditor.

Summary:

• Rights of obligation, rights which are acquired by virtue of obligations, are Transmissible in character.

• If a person can transfer their rights and obligations under a contract to another party, this is known as the transmissibility of rights.

• Not transmissible by their very nature

• There is a stipulation of the parties

• Not transmissible by operation of law

• The intransmissibility by stipulation of parties must be clearly established not merely implied.

MAIN POINT:

• The general rule that, unless otherwise stated, a contract's rights and responsibilities cannot be transferred.

• Even without the parties' explicit consent, the law may provide for the automatic transfer of certain rights or obligations to third parties.

• Furthermore, contract law can be complicated, and parties frequently seek legal counsel to ensure that they understand their rights and obligations under a contract, including whether those rights can be transferred to others.