Compiled Notes • Obligations and Contracts • First Year GG02 • 2016-2017 Espiritu • Gervacio • Liao • Maravilla • Ongtenco • Tabalingcos

OBLIGATIONS: INTRODUCTION AND BASIC CONCEPTS Requisites of a prestation:

1. Physically and juridically possible;
CIVIL OBLIGATIONS VS. NATURAL OBLIGATIONS 2. Determinate or at least determinable;
CIVIL OBLIGATIONS NATURAL OBLIGATIONS 3. Within the commerce of man;
Give a right of action to compel the Cannot be enforced by court action, but 4. Licit;
performance of the obligation they are binding on the party that makes 5. Susceptible of pecuniary appreciation
the obligation, in conscience and
Only civil obligations are governed by according to equity and natural justice. THE VINCULUM JURIS/JURIDICAL TIE/ EFFICIENT CAUSE
the Civil Code.
Definition: A relation established by law, by bilateral acts, or by unilateral acts; see
DEFINITION OF AN OBLIGATION the sources of obligations (quiz question):
Codal Definition: An obligation is a juridical necessity to give, to do, or not to do.
(ART. 1156) The sources of obligations in ART. 1157 are exclusive and are independent sources
of obligations; however, a single act or omission can give rise to different causes
Complete Definition: An obligation is a juridical relation whereby a person (called of action (and consequently, different sources of obligation).
the creditor) may demand from another (called the debtor) the observance of a
determinate conduct, and, in case of breach, may obtain satisfaction from the assets For example, a car crash can give rise to a case for damages based on (1) contract
of the latter. (Arias Ramos) (of carriage); (2) quasi-delict (tort liability).

SOURCES OF OBLIGATIONS
ELEMENTS OF AN OBLIGATION:
1. Law;
1. Active Subject
2. Contracts;
2. Passive Subject
3. Quasi-Contracts;
3. Object or Prestation
4. Acts or Omissions Punished by Law;
4. Juridical Tie/Vinculum Juris/Efficient Cause
5. Quasi-Delicts
PERSONAL ELEMENTS OF AN OBLIGATION
LAW (ART. 1158)
1. Active Subject (creditor or obligee): Has the power to demand prestation
• Cannot exist as a source of obligations unless the acts to which its principles may
2. Passive Subject (debtor or obligor): Is bound to perform the prestation
be applied exist.
• Cannot be presumed.
THE OBJECT OR PRESTATION
• The obligation derived from law may be demandable from the relevant debtor only
if that debtor falls squarely within the contemplation of the law.
Definition: The conduct required of the parties; not a thing, but a particular conduct of
the debtor
CONTRACTS (ART. 1159)
Kinds of Prestations:
1. To give: the delivery of a movable/immovable thing • ART. 1159 states the obligatory force of contracts, in that contracts have the force
• In order to create a real right; of law between the contracting parties.
• For the use of the recipient; • Autonomy of will: Parties are free to stipulate terms in the contract for so long as
they are not contrary to law, morals, good customs, public order, public policy
• For its simple possession; or
o But these stipulations must be clear (e.g. stipulations as to interest)
• To return it to its owner.
2. To do: all kinds of work or service, whether it be physical or mental.
QUASI-CONTRACTS (ART.1160)
3. Not to do: abstaining from some act; includes obligations “not to give”.
Reasonableness is material.
Quasi-Contracts, defined: A juridical relation which arises from certain lawful,
voluntary and unilateral acts, to the end that no one may be unjustly enriched or
benefited at the expense of another.
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Example of quasi-contracts: Two kinds of negligence:
- Negotiorum gestio: the voluntary management of the property/affairs of 1. Culpa aquiliana/Cupla extra-contractual: negligence as a source of
another without the knowledge or consent of the latter (ART. 2144) obligation; quasi-delict
- Solutio indebiti: created when something is received when there is no 2. Culpa contractual: negligence in the performance of a contract.
right to demand it and it was unduly delivered through mistake (ART.
2154) Proximate Cause: such adequate and efficient cause, in the natural order of
events, and under the particular circumstances surrounding the case, would
ACTS OR OMISSIONS PUNISHED BY LAW (DELICTS) (ART. 1161) necessarily produce the event.

• There is a civil liability which springs from a criminal offense (ART. 100, RPC) Doctrine of Proximate Cause: In determining liability for a quasi-delict, the law
• The civil liability is a necessary consequence of the criminal offense. regards the proximate and not the remote cause.
• Deemed instituted in the criminal proceeding except when:
- injured party expressly reserves his right to file a separate civil action; Res ipsa loquitur, defined: “the thing speaks for itself” the facts of the occurrence
or of the injury, taken with the surrounding circumstances, may permit an inference or
- an independent civil action is allowed by law. raise a presumption of negligence, or make out a plaintiff’s prima facie case, and
- Under the Rules of Court, the exceptions are: present a question of fact for defendant to meet with an explanation.
- Waived by the injured party
- Reserved by the injured party Requisites of res ipsa loquitur:
- Instituted prior to the criminal proceeding 1. The occurrence of an injury;
• Subsidiary liability: 2. The thing which caused the injury was under the control and
- To hold employers liable, it must be committed in the performance of management of the defendant;
the functions or duties of the employee. 3. The occurrence was such that in the ordinary course of things, would not
- Must proceed from the conviction of the employee for a crime and not have happened if those who had control or management used proper care;
based on contract where the employer’s liability is primary and and
independent 4. The absence of explanation by the defendant.
• Extent of civil liability (ART. 104, 105, 106, 107 RPC):
- Restitution; NATURE AND EFFECT OF OBLIGATIONS
- Reparation of the damage caused;
- Indemnification for consequential damages. OBLIGATION TO GIVE

QUASI-DELICTS (ART. 1162) Two kinds of obligations to give:

1. Specific/Determinate: Individualized and can be identified or distinguished
Quasi-delicts are imputable from fault or negligence, if there is no pre-existing from others of its kind
contractual relation between the parties. 2. Generic/Indeterminate: - The object due is determinable; the moment it is
• Liability is founded upon a principle of equity: fault of negligence cannot delivered, it becomes determinate.
prejudice anyone else besides the author; its consequences should be borne by • Limited Generic: confined to a particular class.
the author if it prejudiced another.
• Injuria: inadvertence or want of due consideration of duty; damnum: loss Accessory Obligations in an Obligation to Give a Specific/Determinate Thing:
• Responsibility arising from quasi-delict is demandable not only for one’s own acts 1. To preserve the thing with due care (ART. 1163);
or omissions, but also those of persons for whom one is responsible. • Diligence Required: diligence of a good father of a family, as a general rule
(see discussion on diligence under negligence, ART. 1172)
Negligence, defined: the failure to observe for the protection of the interests of 2. To deliver the fruits (ART. 1164);
another person, that degree of care, precaution and vigilance which the 3. To deliver the accessions and accessories (ART. 1166)
circumstances justly demand, whereby such other person suffers injury. • Accessories: those things destined for the embellishment, use, or
preservation of another thing of more importance for the completion of the
latter.
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• Accessions: everything which is produced by a thing, or which is 1. Specific Performance – An action to compel one to perform the
incorporated or attached thereto, either naturally or artificially. prestation. A collection case (“collection for a sum of money”) is a class of
• Exception: Parties may agree to exclude any accession or accessory of an action for specific performance.
the thing. 2. Resolution – In reciprocal obligations, the contract can be rescinded
(“resolved”), with the consequence of mutual restitution. See ART. 1191.
Until delivery of the prestation, the creditor only has a personal right, or a right 3. Damages, in either case (ART. 1170)
to demand. This likewise applies to accessory obligations to deliver.
Real right: the power belonging to a person over a specific thing, without a The creditor may also opt for the following ubsidiary remedies:
passive subject individually determined, against whom such right may be 1. Accion Subrogatoria: Subrogation to the rights of the debtor, save those
personally exercised. which are inherent in the person of the debtor
Personal right: the power belonging to one person to demand of another, as 2. Accion Pauliana: Action to rescind contracts in fraud of creditors (ART.
a definite passive subject, the fulfillment of a prestation to give, to do, or not 1381, NOT ART. 1191)
to do. 3. Other specific remedies

