Business Law “An obligation is a juridical relation whereby a

Module 1 person (called the creditor) may demand from

another (called the debtor) the observance of a
Slide 1 determinative conduct (the giving, doing, or not
doing), and in case of breach (violation), may
Intro to Obligations demand satisfaction from the assets of the latter.” –
Arias Ramos
Meaning of Obligation
Essential Requisites/ Elements of an Obligation
• The term obligation is derived from the Latin word
obligation which means tying or binding. Every obligation has four definite elements, without
• It is a tie or bond recognized by law by virtue of which no obligation can exist, to wit:
which one is bound in favor of another to render
something- and this may consist in giving a thing, 1) A passive subject (called debtor or obligor) – the
doing a certain act, or not doing a certain act. person who is bound to the fulfillment of the
obligation; he who has a duty;
Civil Code definition of Obligation *when a contract involves money, we call it debtor or
Under the New Civil Code, creditor but if performance of an act: obligor or
obligee
Article 1156. An obligation is a juridical necessity to 2) An active subject (called creditor or obligee) – the
give, to do or not to do. person who is entitled to demand the fulfillment of
the obligation; he who has the right;
• An obligation is a legal duty, however created, the 3) Object or prestation (subject matter of the
violation of which may become the basis of an action obligation) – the conduct required to be observed by
of law the debtor. It may consist in giving, doing, or not
doing. Without the prestation, there is nothing to
Meaning of Juridical Necessity perform. In bilateral obligations, the parties are
Obligation is a juridical necessity because in case of reciprocally debtors and creditors; and
noncompliance, the courts may be called upon by Ex of bilateral obligation: contract of sale-
the aggrieved party (angry or unhappy) to enforce halinhinan; buy& sell.
its fulfillment or, in default thereof, the economic 4) A juridical or legal tie (also called efficient cause)
value that it represents. In a proper case, the debtor – that which binds or connects the parties to the
may also be made liable for damages, which obligation. The tie in an obligation can easily be
represents the sum of money given as a determined by knowing the sources of the
compensation for the injury or harm suffered by the obligation.
creditor or obligee (he who has the right to the
performance of the obligation) for the violation of his It is important to identify the prestation in a certain
rights. obligation. Once the prestation is identified, you can
determine who the passive subject
Juridical Necessity is whom the active subject can demand fulfillment of
- pwede syang pumunta sa korte para hilingin dun na the obligation
idirect na yung magpeperform ng obligation ay
gampanan ang kanyang obligation. Kung hindi man Kinds of prestation
kayang gampanan, bayaran yung economic value na 1. To give- consist in the delivery of a movable or
nagpepresents. immovable thing in order to create a real right or for
the use of the recipient or for its simple possession
In other words, the debtor must comply with his or in order to return to its owner
obligation whether he likes it or not; otherwise, his 2. To do- all kinds of work or services, whether
failure will be visited with some harmful or mental or physical.
undesirable consequences. If obligations were not 3. Not to do- consist in abstaining from some act,
made enforceable, then people can disregard them includes “not to give.” both being negative
with impunity (freedom from punishment). If an obligations
obligation cannot be enforced, it may be only a
natural obligation. A contract of sale and a contract of loan are
examples of prestations to give; A contract of labor
Definition of Obligation or a service contract is an example of a prestation to
do.
 Held: The husband should pay, even if he was not the
To illustrate one who called the doctor. It is his duty to support
the wife, and support, includes medical attendance.
In an obligation to pay taxes, the passive subject is The duty to pay is an obligation to give, and is
the taxpayer, the active subject is the government imposed by the law.
through the Bureau of Internal Revenue, the
prestation is ―to give,‖ specifically to pay taxes, the Distinction of obligation, right, and wrong
juridical tie is a source of obligation arising from law.
(1) Obligation is the act or performance which the
In an obligation to give products, the passive subject law will enforce.
is the seller, the active subject is the buyer, the (2) Right, on the other hand, is the power which a
prestation is ―to give,‖ specifically to deliver person has under the law, to demand from another
products, and the juridical tie is a source of any prestation.
obligation arising from contract. (3) A wrong (cause of action), according to its legal
meaning, is an act or omission of one party in
For Example violation of the legal right or rights (i.e. recognized
by
Under a building contract, A bound himself to build a law) of another. In law, the term injury is also used to
house for B, for ₱ 1,000,000.00 refer to the wrongful violation of the legal right of
another.
In the given example, it can be inferred that:
• A is the passive subject The essential elements of a legal wrong or injury
• B is the active subject are:
• The building of the house is the object or (a) a legal right in favor of a person
prestation. (creditor/obligee/
• The agreement or contract, which is the source of plaintiff)
the obligation is the juridical tie. (b) correlative legal obligation on the part of another
(debtor/obligor/defendant)
Slide 2 (c) an act of omission by the latter in violation of the
For Example said right with resulting damage to the former.
-> cause of action arises

Kinds of Obligations

A. From the viewpoint of “sanction” –

1. Civil obligation (or perfect obligation) – Example:
Binay promises to pay Pnoy his (Binay’s) debt of Php.
1 million. Enforceable ang sanction
2. Natural obligation- the duty not to recover what
For Example
has voluntarily been paid although payment was no
longer required.
Suppose A had already constructed the house and it
3. Moral obligation (or imperfect obligation)- the
was the agreement that B would pay after the
duty of a Catholic to hear mass on Sundays and holy
construction is finished.
days of obligation. The sanction here is conscience or
Then,
morality, or the law of the church.
• A becomes the active subject
• B becomes the passive subject.
B. According to the subject matter, obligations may
either be:
Example: Pelayo v. Lauron
1. Real obligation (the obligation to give) is that in
12 Phil. 453 (BAR)
which the subject matter is a thing which the obligor
must deliver to the obligee.
Facts: A wife was about to deliver a child. Her
2. Personal obligation (the obligation to do or not to
parents- in- law called the doctor.
do) is that ub which the subject matter is an act to be
done or not to be done.
Issue: Who should pay the doctor: the husband or
the parents?
(example: the duty to paint a house, or to refrain
from
committing a nuisance) Contract of carriage- madala ang passenger safely,
driver & passenger
C. From the affirmativeness and negativeness of the
obligation Contract of loan- Even borrowing a book from a
1) Positive personal obligation or obligation to do or classmate has a contract
render service. (Art. 1167, NCC)
2) Negative Personal obligation or obligation not to May mga terms and conditions
do. (which naturally includes obligations “not to
give”) (Art. 1168, NCC) Pag simple loan- tangible o pera
Comodatum loan- borrowing book
D. From the viewpoint of the persons obliged
1. Unilateral- where only one of the parties is bound 3. Quasi- contracts- when they arise from lawful,
voluntary and unilateral acts which are enforceable
(Example: Binay owes Pnoy P1million. Binay must to the end that no one shall be unjustly enriched or
pay benefited at the expense of another. (Art. 2142,
Pnoy) NCC) In a sense, these obligations may be considered
as arising from law
2. Bilateral- where both parties are bound
(Example: In a contract of sale, the buyer is obliged Example: The obligation to return money paid by
to mistake or which is not due. (Art. 2154, NCC)
pay, while the seller is obliged to deliver)
Solutio indebty- Pag sobra ang natanggap na sukli,
Bilateral obligations may be: you have the obl to return bc it was delivered
mistakenly.
a. reciprocal
b. non reciprocal (where performance of one Authorized management- inayos muna yung konting
is non dependent upon the performance by butas ng bubong ng kapitbahay so he incurred
the other. expenses so he has the right to ask for the payment.

Sources of obligation Slide 3

Article. 1157. Obligations arise from: 4. Crimes or acts or omissions punished by law-
(1) Law; when they arise from civilliability which is the
(2) Contracts; consequence of a criminal offense. (Art. 1161. NCC)
(3) Quasi-contracts;
(4) Acts or omissions punishable by law (delicts or Example: The obligation of a thief to return the car
crime) ; and stolen by him; the duty of the killer to indemnify the
(5) Quasi-delicts. (torts) heirs of his victim.

(Art. 1157, NCC) Pag nagnakaw ka, kailangan mo rin ibalik at

maiimprison ka rin
Sources of obligation
1. Law- when they are imposed by law itself. Obligation to indemnify the heirs- Moral damages,
actual damages: hospital funeraria expenses as well
Example: Obligation to pay taxes (makikita sa train as the earning capacity of the dead.
law or internal revenue); obligation to support one’s
family. (Art. 291 of NCC) Non-payment of tax is also a crime. Even in rape in a
form of moral.
2. Contracts- when they arise from the stipulation of
the parties. (Art. 1306 of the NCC) 5. Quasi-delicts or torts- when they arise from
damage caused to another through an act or
Example: The obligation to repay a loan or omission, there being fault or negligence, but no
indebtedness by virtue of an agreement. contractual relation exists between parties. (Art.
2176, NCC)
Consent, consideration, object or subject matter
(COC) to be a valid contract Driver and passenger base on contract of carriage
Pag driver and pedestrian walang contract kasi not allowed to recover attorney’s fees from the
driver and passenger lang dapat pwede tong 4 & 5 theater owner)
reckless imprudence resulting to injury.
In case of overpayment of taxes, the National
No cause of action to family when both died Government cannot be required to pay interest on
pedestrian and driver of jeepney. Except in bus na the
may operator. amount refundable in the absence of a statutory
provisions expressly directing or authorizing such
Example: The obligation of the head of a family that payment.
lives in a building or a part thereof to answer for
damages caused by things thrown or falling from the Hilario Jaravata v. Sandiganbayan
same (Art. 2193, NCC); the obligation of the
possessor of an animal to pay for the damage which L-56170, Jan. 31, 1984
it may have caused. (Art. 2183)
A high school principal has no legal obligation to
Pag nakabasag ka, tort din to facilitate the release of the salary differentials of the
teachers under him. So of he receives
Criticism of the Enumeration reimbursement for his “expenses” or as a “gifts” he
Listed Down by the Law cannot be adjudged guilty under the Anti- Graft Law,
for after all, he had no duty to do said facilitation
• The enumeration is not scientific because in reality
there are only two sources: the law and contracts, ART. 1159 of the New Civil
because obligations arising from quasi-contracts, Code provides,
crimes, and quasi-delicts are really imposed by the
law. Obligations arising from contracts have the force of
law between the contracting parties and should be
ART. 1158. Obligations derived from law compiled with in good faith. (1091a)
are not presumed. Only those expressly
determined in this Code or in special Hindi lahat ng terms and condition ay dapat sundin
laws are demandable, and shall be kung contrary naman sa law.
regulated by the precepts of the law
which establishes them; and as to what A contract is a meeting of minds between two
has not been foreseen, by the provisions persons
of this Book. (Art. 1158, NCC) whereby one binds himself, with respect to the
other, to give something or to render some service.
Article 1158 refers to legal (Art. 1305).
obligations or obligations arising
from law. They are not presumed Meaning of the Article
because they are considered a
burden upon the obligor. They are The article means that neither party may unilaterally
the exception, not the rule. To be and upon his own exclusive volition, escape his
demandable, they must be clearly obligations under the contract, unless for causes
set forth in the law, i.e., the Civil sufficient in law and pronounced adequate by a
Code or special laws. competent tribunal.

