Obligations: Nature and Effect

"Ignorance of the law excuses no one..." - Art. 3, R.A. 386

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Recap

In the previous post, Part 1, the concepts about determinate thing and indeterminate things has been discussed. Furthermore, the obligations of a person obliged to give something, to do, and not to do, has been elaborately explained. It is also discussed in Part 1 what are the remedies of a creditor if the debtor fails to comply what has been incumbent in him.

In this continuation of Chapter 2, it will tackle what is delay, fraud, negligence and some of the general presumptions of the law.

_{Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their 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)}

What is Delay?

Delay or default or mora is the non fulfillment of an obligation with respect to time. It is when someone does not fulfill an obligation within the time given unto him.

There are three kinds of delay namely:
I. Mora solvendi - it is a delay on the part of the debtor

a. Ex re - delay in real obligations (to give)
b. Ex persona - delay in personal obligations (to do)

Tips: to easily memorize the two, re for real, persona for personal. Always keep in mind that the debtor can only have an obligation to give, to do, and not to do, so he can only be delayed between the two, to give and to do, because there is no delay in not to do. One cannot be in delay for not doing at all.

II. Mora accipiendi - it is a delay on the part of the creditor

How can a creditor be in delay?

A creditor can be in delay if the debtor fulfills his obligation but the creditor refuses to accept the thing due without justifiable reason. It must be an unjustifiable reason so as delay to exist.

Tips to easily remember: accipiendi sounds the same with accept. And who accepts? it is the creditor. So accipiendi is delay in accepting a fulfillment of an obligation by the creditor.

III. Compensatio morae - it is a delay in reciprocal obligations. It is therefore the creditor and debtor who are in default. If both is in delay therefor in effect there is no delay at all.

When can a debtor be considered in delay?

General Rule: No demand no delay!

The debtor incurs in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation but the debtor failes to perform his obligation. Again the general rule apply that if there is no demand there is no delay. Demand is a must.

For delay to exist the following must be present:

a. The obligation must be due and demandable
b. The debtor does not perform his obligation
c. The creditor demands for the performance of the obligation judicially or extra-judicially
d. The debtor fails to comply to such demand

Example: Asbonclz obliged to give Heda a specific car on January 1, 2018. On Jan. 1, 2018 Asbonclz failed to give and deliver a specific car to Heda. Since Heda wanted a car, she extra-judicially demand Asbonclz's performance by summoning him to Baranggay Saray Hall to execute what they had agreed upon. Though Kapitan Tiago, Baranggay Saray Chairman, mediated for the two to settle their disagreements by making the two agreed to a common understanding that the car will be delivered on Jan. 10 instead. But when Jan. 10 came still Asbonclz failed to deliver the car to Heda..

From the example, Asbonclz is in delay. First, his obligation to give is already due and demandable. Second, Asbonclz did not give the specific car ( a non-performance of obligation. Third, Heda extrajudicially demanded the delivery of such specific car. And lastly, Asbonclz failed to comply to such demand by not delivering the car again after Heda's extrajudicial demand. Hence Asbonclz is really in delay.

Exceptions to the General Rule:

Article 1169 are the exceptions to the general rule in where demand is not necessary in order for delay to exist.

There is no need for demand in order for delay to exist in the following cases:

a. The obligation or the law expressly so declare

Examples:

(LAW) In paying taxes, if someone does not pay on time then such person would be penalized in accordance with the law. There is no need for the BIR to demand in order for delay to exist because the law clearly expresses so. Hence, such person would be penalized automatically because he is already in delay from the time the due date to pay taxes elapse.

(OBLIGATION) There is no need for demand when both parties agreed to an obligation to give that when the debtor fails to deliver the thing on time such debtor would be penalized. The stipulation of the parties renders the need for demand in order for penalty to materialize is unimportant

b. When time is of the essence of the contract

Example: Juliet is about to be married with Romeo on Nov. 1, 2018 at 5PM in Hotel California. She made a contract with Asbonclz, a famous tailor, to make her bridal gown according to her specifications. On Nov. 1,2018 Asbonclz failed to make the gown. Since the gown is to be used only on its intended purpose which is their wedding day on Nov. 1, Asbonclz is already in delay and will be liable since after Nov. 1 the gown would be useless anymore to Juliet. There is no need of demand for delay to exist because time was the controlling motive for the establishment of the contract.

c. Demand would be useless

When the performance of the obligation is beyond the power of the debtor then such demand would be useless. Demand would be useless if the thing the debtor is obliged to give has been destroyed through his fault or he has delivered it to another person not of the same interest.

d. 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.