OBLIGATION TO DO/NOT TO DO DELAY

Remedies in Breach of Obligation to Do ART. 1169 Those obliged to deliver or to do something incur in delay from the
1. Substitute Performance (ART. 1167) time the obligee judicially or extrajudicially demands from them the fulfillment
• “If a person obliged to do something fails to do it, the same shall be of their obligation.
executed at his cost. This same rule shall be observed if he does it in However, the demand by the creditor shall not be necessary in order that delay
contravention of the tenor of the obligation.” may exist;
• Non-compliance with an obligation to do entitles the creditor to have the 1. When the obligation or the law expressly so declares; or
thing done in a proper manner, by himself or by a third person, at the 2. When from the nature and circumstances of the obligation it appears
expense of the debtor that the designation of the time hen the thing is to be delivered or the
2. Rectification (ART. 1167) service is to be rendered was a controlling motive for the establishment
• Furthermore, it may be decreed that what has been poorly done be of the contract; or
undone. 3. When demand would be useless, as when the obligor has rendered it
3. Damages, in either case. beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the other does not
Remedies in Breach of Obligation Not to Do (ART. 1168): comply or is not ready to comply in a proper manner with what is incumbent
1. Undo the thing done; upon him. From the moment one of the parties fulfills his obligation, delay by
2. Damages the other begins. (1100a)

KINDS OF BREACH OF OBLIGATION DELAY (mora)

• Definition: Delay in the fulfillment of obligations
Breach of Obligation • Delay must be either malicious or negligent
1. Complete Failure to Perform (ART. 1167) • Non-fulfillment with respect to time
2. Delay/Default/Mora (ART. 1169) • There can only be delay in positive obligations (to do and to give)
3. Fraud in the Performance (ART. 1171) • There is no mora in natural obligations
4. Negligence (ART. 1173) • Effects of mora arise only when the delay is due to causes imputable to the
5. Contravention of the Tenor of the Obligation (ART. 1167) debtor
• Demand is generally necessary even if a period has been fixed in the
Effect of Breach of Obligation: obligation.
The injured party may resort to any of the principal remedies provided by law, in • There can be no delay when there is no express statement or justification to
case of breach: hold the debtor in default upon failure to pay
• No delay when demand is for a bigger amount than that due.
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When is delay incurred? 2. The debtor becomes liable for damages for the delay, which may come in the
General Rule: Without judicial or extrajudicial demand, the effect of default will not form of:
arise. a. Interest
Exceptions: b. Penalty (the penal clause is triggered)
1. When parties expressly stipulate;
2. When the law expressly so provides *Quiz question.

3. When the period is the controlling motive or the principal inducement

for the creation of the obligation (time is of the essence) MORA ACCIPIENDI
4. When demand would be useless
Mora accipiendi, defined: default on the part of the creditor
THREE CLASSES OF MORA
1. Mora Solvendi; REQUISITES OF MORA ACCIPIENDI
2. Mora Accipiendi; To render the creditor in delay, it is necessary that:
3. Compensatio Morae. 1. There is an offer of performance by the debtor who has the required capacity
2. The offer must be to comply with the prestation as it should be performed
MORA SOLVENDI 3. The creditor refuses the performance without just cause

Mora solvendi, defined: default on the part of the debtor, which may either be ex re Effects of Mora Accipiendi
(obligations to give), or ex persona (obligations to do). 1. Responsibility of the debtor for the thing is reduced and limited to fraud and
negligence
REQUISITES OF MORA SOLVENDI 2. The debtor is exempted from the risks of the loss of the thing, which automatically
To render the debtor in delay, it is necessary: passes to the creditor
1. That the obligation be demandable and already liquidated 3. All expenses incurred by the debtor for the preservation of the thing after the delay
2. That the debtor delays performance shall be chargeable to the creditor
3. That the creditor requires the performance judicially or extrajudicially 4. Creditor becomes liable for damages
• NOTE: A mere reminder (“follow-up”) cannot be considered a demand for 5. Debtor may relieve himself of the obligation by consignation of the thing
performance because it must appear that the tolerance or benevolence of 6. If the obligation bears interest, debtor does not have to pay from the moment of
the creditor must have ended (Solar Harvest v. Davao Corrugated, G.R. the delay
No. 176868, 26 Jul 2010)
COMPENSATIO MORAE
When Demand is Unnecessary:
a. When there is an express stipulation to that effect Compensatio morae, defined: default on both parties in reciprocal obligations.
b. Where the law so provides
c. When the period is the controlling motive or the principal inducement for General Rule: Parties in a bilateral contract can regulate the order in which they
the creation of the obligation (time is of the essence); shall comply with their reciprocal prestations. Otherwise, the fulfillment must be
d. Where demand would be useless simultaneous and reciprocal.
• When demand is useless
1. Impossibility is caused by some act or fault of the debtor (when Exception: Contrary stipulations between the parties
is absent or is in hiding, or has already disposed of the thing
which is to be delivered) Compensatio morae refers to mutual default by both contracting parties in a
2. Impossibility is caused by fortuitous event, but the debtor has reciprocal obligation. It requires:
bound himself to be liable in cases of such events. 1. A bilateral obligation
2. Two contracting parties
EFFECTS OF MORA SOLVENDI: 3. Reciprocal obligations: A reciprocal obligation is where both parties are
1. When the obligation has, for its object, a determinate thing, the delay places debtors and creditors of each other at the same time.
the risks of the thing on the debtor (the debtor becomes liable for loss, even
due to fortuitous event);
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EFFECTS: Contravention of the tenor of the obligation
1. Delay of the obligor cancels delay of the oblige and vice versa • This is the violation of the terms and conditions stipulated in the obligation.
2. No actionable default on both parties The contravention may not be due to a fortuitous event or force majeure.
3. If delay of one party is followed by that of the other, liability of the first infractor
shall be equitably balanced by the courts. If it cannot be determined, the contract Contravention of the Tenor of the Obligation, defined: This includes any illicit
shall be deemed extinguished and each shall bear his own damages (ART. 1192) act which impairs the strict and faithful fulfillment of the obligation, or any kind of
defective performance. (Arrieta v. National Rice and Corn, G.R. No. 15645, 31 Jan
CESSATION OF THE EFFECTS OF DELAY: 1964)
1. Renunciation by the creditor; and
2. Prescription. NEGLIGENCE

