SECTION 2

LOSS OF THE THING DUE

What Loss includes
- Under this section, Loss includes impossibility of performance
- Partial or total
When is there a Loss
1. When the object perishes (physically)
2. When it goes out of commerce
3. When it disappears in such a way that:
a. Its existence is unknown
b. Or it cannot be recovered.
When is there Impossibility of Performance
1. Physical impossibility
2. Legal impossibility:
a. Directly caused as when prohibited by law.
b. Indirectly caused as when the debtor is required to enter a
military draft.
3. Moral impossibility (impracticability)
Art. 1262. An obligation which consists in the delivery of a
determinate thing shall be extinguished if it should be lost or
destroyed without the fault of the debtor, and before he has
incurred in delay.
When by law or stipulation, the obligor is liable even for
fortuitous events, the loss of the thing does not extinguish the
obligation, and he shall be responsible for damages. The same rule
applies when the nature of the obligation requires the assumption
of risk. (1182a)
Comment:
Two Kinds of Obligation To Give
a) To give a generic thing;
b) Or to give a specific thing.
Effect of Loss on Obligation to Deliver a Specific Thing
GENERAL RULE: Obligation is Extinguished.
- The loss must be after the obligation has been incurred, because if
the loss had been prior, there would not be any subject matter and
therefore there would not have been any obligation at all.

EXCEPTIONS:
a) The debtor is at fault.
b) When loss of the thing occurs after the debtor has incurred in delay;
c) When the debtor promised to deliver the same thing to two or more
persons who do not have the same interest;
d) When the debtor is made liable for a fortuitous event because:
Of a provision of law;
Contractual stipulation;
The nature of the obligation requires the assumption of risk on
part of the debtor.
e) When the obligation to deliver arises from a criminal offense.
Art. 1263. In an obligation to deliver a generic thing, the loss
or destruction of anything of the same kind does not extinguish the
obligation.
Comment:
Effect of Loss on Obligation to Deliver a Generic Thing
GENERAL RULE: Obligation is not extinguished.
- Genus Nunquam Peruit- Genus never perishes.
EXCEPTIONS
a) If the generic thing is delimited.
Ex: 60 kilos of sugar from my 2004 harvest
b) If the generic thing has already been segregated or set aside.
Monetary Obligations
- An obligation to pay money is generic.

Article 1264. The courts shall determine whether, under the

circumstances, the partial loss of the object of the obligation is so
important as to extinguish the obligation.
Partial Loss
- When only a portion of the thing is lost or destroyed or when it
suffers depreciation or deterioration.
- It is the equivalent of difficulty of performance in obligations to do.
Comment:

* Partial Loss of the Object of the Obligation, May Extinguished the

Obligation.
Illustrations:
1.
A purchased a house and lot because of its beautiful garden and a
swimming pool. This is the only reason for the purchase, that portion was
expropriated by the government before A was able to pay for the property.
The obligation to pay for the house is extinguished. The partial loss may
consider total by the court after considering the intention of the parties.
2.
S obliged himself to deliver to B a specific racehorse. The horse
met an accident as a result of which it suffered a broken leg. The injury is
permanent. Here, the partial loss is so important as to extinguish the
obligation.
If the loss is due to fault of S, he shall be obliged to pay the value of
the horse with indemnity for damages.
If the horse to be delivered is to be slaughtered by B, the injury is
clearly not important. Even if there was fault on the part of S, he can still
deliver the horse with liability for damages, if any, suffered by B.
Article 1265. Whenever the thing is lost in the possession of
the debtor, it shall be presumed that the loss was due to his fault,
unless there is proof to the contrary, and without prejudice to the
provisions of Article 1165. This presumption does not apply in case
of earthquake, flood, storm, or other natural calamity.
Comment:
* Presumption of Negligence on the Part of the Debtor in Possession of the
Thing
Cases:
1. Atlantic Mutual Ins. Co vs. Macondary & Co., Inc. 112 Phil. 502
2. Palacio vs. Sudario, 7 Phil 275
* Presumption Does Not Apply in Case of Natural Calamity
Cases:
1. Lizares vs. Hernaez and Alunan, 40 Phil 981
Art. 1266 The debtor in obligation to do shall also be released
when the prestation becomes legally or physically impossible
without the fault of the obligor.

