Obligation: Concepts and Sources

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An obligation is a juridical necessity to give, to do or not to do.¹ An obligation needs to be juridical in nature in order for it to have the force of law. Through this, a court may be asked to order the performance of an obligation.

An obligation are civil or natural. Civil Obligation is based on a positive law and gives right of action to compel their performance, while Natural Obligation is based on natural law, but on equity and moral justice. Hence, it is not enforceable by court action, but after voluntary performance of the debtor, he can no longer recover what he has given.

Example: Romeo executed a promissory note in favor of Juliet for $50, 000. Romeo is the debtor (payor) while Juliet is the creditor (payee). If Romeo does not pay on due date, Juliet can enforce the fulfillment of the obligation by court action. If Juliet does not file a court action against Juliet within 10 years from due date which is the prescriptive period for an action against a written contract. Juliet looses the right to exact performance by court action. However, if Romeo, out of his love for Juliet, voluntarily makes the payment to Juliet thought such obligation has prescribed, Romeo will no longer be allowed to recover what he has given as payment because although the obligation has prescribed, in equity and moral justice, Romeo still owed Juliet the amount of $50, 000.

( Article 1144 (3), Civil Code of the Philippines. Upon a written contract; actions must be brought withing 10 years from the time the right of action accrues. )

There are 4 essential requisites of an obligation in order to exist. All of these must be present:

1. Active subject - It is the party (creditor or obligee) who has the right to demand the performance of an obligation.

2. Passive subject - It is the one (debtor or obligor) who is obliged to perform the obligation.

3. Prestation - It is the object of the obligation. It is what the obligation is all about either to give, to do, not to do, or a combination.

4. Efficient Cause - The juridical tie that binds the parties to an obligation. It is what binds the parties (e.g. contracts, quasi contracts).

Example: Romeo executed a contract of loan to borrow money from Juliet whom he wishes to spend in courting Juliet. Juliet in turn agreed and lend money to Romeo.

In the preceding example, Romeo is the passive subject while Juliet is the active subject. Their prestation is the money being borrowed while their efficient cause is the contract of loan. All of the essential requisites of an obligation is present, hence such contract creates an obligation.

The law clearly defines what the different sources of an Obligation are.

Obligations arise from:²

(1) Law;

(2) Contracts;

(3) Quasi-contracts;

(4) Acts or omissions punishable by law; and

(5) Quasi-delicts. (1089a)

Law

Obligations derived from law are not presumed. Only those expressly determined in this Code or in special laws are demandable, and shall be regulated by the precepts of the law which establishes them; and as to what has not been foreseen, by the provisions of this Book. (1090)³

A law is a binding custom or practice of a community : a rule of conduct or action prescribed or formally recognized as binding or enforced by a controlling authority.⁴ Obligation derived from law must not be presumed. If the law does not include, therefore it excludes. Only those which the law clearly stipulate or express are demandable.

Example of this is the obligation to pay Taxes. Those which are clearly stipulated in the National Internal Revenue Code (R.A. 8424) are demandable and those which are not clearly expressed are not presumed.

Contracts

Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. (1091a)⁵

A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.(125a).⁶ A contract, according to article 1159 and 1305, bind two persons to perform an obligation that are incumbent upon them based on their agreement having in them the force of law and should be complied in good faith. The two persons are the active and passive subject while their agreement and what they have agreed upon are the prestation and efficient cause.

An example of this is a contract of loan, wherein the active subject is the creditor; the passive subject is the debtor. The prestation is money to be borrowed and the efficient cause is the contract.

Example: Romeo executed a contract of loan to borrow money from Juliet whom he wishes to spend in courting Juliet. Juliet in turn agreed and lend money to Romeo. The meeting of the minds of Romeo and Juliet created the contract of loan and to enforce what they have agreed upon they put it in writing (contract of loan) which is what the statute of fraud demand.

Quasi-contracts

Obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII, of this Book. (n)⁷

Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another (n).⁸ Quasi-contract arises because of these acts which might result to an unjust enrichment. There is unjust enrichment when a person unjustly retains a benefit at the loss of another that is against the fundamental principles of justice, equity and good conscience.