What are the effect of delay?

As to debtor:

a. Debtor shall be liable for damages (Art. 1170)
b. If obligation to deliver determinate thing, debtor shall be responsible for any fortuitous event until he has effected the delivery. (Art. 1165)

As to criditor:

a. Debtor may resort to consignation of the thing due. (Art 1258)
b. Creditor shall bear the risk of loss and shoulders the expenses for preservation of the thing.

_{Consignation - depositing the thing due to a court of law, when the creditor unjustifiably refuses to accept such thing, as an act of fulfillment of his obligation to free himself from burden.}

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_{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)
Art. 1171. Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void. (1102a)
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)
Art. 1173. The fault or negligence of the obligor consists in the omission of that 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. When negligence shows bad faith, the provisions of Articles 1171 and 2201, paragraph 2, shall apply.
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)
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)}

Grounds for liability to pay damages (Art. 1170)

a. Fraud
b. Negligence
c. Delay
d. Contravene the tenor of an obligation.

What is Damages?

The word "damage" is used in two concepts: the "harm" done and "reparation" for the harm done. And with respect to harm it is plain that it includes both injuries to person and property since "harm" is not limited to personal but also to property injuries. (Cinco vs Canonoy, G.R. No. L-33171 May 31, 1979)

What are the kinds of damages?

Tips to Easily Memorize: MENTAL

a. Moral damages - They include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant's wrongful act for omission. (Art. 2217)

b. Exemplary or corrective damages - They are imposed, by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages. (Art. 2229)

c. Nominal damages - They refer to damages to vindicate a right (Art. 2221)

d.Temporate or moderate damages - They are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount can not, from the nature of the case, be provided with certainty. (Art. 2224)

e. Actual or compensatory damages - These refers to adequate compensation for pecuniary loss suffered and has been duly proved that may be recovered. It includes not only the value of the loss suffered, , but also that of the profits which the obligee failed to obtain. (Art. 2199 & 2200)

f. Liquidating damages - are those agreed upon by the parties to a contract, to be paid in case of breach thereof. (Art. 2226)

What is Fraud and Negligence?

Fraud is the intentional deception of a person or entity by another made for monetary or personal gain. Also, fraud is the deliberate or intentional evasion by the debtor to perform his obligation on a normal way. Fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. (Art. 1338) While negligence is a failure to behave with the level of care that someone of ordinary prudence would have exercised under the same circumstances. The behavior usually consists of actions, but can also consist of omissions when there is some duty to act (e.g., a duty to help victims of one's previous conduct). Negligence consists in the omission of that 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. (Art. 1173)

FRAUD or dolo

What are the different kinds of fraud?

A. According to meaning

1. Fraud employed in obtaining consent



a. dolo causante or causal fraud

• fraud used to obtain the consent of the other party. It refers to fraud without which consent would not have been given. It makes a contract voidable





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Example: Romeo sell his ring that is aluminum plated with gold to Juliet telling her that the ring is made of 18 karat gold. Romeo knew all along that it was not made of 18 karat gold but made it looks like. Juliet bought the ring relying upon what Romeo told him. Juliet here gave her consent to buy Romeo's ring because of the fraud employed by Romeo. Hence, Romeo will be liable for damages and the contract of sale between the two is voidable.




b.dolo incidente or incidental fraud

• This refers to fraud without which consent would still been given but the person giving it would not have agreed but may agree on different terms. The person employing fraud will be liable for damages.





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Example: Juliet applied to be an IT specialist of ABC company owned by Romeo. Romeo upon reading Juliet's resume learned that Juliet is an IT expert with a masters degree. However, Juliet was in fact an IT graduate only with no masters degree. Romeo hired Juliet and gave her $10000 salary a month. If Romeo would have hired Juliet even if she did'nt have a masters degree but that Romeo would have given a salary of $5000 a month to Juliet. Juliet in this example committed an incidental fraud and it would entitle Romeo to recover damages.




2. Fraud employed in the performance of an obligation



It is the deliberate or intention act to evade the performance of an obligation in a normal manner. This will not have any effect on the validity of a contract since it was employed after the perfection of such contract. The party employing such fraud will be liable for damages.

B. According to the time of the commission of the fraud

1. Past Fraud

Past fraud committed can be waived by the creditor. The waiver of such fraud is an act of liberality on the part of the creditor




2. Future Fraud



Any waiver of an action for future fraud is void. If the parties agreed for a wiaver of a fraud that is to be committed is void. The law discourages the employment of fraud even if consent for its commission has been granted. Thus, a debtor will still be liable for fraud committed even if there is such a waiver.