FRAUD ART. 1172 Responsibility arising from negligence in the performance of every
kind of obligation is also demandable, but such liability may be regulated by the
ART. 1170 Those who in the performance of their obligation are guilty of fraud, courts, according to the circumstances.
negligence, or delay, and those who in any manner contravene the tenor thereof,
are liable for damages. Negligence, defined: the failure to observe for the protection of the interests of
another person, that degree of care, precaution and vigilance which the
Fraud, defined: Voluntary execution of a wrongful act, or a willful omission, knowing circumstances justly demand, whereby such other person suffers injury.
and intending the effects which naturally and necessarily arise from such act of
omission Two kinds of fault or negligence
a. Culpa Contractual - negligence in the performance of a contract (the source
Fraud: of damages arising from negligence is the principal contract, e.g. contract of
• Implies some kind of malice or dishonesty and it cannot cover cases of carriage)
mistake and errors of judgment made in good faith b. Culpa Aquiliana - negligence as a source of obligation (quasi delict)
• Every debtor who fails in the performance of his obligation is bound to
indemnify for the losses and damages caused Two kinds of stipulation exempting from liability for fault or negligence
• Delay or contravention of the obligation must either be malicious/negligent to 1. Party to a contract is relieved from the effects of his fault or negligence by a
be actionable third person
• No liability if default is due to fortuitous events or force majeure, unless there 2. One party to a contract renounces in advance the right to enforce liability
is an express agreement to the contrary, or the law otherwise provides in arising from the fault or negligence of the other
particular cases
• Breach of contractual obligation entitles the other party to damages even if NOTE: Stipulations arising from liability for gross negligence are void, because such
no penalty for such breach is provided in the contract negligence amounts to fraud.
• Responsibility for damages cannot be extended to persons who have nothing
to do with the obligation ART. 1173 The fault or negligence of the obligor consists in the omission of that
diligence which is required by the nature of the obligation and corresponds with
GOOD FAITH, defined: Honest belief that no harm will be done; absence of malice the circumstances of the persons, of the time and of the place. When negligence
or knowledge that an act is going to cause harm to another shows bad faith, the provisions of articles 1171 and 2201, par. 2, shall apply.
If the law or contract does not state the diligence which is to be observed, that
ART. 1171 Responsibility arising from fraud is demandable in all obligations. which is expected of a good father of a family shall be required. (1104)
Any waiver of an action for future fraud is void.
Good father of a family
Ratio: To permit such advance renunciations would leave the obligation without effect. • In Latin: bonos paterfamilias
• Fraud in this article is the malice or bad faith in the performance of an existing • A person of ordinary care or average diligence
obligation • Must use as basis the abstract average standard corresponding to a normal
• Fraud does not refer to fraud in obtaining the requisite consent for a contract, orderly person
which would render the contract voidable. That is a different kind of fraud. • Anyone who uses diligence below this standard is guilty of negligence
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Negligence EFFECTS OF A FORTUITOUS EVENT:
• Absence of due care required by the obligation a. On determinate obligation – obligation is extinguished
• No deliberate intention to cause the injury b. On generic obligation – obligation is not extinguished (you can always
substitute something generic)
Diligence to be Required by the Obligation:
The law or contract should state the diligence which is to be observed. If it EVENTS WHICH DO NOT EXCUSE FULFILLMENT:
does not state the diligence which is to be observed, the default rule should apply. a. Increase in cost performance
b. Poverty
General Rule: Diligence normally required is ordinary diligence or diligence of a c. War between the subjects of a neutral country
good father of a family
ART. 1175 Usurious transactions shall be governed by special laws
Exception: When the law or contract requires another standard of care.
Examples: Usurious
1. Common carriers which are required to exercise extraordinary diligence; • Contracting for or receiving something in excess of the amount allowed by
2. Banks are imbued with public interest and should exercise extraordinary law for the loan or forbearance of money, goods or chattels.
diligence in transactions, e.g. checking the title of its mortgagees; • Taking of more interest for the use of money, goods, or chattels or credits
3. Medical practitioners, who are expected to exercise extraordinary than the law allows.
diligence by the nature of their work • There is no more usury law!

FORTUITOUS EVENT ART. 1176 The receipt of the principal by the creditor, without reservation with
respect to the interest, shall give rise to the presumption that said interest has
ART. 1174 Except in cases expressly specified by the law, or when it is otherwise been paid.
declared by stipulation, or when the nature of the obligation requires the The receipt of a later installment of a debt without reservation as to prior
assumption of risk, no person shall be responsible for those events which could installments, shall likewise raise the presumption that such installments have
not be foreseen, or which, though foreseen, were inevitable. been paid. (1110a)

Caso Fortuito INSTANCES WHEN THE PRESUMPTIONS DO NOT APPLY:

• An event which takes place by accident and could no have been foreseen a. When there is a reservation made orally or in writing
(e.g., destruction of houses, unexpected fire, shipwreck, violence of robbers b. If the receipt does not recite that it was issued for a particular installment due
etc.) as when the receipt is only dated
• An expected event or act of God which could neither be foreseen nor resisted, c. To payment of taxes
such as flood, torrents, shipwrecks, conflagrations, lightning and other d. Where non-payment of the prior obligations has been proven
occurrences of similar nature (Escriche)
• To be free from any liability, he must be free from any previous negligence ART. 1177 The creditors, after having pursued the property in possession of the
debtor to satisfy their claims, may exercise all the rights and bring all the actions
ELEMENTS/CHARACTERISTICS OF A FORTUITOUS EVENT of the latter for the same purpose, save those which are inherent in his person;
1. Extraordinary circumstance independent of the will of the obligor they may also impugn the acts which the debtor may have done to defraud them.
2. Impossible to foresee (1111)
3. Foreseen but was inevitable
4. Obligor must not participate in aggravating the injury resulting to the creditor SUCCESSIVE RIGHTS OF CREDITORS:
a. To levy by attachment and execution upon all the property of the debtor,
except such as are exempt by law from execution
TWO GENERAL CAUSES OF FORTUITOUS EVENT: b. To exercise all the rights and actions of the debtor, except such as are
a. Nature (earthquakes, epidemic, floods) inherently personal to him
b. Act of Man (robbery, armed invasion) c. To ask for the rescission of the contracts made by the debtor in fraud of their
rights.
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ART. 1178 Subject to the laws, all rights acquired in virtue of an obligation are 2. When the law provides for extrajudicial rescission, it may be extrajudicially
transmissible, if there has been no stipulation to the contrary. (1112) rescinded (e.g. in lease contracts); moreover, there is no need to file a
separate action for rescission of a contract where there is an action
THE REMEDY OF RESCISSION compatible with rescission (e.g. ejectment cases) (CAMI v. General Milling
Corp., G.R. No. 151168, 25 Aug 2010)
The remedy of rescission/resolution:
1. Is governed by ART. 1191 of the Civil Code; Express Resolutory Condition in Bilateral Contract
2. Is available in reciprocal obligations; • Valid stipulation that if one of them does not comply with obligation, the
3. Can only be invoked by the injured party; contract shall be automatically resolved.
4. Is based on substantial breach of contract; • Nature of facultative resolutory condition
5. Is alternative to specific performance; • Resolution takes place by force of law, and the court cannot grant the debtor
6. Must be, as a general rule, exercised judicially. a period within which to perform.
• The resolution produces its effects when the creditor notified debtor of his
Reciprocal Obligation decision to resolve.
• Arises when there is identity of cause and the two obligations are created
at the same time The exercise of the power to rescind would also depend upon the extent of the
• Those which arise from the same cause in which each party is a DEBTOR performance of the obligation.
and CREDITOR of the other, such that the obligation of one is dependent • Obligation not yet performed: EXTRAJUDICIAL DECLARATION of
upon the obligation of the other. resolution by the party ready and willing to perform his obligation is allowed
• To be performed SIMULTANEOUSLY: performance of one is conditioned o If debtor impugns the declaration of rescission by the creditor, it shall
upon simultaneous fulfillment of the other be subject to judicial determination.
• When one party performs his part, the other incurs delay upon non-fulfillment • Obligation already performed by the injured party: COURT ACTION for
giving the former the right to rescind the obligation RESCISSION is necessary