Meaning of the Article (1) Binding force- Obligations arising from contracts
The law says “obligations derived from law are not have the force of law between the contracting
presumed”. This merely means that the obligation parties, i.e., they have same binding effect of
must be clearly (expressly or impliedly) set forth in obligations imposed by laws. This does not mean,
the law (the Civil Code or Special Laws). Thus, an however, that contract is superior to the law. As a
employer is ordinarily not required to furnished his source of enforceable obligation, contract must be
employees with legal assistance, for no law requires valid and it cannot be valid if it is against the
this. law

(De la Cruz v. Northern Theatrical Enterprises, where (2) Requirement of a valid contract – a contract is
a movie house guard, forced to defend himself in valid (assuming all the essential elements are
court for killing a gate crasher, was acquitted but was present; Art. 1318) if it is not contrary to law, morals,
good customs, public order, and public policy. It is sale with Carlo, a customer. The contract of sale itself
invalid or void if it is contrary to laws, morals, good results in the obligations to pay and to deliver. The
customs, public order, or public policy. (Art. 1306) obligation to deliver may result in a contract of
carriage, and so on, ad infinitum.
Slide 4
Compliance in good faith Condrado v. Judge Tan
51 O.G. 2923, Jun. 1955
Compliance in good faith means compliance or
performance in accordance with the stipulations or FACTS: In a validity made contract, some
terms of the contract or agreement. Sincerity and provisions were later on inserted by a falsifier.
honesty must be observed to prevent one party from Issue: Is the whole contract void?
taking unfair advantage over the other.
HELD: Only the additional provision should be
Non-compliance by a party with his legitimate disregarded, and the original terms should be
obligations after receiving the benefits of a contract considered valid and subsisting.
would constitute unjust
enrichment on his part. ART. 1160. Obligations derived from quasi-contracts
shall be subject to the provisions of Chapter 1, Title
Examples: XVII of this Book. (n) (Art. 1160, NCC)

(1) If Francis agrees to sell his house to Paul and Paul A quasi-contract is that juridical relation resulting
agrees to buy the house of Francis, voluntarily and from lawful, voluntary, and unilateral acts by virtue
willingly, then they are bound by the terms of their of which the parties become bound to each other to
contract and neither party may upon his own will, the end that no one will be unjustly enriched or
and without any unjustifiable reason, withdraw from benefited at the expense of another.
the contract or escape from his obligations there
under. It is not properly a contract at all. In contract, there is
a meeting of the minds or consent; the parties must
That which is agreed upon in the contract is the law have deliberately entered into a formal agreement.
between Francis and Paul and must be complied with In a quasi-contract, there is no consent but the same
in good faith. is supplied by a fiction of law. In other words, the
law considers the parties as having entered into a
(2) A contract whereby Francis will kill Paul in contract, although they have not actually did do, and
consideration of P1,000.00 to be paid by CJ, is void irrespective of their intention, to prevent injustice.
and non-existent because killing a person is contrary
to law. Likewise, an agreement whereby Francis will Kinds of quasi-contracts
render domestic service gratuitously (without good
reason) until his loan to Paul is paid, is void as being (1) Negotiorum gestio is the voluntary management
contrary to law and morals. of the property or affairs of another without the
knowledge or consent of the latter. (Art. 2144,
Differences between an Obligation and a NCC.)
Contract (2) Solutio indebiti is the juridical relation which is
created when something is received when there is
An obligation is the result of a contract (or some no right to demand it and it was unduly delivered
other source). Hence, while a contract, if valid, through mistake. (Art. 2154, NCC) The requisites
always results in obligations, not all obligations come are:
from contracts. A contract always presupposes a
meeting of the minds; this is not necessarily true for (a) There is no right to receive the thing delivered
all kinds of obligations. (b) The thing was delivered through mistake

Be it noted however, from another viewpoint that UST Cooperative Store v. City of Manila, et al.
a contract may itself be the result of an obligation. L-17133, Dec. 31, 1965
Thus, if Paul engages Allen as the former’s agent, we
have the contract of agency. As an agent, Allen has FACTS: The UST Cooperative Store, which is tax-
the obligation, say to look around for clients or exempt under RA 2023 (The Philippine Non
buyers, as in the real estate business. As a result of Agricultural Cooperative Act) because its assets are
such obligation, Allen may enter into a contract of
not more than P500,000 paid taxes to the City of A quasi-delict is an act of or omission by a person
Manila, not knowing that it was tax exempt. (tort feasor) which causes damage to another giving
rise to an obligation to pay for the damage done,
ISSUE: May it successfully ask for refund? there being fault or negligence but there is no pre-
existing contractual relation between the parties.
HELD: Yes, because the payment is not considered (Art. 2176, NCC)
voluntary in character. Clearly, the payment was
made under mistake. Examples

Query: Is a Quasi-Contract an Implied Contract? • While driving a car recklessly, I injured a

• No, because in a quasi- contract (unlike in an pedestrian.
implied contract) there is NO meeting of the minds.
• While cleaning my window sill, my
Other Examples of Quasi-Contracts negligence caused a flower pot to fall on
the street, breaking the arms of my
• When during fire, flood, or other calamity, neighbor.
property is saved from destruction by another
person without the knowledge of the owner, the Requisites of quasi-delict
latter is bound to pay the former just compensation. • There must be an act or omission
• There must be fault or negligence
• Any person who is constrained (force) to pay the • There must be damage caused
taxes of another shall be entitled to reimbursement • There must be a direct relation of cause and effect
(repaying) from the latter. between the act or omission and the damage
• There is no pre-existing contractual relation
Slide 5 between parties
ART. 1161 Civil obligations arising from criminal
offenses shall be governed by the penal laws, subject Example: While playing softball with his friends,
to the provisions of article 2177, and of the pertinent Francis broke the window glass of Paul, his neighbor.
provisions of Chapter 2, Preliminary Title, on Human The accident would not have happened had they
Relations, and of the Title XVII of this Book, played a little farther from the house of Paul.
regulating damages. (Art. 1161, NCC)
Test for determination of Negligence
• Oftentimes, the commission of a crime causes not
only moral evil but also material damage. From this “The test in determining whether a person is
principle, the rule has been established that every negligent is this: Would a prudent man (in his
person criminally liable for an act of omission is also position) foresee harm to the person injured as a
civilly liable for damages. (Art. 100, Revised Penal reasonable consequence of the course about to be
Code) pursued? If so, the law imposes a duty on the actor
to refrain from that course, or to take precaution
Scope of civil liability against its mischievous results, and the failure to do
so constitutes negligence. Reasonable foresight of
The extent of the civil liability arising from crimes is harm, followed by the ignoring of the admonition
governed by the Revised Penal Code and the Civil born of this provision, is the constitute fact of
Code. This civil liability includes: negligence”

(1) Restitution Crime distinguished from quasi-delict

(2) Reparation for damaged caused
(3) Indemnification for consequential The following are the distinctions:
damages. (Art. 104, RPC)
1. In crime, there is criminal or malicious intent or
ART. 1162. Obligations criminal negligence, while in quasi-delict, there is
derived from quasi-delicts only negligence;
shall be governed by the 2. In crime, the purpose is punishment, while in
provisions of Chapter 2, Title quasi-delict, indemnification of the offended party;
XVII of this Book, and by 3. Crime affects public interest, while quasi-delict
special laws. (Art. 1162, NCC) concerns private interest;
4. In crime, there are generally two liabilities: treacherous one, a veritable trap. His act was clearly
criminal and civil, while in quasi-delict, there is only a departure from the standard of conduct required
civil liability; of a
5. Criminal liability cannot be compromised or settled prudent man. He should have desisted from making
by the parties themselves, while the liability for the order. Since he failed to appreciate the
quasi-delict can be compromised as any other civil predictable danger and aggravated such negligence
liability. by offering part of the fruits as a reward, it is clear
6. In crime, the guilt of the accused must be proved that he should be made to respond in damages for
beyond reasonable doubt, while in quasi-delict, the the actionable wrong committed by him.
fault or negligence of the defendant need only be
proved by pre-ponderance (superior or greater Preserve the thing – In obligations to give (real
weight) of evidence. obligations), the obligor has the incidental duty to
take care of the thing due with the diligence
Nature and Effects of Obligations of a good father of a family pending delivery.