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Example: Romeo went to Juliet gasoline station to fuel up his car. Romeo and Juliet agreed that on his next fueling up Juliet can mix water to the gasoline in fueling his car and that he will waived his rights. During Romeo's next fueling in the station Juliet fuel up his car with a water mixed gasoline. In this example, though Romeo gave a waiver to Juliet still Juliet will be liable for fraud committed since such waiver is void. And the law does not want any employment of fraud.

Negligence

What are the different kinds of negligence?

1. Culpa Contractual (contractual negligence)



Negligence on the performance of a contract.




2. Culpa Aquiliana (tort or quasi-delict)



Act or omission causes damage to another, ... there being no pre-existing contractual relation between the parties.
(Art. 2176)




3. Culpa Criminal (criminal negligence)



Negligence that results to a commission of a crime.
(Art. 2176)

What is a Fortuitous Event?

Fortuitous events are events that could not be foreseen, or which, though foreseen, are inevitable. (Art. 1174)

Examples: Natural calamities or acts of God like storms, earthquakes, tsunami and acts of man (force majeure) such as war.

General Rule: No person shall be liable for fortuitous event!

Exceptions to the general rule:

when the law or stipulation of the parties so express

when the nature of the obligation require the assumption of risk

Example: Asbonclz is obliged to deliver a specific car to Heda. Before the said date of delivery, there was severe tropical depression which caused flooding and took the car out of Asbonclz's garage and brought it to nowhere. In the absence of any stipulation to the contrary, the loss of the car due to fortuitous event does not make Asbonclz liable unless he is in delay. The loss of the thing due to fortuitous event without the fault of Asbonclz will extinguish the obligation since the thing that is to be delivered is a determinate thing.

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_{Art. 1175. Usurious transactions shall be governed by special laws. (n)
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)
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)
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)}

As of the moment there is no usury law in the Philippines. But the Supreme Court has the power to declare such thing as usurious when it is unjust, iniquitous and unconscionable to the human consciousness.

Article 1176 are general presumptions and can be subject to rebuttal to prove the contrary.

What are the Remedies of a Creditor to enforce his claims?

1. Pursue the properties of the debtor except those exempt by law
2. Exercise all the rights and bring all the actions of the latter for the same purpose, save those which are inherent in his person (accion subrogatoria).
3. Impugn the acts which the debtor may have done to defraud his creditors (accion pauliana).

The first remedy of a creditor to enforce payment of his claims is to pursue the properties of the debtor. He must have to secure the properties of the debtor in order to satisfy his claims. It is where the creditor files to a court to set a side the properties belonging to the debtor to satisfy his claims. This is called attachment. If the creditor does pay then the court may order that the properties attached be sold and the proceeds thereof be applied to the claims of the creditor.

After pursuing the debtors properties, the creditor can exercise all the rights and bring all the actions of the latter for the same purpose, save those which are inherent in his person .

Example: Romeo owed Asbonclz. Asbonclz owed Juliet. If Juliet files a court action against Romeo to collect what they have agreed upon, Juliet may ask the court to order Romeo not to pay Asbonclz, so that if Juliets request has been favored by the court, Romeo will be required to pay only to Juliet and not to Asbonclz.

Accion pauliana is the last resort of the creditor. He must have to exhaust the first two remedies before he can resort to accion pauliana.

Rules on Transmissibility of Rights

General Rule: All rights acquired in virtue of an obligation are transmissible.

Exceptions

1. If the law so prohibits the transmission of rights





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Example: In the contract of partnership, the rights of the deceased general partner cannot be transmitted to his heir as such is against the law. Such death would make the partnership enter into dissolution.




2. If there is a stipulation or the parties agreed against transmission of rights
3. When the nature of such right is not transmissible

“The law was made for man, not man for the law” (Mk 2:27)

SOURCES:
[1]R.A. 386 Civil Code of the Philippines
[2]http://criminal.findlaw.com/criminal-charges/fraud.html
[3]https://www.law.cornell.edu/wex/negligence
[4]https://www.coursehero.com/file/p47rch/Kinds-of-Fraud-1-Dolo-causante-Causal-Fraud-This-refers-to-fraud-without-which/
[5]http://www.chanrobles.com/civilcodeofthephilippinesbook4.htm

Thank you for reading! You had just finished Chapter 2.

For any question or topics you want to discuss, feel free to comment.

-Your Lovely Accountant Steemian-