Obligations and Contracts
Foundational principles of the Civil Code of the Philippines regarding obligations, torts, damages, delays, and defective contracts.
Overview of Civil Code
Before diving into specific construction contracts, a civil engineer must understand the fundamental principles of obligations as defined in the Civil Code of the Philippines (Republic Act No. 386). These laws govern the interactions, responsibilities, and liabilities between parties.
Obligation
Article 1156 of the Civil Code defines an obligation as a juridical necessity to give, to do, or not to do.
Sources of Obligations
Obligations do not just appear; they arise from specific legal sources.
Where Do Obligations Come From?
Checklist
- Law: Imposed by the state (e.g., the obligation to pay taxes).
- Contracts: Arising from the stipulation of the parties (e.g., a contract to build a house).
- Quasi-Contracts: Lawful, voluntary, and unilateral acts giving rise to a juridical relation to prevent unjust enrichment (e.g., Negotiorum Gestio or unauthorized management, and Solutio Indebiti or payment by mistake).
- Acts or Omissions Punished by Law (Delicts/Crimes): Civil liability arising from a criminal offense.
- Quasi-Delicts (Torts/Culpa Aquiliana): Damage caused to another through fault or negligence, with no pre-existing contractual relation.
Nature and Effect of Obligations
The behavior of the parties involved in an obligation determines its effect, especially concerning delays and extinguishment.
Delay (Mora)
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.
There are three types:
- Mora Solvendi: Delay on the part of the debtor to fulfill his obligation.
- Mora Accipiendi: Delay on the part of the creditor to accept the performance of the obligation.
- Compensatio Morae: Delay of the obligors in reciprocal obligations (like in a contract of sale).
Extinguishment of Obligations
Obligations are extinguished by:
- Payment or performance
- Loss of the thing due
- Condonation or remission of the debt
- Confusion or merger of the rights of creditor and debtor
- Compensation
- Novation (substitution or alteration of an obligation by a subsequent one)
Contracts
Contracts are the most common source of obligations in civil engineering practice.
Contract
A meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. (Art. 1305)
Essential Requisites of a Valid Contract
Checklist
- Consent: The meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract.
- Object Certain: The subject matter of the contract must be determinate or determinable.
- Cause of the Obligation: The essential reason or purpose which the contracting parties have in view at the time of entering into the contract.
Defective Contracts
Contracts may be defective and subject to annulment or modification. They are classified into four types, in order of increasing severity of the defect.
Types of Defective Contracts
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- Rescissible: Valid until rescinded. There is a sort of economic damage or lesion to one of the parties or to a third person (e.g., contracts entered into by guardians where the ward suffers lesion of more than 1/4 of the value of the things).
- Voidable: Valid until annulled. Defect is caused by vice of consent (violence, intimidation, mistake, fraud, undue influence) or legal incapacity of one party.
- Unenforceable: Cannot be sued upon or enforced unless ratified. Examples include contracts entered into without authority, or those that do not comply with the Statute of Frauds.
- Void or Inexistent: Produces no effect whatsoever. Examples include contracts whose cause, object, or purpose is contrary to law, morals, good customs, public order, or public policy.
Kinds of Damages
When an obligation is breached or a tort is committed, the injured party is entitled to damages.
M-E-N-T-A-L Damages
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- Moral: Awarded for physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation.
- Exemplary (Corrective): Imposed by way of example or correction for the public good, in addition to moral, temperate, liquidated, or compensatory damages.
- Nominal: Adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized.
- Temperate (Moderate): More than nominal but less than compensatory damages; awarded when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be provided with certainty.
- Actual (Compensatory): Adequate compensation only for such pecuniary loss suffered by him as he has duly proved.
- Liquidated: Those agreed upon by the parties to a contract, to be paid in case of breach thereof (e.g., daily penalties for delay in a construction project).
Liability for Building Collapse (Article 1723)
A critical provision for Civil Engineers in the Civil Code is Article 1723, which assigns severe long-term liability for structural failures.
Important
Article 1723:
The engineer or architect who drew up the plans and specifications for a building is liable for damages if within fifteen (15) years from the completion of the structure, the same should collapse by reason of a defect in those plans and specifications, or due to the defects in the ground.
The contractor is likewise responsible for the damages if the edifice falls, within the same period, on account of defects in the construction or the use of materials of inferior quality furnished by him, or due to any violation of the terms of the contract.
If the engineer or architect supervises the construction, he shall be solidarily liable with the contractor.
Key Elements of Article 1723
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- 15-Year Prescription: The liability lasts for 15 years from the completion of the building. This is a non-waivable public policy rule to ensure public safety.
- Action for Damages: The action to claim damages must be brought within 10 years following the collapse of the building.
- Solidary Liability: If the engineer/architect also supervised the construction, they are jointly and severally (solidarily) liable with the contractor. The victim can claim the full amount of damages from either party.
Key Takeaways
- Obligations do not arise from nowhere; they must come from law, contracts, quasi-contracts, delicts, or quasi-delicts.
- Quasi-contracts exist to prevent unjust enrichment.
- The essential requisites of a valid contract are Consent, Object, and Cause (COC).
- A contract lacking any of these essential elements is generally considered void from the beginning.
- Defective contracts range from Rescissible, Voidable, Unenforceable, to Void.
- Mora (Delay) generally requires a demand to be legally actionable.
- Actual damages must be duly proven.
- Liquidated damages are pre-agreed penalties, commonly seen as daily delay penalties in construction contracts.
- Engineers/Architects and Contractors have a 15-year liability for building collapses due to design flaws, defective ground, or poor construction.
- The lawsuit for damages must be filed within 10 years of the collapse.
- If the engineer supervises the work, they share solidary liability with the contractor.
- The most common and natural way to extinguish an obligation is through Payment or Performance.
- Novation involves replacing an old obligation with a new one.