ART. 1163. Every person obliged to give Factors to be considered. – The diligence required
something is also obliged to take care of it necessarily depends upon the nature of the
with the proper diligence of a good father of obligation and corresponds with the circumstances
a family, unless the law or the stipulation of of the person, of the time, and of the place. (Art.
the parties requires another standard of 1173, NCC.) It is not necessarily the standard of care
care. (Art. 1163, NCC) one always uses in the protection of his property. As
a general rule, the debtor is not liable if his failure to
Slide 6 preserve the thing is not due to his fault or
negligence but to fortuitous events or force majeure.
Duty to Exercise Diligence
A thing is said to be specific or determinate
This article deals with the first effect of an particularly designated or physically segregated
obligation to deliver a determinate thing (as others of the same class.
distinguished from a generic thing – or one of a
class) – namely- the duty to exercise proper Examples:
diligence. Unless diligence is exercised, there is a 1. the watch I am wearing
danger that the property would be lost or 2. The car sold by X
destroyed, thus rendering illusory the obligation. 3. My dog named “Terror”
4. the house at the corner of Rizal and del Pilar
Diligence Needed 5. the Toyota car with Plate No. AAV 316
• That which is required by the nature of the 6. this cavan of rice
obligation and corresponds with the circumstances 7. the money I gave you.
of person, time, and place.
This is really diligence of a good father of a family. Specific thing and generic thing distinguished.
• A determinate thing is identified by its
• However, if the law or contract provides for a individuality. The debtor cannot substitute it with
different standard of care, said law or stipulation another although the latter is of the same kind and
must prevail. quality without the
consent of the creditor.
Ronquillo, et al. v. Singson
CA, L-22612-R, Apr. 22, 1959 • A generic thing is identified only by its specie. The
debtor can give anything of the same class as long as
FACTS: A man ordered a ten-year-old boy, Jose it is of the same kind.
Ronquillo, to climb a high and rather slippery santol
tree, with a promise to give him part of the fruits. ART. 1164. The creditor has a right to the fruits of
The boy was killed in the act of climbing. the thing from the time the obligation to deliver it
arises. However, he shall acquire no real right over it
ISSUE: Is the person who ordered him liable? until the same has been delivered to him. (Art. 1164,
NCC.)
HELD: Yes, in view of his negligent act in making the
order. He did not take due care to avoid a reasonably Different Kind of fruits
foreseeable injury to the 10y/o boy. The tree was a
The fruits mentioned by the law refer to natural, upon the fulfillment of the condition or arrival of
industrial, and civil fruits. the term. However, the parties may make a
1. Natural fruits are the spontaneous products of the stipulation to the contrary as regards the right of the
soil, and the young and other products of animals. creditor to the fruits of the thing.
3. In a contract of sale, the obligation arises from the
Example: Grass; all trees and plants on lands’ perfection of the contract even if the obligation is
produced without the intervention of human labor. subject to a suspensive condition or a suspensive
period where the price has been paid.
2. Industrial fruits are those produced by lands of any 4. In obligations to give arising from law, quasi-
kind through cultivation or labor. contracts, delicts, and quasi-delicts, the time of
performance is determined by the specific provisions
Example: Sugar cane, vegetables; rice; and all of the law applicable.
products of lands brought about by reason of human
labor. Meaning of personal right and real right

3. Civil fruits are those derived by virtue of a juridical 1. Personal right is the right or power of a person
relation. (creditor) to demand from another (debtor), as a
definite passive subject, the fulfillment of the latter’s
Example: Rents of buildings, price of leases of lands obligiation to give, to do, or not to do.
and other property and the amount of perpetual or
life annuities or other similar income. (Art. 442, NCC) 2. Real right is the right or interest of a person over a
specific thing (like ownership, possesion, mortgage),
Right of creditor to the fruits without a definite passive subject against whom the
right may be personally enforced.
The creditor is entitled to the fruits of
the thing to be delivered from the time the Personal right and real right distinguished
obligation to make delivery arises. The • In personal right there is a definite active subject
intention of the law is to protect the interest and a definite passive subject, while in real right,
of the obligee should the obligor commit there is only a definite subject without any definite
delay, purposely or otherwise, in the passive subject. (See Art. 1156.)
fulfillment of his obligation. • A personal right is, therefore, binding or
enforceable only against a particular person, while a
Slide 7 real right is directed against the whole world.
When creditor is entitled to the fruits
– Example: Francis is obliged to give Paul on Dec. 3, Example:
2004, a particular parcel of land. (before Dec. 3, he Francis is the owner of a parcel of land under a
has no right whatsoever over the fruits). After Dec. 3, torrens title registered in his name in the Registry of
2004, Paul, the creditor is entitled (as of right) to the Property. His ownership is a real right directed
fruits. But if the fruits and the land are actually or against everybody. There is no definite passive
constructively delivered only on Dec. 15, 2004, Paul subject. If the land is claimed by Paul who takes
becomes owner of the said fruits and land only from possesion, Francis has a personal right to recover
the said date. Between Dec.3 and Dec. 15, Paul had from Paul, as a definite passive subject, the property.
only a personal right (enforceable against Francis);
after Dec. 15, he has a real right (over the If the same land is mortgaged by Francis to Mae, the
properties), a right that is enforceable against the mortgage; if duly registered, is binding against third
whole world. persons. A purchaser buys the land subject to
mortgage which is a real right.
When obligation to deliver fruits arises
Ownership acquired by delivery
1. Generally, the obligation to deliver the thing due Ownership and other real rights over property are
and, consequently, the fruits thereof, if any, arises acquired and transmitted in consequence of certain
from the time of the “perfection of the contract. contracts by tradition or delivery. Mere agreement
Perfection, in this case, refers to the birth of the does not effect transfer of ownership. The meaning
contract or to the meeting of the minds between the of the phrase “he shall acquire no real right over it
parties. (Art. 1305, 1315, 1319, NCC.) until the same has been delivered to him”, is that
2. If the obligation is subject to a suspensive the creditor does not become the owner until the
condition or period (Art. 1179, 1189, 1193), it arises specific thing has been delivered to him. Hence,
when there has been no delivery yet, the proper Slide 8
court action of the creditor is not one for recovery of Effects of Fortuitous Events
possession and ownership but once for specific Another important difference between a generic and
performance or rescission of the obligation. a specific obligation is that, a specific obligation, that
is, an obligation to deliver a specific thing, is, as a
ART. 1165. When what is to be delivered is a rule, extinguished by a fortuitous event or act of
determinate thing, the creditor, in addition to the God. Upon the other hand, generic obligations are
right granted him by Article 1170, may compel the never extinguished by fortuitous events.
debtor to make the delivery.
Examples:
If the thing is indeterminate or generic, he may ask a. Francis is obliged to give Paul this car. Before
that the obligation be complied with the expense of delivery, an earthquake destroys completely the car.
the debtor. The obligation to deliver is extinguished.
b. Francis is obliged to give Paul a book. Since this is a
If the obligor delays, or has promised to deliver the generic thing, even if one particular book is lost,
same thing to two or more persons who do not have other
the same interest, he shall be responsible for book may7 take its place. Hence the obligation is not
fortuitous event until he has effected the delivery. extinguished (genus nunquam perit)
(Art. 1165, NCC.)
‘Ordinary Delay’ Distinguished from ‘Default’
Remedies of creditor in real obligation
Ordinary delay is different from legal delay
In a specific real obligation (obligation to deliver a (default). The first is merely non-performance at the
determinate thing), the creditor may exercise the stipulated time; default is that delay which amounts
following remedies or rights in case the debtor fails to a virtual nonfulfillment of the obligation. (As a
to rule, to put a debtor in default, there must be a
comply with his obligation: demand for fulfillment, the demand being either
judicial or
a. Demand specific performance or fulfillment (if it is extrajudicial)
still possible) of the obligation with a right to
indemnity for damages; or Examples:
b. Demand rescission or cancellation (in a certain a. Ron is obliged to give Harry his Jaguar car on Dec.
cases) of the obligation also with the right to recover 7, 2005. If on said day, Ron does not deliver, he is in
damages(Art. 1170); or ordinary delay (not default). If on Dec. 8, 2005, an
c. Demand payment of damages only where it is the earthquake destroys the Jaguar car, Ron is not liable
only feasible remedy. because the obligation is extinguished.
b. If, however, on Dec. 8, demand was made for
A generic real obligation delivery, Ron would be in legal delay (default) and if
(obligation to deliver a generic thing), on the other later, the car is destroyed by a fortuitous event, he
hand, can be performed by a third person since the would still be liable (in that the obligation to deliver
object is expressed only according to its family or the lot specific thing is converted into a monetary
genus. It is, thus, not necessary for the creditor to claim for damages). However, if the car would have
compel the debtor to make the delivery, although he been destroyed at any rate even if no demand had
may ask for performance of the obligation. *the been made, the amount of damage would reduced.
manner of compliance with an obligation to deliver a
generic thing is governed by Article 1246. ART. 1166. The obligation to give a determinate
thing
Responsibility of debtor who delays or has includes that of delivering all its accessions and
promised delivery to separate creditors. accessories, even though they may not have been
mentioned. (Art. 1166, NCC.)
Paragraph 3 gives two instances when a fortuitous
event does not exempt the debtor from Meaning of Accessions and Accessories
responsibility. It likewise refers to a determinate
thing. An indeterminate thing can not be the object a. Accessions are the fruits of a thing or additions to
of destruction by a fortuitous event because genus or improvements upon a thing (the principal).
nunquam perit (genus never perishes).
Examples: house or trees on a land; rents of a
building; air-conditioner in a car; profits or dividends obligation to do because this may amount to
accruing from shares of stocks, etc/ involuntary servitude which, as rule, is prohibited
under our Constitution.
b. Accessories are things joined to or included with
the principal thing for the latter’s embellishment, Where, however, the personal qualifications of the
better use, or completion. debtor are the determining motive for the obligation
contracted (e.g., to sing in a night club), the
Examples: Key of a house; frame of a picture; performance of the same by another would be
bracelet of a watch; machinery in a factory; bow of a impossible or would result to be so different that the
violin. obligation could not be considered performed.
Hence, the only feasible remedy of the creditor is
Right of creditor to accessions and accessories indemnification for damages. But where the
obligation can still be performed at the expense of
The general rule is that all accessions and accessories the
are considered included in the obligation to deliver a debtor notwithstanding his failure or refusal to do so,
determinate thing although they may not have been the court is not authorized to merely grant damages
mentioned. This rule is based on the principle of law to the creditor.
that the accessory follows the principal. In order that
they will be excluded, there must be a stipulation to ART. 1168 When the obligation consists in not doing,
that effect. and the obligor does what has been forbidden him, it
shall also be undone at his expense. (Art. 1168, NCC)
But, unless otherwise stipulated, an obligation to
deliver the accessions or accessories of a thing does Slide 9
not include the latter. Thus, a sale of the In an obligation not to do, the duty of the obligor is
improvements (e.g., house) upon a land is not to
sufficient to convey title or any right to the land. But abstain from an act. Here, there is no specific
the lease of a building or house naturally includes the performance. The very obligation is fulfilled in not
lease of the lot on which it is constructed for the doing what is forbidden. Hence, in this kind of
possession of the lot is implied in the lease of the obligation the debtor cannot be guilty of delay.
improvement. (Art. 1169, NCC)

