Law on Obligations and Contracts (Part 2)

Nature and Effects of Obligations
The following are the rights available to a creditor in obligations to give:

If it is a determinate thing:
1. To compel specific performance
2. To recover damages in case of breach
3. Acquires personal right to the fruits of the thing from the time the obligation to deliver arises
4. Acquires real right over the thing once the thing has been delivered to him
5. Rights over the accessories and accessions.

If it is a generic thing:
1. To ask for performance of the obligation
2. To ask that the obligation be complied with at the expense of the debtor.

A determinate thing is one that is particularly designated or physically segregated from all others of the same class. A generic thing is one whose determination is confined to that of its nature, to the genus to which it pertains such as a horse, a chair. A contract of sale uses a determinate thing, while a contract of loan uses a generic thing.

The following are the obligations of the passive subject in:

a) Obligations to give a determinate thing:
1. To deliver the thing which he has obligated himself to give.
2. To take care of the thing with the proper diligence of a good father of a family.
3. To deliver all its accessories and accessions.
4. To pay damages in case of breach of obligation.

b) Obligations to do:
1. If the debtor fails to do what he is obliged to do, it will be done at his expense.
2. If the work is done in contravention of the tenor of the obligation, it will be re-done at debtor’s expense.
3. If the work is poorly done, it will be re-done at debtor’s expense.

In obligations to do, you will note that you cannot compel the passive subject to perform, otherwise, it will constitute involuntary servitude which is in violation of the Constitution. However, the passive subject may be held liable for damages.

The sources of liability (for damages) of a party in an obligation are as follows:

(1) Fraud. The fraud is incidental fraud (dolo incidente) which is fraud incident to the performance of an obligation. In fraud, there is an intent to evade the normal fulfillment of the obligation and to cause damage.
The fraud is causal (dolo causante) or when fraud used to induce a person to agree to a contract. This kind of fraud is a ground for annulment of the contract plus damages;

(2) Negligence. The negligence referred here, in the case of contracts (i.e. common carrier) is culpa contractual, the lack of diligence or carelessness. 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, or the time and of the place.

(3) Delay (Mora). The debtor can be held liable for the delay or default in the fulfillment of his obligation only after the creditor has made a demand, judicial or extrajudicial, on the debtor, except:
 When the law expressly provides that demand is not necessary;
 When the contract expressly stipulates that demand is not necessary;
 When time is of the essence;
 When demand would be useless.

In a contract of loan, if a particular rate of interest has been expressly stipulated by the parties, such stipulated interest shall be applied. If the exact rate of interest is not mentioned, the legal rate shall be payable (which is 12% per annum under Sec. 1 of the Usury Law).

It is only in contracts of loan, with or without security, that interest may be stipulated and demanded. This interest by way of compensation, must be in writing, otherwise, no interest by way of compensation may be collected.
The debtor in delay is also liable to pay legal interest by way of indemnity for damages, which interest may be agreed upon, and in the absence of any stipulation, the legal interest shall be 12% per annum.

In all cases, interest due shall earn legal interest from the time it is judicially demanded although the obligation may be silent upon this point.

(4) Contravention of the tenor of the obligation. Performance in contravention of the tenor or terms of the obligations means where performance is contrary to what is agreed upon or stipulated thus making the debtor liable for damages.