Subsequent impossibility arises;

BEFORE- the object is impossible, the contract void and inexistent;
impossible things or service cannot be object of contracts.
AFTER- Obligation has been constituted. It may extinguish or brings
about modification of the obligation.
Kinds of Impossibility
As to source
LEGAL IMPOSSIBILITY- When the act, by reason of subsequent law
prohibits.
a. Direct- prohibited by law.
b. Indirect- prevented by supervening legal duty such as military
service.

PHYSICAL IMPOSSIBILITY- When the act by reason of its nature

cannot be accomplished.

As to extent
OBJECTIVE- When the act or service in itself becomes ABSOLUTELY
impossible.
SUBJECTIVE- When the act cannot be done by the debtor himself, but
it can still be accomplished by other person.
As to effects
PARTIAL IMPOSSIBIILTY
In case of partial performance by the debtor: the creditor
must pay as long as he benefits from the partial compliance.
If debtor has already received anything from the creditor, he
must return anything in excess of what corresponds to the
part already performed.
TEMPORARY IMPOSSIBILITY Temporary obstacles to the performance of the prestation,
which later may disappear does not extinguish the obligation
but merely delay the its fulfillment.
If the obstacles are of an unknown and unforeseen duration,
the obligation may be considered extinguished by juridical
impossibility.
RECIPROCAL OBLIGATIONS
The release of the debtor due to impossibility of the
performance, also releases the creditor from counterprestation or compliance, because each other obligation
depends upon the other.

Requisites of Impossibility
1. Obligation used to be possible at the constitution of
obligation
2. Subsequent impossibility
3. Without the fault of the debtor

Art. 1267 When the service has become so difficult as to be

manifested beyond the contemplation of the parties, the obligor
may be released therefrom, in whole or in part.
Requisites
1. The event or change in circumstances could not have been forseen at
the time of the execution of the contract;
2. It makes the performance of the contract extremely difficult but not
impossible;
3. The event must not be due to the act of any of the parties; and
4. The contract is for a future prestation.
Effects of impossibility
Releases the debtor if performance has become so difficult to be so
manifestly beyong the contemplation of the parties.
Effects of fortuitous event where obligation proceeds from a
criminal offense
Article 1268. When the debt of a thing certain and determinate
proceeds from a criminal offense, the debtor shall not be exempted
from the payment of its price, whatever may be the cause for the
loss, unless the thing having been offered by him to the person who
should receive it, the latter refused without justification to accept
it.

The obligation subsists except when the creditor refused to accept the
thing without justification, after it had been offered to him.
EXAMPLE:
A stole the car of B. Here, A has the obligation to return the car to B.
The obligation of A arises from an act punishable by law.
Even if the car was destroyed without the fault of A, he shall be liable
for the payment of its price. The exception to the rule is when B is in MORA
ACCIPIENDI. In either case, A is liable if the loss is due to his fault.

Right of creditor to proceed against third persons

Article 1269. The obligation having been extinguished by the
loss of the thing, the creditor shall have all the rights of action
which the debtor may have against third persons by reason of the
loss.

The CREDITOR is given the right to proceed against the third person
responsible for the loss.
There is no need for an assignment by the DEBTOR.
The rights of action by the DEBTOR is TRANSFERRED to the CREDITOR
from the moment the obligation is extinguished, by operation of law, to
protect the interest of the latter by reason of loss.

EXAMPLE:
A is obliged to deliver to B a specific horse. The horse is lost through
the Fault of C.
The obligation of A is extinguished and he is not liable to B. Such being
the case, A would not be interested in going after C. The law, however,
protects B by giving him the right to bring an action against C to recover the
price of the horse with damages.