ART. 1167. If a person obliged to do something fails As a rule, the remedy of the obligee is the undoing of
to do it, the same shall be executed at his cost. the forbidden thing plus damages. However, if it is
not possible to undo what was done, either
This same rule shall be observed if he does it in physically or legally, or because of the rights acquired
contravention of the tenor of the obligation. by third persons who acted in good faith, or for some
Furthermore, it may be decreed that what has been other reason, his remedy is an action for damages
poorly done be undone. (Art. 1167, NCC) caused by the debtor’s violation of his obligation.

Remedies of Creditor if Debtor Fails to Do Example:

Ron bought a land from Harry. It was stipulated that
a. To have the obligation performed (by himself or by Harry would not construct a fence on a certain
another) at debtor’s expense (only if another can do portion of his land adjoining that sold to Ron.
the performance).
Should Harry construct a fence in violation of the
b. Also– to obtain damages. (Damages alone cannot agreement, Ron can bring an action to have the
substitute for performance if owners can do it; if fence
purely personal or special – as a painting to be done removed at the expense of Harry.
by a reputed artist – only damages may be asked,
unless substitution is permitted) When Demand is Not Needed to Put Debtor in
Default
Performance by a third person a. When the law so provides (Example: Taxes should
A personal obligation to do, like a real obligation to be paid within a definite period, otherwise penalties
deliver a generic thing, can be performed by a third are imposed without need of demand for payment)
person. While the debtor can be compelled to make b. When the obligation expressly so provides
the delivery of a specific thing, a specific
performance cannot be ordered in a personal
c. When time is of the essence of the contract (or b. Here performance may be set on different dates.
when the fixing of the time was the controlling (Example: delivery date on Dec. 9, 2005; and
motive for the establishment of the contract) payment on Dec. 13, 2005. To put the seller in
d. When demand would be useless, as when the default, demand as a rule must be made. Delivery
obligor has rendered it beyond his power to perform. upon the other hand, does not put the buyer in
(Example: When before the maturity, the seller has default, till after demand, unless demand is not
disposed of it in favor of another, or has destroyed required. This is because, in the example given,
the subject matter, or is hiding) different periods for performance were given)
e. When the obligor has expressly acknowledged that c. If the performance is not set on different dates,
he really is in default (But it should be noted that his either by the law, contract, or customs, it is
mere asking for extension of time is not an express understood that performance must be simultaneous.
acknowledgement of the existence of default on his Hence, one party cannot demand performance by
part) the other, if the former himself cannot perform. And
when neither has performed , there is compensatio
Different Kinds of Mora morae (default on part of both; so it is as if no one is
a. mora solvendi (default on part of the debtor) in default). If one party performs and the other does
not, the latter would be in default.
1. mora solvendi ex re (debtor’s default in real
obligations) ART. 1170. Those who in the performance of their
2. mora solvendi ex persona (debtor’s default in obligations are guilty of fraud, negligence, or delay
personal obligations) and those who in any manner contravene the tenor
thereof, are liable for damages. (Art. 1170, NCC)
b. mora accipiendi (default on part if the creditor)
Grounds for Liability
c. compensatio morae (when in a reciprocal 1. Fraud (deceit or dolo) – as used in Article 1170, it
obligation both parties are in default; here it is as if is the deliberate or intentional evasion of the normal
neither is in dafault) fulfillment of the obligation. As a ground for
damages, it implies some kind of malice or
Requisites for mora solvendi dishonesty and it cannot cover cases of mistake and
1. The obligation must be due, enforceable, and errors of judgment
already liquidated or determinate in amount. made in good faith. It is synonymous to bad faith.
2. There must be non-performance
3. There must be a demand, unless the demand is Article 1170 refers to incidental fraud (dolo
not required (as already discussed). (When demand incidente)
is needed, proof of it must be shown by the creditor) committed in the performance of an obligation
4. The demand must be for the obligation that is due already existing because of contract. It is to be
(and not for another obligation, nor one with a differentiated from casual fraud (dolo causante) or
bigger amount, except in certain instances, fraud employed in the execution of a contract under
considering all the circumstances) Article 1338, which vitiates consent.

Mora Accipiendi 2. Negligence (fault or culpa) – it is any voluntary act

a. The creditor is guilty of default when he or omission, there being no malice, which prevents
unjustifiably refuses to accept payment or the normal fulfillment of an obligation. (see Arts.
performance at the time said payment or 1173, 1174, NCC)
performance can be done. Some justifiable reasons
for refusal to accept may be that the payor has no Slide 10
legal capacity or that there is an offer to pay an 3. Delay (mora) – this has already been discussed
obligation other than what has been agreed upon. under article 1169.
b. If an obligation arises ex delicto (as a result of a
crime), the debtor-criminal is responsible for loss, 4. Contravention of the terms of the obligation –
even though this be through a fortuitous event, This is the violation of the terms and conditions
unless the creditor is in mora accipiendi. stipulated in the obligation. The contravention must
not be due to s fortuitous event or force majeure.
Reciprocal Obligations (Art. 1174, NCC)
a. Reciprocal obligations depend upon each other for
performance (Example: In a sale, the buyer must Fraud and Negligence distinguished
PAY, and the seller must DELIVER)
1. In fraud, there is deliberate intention to cause Bessie will not file an action in court against Sally,
damage or injury, while in negligence, there is no should Sally commit fraud in the performance of her
such intention. obligation. This waiver of an action for future fraud is
2. Waiver of the liability for future fraud is void (Art. void. Hence, Bessie can still bring an action against
1171), while such waiver may, in a certain sense, be Sally for damages arising from the fraud.
allowed in negligence. (Art1172)
3. Fraud must be clearly proved, while negligence is But once fraud is committed, Bessie, with full
presumed from the violation of a contractual knowledge thereof, can waive her right to indemnity
obligation. as an act of forgiveness on her part.
4. Lastly, liability for fraud cannot be mitigated or
reduced by the courts, while liability for negligence ART. 1172. Responsibility arising from negligence in
may be reduced according to the circumstances. the performance of every kind of obligation is also
(Art. 1173) demandable, but such liability may be regulated by
the courts, according to the circumstances. (Art.
They are similar in that both are voluntary, that is, 1172, NCC.)
they are committed with volition. Where, however,
the negligence shows bad faith; or in so gross that it Validity of waiver of action arising from negligence
amounts to malice or wanton attitude on part of the 1. An action for future negligence (not fraud) may be
defendant, the rules on fraud shall apply. In such renounced except where the nature of the obligation
case no more distinction exists between the two, at requires the exercise of extraordinary diligence as in
least as to effects. the case of common carriers. Thus, in the preceding
example, the law allows an agreement between Sally
ART. 1171. Responsibility arising from fraud id and Bessie, whereby Sally will not be liable for
demandable in all obligations. Any waiver of action damages arising from negligence in the performance
for of his obligation. But if Sally is a common carrier
future fraud is void. (Art. 1171, NCC) (e.g., bus, shipping or airline company) such waiver is
void.
Waiver of Action for future fraud void
According to the time of commission, fraud may be 2. Where negligence shows bad faith (i.e.,
past or future. deliberately
committed), it s considered equivalent to fraud. Any
A waiver of an action for future fraud is void (no waiver of an action for future negligence of this kind
effect, as if there is no waiver) as being against the is, therefore, void.
law. And public policy. A contrary rule would
encourage the perpetration of fraud because the Kinds of negligence according to source of
obligor knows that even if he should commit fraud, obligation
he would not be liable 1. Contractual negligence (culpa contractual) or
for it, thus making the obligation illusory. negligence in contracts resulting in their breach.
Article 1172 refers to culpa contractual. This kind of
Waiver of Action for Past Fraud Valid negligence is not a source of obligation. (Art. 1157) It
What the law prohibits is waiver anterior to the fraud merely makes the debtor liable for damages in view
and to the knowledge thereof by the aggrieved party. of his negligence in the fulfillment of a pre-existing
obligation. (Arts. 1170, 1172)
A past fraud can be the subject of a valid waiver 2. Civil negligence (culpa aquiliana) or negligence
because the waiver can be considered as an act of which itself is the source of an obligation between
generosity and magnanimity on the part of the party the parties not so related before by any pre-existing
who is the victim of the fraud. Here, what is contract. It is also called tort or quasi-delict. (Art.
renounced is the effect of the fraud, that is, the right 2176)
to indemnity of the party entitled thereto. 3. Criminal negligence (culpa criminal) or negligence
resulting in the commission of a crime. The same
Example: negligent act causing damages may produce civil
Sally promised to deliver 120 cavans of rice of a liability arising from a crime under Article 100 of the
particular brand and quality to Bessie at the rate of Revised Penal Code, or create an action for quasi-
10 cavans a month. delict under Article 2176 of the Civil Code.