Who is the Injured Party? Material Differences Between Rescission Under Art. 1191 and Art. 1381:
The injured party is the party who stands to lose from the contract. If both parties RESOLUTION (Art. 1191) RESCISSION (Art. 1381)
committed breach of contract, and it cannot be determined who the first infractor was, Nature of the Principal and retaliatory Subsidiary remedy (other
ART. 1192 applies; that is, the contract shall be DEEMED EXTINGUISHED, each shall Remedy remedy remedies must be exhausted
bear his/its own damages (offset equitably). first)
Legal Basis for Based on SUBSTANTIAL Based on
Alternative Remedies of the injured party when the other fails to comply (either the Remedy BREACH by other party in LESION/ECONOMIC
one of the two), with damages in either case: reciprocal obligation PREJUDICE (law should
1. Demand performance (specific performance) OR provide that it is a ground)
2. Resolution of the contract Extent of the Completely but NOT Granted only to the extent
• When performance became impossible or there are insuperable and Remedy AUTOMATICALLY* cancels necessary to COMPENSATE
legal obstacles after choosing specific performance, rescission is reciprocal obligation for the damage caused to
allowed (4 year prescriptive period applies) (Destroys juridical tie; as if creditor
no contract/ obligation) (there can be partial
The alternative remedies are available only in cases of substantial breach. rescission)
*Not automatically, because
Judicial Exercise of the Remedy rescission must be judicially
invoked unless the contract
provides for rescission.
General Rule: The remedy of rescission (resolution) must be exercised judicially
Effect of the Mutual restitution Mutual restitution
Exception: When the law or stipulation provides for extrajudicial rescission:
Remedy (Buyer should return property (Creditor will not return
1. Stipulations providing for extrajudicial rescission should take effect (Froilan
and compensate for damage anything- did not receive
v. Pan Oriental, G.R. No. L-11897, 31 Oct. 1964);
due to non-payment anything)
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RESOLUTION (Art. 1191) RESCISSION (Art. 1381) JURIDICAL PERFECTION AND EXTINGUISHMENT: PURE AND
CONDITIONAL OBLIGATIONS; OBLIGATIONS WITH A TERM

Alternative Injured party can: Option in cases of rescissible Art. 1179 Every obligation whose performance does not depend upon a future
Remedy 1. Demand fulfillment contracts is ONLY restitution or uncertain event, or upon a past event unknown to the parties, is demandable
(specific at once.
performance); or Every obligation which contains a resolutory condition shall also be
2. Restitution demandable, without prejudice to the effects of the happening of the event.
Prescriptive 10 years 4 years (1113)
Period
Who May Granted to CREDITOR/ can Granted to CONTRACTING Pure Obligations: Obligations whose performance does not depend upon a future
Exercise Power be invoked by INJURED PARTIES or even THID or uncertain event or upon a past event unknown to the parties. A pure obligation is
PARTY PARTY demandable at once.

The Effect of Rescission Example of a pure obligation: A demand note – subject to neither a suspensive
• Extinguishes obligatory relation as if it had never been created, the extinction condition nor a suspensive period; strictly a pure obligation. A demand note is strictly
having retroactive effect a pure obligation, and payment is immediately demandable.
• Invalidating or unmaking the juridical tie
• It is the duty of the court to require both parties to surrender that which they Other instances of pure obligations:
have respectively received and place each other in his original situation 1. When the original period has been cancelled;
• Party seeking rescission cannot have performance as to part and rescission 2. Non-fulfillment of a condition resolved the period stipulated
as to the remainder.
Conditional Obligations: Obligations in which the acquisition of rights as well as
Waiver of Implied Rescission in Reciprocal Obligation is allowed. the extinguishment or loss of those already acquired, shall depend upon the
e.g. Acceptance by a creditor of installment payments after grace period happening of the event which constitutes the condition
Condition
DIFFERENT CLASSIFICATIONS OF OBLIGATIONS • Every future and uncertain event upon which an obligation or provision is
1. By their juridical quality and efficaciousness made to depend
a. Natural • Future and uncertain event upon which the acquisition or resolution of rights
b. Civil is made to depend by those who execute the juridical act
c. Mixed • Futurity and uncertainty – must concur
2. By their subject • Death of a person – not a condition
a. Unilateral and bilateral
3. By their object Effects of failure to comply (Catungal v. Rodriguez)
a. Simple or individual, and multiple or collective a. If condition is imposed on the perfection of a contract – results in the failure
i. Multiple or compound – conjunctive or distributive of the contract
1. Distributive b. If condition is imposed on the performance of the obligation – gives the other
a. Specific or Generic party an option either to refuse to proceed, for the compliance of the
b. Alternative of Facultative obligation, or to waive the condition
b. Possible and impossible
c. Divisible and indivisible
d. Principal and accessory
4. By their juridical perfection and extinguishment
a. Pure
b. Conditional
c. With a term
• Condition and period may either be suspensive or resolutory
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CLASSIFICATIONS OF CONDITIONS ACCORDING TO ORIGIN: POTESTATIVE, CASUAL & MIXED (ART. 1182)
POTESTATIVE CASUAL MIXED
ACCORDING TO EFFECT: SUSPENSIVE AND RESOLUTORY (ART. 1181) A condition which A condition which A condition which
Suspensive Resolutory depends upon the will of depends exclusively upon depends upon the will of
Suspensive condition happens, Resolutory condition happens, one of the contracting chance, will of a third one of the contracting
obligation ARISES obligation and rights already existing parties person, or partially by parties and other
shall be EXTINGUISHED chance and partially by circumstance (including
If it depends upon the will of a third person, or the will of third persons or
By way of illustration: Suspensive and Resolutory Conditions in Differentiating sole will of the debtor, other factors and not chance)
Contracts of Sale/Deeds of Sale (COS/DOS) and Contracts To Sell (CTS) (De Leon then the conditional upon will of the
v. Ong, G.R. No. 170405, 2 Feb 2010) obligation (not just the contracting parties. Example: I will give you a
condition!) shall be void. house if you marry her.
(Conditional) Contract of Sale Contract to Sell Example: I will give you
The For the seller to deliver the For the seller to convey the Deed my land if war breaks out
Prestation property of Absolute Sale upon the next month.
For the buyer to pay the price completion of the condition
For the buyer to pay the
installments POTESTATIVE CONDITIONS
Condition Non-payment is the negative The deed itself is subject to a Kinds Simple Potestative Purely Potestative
Imposed resolutory condition positive suspensive condition SIMPLE: A condition PURELY
• Conveyance of the property • Conveyance of the property presupposing not only a POTESTATIVE: depends
is upon execution of the is only upon payment of full manifestation of will but solely and exclusively
deed (right to property is purchase price (there is also the realization of an upon the will of the
acquired) normally a reservation of title external act debtor. This destroys
• Non-payment extinguishes clause in a CTS) Simple potestative efficacy of the legal tie
right to the property • The fulfillment of the conditions on the part of
condition gives rise to the the debtor does not
Deed of Absolute Sale prevent the formation of a
Remedies Default remedies (specific Just damages (because there’s valid obligation because it
performance + damages; no breach of obligation when is still subject in part to
resolution + damages; just there obligation has not been contingencies over which
damages) fulfilled) he has no control
Where the On the performance of an On the perfection of a contract
Condition obligation Effects • It is only when the potestative condition
is depends exclusively upon the WILL OF THE
Imposed DEBTOR that the obligation is VOID in its
entirety.
• If partly on the will of the debtor and partly on
rd
the will of the 3 person= VALID
• Depends exclusively on the part of creditor=
VALID
• A condition BOTH POTESTATIVE (or
facultative) and RESOLUTORY may be valid
even though the condition is made to depend
upon the will of the obligor.
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ACCORDING TO POSSIBILITY: POSSIBLE AND IMPOSSIBLE CONDITIONS ACCORDING TO MODE: POSITIVE AND NEGATIVE CONDITIONS (ARTS. 1184
(ART. 1183) AND 1185)
POSSIBLE IMPOSSIBLE POSITIVE (ART. 1184) NEGATIVE (ART. 1185)
The condition is capable of realization The condition is incapable of realization A condition that some event happen at a A condition that some event will not
according to nature, law, public policy, or determinate time shall extinguish happen at a determinate time shall
good customs existing obligation as soon as the time render the obligation effective from the
IMPOSSIBLE CONDITIONS: expires moment the time has elapsed
Effect General Rule: If the obligation is divisible, the impossible conditions
shall annul the obligation which depend upon them (again, not just
the condition, but the obligation) CCORDING TO DIVISIBILITY: DIVISIBLE AND INDIVISIBLE
Exceptions: Pre-existing obligations, divisible obligation, negative DIVISIBLE INDIVISIBLE
impossible things and testamentary deposition
Condition is susceptible of partial Condition is not susceptible of partial
Kinds 1. Physical Impossibility: Contrary to the law of nature
realization realization
2. Juridical Impossibility: Contrary to law, morals, good
customs, public policy; when it restricts certain essential rights
necessary for the free development of human activity;
ACCORDING TO PLURALITY: CONJUNCTIVE AND DISJUNCTIVE
• Necessary that it consist of an act or fact for one of the
if several conditions are imposed for the same obligation, the necessity of
parties to the contract
complying with all or one only depends upon the intention of the parties.
• It is not the act but the INTENTION AND ITS EFFECT that
CONJUNCTIVE ALTERNATIVE/DISJUNCTIVE
determine whether the condition is illicit.
There are several conditions; all of them There are several conditions; fulfillment
• One who promises something that is impossible or illicit
must be complied with of one is sufficient
knows that it cannot be fulfilled, thus the effect is nullity of
the promise.
• Impossible or illicit conditions ANNUL the obligations
dependent upon them only when the conditions are ACCORDING TO FORM: EXPRESS AND IMPLIED
POSITIVE AND SUSPENSIVE. EXPRESS IMPLIED
o Applicable only to contracts and not to donations The condition is expressly stated The condition is tacit (but can be
and testamentary disposition inferred from the agreement)
o Impossibility must exist AT THE TIME OF THE
CREATION OF THE OBLIGATION, supervening Art. 1180 When the debtor binds himself to pay when his means permit him to
impossibility does not affect the existence of do so, the obligation shall be deemed to be one with a period, subject to the
obligation provisions of Article 1197. (n)
• Divisible obligation: that which is not affected by the
impossible or unlawful condition shall be VALID • Creditor should file an action to fix a period for the payment of the obligation
3. Logical Impossibility: Intrinsic absurdity (to the point of (see discussion on period)
illogic), although the condition itself is not impossible • An immediate action to enforce the obligation, without a period having been
Negative The condition is considered as not imposed and obligation must be previously fixed by the court would be premature
Impossible regarded as PURE, SIMPLE and IMMEDIATELY DEMANDABLE • See Obligations with a Period
Conditions;
Effect Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily
prevents its fulfillment. (1119)

