Short answer. Yes. Article 1173 of the Civil Code provides that when negligence shows bad faith, the law treats it the same as fraud. This means liability is not limited to foreseeable damages — the negligent party becomes responsible for all damages that can reasonably be attributed to the breach.
What the law says
When negligence shows bad faith, the provisions of articles 1171 and 2201, paragraph 2, shall apply.
Civil Code, Article 1173 — What Negligence Is. Read the full provision →
What ordinary negligence means
Article 1173 defines fault or negligence as the omission of the diligence required by the nature of the obligation and the circumstances of the persons, time, and place. When no specific standard is set by law or contract, the law requires the diligence of a good father of a family — a reasonable, careful person. Under ordinary negligence, the party who breached is liable for the natural and probable consequences of the breach that could have been foreseen at the time the obligation was made.
When negligence crosses into bad faith
Not all negligence is equal. Article 1173 draws a sharp line: when negligence shows bad faith, the provisions of articles 1171 and 2201, paragraph 2, shall apply. This is the key upgrade. Bad faith is more than carelessness — it implies a dishonest purpose, deliberate indifference, or conduct that betrays a wanton disregard for the other party's rights. When the negligence reaches that level, the law stops treating it as simple carelessness and applies the same rules that govern fraud.
What stricter liability means in practice
Article 2201 sets two different damage standards. For a party who acted in good faith, liability is limited to damages that are the natural and probable consequences of the breach and were foreseeable. But Article 2201, paragraph 2 removes that foreseeability cap: 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. The shift is significant — you are no longer arguing about what was predictable at the time the contract was made. Every loss that flowed from the breach and can be reasonably traced to it becomes recoverable.
What you need to show
Proving that negligence crossed into bad faith requires more than showing the other party made a serious mistake. You need to demonstrate conduct that implies a conscious and deliberate disregard for your rights — something beyond an honest error, however large. Evidence might include: repeated warnings that were ignored, a pattern of conduct showing indifference to consequences, internal records showing the party knew the risk, or the sheer magnitude of the departure from any reasonable standard. The line between gross negligence and bad-faith negligence is one of the most fact-sensitive questions in Philippine contract law.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Valenzuela Hardwood and Industrial Supply, Inc. vs. Court of Appeals, et al, G.R. No. 102316, June 30, 1997 — read the decision on LawPhil →
- Solidbank Corp./Metro Bank & Trust Co. vs. Sps. Peter & Susan Tan, G.R. No. 167346, April 2, 2007 — read the decision on LawPhil →
- Sister Pilar Versoza vs. People of the Philippines, Michelina S. Aguirre-Olondriz, Pedro Aguirre, G.R. No. 184535, September 3, 2019 — read the decision on LawPhil →
- Al Dela Cruz vs. Capt. Renato Octaviano and Wilma Octaviano, G.R. No. 219649, July 26, 2017 — read the decision on LawPhil →
Related provisions
- Civil Code, Article 1173 — What Negligence Is
- Civil Code, Article 1171 — Waiver of Future Fraud Is Void
- Civil Code, Article 2201 — Damages in Contracts and Quasi-Contracts