Sally cannot make an agreement with Bessie, Slide 11

whereby Examples:
 those events which could not be foreseen, or which
1. If Sandy entered into a contract with Bandy to though foreseen, were inevitable. (Art. 1174, NCC)
deliver a specific horse on a certain day and the
horse died through the negligence of Sandy before A fortuitous event is any event which cannot be
delivery, Sandy is liable for damage to Bandy for foreseen, or which, though foreseen, is inevitable.
having failed to fulfill a pre-existing obligation
because of his negligence. This is culpa contractual. The essence of a fortuitous event consists of being a
2. Assume now, that the horse belongs to and is in happening independent of the will of the debtor and
the which happening, makes the normal fulfillment of
possession of Bandy. The negligence of Sandy which the obligation impossible.
results in the death of the horse is culpa aquiliana. In
this case, there is no pre-existing contractual relation Fortuitous event distinguished from force
between Sandy and Bandy. The negligence itself is majeure
the source of liability
3. A crime can be committed by negligence. If Bandy Examples: War, fire, robbery, insurrection
wants, she can bring an action for culpa criminal
(damage to property through simple or reckless 2. Acts of God – They refer to what is called majeure
imprudence). Here, the crime is the source of the or those events which are totally independent will of
obligation of Sandy to pay damages. every human being.

ART. 1173. The fault or negligence of the obligor Examples: Earthquake, flood, rain, shipwreck,
consists in the omission of that diligence which is lightning, eruption of volcano, etc.
required by the nature of the obligation and
corresponds with the circumstances of the person, of Kinds of Fortuitous Events
the time and of the place. When negligence shows 1. Ordinary fortuitous events or those events which
bad faith, the provisions of the articles 1171 and are common and which the contracting parties could
2201, paragraph 2, shall apply. reasonably foresee (e.g., rain)

If the law or contract does not state the diligence 2. Extra-ordinary fortuitous events or those events
which is to be observed in the performance, that which are uncommon and which the contracting
which is expected of a good father of a family shall parties could not have reasonably foreseen. (e.g.,
be required. (Art. 1173) earthquake, fire, war, pestilence, unusual flood). (see
Art. 1680, par. 2.)
Negligence is a question of fact, its existence being
dependent upon the particular circumstances of each Rule as to liability in case of fortuitous event
case. In determining the issue of negligence, the A person is not, as a rule, responsible for loss or
following factors must be considered: damage caused to another resulting from fortuitous
1. Nature of Obligation events. In other words, his obligation is extinguished.
Example: Smoking while carrying materials known to The exceptions are enumerated below.
be inflammable constitutes negligence.
2. Circumstances of the person 1. When expressly specified by law – In exception
Example: A guard, a man in the prime of life, robust (a), (b), and (c) below, the special strictness of the
and healthy, sleeping while on duty is guilty of law is justified.
negligence.
3. Circumstances of time (a) The debtor is guilty of fraud, negligence, or delay,
Example: Driving a car without headlights at night is or contravention of the tenor of the obligation. (Arts.
gross negligence but it does not by itself constitute 1170, 1165, par 3.)
negligence when driving during the day. (b) The debtor has promised to deliver the same
4. Circumstances of the place (specific) thing to two or more persons who do not
Example: Driving at 80kph on the superhighway is have the same interest
permissible but driving at the same rate of speed in (c) The obligation to deliver s specific thing arises
Rizal Avenue, Manila is gross recklessness. from a crime. (Art. 1268, NCC)
(d) The thing to be delivered is generic. (Art. 1263)
ART. 1174. Except in cases expressly specified by law,
or when it is otherwise declared by stipulation, or 2. When declare by stipulation- the basis for the
when the nature of the obligation requires the exception rests upon the freedom of contract, (see
assumption of risk, no person shall be responsible for Art. 1306, NCC). Such stipulation is usually intended
to better protect the interest of the creditor and a. I promise to pay you P1million (This is demandable
procure greater diligence on the part of the debtor in at once, unless period was really intended, as when a
the fulfillment of his obligation. But the intention to loan
make the debtor liable even in the case of a has just been contracted, or when some time is
fortuitous event should be clearly expressed. reasonably
necessary for the actual fulfillment of the obligation,
3. When the nature of the obligation requires the as when
assumption of risk a person binds himself to pay immediately for the
-here, risk of loss or damage is an subscription
essential element in the obligation. of corporate share of stock.

TOPIC 2 b. “I’ll pay you P1million on demand”. But instant

Classification of performance is not a necessity, otherwise absurd

Obligations consequences will arise.

Classification of Obligations c. When the original period or condition has been

• Primary classification of obligations under the Civil
Code: cancelled by the natural stipulation of both parties.
– Pure and conditional obligations (Articles 1179-
1192); Condition is a future and uncertain event, upon the
– Obligations with a period (Articles 1193-1198); happening of which, the effectivity or extinguishment
– Alternative (1199-1205) and facultative obligations of an
(Article 1206); obligation (or right) subject to it depends.
– Joint and solidary obligations (Articles 1207-1222);
– Divisible and indivisible obligations (Articles 1223- Characteristic of a condition
1225); and 1. Future and uncertain – In order to constitute an
– Obligations with a penal clause (Articles 1226-1230) event as a
• Secondary classification of obligations under the condition, it is not enough that it be future; it must
Civil Code: also be
– Unilateral and bilateral obligations (Articles 1169- uncertain. The first paragraph of Article 1179
1191); obviously uses
– Real and personal obligations (Articles 1163-1168); the disjunctive or between future and uncertain to
– Civil and natural obligations (Articles 1423); and distinguish pure obligation from both the conditional
– Legal, conventional, and penal obligations (Articles obligation and one with a period. Be that as it may,
1157, 1159, 1161) the
word or should be and.
ART. 1179. Every obligation whose 2. Past but unknown – a condition may refer to a
performance does not depend upon a past event
future or uncertain event, or upon a past unknown to the parties. (infra) If it refers to a future
event unknown to the parties, is event,
demandable at once. both its very occurrence and the time of such
occurrence
Every obligation which contain a must be uncertain; otherwise, it is not a condition.

resolutory condition shall also be 2 Principal Kinds of Condition

demandable, without prejudice to the
effects of the happening of the event. 1. Suspensive condition (condition precedent or
(Art. 1179, NCC) condition antecedent) or one the fulfillment of which
will give rise to an obligation (or right). In other
Pure Obligation- one without a condition or a term words,
(hence, the demandability of the obligation is suspended
demandable at once, provided there will be no until
absurdity). the happening of the uncertain event which
constitutes the condition.
Examples:
Example:
 once
I will sell you the land if it is adjudicated to me in
the division of my deceased father’s estate. My An obligation is demandable at once –
obligation
is demandable only after the condition is fulfilled – 1. When it is pure. (Art. 1179, par. 1, NCC)
my
becoming the owner of the land. In the meantime, I 2. When it is subject to a resolutory condition (Ibid.,
am par. 2)
not liable to you.
3. When it is subject to a resolutory period (Art.
2. Resolutory condition (condition subsequent) or 1993, par 2.)
one
the fulfillment of which will extinguish an obligation Past event unknown to the
(or right) already existing.
parties
Example:
A condition really refers only to an uncertain
“Dong binds himself to give Casy P1 thousand and future event. A past event cannot be said to be a
condition since the demandability of an obligation
monthly allowance until Casy graduates from subject to a condition depends upon whether the
college.” event
will happen or will not happen.
Dong’s obligation is demandable now but it
What is really contemplated by the law is the
shall be extinguished or terminated upon the knowledge to be acquired in the future of a past
happening of the resolutory condition – Casy’s event
graduating from college. which at the moment is unknown to the parties
interested, for it is only in that sense that the event
Distinctions between suspensive and can
be deemed uncertain. This knowledge determines
resolutory conditions whether the obligation will arise or not

The difference between the two conditions is very ART. 1180. When the debtor
clear:
both bear an influence on the existence of the binds himself to pay when his
obligation, but in means permit him to do so, the
diametrically opposed manner. obligation shall be deemed to
be one with a period, subject to
1. If the suspensive condition is fulfilled, the the provisions of article 1197.
obligation arises, while if it is the resolutory (Art. 1180, NCC)
condition that is fulfilled, the obligation is
extinguished. Where duration of period
depends upon the will of the
2. If the first does not take place, the tie
of the law (juridical or legal tie) does not debtor?
appear, while if it is the other, the tie of
the law is consolidated. A period is a future and