CONSTRUCTIVE FULFILLMENT OF A CONDITION

Constructive fulfillment of a condition is when the debtor voluntarily prevents the

fulfillment of the obligation
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REQUISITES OF CONSTRUCTIVE FULFILLMENT: LOSS DETERIORATION IMPROVEMENT
1. The intent of the obligor to prevent the fulfillment of the condition; Without The obligation shall be The impairment is to Such as by
2. The actual prevention of the fulfillment. the Fault extinguished, unless be borne by the nature/time: The
of the there is a stipulation to creditor improvement shall
Mere intention of the debtor to prevent the happening of the condition, or to place Debtor the contrary inure to the benefit of
ineffective obstacles to its compliance, without actually preventing the fulfillment, is the debtor
insufficient (International Hotel Corp. v. Joaquin, G.R. No. 158361, 10 Apr 2013). With the The debtor shall be The creditor may The debtor shall have
Fault/at obliged to pay choose between: no other right than that
RETROACTIVITY OF CONDITIONAL OBLIGATION (ART. 1187) the damages upon the 1. Rescission + granted to the
Expense fulfillment of the damages; usufructuary
• The effect of obligation retroacts to the moment when such obligation was of the condition 2. Specific
constituted or created. Debtor performance+ If improvement can be
o Condition is only accidental and not an essential element of the damages removed: debtor may
obligation. remove the
• When the obligation is fulfilled (effectivity of obligation), the effects of such is improvement
deemed commenced from the time the obligation itself was constituted, not
from the time the accidental element was fulfilled= TIME OF PERFECTION If improvement cannot
• The application of retroactivity of conditional obligations is NOT ABSOLUTE. be removed: debtor
• It is still subject to certain limitations dictated by justice and required by cannot remove the
practicablility or convenience thing: he has to deliver
o If the thing is lost by fortuitous event before the happening of the the same to the
condition, the debtor suffers the loss because he is still owner. creditor with the
• The right to the fruits of the thing is not within the principle of retroactivity principal thing, and
• The courts shall determine by use of sound discretion the retroactive effect the creditor is not
of fulfillment of condition in obligation to do and not to do liable for indemnity.