Examples of these acts that give rise to quasi-contract are Negotiorum gestio and Solutio indebiti.

a. Negotiorum gestio

Negotiorum gestio is the voluntary administration of the property, business or affairs of another, without his consent or authority, that creates an obligation for reimbursement for the necessary expenses the gestor had spent.⁹

Example: Juliet left her farm unattended for 1 week because she is having a vacation. Romeo, a concerned lover in secrecy, noticed that Juliet has not been around and the plants are slowly dying. Out of affection, Romeo cultivated the land, watered the plants, buy fertilizers and placed fertilizers to the plants, removed the weeds and do all what a farmer should do. Romeo spent necessary expenses which needs to be reimbursed in order for Juliet not to unjustly enrich herself at the expense of Romeo.

b. Solutio indebiti

If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises. (1895)¹⁰

Solutio indebiti refers to payment by mistake. It is receiving payment by mistake that is not due or does not have such right to demand such payment. It creates an obligation to return such payment.

Example: Romeo bought goods from Juliet Store. The goods cost $1500. Romeo gave $2000 to the store cashier and receive a change of $700. Romeo is duty bound to return the excess of $200 to the store. Otherwise, he will be unjustly enriching himself at the expense of Juliet Store.

Another example, Romeo commutes via jeepney on his way to school. Juliet, a jeepney driver, receives Php 10 from Romeo. Because of the handsomeness and cuteness of Romeo, Juliet thought that Romeo is a student. So, she gave Romeo a change of Php 4 rather than Php 2 if no discount given. By solutio indebiti, Romeo has no right to receive the excess Php 2. Therefore, Romeo is bound to return the excess Php 2 or else he will be unjustly enriching himself at the expense of Juliet.

Acts or omissions punishable by law

Civil obligations arising from criminal offenses shall be governed by the penal laws, subject to the provisions of Article 2177, and of the pertinent provisions of Chapter 2, Preliminary Title, on Human Relations, and of Title XVIII of this Book, regulating damages. (1092a)¹¹

Every person criminally liable for a felony is also civilly liable.¹² Commission of a crime makes the offender civilly liable. Such civil liability includes:¹³

1. Restitution;
2. Reparation of the damage caused;
3. Indemnification for consequential damages.

Example: Romeo, a horse racing enthusiast, steals the horse of Juliet. Romeo commits the crime of stealing Juliet's beloved horse. Romeo is criminally liable. In addition, Romeo is also civilly liable. He is liable to return the horse, paying for its value if he cannot return the horse and indemnifying Juliet of the consequential damages she had suffered.

Quasi-delict

Obligations derived from quasi-delicts shall be governed by the provisions of Chapter 2, Title XVII of this Book, and by special laws. (1093a)¹⁴

Quasi-delict (also known as tort or culpa aquiliana ) are acts or omissions that cause damage to another, there being fault or negligence, is obliged to pay for the damage done but without any pre-existing contractual relations between the party.¹⁵ There is quasi-delict if there is damages sustained, negligence by act or omission, and the connection of the cause and effect between such negligence and damages.

Example: Romeo, a handsome try hard baseball player, was playing baseball outside Juliet's house. Upon seeing Juliet, Romeo suddenly got excited and hit the ball so hard that it fly straight to Juliet's window shattering it into pieces and bounce right into Juliet's face injuring her beloved nose. Though Romeo and Juliet has no contractual relation at all. They are now bound to each other because of quasi-delict. Because of Romeo's negligence, he will be liable for the damages to Juliet.

Sources

¹Article 1156, Civil Code of the Philippines
²Article 1157, Civil Code of the Philippines
³Article 1158, Civil Code of the Philippines
⁴Merriam-Webster Dictionary
⁵Article 1159, Civil Code of the Philippines
⁶Article 1305, Civil Code of the Philippines
⁷Article 1160, Civil Code of the Philippines
⁸Article 2142, Civil Code of the Philippines
⁹Article 2144, Civil Code of the Philippines
¹⁰Article 2154, Civil Code of the Philippines
¹¹Article 1161, Civil Code of the Philippines
¹²Article 100, Revised Penal Code of the Philippines
¹³Article 104, Revised Penal Code of the Philippines
¹⁴Article 1162, Civil Code of the Philippines
¹⁵Article 2176, Civil Code of the Philippines
Civil Code of the Philippines

The topic on contracts will soon to be discussed. It is a broad topic. What is in this post is just a nutshell of what contract is. Additional topics will soon be posted. Keep in touch.
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-Your Lovely Accountant Steemian-