3. Until the first takes place, the certain event upon the arrival of
existence of the obligation is a mere which the obligation subject to
hope, while in the second, its effects it either arises or is extinguished.
flow, but over it hovers the possibility of
termination. 1. The debtor promises to pay when his
means permit him to do so. – the
-- obligation shall be deemed to be one
When obligation is demandable at with a period. In this case, what
depends upon the debtor’s will is not
whether he should pay or not for indeed
he binds himself to pay. What is left only In this case, Harry would acquire a right to the
to his will is the duration of the period. If
the debtor and the creditor cannot land only upon happening of the suspensive
agree as to the specific time for condition: death of Teddy within two years. (if there
payment, the court shall fix the same on is
the application of either party. (Art. no length of time within which death must take
1197, par. 2) place,
the obligation is one with a period.)
2. Other cases. – As when the debtor binds himself to
pay: 2. The surrender of the sweepstakes ticket is a
a. “little by little”(Scone v. Francisco, 24 Phil. 309.) condition precedent to the payment of the prize.
b. “as soon as possible” (Gonzales v Jose, 66 Phil.
369.) 2. Loss of rights already
c. “from time to time” acquired. – In obligations
subject to a resolutory
d. “at any time I have the money” (Soriano v. Abalos, condition, the happening of the
84 Phil. 206.) event which constitutes the
e. “in partial payments” (Levy Hermanos v. Paterno, condition produces the
18 Phil. 353.) extinguishment or loss of rights
f. “when I am in a position to pay” (see Luding Hahn v already acquired.
Lazatin, 105 Phil. 1358)
--
Art. 1181. In conditional obligations, the Examples:
acquisition of rights, as well as the extinguishment 1. Xander binds himself to support Agnes until
or loss of those already acquired, shall depend Agnes graduates from college. Here, the right
upon the happening of the event which already acquired by Agnes – the right to
constitutes the condition. (1114) (Art. 1181, NCC) receive support – shall be extinguished or lost
once the condition is fulfilled.
Effect of happening condition
This article reiterates the distinction between a 2. Sally sold to Barney a parcel of land subject
suspensive (or antecedent) condition and a to Sally’s right of repurchase. The ownership
resolutory (or already acquired by Barney under the
subsequent) condition. contract shall be extinguished or lost should
Sally exercise her right of repurchase.
1. Acquisition of rights – in obligations subject to a
suspensive condition, the acquisition of rights by the ART. 1182. When the fulfillment
creditor depends upon the happening of the event of the condition depends upon the
which sole will of the debtor, the
constitutes the condition. What characterizes this conditional obligation shall be void.
kind of If it depends upon chance or upon
obligation is the fact that its efficacy or obligatory the will of a third person, the
force obligation shall take effect in
(as distinguished from its demandability) is conformity with the provisions of this
subordinate to Code. (Art. 1182, NCC)
the happening of a future and uncertain event; so
that if This article deals with three
the suspensive condition does not take place, the
parties kinds of Conditions
would stand as if the conditional obligation had
never a. Potestative – depends on the exclusive will
existed. of one of the parties. (this is also called
facultative condition)
Examples
1. Teddy, testator, in his last will and testament gave b. Casual– depends on chance OR upon the
some property to Harry (heir) provided Teddy would will of the third person. [If I win the lotto.
die within two years. (valid)]
A. Potestative on the part of the DEBTOR 1. Conditional obligation void–
1. If also suspensive – both the Impossible conditions annul the
obligation which depends upon
condition and the obligation are VOID, for the them. Both the obligation and the
obligations is really illusory. condition are void. The reason
behind the law is that the obligor
2. If also resolutory – valid knows his obligation cannot be
fulfilled. He has no intention to
B. Potestative on the part of the CREDITOR- comply with his obligation.
VALID
2. Conditional obligation valid– If the condition is
ART. 1183. Impossible conditions, those negative,
that is, not to do an impossible thing, it is
contrary to good customs or public policy disregarded and
and those prohibited by law shall annul the the obligation is rendered pure and valid. Actually,
obligation which depends upon them. If the the
obligation is divisible, that the part thereof condition is always fulfilled when it is not to do an
which is not affected by the impossible or impossible thing so that it is the same as if there
unlawful condition shall be valid. were no
condition.
The condition not to do an impossible
thing shall be considered as not having been Examples:
agreed upon. (Art. 1183, NCC) a. “I will sell you my land if you do not carry 20
cavans of
Two kinds of impossible palay on your shoulder”
conditions b. “I will sell you my land if you do not give me a dog
that
1. Physically impossible conditions – when they, in talks.”
nature of things, cannot exist or cannot be done.
The obligations are pure and, therefore,
Examples:
a. “I will pay you P1 thousand if it will not rain for demandable at once.
one
year in the Philippines.” 3. Only the affected obligation void – If the obligation
b. “I will pay you P1 thousand if you can carry is divisible, the part thereof not affected by the
20cavans of palay on your shoulder.” impossible condition shall be valid.

2. Legally impossible conditions – when they are Example:

contrary “ I will give you P5,000 if you sell my land, and a car,
to law, morals, good customs, public order, or public if
policy. you kill Pedro”

Examples: The obligation to give P5,000 is valid but the

Xander will give Agnes P1 thousand if Agnes—
a. Will kill Barney (against the law) obligation to give a car is void because it is
b. Will be the common-law wife of Xander (against dependent upon an impossible condition.
morals)
c. Will slap her father (against good customs) --
d. Will publicly advocate the overthrow of the 4. Only the condition void – If the
government obligation is a pre existing
(against public order) obligation, and, therefore, does not
e. Will not appear as a witness against Xander in a depend upon the fulfillment of the
criminal condition which is impossible, for its
case (against public policy) existence, only the condition is void.

Effect of Impossible Conditions ART. 1184. The condition

that some event happen at a has become evident that the
determinate time shall event cannot occur. (Art. 1185,
extinguish the obligation as NCC)
soon as the time expires or if it
has become indubitable that Example
the event will not take place.
(Art. 1184, NCC) Harry binds himself to give Ron P10,000 if Ron is not
yet
Positive (Suspensive) Condition – the
happening of an event at a determinate married to Hermione on December 30.
time. The obligation is extinguished:
a. Harry is not liable to Ron if Ron marries Hermione
a. As soon as the time expires without the on December 30 or
event taking place; or prior thereto.

b. As soon as it has become indubitable that b. Harry is liable to Ron if on December 30, Ron is not
the event will not take place although the married to
time specified has not expired. Hermione and if Ron marries Hermione after
December 30. In the latter
Example case, the condition (not marrying Hermione) is
fulfilled upon the
Xander obliges himself to give Barney P10,000 if expiration of the time indicated, which is December
Barney will 30.

marry Charley before Barney reaches the age of 23. c. Suppose Hermione dies on November 20 without
having been
a. Xander is liable if Barney marries Charley before he married to Ron. The obligation is rendered effective
reaches the because it is certain
age of 23. that the condition not to marry Hermione will be
fulfilled. In this case, the
b. Xander is not liable if Barney marries Charley at obligation becomes effective from the moment of
the age of 23 or Hermione’s death on
after he reaches the age of 23. In this case, the time November 20 although the time indicated
specified, before (December 30) has not yet
reaching the age of 23, has expired without the elapsed.
condition (marrying
Charley) being fulfilled. The obligation is extinguished ART. 1186. The condition
as soon as
Barney becomes 23 y/o. shall be deemed fulfilled
when the obligor voluntarily
c. If Barney dies at the age of 22, without having prevents its fulfillment. (Art.
married Charley, the 1186, NCC)
obligation is extinguished because it has become
indubitable that There are three requisites for the application
the condition will not take place. In this case, the
obligation of of this article:
Xander is deemed extinguished from the death of
Barney, although 1. The condition is suspensive
the time specified has not yet expired. 2. The obligor actually prevents the fulfillment of the
condition
ART. 1185. The condition 3. He acts voluntarily