RULES WITH RESPECT TO LOSS/DETERIORATION/IMPROVEMENT IN Art. 1190. When the conditions have for their purpose the extinguishment of an
SUSPENSIVE CONDITIONS: obligation to give, the parties, upon the fulfillment of said conditions, shall
return to each other what they have received.
Loss of a Thing: A thing is lost, when:
1. It perishes; In case of the loss, deterioration or improvement of the thing, the provisions
2. It goes out of commerce or man; which, with respect to the debtor, are laid down in the preceding article shall be
3. it disappears in a manner that its existence is unknown or cannot be applied to the party who is bound to return.
recovered As for the obligations to do and not to do, the provisions of the second
paragraph of Article 1187 shall be observed as regards the effect of the
Deterioration extinguishment of the obligation. (1123)
- Any reduction or impairment in the substance or value of a thing which does
not amount to loss OBLIGATIONS WITH A PERIOD
- Thing still exists at the time the condition is fulfilled, but it is no longer intact
or is less than what it was when the obligation was constituted. Term / Period à space of time which, exerting an influence on obligations as a
consequence of a juridical act, suspends their demandability or determines their
Improvement extinguishment
- Anything added to, incorporated in or attached to the thing due
- Caused by nature of the thing or time: inure to the benefit of the creditor Effect of a period: The obligation is demandable only when the day fixed for their
(retroactivity of the effects of conditional obligation) performance arrives
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Suspension of a period: in the event of a fortuitous event of force majeure, a contract Effect of Arrival of a Term à Recovery of the thing or money itself, plus the fruits or
being deemed suspended during the said period does not mean that the happening interest, accruing from the moment of payment to the date of recovery
of any of those events stops the running of the period of the contract has been agreed • If the action to recover is not brought BEFORE THE MATURITY, the right to
upon to run. recover the thing or money will cease; but the reason for the law (ratione
legis) will justify the recovery of the fruits or interest from the time of payment
OBLIGATION WITH A PERIOD à one whose effects or consequences are subjected to the date of maturity
in one way or another to the expiration or arrival of said period or term
Fruits or interests cannot be recovered, notwithstanding premature payment,
DAY CERTAIN à a fixed or appointed day; a specified particular day; a day in the following cases:
in term 1. Obligation is reciprocal, and there has been premature performance on both
sides
TERM VS. CONDITION 2. When the obligation is a loan on which the debtor is bound to pay interest
TERM / PERIOD CONDITION 3. When the period is exclusively for the benefit of the creditor, because the
debtor paying in advance loses nothing
As to Fulfillment Event which must An uncertain event
necessarily come although
it may not be known when GENERAL RULE: The period is intended for the benefit of both parties.
• If for the benefit of both
As to influence on No effect upon the Gives rise to an obligation
o Creditor cannot demand payment and the debtor cannot make an
the obligation existence of obligations, or extinguishes one
effective tender and consignation of payment before the period
but only their already existing
stipulated
demandability or
performance (does not
EXCEPTION: The parties intended the period to benefit one of them
carry with it a retroactive
a. If for the benefit of the creditor only
effect)
o Creditor may demand performance at any time, but the debtor
As to time Always refers to the future May refer to a past event
cannot compel him to accept payment before the period expires
unknown to the parties
b. If for the benefit of the debtor only
As to the will of the Merely empowers the Annuls the obligation
o Debtor may oppose a premature demand for payment, but may
debtor courts to fix such period
validly pay at any time before the period expires
o A stipulation that the payment is to be made “within” the stipulated
REQUISITES OF A PERIOD: period
1. Future
2. Certain
DEFINITE OR INDEFINITE PERIOD
3. Possible
INSTANCES WHEN THE COURT MAY FIX A PERIOD:
KINDS OF TERMS:
1. No period is fixed but a period was intended
1. Suspensive à Ex Die – from a day certain à one that must lapse before the
2. Duration of the period depends upon the sole will of the debtor
performance of the obligation can be demanded
2. Resolutory à In Diem – to a day certain à period after which the
**NOTE:
performance must terminate
• Mere failure of the parties to fix a period will not always justify the court in
TERMS CLASSIFIED ACCORDING TO SOURCE: fixing one;
1. Legal à by law • When the obligation is pure, simple, and unconditional, the debtor cannot ask
2. Voluntary à by stipulation of the parties that a period be fixed, when he cannot show that it was the intention of the
3. Judicial à by courts creditor to grant him an extension of time within which to pay
• Period fixed cannot be changed by courts.
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WHEN THE DEBTOR LOSES THE BENEFIT OF THE PERIOD (ART. 1198) Effect of Choice à to limit the obligation to the object or prestation selected, with all
The creditor may demand the obligation from the debtor before the lapse of the the consequences which the law provides à obligation is converted into simple
period: obligation to perform the obligation chosen
1. When debtor becomes insolvent
2. When debtor does not furnish guarantees or securities promised When obligation becomes SIMPLE à if all the prestations, except one, are impossible
3. When guarantees or securities given have been impaired or have or unlawful, the debtor can choose and perform only one so the obligation ceases to
disappeared be alternative and is converted into a simple obligation to perform the only feasible or
4. When the debtor violates an undertaking practicable prestation
5. When the debtor attempts to abscond*
*Abscond:Escape;evade; flee RIGHT TO INDEMNITY FOR DAMAGES

Loss of the Term à obligation becomes immediately due and demandable even if 1. Loss or Fault by the debtor
the period has not yet expired à obligation is converted into PURE OBLIGATION • if only some of the prestations are rendered impossible, the fault of
the debtor does not make him liable for damages because he can
OBLIGATIONS WITH SEVERAL OBJECTS still comply with the obligation by performing any of the prestations
remaining or the one which remains
CONJUNCTIVE ALTERNATIVE FACULTATIVE 2. Fortuitous event
One where the debtor Several objects being Only one thing is due but • obligation is extinguished and the debtor is not liable for damages
has to perform several due, the fulfillment of one the debtor has reserved • if one or more of the prestations due become impossible by
prestations and it is is sufficient, determined the right to substitute it fortuitous event, leaving only one prestation, and then this last one
extinguished only by the by the choice of the with another becomes impossible by fault of the debtor, the provisions of the
performance of all of debtor who generally has present article will apply then the debtor will be liable for damages,
them the right of election with the value of the last prestation as the basis
Loss of the thing due Loss of the thing which • the liability of the debtor shall be based on the value of the last
affects the obligation may be given as prestation which became impossible through his fault
substitute does not affect
the obligation OBLIGATIONS ACCORDING TO MULTIPLICITY OF PARTIES
Election may be granted Election can never be
to the creditor granted to the creditor Note Before Reading This Section:
Loss of that which is due 1. Dividing Prestations vs. Multiple Parties. There is a difference between
as the object of the divided/multiple prestations and multiple parties. The terms “divisible” and
obligation will extinguish “indivisible” refers to whether the prestation can be divided or not; the terms
such obligation “joint” and “solidary” refer to the fulfillment of the obligation by the multiple
parties, either debtor or creditor.
Kinds of obligations according to object: 2. Solidarity refers to the vinculum; divisibility refers to the prestation.
1. Simple – only 1 prestation
2. Compound – 2 or more prestations JOINT (DIVISIBLE) OBLIGATION
a. Conjunctive
b. Distributive A joint divisible obligation is one where:
i. Alternative 1. Each of the debtors is liable only for a proportionate part of the debt;
ii. Facultative 2. Each creditor is entitled only to a proportionate part of the credit.
Notice of Selection may be made: à purpose of notice is to give the creditor • Also known as: mancomunada or mancomunada simple or a pro rata
an opportunity to express his consent or to impugn the election made to the debtor • “We promise to pay”
1. Orally • Each creditor is entitled only to a proportionate part of the credit
2. In writing • Each creditor can recover only his share of the obligation
3. Tacitly • Each debtor can be made to pay only his part
4. By any other other equivocal means
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• Obligation presumed to be divided into as many equal shares as there are Plurality of Debtors
creditors or debtors o Indivisible obligation can be performed by them only by acting together
• Each credit is distinct from one another, therefore a joint debtor cannot be o If any of the debtors is not willing to perform, the prestation is converted into
required to pay for the share of another with debtor, although he may pay if an indemnification for damages
he wants to o Once converted, the creditor can sue the debtors separately for their
respective shares in the indemnity
NOTE: When two persons are liable under a contract or under a judgment, and no
words appear in the contract or the judgment to make each liable for the entire INDIVISIBILITY SOLIDARITY
obligation, the presumption is that their obligation is JOINT Each creditor cannot demand more Each creditor may demand the full
than his share and each debtor is prestation and each debtor has likewise
Effect of Joint Liability not liable for more than his share. the duty to comply with the entire
1. The demand by one creditor upon one debtor, produces the effects of default prestation.
only with respect to the creditor who demanded and the debtor on Refers to the prestation that is not Refers to legal tie or vinculum defining the
whom the demand was made, but not with respect to others capable of partial performance extent of liability
2. The interruption of prescription by the judicial demand of one creditor upon
a debtor does not benefit the other creditors and does not interrupt the SOLIDARY OBLIGATION
prescription to other debtors
3. The vices of each obligation arising from the personal defect of a particular A solidary obligation is one where:
debtor or creditor does not affect the obligation or rights of the others 1. Each debtor is liable for the entire obligation
4. The insolvency of a debtor does not increase the responsibility of his co- 2. Each creditor is entitled to demand the whole obligation
debtors, nor does it authorize the joint divisible obligation 3. Each creditor may enforce the entire obligation
5. The defense of res judicata is not extended from one debtor to another 4. Each debtor may be obliged to pay it in full

