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B. Nature and Effect of Obligations

1. Obligation to give

a. GOOD FATHER OF A FAMILY

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. (Article 1163, Civil Code)

b. RIGHTS OF CREDITORS

1) To receive the fruits of the thing

The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. However, he shall acquire no real right over it until the same has been delivered to him. (Article 1164, Ibid.)

2) To demand delivery

When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by Article 1170, may compel the debtor to make the delivery. (Article 1165, Ibid.)

a) Includes accessions, accessories

The obligation to give a determinate thing includes that of delivering all its accessions and accessories, even though they may not have been mentioned. (Article 1166, Ibid.)

3) To demand compliance at expense of the debtor

If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor. (Paragraph 2, Article 1165, Ibid.)

4) To be entitled to damages

When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by Article 1170, may compel the debtor to make the delivery. (Article 1165, Ibid.)

a) Fraud, negligence, delay

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. (Article 1170, Ibid.)

b) Even in fortuitous event – subject to conditions

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 any fortuitous event until he has effected the delivery. (Paragraph 3, Article 1165, Ibid.)

2. Obligation to do or not to do

a. RIGHTS OF DEBTOR-OBLIGEE

1) To have obligation done by another at obligor’s expense

If a person obliged to do something fails to do it, the same shall be executed at his cost. (Article 1167, Ibid.)  

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. (Paragraph 2, Article 1167, Ibid.)  

2) To have obligation undone by another at obligor’s expense

When the obligation consists in not doing, and the obligor does what has been forbidden him, it shall also be undone at his expense. (Article 1168, Ibid.)

3. Transmissibility of obligations

a. TRANSMISSIBLE, BY DEFAULT

Subject to the laws, all rights acquired in virtue of an obligation are transmissible, if there has been no stipulation to the contrary. (Article 1178, Ibid.)  

4. Performance of obligations

a. FRAUD, NEGLIGENCE, DELAY, CONTRAVENTION

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. (Article 1170, Ibid.)

5. Breaches of obligations

a. DELAY

1) Judicial demand

2) Extrajudicial demand

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. (Article 1169, Ibid.)

b. WHEN DEMAND IS NOT NECESSARY

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. (Paragraph 2, Article 1169, Ibid.)

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.(Paragraph 3, Article 1169, Ibid.)  

c. FORTUITOUS EVENTS

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. (Article 1174, Ibid.)  

6. Remedies available to creditor in cases of breach

a. REMEDIES OF CREDITORS

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. (Article 1177, Ibid.)

The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.(Article 1191, Ibid.)

The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. (Paragraph 2, Article 1191, Ibid.)

1) Compel performance of obligation

2) Rescission

3) Damages (in addition to either a or b)

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. (Article 1170, Ibid.)

a) Fraud

Responsibility arising from fraud is demandable in all obligations.

Any waiver of an action for future fraud is void. (Article 1171, Ibid.)

b) Negligence

(1) Omission of negligence

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. (Article 1173, Ibid.)

(2) If with bad faith – liable for all damages

When negligence shows bad faith, the provisions of Articles 1171 and 2201, paragraph 2, shall apply.(Ibid.)

Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void. (Article 1171, Ibid.)

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. (Paragraph 2, Article 2201, Ibid.)

(3) Good father of a family, as default

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. (Paragraph 2, Article 1173, Ibid.)

(4) Courts to regulate

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. (Article 1172, Ibid.)

c) Delay

d) Contravention of the tenor

b. Interest

1) Presumptions

a) Receipt of principal, without reservation on interest

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. (Article 1176, Ibid.)

b) Receipt of later installment, without reservation to prior installment

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. (Paragraph 2, Article 1176, Ibid.)

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