that some event will not happen The law does not require that the obligor acts
at a determinate time shall
render the obligation effective with malice or fraud as long as his purpose is to
from the moment the time prevent the fulfillment of the condition. He should
indicated has elapsed, or if it not
be allowed to profit from his own fault or bad faith. what date such retroactive effect shall take
effect.
ART. 1187. The effects of a conditional
obligation to give, once the condition has been ART. 1188. The creditor may,
fulfilled, shall retroact to the day of the constitution before the fulfillment of the condition,
of bring the appropriate actions for the
the obligation. Nevertheless, when the obligation preservation of his right.
imposes reciprocal prestations upon the parties, the
fruits and interests during the pendency of the The debtor may recover what
condition shall be deemed to have been mutually during the same time he has paid by
compensated. If the obligation is unilateral, the mistaken in case of a suspensive
debtor condition. (Art. 1188, NCC)
shall appropriate the fruits and interests received,
unless from the nature and circumstances of the Rights of the Creditor
obligation it should be inferred that the intention of He may take or bring appropriate actions for the
the
person constituting the same was different. preservation of his right, as the debtor may render
nugatory the obligation upon the happening of the
In obligations to do and not to do, the courts condition. Thus, he may go to court to prevent the
shall determine, in each case, the retroactive effect alienation or concealment of the property of the
of debtor
the condition that has been complied with. (Art. or to have his right annotated in the registry of
1187, property.
NCC) The rule in paragraph one applies by analogy to
obligations subject to a resolutory condition. (see
1. In obligation to give – an obligation to give subject Art.
to a suspensive condition becomes demandable only 1190, par. 1)
upon the fulfillment of the condition. However, once
the condition is fulfilled, its effects shall retroact to Right of the Debtor
the
day when the obligation was constituted. (par. 1; see He is entitled to recover what he has
Enriquez v Ramos, 73 SCRA 116.) paid by mistake prior to the happening of the
suspensive condition. This right is granted to
The reason is because the condition is only an the debtor because the creditor may or may
accidental element of a contract. (see Art. 1318) An not be able to fulfill the condition imposed
obligation can exist without being subject to a and hence, it is not certain that the obligation
condition. Had the parties known beforehand that will arise. This is a case of solutio indebiti which
the condition would be fulfilled they would have is based on the principle that no one shall
bound themselves under a pure obligation. Hence, enrich himself at the expense of another.
the obligation should be considered from the time it
is ART. 1189. When the
constituted and not from the time the condition is
fulfilled. conditions have been imposed with
-- the intention of suspending the
2. In obligation to do or not to do – with respect to efficacy of an obligation to give,
the retroactive effect of the fulfillment of a the following rules shall be
suspensive condition, in obligations to do or not observed in case of the
to do, no fixed rule is provided. improvement, loss or deterioration
This does not mean, however, that in these of the thing during the pendency of
obligations the principle of retroactivity is not the condition:
applicable. The courts are empowered by the
use of sound discretion and bearing in mind the 1. If the thing is lost without
intent of the parties, to determine, in each case, the fault of the debtor, the
the retroactive effect of the suspensive condition obligation shall be
that has been complied with. It includes the extinguished.
power to decide that the fulfillment of the
condition shall have no retroactive effect or from 2. If the thing is lost through the fault
of the debtor, he shall be obliged to The obligation is extinguished and
pay the damages; it is understood Francis is not liable to Paul even if Paul sells
that the thing is lost when it the property. A person, as a general rule, is
perishes, or goes out of commerce, not liable for a fortuitous event. (Art. 1174)
or disappears in such a way that its
existence is unknown or it cannot 2. Loss of thing through debtor’s fault
be recovered.
Example:
3. When the thing
deteriorates without the fault In the same example, if the loss occurred because
of the debtor, the impairment
is to be borne by the creditor. of the negligence of Francis, Paul will be entitled to
demand damages (Art. 1170) i.e., P100,000 plus
4. If it deteriorates through the incidental damages, if any.
fault of the debtor; the creditor
may choose between the 3. Deterioration of thing without debtor’s fault – A
rescission of the obligation and thing deteriorates
its fulfillment, with indemnity for when its value is reduced or impaired with or
damages in either case. without the fault of
the debtor.
5. If the thing is improved by its
nature, or by time, the improvement Example:
shall inure to benefit of the creditor.
-- If the car figured in an accident, as a result of which
6. If it is improved at the expense of its
the debtor, he shall have no other windshield was broken and some of its paints were
right than that granted to the scratched
usufructuary. (Art. 1189, NCC) away without the fault of Francis, thereby reducing
its value to
Requisites for Application of Article 1189 P90,000, Paul will have to suffer the deterioration or
impairment in
Article 1189 applies only if: the amount of P10,000. (Art. 1174, NCC)

1. The obligation is a real obligation 4. Deterioration of thing through debtor’s fault

2. The object is in a specific or determinate thing Example:
3. The obligation is subject to a suspensive
conditions In this case, B may choose between:
4. The condition is fulfilled
5. There is loss, deterioration, or improvement of a. Rescission (or cancellation) of the
the thing during the pendency of the obligation with damages; in this case,
condition Francis is liable to pay Paul P100,000, the
value of the car before its deterioration
Rules in case of loss, plus incidental damages, if any
deterioration, or b. Fulfillment of the obligation also with
improvement of thing damages. In this case, Francis is bound to
during pendency of Paul to give the car and pay P10,000 plus
suspensive condition incidental damages, if any.

1. Loss of thing without debtor’ fault 5. Improvement of thing by nature or by time –A

Example: thing
is improved when its value is increased or enhanced
Francis obliged himself to give Paul his by nature or by time or at the expense of the debtor
or creditor. (see Art. 1187, NCC)
car worth P100,000 if Paul will sell Francis’
property. The car was lost without the fault of Example:
Francis.
Suppose the market value of car increased,
 condition is retroactive. But in case the thing to be
who gets the benefit? returned is
legally in the possession of a third person who did
The improvement shall inure to the benefit of not act in bad
faith, the remedy of the party entitled to restitution
Paul. In as much as Paul would suffer in case of is against the
deterioration of the car through a fortuitous event, it other.
is
but fair that he should be compensated in case of The obligation of mutual
improvement of the car instead. restitution applies not only to the
thing received but also to the fruits
6. Improvement of thing at the expense of and interests. In obligations to give
debtor subject to suspensive condition, the
retroactivity admits exceptions
Example: according as the obligation is
bilateral or unilateral.
During the pendency of the condition,
Francis had the car painted and its seat cover The reason for the difference is
changed at his expense.
quite plain. The happening of the
In this case, Francis will have the right suspensive condition gives birth to the
granted to a usufructuary with respect to obligation. On the other hand, the
improvements made on the thing held in fulfillment of the resolutory condition
usufruct. produces the extinguishment of the
obligation as through it had never
ART. 1190. When the condition have for their existed. The only possible exception is
purpose the extinguishment of an obligation to give, when the intention of the parties is
the parties, upon the fulfillment of said conditions, otherwise.
shall return to each other what they have received.
In case of loss, deterioration or improvement 2. In obligation to do or not to do –
of the thing, the provisions which, with respect to In such obligations, the courts shall
the determine the retroactive effect of
debtor, are laid down in the preceding article shall be the fulfillment of the resolutory
applied to the party who is bound to return. condition as in the case where the
condition is suspensive. (Art. 1187,
As for obligations to do and not to do, the par. 2) The courts in the exercise of
the discretion may even disallow
provisions of the second paragraph of the Article retroactivity, taking into account
1187 the circumstances of each case.
shall be observed as regards the effect of the
extinguishment of the obligation. (Art. 1190, NCC) ART. 1191. The power to rescind obligations is
-- implied in reciprocal ones, in case one of the obligors
Effects of fulfillment of resolutory should not comply with what is incumbent upon him.
The injured party may choose between the
condition fulfillment and the rescission of the obligation, with
the
1. In obligation to give – when the resolutory payment of damages in either case. He may also
condition in an seek rescission, even after he has chosen fulfillment ,
obligation to give is fulfilled, the obligation is if the latter should become impossible.
extinguished (Art.
1181.) and the parties are obliged to return to each The court shall decree the rescission claimed,
other what unless there be just cause authorizing the fixing of a
they have received under the obligation. There is a period.
return to the
status quo. In other words, the effect of the This is understood to be without prejudice to
fulfillment of the the rights of third persons who have acquired the
thing, In accordance with articles 1385 and 1388 and
the Mortgage Law (Art. 1191, NCC) parties in case of reciprocal obligations. The
remedy is granted for breach by the other
Kinds of obligation contracting party that violates the reciprocity
according to the between them.
person obliged. --
ART. 1192. In case both parties
1. Unilateral – when only one party is
obliged to comply with a prestation. have committed a breach of the
obligation, the liability of the first
Examples: infractor shall be equitably
tempered by the courts. If it cannot
Donation; in a contract of loan, the be determined which of the parties
lender has the obligation to give. After the first violated the contract, the same
lender has complied with his obligation, shall be deemed extinguished, and
the debtor has the obligation to pay. each shall bear his own damages.
(Art. 1192, NCC)
2. Bilateral – when both parties are mutually bound
to Example
each other. In other words, both parties are debtors
and creditors of each other. Bilateral obligations may Simon sold his television set to Barbie. The
be reciprocal or non-reciprocal. agreement
is that set shall be delivered on October 1 at the
a. Reciprocal obligations are those which house of
arise from the same cause and in which each party is Barbie and payment shall be made by Barbie upon
a debtor and creditor of the other, such that the delivery.
performance of one is designed to be the equivalent Simon did not deliver the set on October 1 in spite of
and the condition for the performance of the other. the
Each party may treat the fulfillment of what is demand made by Barbie. Five days later, Simon
incumbent upon the other as a suspensive condition delivered the
to his obligation (see Art. 1169, last par.) and its non set but Barbie incurred in delay in paying the
fulfillment, as a tacit or implied resolutory condition, purchase price.
giving him the right to demand the rescission of the In suit between Simon and Barbie, the liability of
contract. Simon for damages should be equitably tempered by
the
Remedies in reciprocal court, taking into consideration the breach also of
obligations the
obligation on the part of Barbie.
In case one of the obligors does not comply
with what is incumbent upon him, the aggrieved If both alleged that the other was the first infractor
party nay choose between two remedies: and the court cannot determine who of the two is
telling the
1. Action for specific performance (fulfillment) of the truth, the court shall be deemed extinguished and
obligation with damages. each shall
bear his/her own damages. This means that the
2. Action for rescission of the obligation also with contract shall
damages. not be enforced.