JOINT INDIVISIBLE OBLIGATIONS (ART. 1224) Also known as: mancomunada solidaria or joint and several or in solidum
Words in a contract which may imply solidarity:
A joint indivisible obligation is one where: 1. “I promise to pay”
1. There are several debtors or several creditors; 2. “individually and collectively”
2. The prestation is indivisible. 3. “individually liable”
4. “individually and jointly liable”
In case of multiple joint debtors: The concurrence of all the debtors is necessary, 5. The terms “juntos o separadamente” on a promissory note creates a solidary
but the each debtor may only speak for their particular part. responsibility
In case of multiple joint creditors: The collective action of all the creditors is
expressly required for acts which may be prejudicial to the interest of the creditors. Solidary Exists When
1. When there is an express stipulation in the contract that the obligation is
Plurality of Creditors solidary
o If there are several creditors and only one debtor, the obligation can be 2. When a charge or condition is imposed upon heir or legatees, and the
performed only by delivering the object to all the creditors jointly. testament expressly makes the charge or condition in solidum
o In case of non-performance by the debtor, the obligation to pay damages 3. When the law expressly provides for solidarity of the obligation of several
arises. obligors
o With respect to damages, the prestation becomes divisible, and each 4. When a solidary responsibility is imposed by a final judgment
creditor can recover separately his proportionate share. 5. When the nature of the obligation requires solidarity

Interruption of Prescription KINDS OF SOLIDARITY:

o As long as the obligation is joint, the act of one creditor cannot have any effect 1. Active – exists among the creditors
as to another creditor, because the credit of each one is separate from the 2. Passive – exists among the debtors
credits of the others. 3. Mixed – part of both creditors and debtors
o The indivisibility requires collective action to be effective.
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ACTIVE SOLIDARITY PASSIVE SOLIDARITY NOTE: Sureties who are liable solidarily may bind themselves to conditions distinct
The authority of each creditor to claim Each debtor can be made to answer from those under which their principle is liable; the only limitation upon this
and enforce the rights of all, with the for the others, with the right on the part proposition is that the obligation of the surety cannot be greater than that of the
resulting obligation of paying everyone of the debtor-payor to recover from the principal, either as to the amount or to the burdensome character of the conditions
what belongs to him; there is no merger, others their respective shares.
much less a renunciation of rights, but Each solidary creditor may:
only a mutual representation o interrupt prescription,
JURIDICAL EFFECTS o Constitute the debtor in default, or
Death of a solidary creditor does not Each debtor can be required to pay o Bring suit so that the obligation may produce interest
transmit the solidarity to each of his heirs the entire obligation; but after
but to all of them taken together payment, he can recover from the co- A solidary creditor cannot do anything prejudicial to others. Remission is
debtors their respective shares particularly prejudicial to the co-creditors.
Each creditor represents the others in The debtor who is required to pay may
the act of receiving payment, and in all set up by way of compensation his The act of extinguishment which is prejudicial to the co-creditors, will be valid so as to
other acts which tend to secure the credit own claim against the creditor, in this extinguish the claim against the debtors, but not with respect to the co-creditors whose
or make it more advantageous case, the effect is the same as that of rights subsist and can be enforced against the creditor who performed the act alone.
payment
The total remission of the debt in favor The solidary creditor is an agent of the others; he cannot assign that agency to a
One creditor does not represent the of a debtor releases all the debtors; third person without the consent of the other creditors.
others in such acts as novation, but when this remission affects only the
compensation, and remission share of one debtor, the other debtors Creditors are tacitly mutually representatives of each other for demanding
are still liable for the balance of the payment.
obligation.
The credit and its benefits are divided All the debtors are liable for the loss of The equality of the rights of the solidary creditors by virtue of the mutual
equally among the creditors, unless the thing due, even if such loss is representation lasts only until one of them goes ahead of the others and sues the
there is an agreement among them to caused by the fault of only one of them, debtor.
divide differently. or by fortuitous event after one of the
debtors has incurred in delay. TYPE OF DEFINITION
The interruption of prescription as to DEMAND
one debtor affects all the others; but Judicial Demand When one creditor makes a judicial demand, the tacit
The debtor may pay to any solidary the renunciation by one debtor of representation by the other creditors is considered
creditor, but if a judicial demand is made prescription already had does not revoked, and during the pendency of the action, the creditors
on him, he must pay only to the prejudice the others, because the who did not sue lose their representation of the others.
plaintiff. extinguishment of the obligation by
prescription extinguishes also the The action does not definitely eliminate the other creditors,
mutual representation among the but only during the time that the effects of the actions exists.
solidary debtors. If the action is dismissed, the other creditors may in turn sue
Each creditor may renounce his right The interests due by reason of the the debtor.
even against will of debtor, and the delay of one of the debtors are borne Extra-Judicial Has the same effect as judicial demand in terminating the
latter need not thereafter pay the by all of them. Demand mutual representation among the solidary creditors and
obligation to the former. concentrating the agency in the creditor who made the
demand
Terms and Conditions Demand by If all or several solidary creditors demand payment
1. Uniform – when the debtors are bound by the same conditions and clauses Several Creditors separately, the debtor should pay to the one who first
2. Varied – where the obligors, although liable for the same prestation, are notified him.
nevertheless not subject to the same terms and conditions
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TYPE OF DEFINITION Remission – a gratuitous act
DEMAND One creditor Several
If they demand at the same time or collectively, as when they Extinguishes the obligation in the There can be no action as between
join together in a single action or written demand upon the amount and to the extent in which it is those who made it, but all of them will be
debtor, the latter preserves his right to choose and may made liable for the shares of the creditors who
pay anyone of those demanding payment Creditor becomes liable to his co- did not remit
Partial Payment If a debtor has already paid the share of a creditor who made creditors for their shares
no demand upon him, his obligation to that extent should Effects of Novation, Compensation, Confusion, or Remission of Debt
be considered reduced. Any of the acts will extinguish the
In Mixed When one creditor makes a demand upon one of the debtors, obligation
Solidarity the latter cannot pay to any other creditor but the one who Between the creditors and debtors
made the demand. Exception: In case of novation, it is no
longer the original obligation, but the
Exception: Debtors upon whom no demand has been made, new one
and so they may pay to any creditor who may not be the one Does not prejudice the rights of the
who made the demand. Among co-creditors other creditors to recover their
respective shares
EFFECTS OF SOLIDARITY IN CASE OF NOVATION Cannot recover from his other co-
• Each solidary debtor may release all the others by binding himself alone, Among co-debtors debtors more than their respective
in their place, in favor of the creditor. shares
• The debtor who effect the novation cannot, by himself, bind the others to a
new debt without their consent. Passive Solidarity and Suretyship
• General Rule: the mere extension of time for payment given by the creditor A solidary debtor, like a surety, stands
to a solidary debtor, does not release the others from the obligation for some other person
(Inchausti & Co. v. Yulo) Similarities Both debtor and surety, after payment,
may require that they be reimbursed
NATURE OF A SURETY AGREEMENT A solidary debtor, unlike the surety, is
o Sureties are bound in solidum: a material alteration of the principal contract, liable, not only for his co-debtor’s
effected by the creditor and the principal debtor, without the knowledge and obligation, but also for his own; hence,
consent of the sureties, completely discharge the sureties from all liability he is both a principal debtor and a
on the contract of suretyship. surety
Distinctions A solidary debtor’s responsibility for his
DACION EN PAGO (DATION IN PAYMENT) co-debtor is primary, not subsidiary
o Delivery of a specific object as a substitute for the performance of the An extension of time given by the
obligation creditor to a debtor would not release
o If the dation in payment is not immediately effected, but is in the form of a a solidary co-debtor but would
promise, it amounts to a novation release a solidary guarantor or surety

MERGER AND COMPENSATION Parties may validly stipulate that the solidary debtors can only be sued simultaneously,
• Partial – rules on application of payments should govern or they may provide for the order in which the debtors may be sued individual.
• Total – obligation is extinguished
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Judgment as Regards Creditors Judgment as Regards Debtors INDIVISIBLE DIVISIBLE
The judgment adverse to a solidary The judgment against one debtor 2. When the creditor accepts
creditor can be set up against the cannot be enforced against the performance, knowing its
other co-creditors in subsequent others; a new action must be filed incompleteness and without protest
actions, unless it is founded on a cause against the latter. (ART. 1235)
personal to the plaintiff in the first
action. PRESUMPTIONS AS TO DIVISIBILITY (ART. 1225)
Note: These are only presumptions; hence, even if an object/service may be
Identity of Parties divisible, the obligation is indivisible if so provided by law or intended by the
o Res judicata requires identity of parties, but not necessarily of individuals parties.
o The solidary debtors may be individually distinct from each other, they Obligations to give definite things and Obligations which have for its object:
constitute legally one and the same party with the same interest. those which are not susceptible of • A certain number of days of work
partial performance are deemed • The accomplishment of work by
DIVISIBILITY OF OBLIGATIONS indivisible. metric units
• Analogous things which by their
Divisibility or indivisibility of an obligation refers to the ability of the prestation to nature are susceptible of partial
be divided into parts. performance
are deemed divisible
INDIVISIBLE DIVISIBLE
The prestation cannot validly be The prestation can be performed in OBLIGATIONS WITH A PENAL CLAUSE
performed in parts because of the parts, by its nature
nature of thing or because of the A penal clause is an accessory undertaking to assume greater liability in case
agreement of the parties How a thing may be divided of breach. It is a substitute for damages and payment of interests in case of
1. Qualitative – not entirely noncompliance with the obligation.
Effect of Partial Performance in homogeneous (e.g. inheritance)
Indivisible Obligations: The debtor who 2. Quantitative – homogeneous (e.g. Advantage of a Penal Clause (as opposed to lack of it): No need to prove actual
fails to perform the work but abandons movables) damages suffered by the creditor (ART. 1228). All that is necessary is non-
the same after performing a part cannot 3. Ideal – the parts are not separated performance of the obligation.
recover on quantum meruit because in amaterial way, but are
in indivisible obligations, partial nonetheless divisible (e.g. Nature of a Penal Clause: A penal clause is an accessory obligation. (ART. 1230)
performance is equivalent to non- “undivided portion” in co-
performance. ownership) GENERAL RULE: The nullity of the principal obligation renders the accessory
obligation (the penal clause) void. The nullity of the penal clause does not render
GENERAL RULE: An indivisible the principal obligation void
obligation is not susceptible of partial
fulfillment EXCEPTIONS:
EXCEPTIONS: 1. If the nullity of the obligation is the reason to enforce the penalty;
1. Where there is substantial 2. When the penalty is undertaken by a third person precisely for an obligation
performance in good faith (ART. which is unenforceable, voidable, or natural, in which case it assumes the form
1234) of a guaranty which is valid under ART. 2052.
a. The debtor may recover in
this instance The double function of a penal clause:
b. But the damages suffered 1. Provides for liquidated damages (no need to determine extent of actual damages);
by the creditor for partial 2. Strengthens the coercive force of the obligation by the threat of greater
performance is responsibility in the event of breach.
subtracted from the
amount recovered
 Compiled Notes • Obligations and Contracts • First Year GG02 • 2016-2017 Espiritu • Gervacio • Liao • Maravilla • Ongtenco • Tabalingcos

KINDS OF PENALTIES: PENAL CLAUSE FACULTATIVE
1. Subsidiary/Alternative: The penalty replaces the obligation in case of non- OBLIGATION
performance Substitution The payment of the penalty in The power of the debtor to
2. Joint/Cumulative: The penalty is an addition to the principal obligation. lieu of the principal obligation make the substitution is
can be made only by express absolute
Rule of Thumb in Claiming Damages After Penalty: stipulation
1. If the purpose of the penalty is as punishment: the question of damages is Right of The right to demand may be The creditor can never
not resolved, and must be determined Creditor to granted to the creditor demand both prestations
2. If the purpose of the penalty is as reparation: the matter of damages is Demand (because they are
resolved, because the purpose of the penalty is precisely to serve as substitutes)
liquidated damages. PENAL CLAUSE GUARANTY
Similarities 1. Intended to insure the performance of the principal
!!Construction of Penal Clauses: STRICT CONSTRUCTION!! obligation
2. Both accessory and subsidiary obligations
The imposition of a penalty does NOT preclude the creditor from recovering Object The obligation to pay the The object of the guarantor
damages and interests, in the following instances: penalty is different from the and the principal debtor are
1. When the parties stipulate (example: “without prejudice to any action by the principal obligation the same
creditor to collect damages”); Person The principal obligation and The principal debtor cannot
2. When the debtor refuses to pay the penalty; the penalty can be assumed be the guarantor of the same
3. When the debtor is guilty of fraud in the fulfillment of the obligation (ART. 1227) by the same person obligation
Extinguishment Extinguished by the nullity of Subsists even when the
PENAL CLAUSE CONDITIONAL the principal obligation, except principal obligation is (a)
OBLIGATIONS when the penal clause is voidable; (b) unenforceable;
Existence of an There is already an existing There is no obligation before assumed by a third person or (c) a natural obligation.
obligation obligation (the principal the suspensive condition (This principle applies to the
obligation) from the very happens penal clause if a third person
beginning assumed the penal clause)
Dependence on The accessory obligation is The principal obligation itself
event dependent upon the non- is dependent upon an Guaranty, defined: A contract by virtue of which a third person, called the
performance of the principal uncertain event guarantor, binds himself to fulfill the obligation of the principal debtor in case the
obligation latter should fail to do so (a surety is a special kind of guaranty)
PENAL CLAUSE ALTERNATIVE
OBLIGATIONS REDUCTION OF THE PENAL CLAUSE BY THE COURTS (ART. 1129)
Multiplicity of There is only one prestation Two or more obligations are 1. Partial/Irregular Performance of the Principal Obligation
Prestations and the penal clause is due, but fulfillment of one is 2. If the penalty imposed is iniquitous or unconscionable.
enforceable only after failure sufficient
to perform the principal REVIEW: Intervention by the Courts:
obligation 1. To fix a period;
Effect of The impossibility of the The impossibility of one of the 2. To equitably temper the liability of the first infractor in case of breach by both
Impossibility principal obligation conditions, without the fault of parties;
extinguishes the penalty the debtor, still leaves the 3. To reduce a penal clause.
others subsisting
Debtor’s Right The debtor cannot choose to The debtor can choose which
of Choice pay the penalty to relieve prestation to fulfill
himself of the principal
obligation (unless expressly
granted)