The principal action for rescission for non- Obligations with period
performance under Article 1191 must be
ART. 1193. Obligations for
distinguished from the subsidiary action for whose fulfillment a day has been
rescission by reason of lesion or damage under fixed, shall be demandable only
Article 1318, et seq., and from cancellation of a when that day comes.
contract based, for example, on defect in the
consent and not on violation by a party of his Obligations with a resolutory
obligation. Article 1191 governs where there is period take effect at once, but
non-compliance by one of the contracting terminate upon arrival of the day
certain. upon the will of the debtor empowers the court to fix
the duration
A day certain is understood to be thereof. (Art. 1197, par. 2), while a condition which
depends upon
that which must necessarily come, the sole will of the debtor invalidates the obligation
although it may not be known when. (Art. 1182)
If the uncertainty consists in 3. As to retroactivity of effects. – unless.– Unless
there is an
whether the day will come or not, the agreement to the contrary, the arrival of a period
obligation is conditional, and it shall be does not
regulated by the rules of the preceding have any retroactive effect, while the happening of a
section. (Art. 1193, NCC) condition has retroactive effect.
Period and Condition distinguished
An obligation with a period is
Like a condition (see Art.
one whose consequences are
subjected in one way or another to 1183), a period must be possible. If
the expiration of said period of the period is impossible (e.g.,
term. February 30 because it will never
Meaning of Obligation with a come; construction of a building
Period within 24hrs because it is too short),
the obligation is void.
A period is a future and certain event upon --

the arrival of which the obligation (or right) According to effect:

subject to it either arises or is terminated. It is a a. Suspensive period (ex die). – The obligation
day certain which must necessarily come (like the begins only from a day certain upon the
year 2013; next Christmas), although it may not arrival of period. (Art. 1183, par. 1)
be known when, like the death of a person. (Art. b. Resolutory period (in diem). – The obligation
1193, par. 3.) is valid up to a day certain and terminates
Meaning of Period or Term upon arrival of the period.
Kinds of Period or Term
1. As to fulfillment. – A period is a certain event
which 2. According to source:
must happen sooner or later at a date known
beforehand, or at a time which cannot be a. Legal period. – When– When it is
determined, while a condition is an uncertain event. provided for by laws.
2. As to time. – A period refers only to the future, b. Conventional or voluntary period. –
while a When it is agreed to by the parties. (Art.
condition may refer also to past event unknown to 1196, NCC)
the c. Judicial period. – When it is fixed by the
parties. court.(Art. 1197, NCC)
3. As to influence on the obligation. – A period Kinds of Period or Term
merely
fixes the tome for the efficaciousness of the 3. According to definiteness:
obligation.
If suspensive, it cannot prevent the birth of the a. Definite period. – When it is fixed or it is
obligation in due time; If resolutory, it does not known when it will come. (Art. 1193, par. 1, NCC)
invalidate the fact that the obligation existed. On the b. Indefinite period. – When it is not fixed or
other hand, a condition causes an obligation either to
arise or to cease. it is not known when it will come. Where the
Period and Condition period is not fixed but a period is intended, the
distinguished courts are usually empowered by law to fix the
same. (see Art. 1197, NCC)
4. As to effect, when left to debtor’s will. – A period Kinds of Period or Term
which depends
ART. 1194. In case of
loss, deterioration or Francis owes Paul P10,000 which was supposed
improvement of the thing
before the arrival of the day to be paid on December 31 this year. By mistake,
certain, the rules in Article Francis paid his obligation on December 31 last year.
1189 shall be observed. (Art. Assuming that today is June 30, Francis can
1194, NCC) recover the P10,000 plus P600 which is the interest
for
Note one half year at the legal rate of 12% or a total of
P10,600. But Francis cannot recover, except the
The effect of loss, deterioration, or improvement interest,
before arrival of if the debt had already matured.
period was discussed in the previous slides. (see
slides on Art. Neither can there be a right to recovery if
1189)
Francis had knowledge of the period. The theory
ART. 1195. Anything paid or under
delivered before the arrival of solutio indebiti obviously will not apply. Francis is
the period, the obligor being deemed to have impliedly renounced the period.
unaware of the period or
believing that the obligation Example:
has become due and No recovery in personal obligations
demandable, may be
recovered, with the fruits, and Article 1195 has no application to
interests. (Art. 1195, NCC) obligations to do or not to do because
as to the former, it is physically
Article 1195 applies only to obligation to give. impossible to recover the service
It is similar to Article 1188, paragraph 2, which allows rendered, and as to the latter, as the
the recovery of what has been paid by mistake obligor performs by not doing, he
before the fulfillment of a suspensive condition. cannot, of course, recover what he has
not done.
The creditor cannot unjustly enrich himself by
retaining the thing or money received before the --
arrival of the period. ART. 1196 Whenever in an

Payment before arrival period obligation a period is designated, it

is presumed to have been
The presumption, however, is that the debtor knew established for the benefit of both
that the creditor and the debtor, unless
the debt was not yet due. He has the burden of from the tenor of the same or other
proving that he circumstances, it should appear
was unaware of the period. Where the duration of that the period has been
the period established in favor of one or of the
depends upon the will of the debtor (see Art. 1197, other. (Art. 1196, NCC)
par 3),
payment by him amounts, in effect, to his In an obligation subject to a period fixed by
determination of the the parties, the period is presumed to have been
arrival of the period. established for the benefit of both the creditor and
the debtor. This means that before the expiration of
The obligor may no longer recover the thing or the period, the debtor may not fulfill the obligation
money and neither may the creditor demand its fulfillment
once the period has arrived but he can recover the without the consent of the other especially if the
fruits or latter would be prejudiced or inconvenienced
interests thereof from the date of premature thereby.
performance to the
date of maturity of the obligation. The presumption, of course, is rebuttable.
Debtor presumed aware of period
Presumption as to benefit of period When the laws speak of years, months, days or
nights, it
The tenor of the obligation or the shall be understood that years are of 365 days each,
circumstances may, however, show months of 30
that it was the intention of the parties to days; days of 24hours; and nights from sunset to
constitute the period for the benefit of sunrise.
either the debtor or the creditor. The
benefit of the period may be the If months are designated by their name, they shall be
subject of express stipulation of the computed by the number of days which they
parties. respectively have.
In computing a period, the first day shall be excluded,
Exceptions to the general rule and

1. Term is for the benefit of the debtor alone. – He the last day included.
cannot be
compelled to pay prematurely, but he can, if he If the last day is a Sunday or a legal holiday, the time
desires to do so. shall
not run until the end of the next day which is neither
Examples: Sunday nor a
holiday.
Kordell borrowed from Shane P1,000 to be paid Computation of term or period
within 1
ART. 1197. If the obligation does not fix a
year without interest. period, but from its nature and the circumstances it
can be inferred that a period was intended, the
In this case, the period of 1 year should be deemed courts may fix the duration thereof.
intended for the benefit of Kordell only. Therefore,
she can pay The courts shall also fix the duration of the
any time but she cannot be compelled to pay before period when it depends upon the will of the debtor.
1 year. In every case, the courts shall determine such
Exceptions to the general rule period as may under the circumstances have been
probably contemplated by the parties. Once fixed
2. Term is for the benefit of the creditor. – He may by the courts, the period cannot be changed by
demand fulfillment them. (Art. 1197, NCC)
even before the arrival of the term but the debtor
cannot require him to The period mentioned in the above provision
accept payment before the expiration of the refers to a judicial period as distinguished from the
stipulated period. period fixed by the parties in their contract which is
known as contractual period.
Example:
If the obligation does not state a period and
Jojo borrowed from Junjun P1,000 payable on no period is intended, the court is not authorized to
December 31 fix a period. The courts have no right to make
with the stipulation that Jojo cannot make payment contracts for the parties. (Tolentino v. Gonzalez, 50
before the lapse of Phil. 577)
the period but Junjun may demand fulfillment even
before said date. Court generally without power to fix
Here, Junjun can demand payment at any time but a period
Jojo
cannot shorten the one year period without the 1. No period is fixed but a period was intended.-
consent of Junjun. The obligation does not fix a period but it can be
Ordinarily, there must be a stipulation granting the inferred from its nature and the circumstances
benefit of the term to that a period was intended.
only the creditor.
Exceptions to the general rule 2. Duration of the period depends upon the will of
the debtor.
Exceptions to the general rule December if Dora becomes insolvent, say on
September
ART. 1198. The debtor shall lose 10, Cris can demand immediate payment from Dora
every right to make use of the period: even before maturity unless gives sufficient guaranty
or
1. When after the obligation has security.

been contracted, he becomes The insolvency in this case need not be judicially
insolvent, unless he gives a guaranty or declared. It is sufficient that the assets of Dora are
security for the debt; less
than his liabilities or Dora is unable to pay his debts
2. When he does not furnish to the as they
mature. Note that the insolvency of Dora must occur
creditor the guaranties or securities after
which he has promised; the obligation has been contracted.

-- 2. When debtor does not furnish

3. When by his own acts he has guaranties or securities promised.-

impaired said guaranties or securities after Example:

their establishment, and when through a
fortuitous event they disappear, unless he Suppose in the same example,
immediately gives new ones equally Dora promised to mortgage his house
satisfactory; to secure the debt. If he fails to furnish
said security, he shall lose his right to the
4. When the debtor violates any period.

undertaking, in consideration of which the 3. When guaranties or securities given have been
creditor agreed to the period; impaired or have
disappeared.-
5. When the debtor attempts to
Examples:
abscond. (Art. 1198, NCC)
If the debt is secured by a mortgage on the house of
The general rule is that the obligation is not Dora,

demandable before the lapse of the period. but the house was burned through his fault, the
However, in any of the cases mentioned in Article obligation also
1198, the debtor shall lose every right to make use of becomes demandable unless Dora gives a new
the period, that is, the period is disregarded and the security equally
obligation becomes pure and, therefore, satisfactory.
immediately demandable.
In this case, the house need not be totally destroyed
The exceptions are based on the fact that as it is
sufficient that the security be impaired by the act of
debtor might not be able to comply with his Dora. But in case
obligation. of fortuitous event; it is required that the security
must disappear.
When obligation can be demanded If the security given deteriorates in such a manner as
before lapse of period to
become illusory, it must be deemed to have
1. When debtor becomes insolvent. – disappeared or lost as
contemplated in paragraph 3.
Example:
If the debt is secured by a bond, the failure of Dora
Dora owes Cris P1,000 due and payable on to renew
the bond or replace it with an equivalent guarantee
upon its
expiration will likewise give Cris the right to demand
immediate
payment.

4. When debtor violates an undertaking.

Example:

Now, suppose that Cris agreed to

the period in consideration on the

promise of Dora to repair the piano of
Cris. The violation of this undertaking by
Dora gives Cris the right to demand
immediate payment of the loan.

5. When the debtor attempts to abscond.

Example:

Before the due date of the obligation,

Dora changed her address without informing Cris
and with the intention of escaping from her
obligation. This act of Dora is a sign of bad faith
which results in the loss f his right to the benefit of
the period stipulated.

Observe that a mere attempt or intent to

abscond is sufficient.

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