KINDS OF OBLIGATION

PART 3
Law 421/Civil Law Review II
2nd Semester, A.Y. 2022-2023
JENNIFER N. ASUNCION, LL.B., LL.M.
JOINT AND SOLIDARY
OBLIGATIONS
 COLLECTIVE OBLIGATION
A. JOINT OBLIGATION (MANCOMUNADA)
The whole obligation is to be PAID OR FULFILLED
PROPORTIONATELY by different debtors and/or is to be
DEMANDED PROPORTIONATELY by different creditors. (Art.
1208, NCC)
B. SOLIDARY OBLIGATIONS (SEPARADAMENTE)
One where each one of the debtors is bound to render,
and/or each of the creditors has a right to demand from any
of the debtors the ENTIRE COMPLIANCE of the prestation. (Art.
1207, NCC)
 GENERAL RULE

•Art. 1208, NCC

Obligation is presumed to be JOINT if
there is concurrence of two or more
creditors or of two or more debtors in
one and the same obligation.
 EXCEPTIONS

•THE OBLIGATION IS SOLIDARY IF:

a.The obligation expressly so states
that there is solidarity.
b.The law requires solidarity.
c.The nature of the obligation
requires solidarity.
 EFFECTS OF JOINT OBLIGATIONS
a. A joint creditor cannot act in representation of the
others. Neither can a joint debtor be compelled to
answer for the liability of the others.
b. The effect of demand or interruption of prescription
is limited only to a particular creditor or debtor who
made or received the demand or interruption.
c. The extinguishment of the obligation of one of the
debtors do not necessarily extend to the shares of
his co-debtors.
 EFFECTS OF JOINT OBLIGATIONS

d. The nullity or vices of obligation affecting

one of the debtors do not necessarily extend to
the shares of his co-debtors.
e. The insolvency of one of the debtors does
not increase the liability of his co-debtors.
 JOINT INDIVISIBLE OBLIGATIONS

• Art. 1209, NCC

DEFINITION: The obligation of the parties are JOINT
and the nature of the object is INDIVISIBLE.
CHARACTERISTICS OF A JOINT INDIVISIBLE
OBLIGATION:
a. No joint creditor can act in representation of the
other joint creditor or creditors.
 JOINT INDIVISIBLE OBLIGATIONS

b. No joint debtor can be compelled to

fulfill the obligation of the other joint
debtors.
NB: All the creditors should collectively
make a demand and all the debtors
should perform their respective obligation.
 REMEDY IN CASE OF BREACH

• Art. 1224, NCC

A joint indivisible obligation gives rise to indemnity for
damages from the time anyone of the debtors does
not comply with his undertaking. The debtors who
may have been ready to fulfill their promises shall NOT
contribute to the indemnity beyond the
corresponding portion of the price of the thing or of
the value of the service in which the obligation
consists.
 INDIVISIBILITY V. SOLIDARITY
• Art. 1210, NCC
• The indivisibility of an obligation does not necessarily give rise to
solidarity. Nor does solidarity of itself imply indivisibility.
DISTINCTION:

INDIVISIBILITY SOLIDARITY
Refers to the prestation that is not Refers to the juridical tie or vinculum
capable of partial fulfillment juris

Exists even if there is one debtor and Exists only if there are 2 or more
one creditor creditors or 2 or more debtors.
 INDIVISIBILITY V. SOLIDARITY
INDIVISIBILITY SOLIDARITY
Each debtor is not bound to fulfill the obligation more Each debtor is bound to the fulfillment or
than his share and each creditor cannot demand compliance of the entire obligation and each
fulfillment of the obligation more than his share creditor may demand the fulfillment or the
compliance of the obligation.

In case of breach, the indivisible obligation is In case of breach, the solidary character of the
converted into indemnity for damages; thus, the obligation remains.
indivisible character of the obligation is terminated.

Only the debtor/s guilty of breach is liable for All the debtors are liable for damages even if only of
damages them is guilty of breach.

If the debtor becomes insolvent, the other debtors If one debtors is insolvent, all the other debtors who
are not liable for his share are solvent are proportionately liable for the share of
the former.
SOLIDARY OBLIGATIONS

KINDS OF SOLIDARITY
 AS TO SOURCE

A.LEGAL SOLIDARITY
Solidarity imposed by law
B. CONVENTIONAL SOLIDARITY
Agreed upon by the parties.
C. REAL SOLIDARITY
Imposed by the nature of the obligation.
 AS TO THE PARTIES BOUND

A.ACTIVE SOLIDARITY
(MUTUAL AGENCY)
Solidarity of creditors.
B. PASSIVE SOLIDARITY
(MUTUAL GUARANTY)
Solidarity of debtors.
 AS TO THE PARTIES BOUND

C. MIXED SOLIDARITY
Solidarity among debtors and creditors.
NB: Either creditor may demand and either
debtor may pay subject to reimbursement.
 AS TO UNIFORMITY

A.UNIFORM SOLIDARITY
Parties are bound by the same stipulation.
B. NON-UNIFORM OR VARIED SOLIDARITY
Parties are subject to different stipulations.
 BENEFICIAL ACTS AND PREJUDICIAL
ACTS OF SOLIDARY CREDITORS
Art. 1212, NCC
RULE:
Each one of the solidary creditors may do whatever may be useful or
beneficial to the others but not anything which may be prejudicial to
the latter.
EFFECT:
As far as the debtor or debtors are concerned, a prejudicial act
performed by a solidary creditor shall be valid and binding because of
the principle of mutual representation/agency which exist among the
creditors. However, as far as the solidary creditors are concerned, the
creditor who performed the act shall incur the obligation of
indemnifying the others for damages.
 ASSIGNMENT OF RIGHTS

•Art. 1213, NCC

GENERAL RULE:
A solidary creditor cannot assign his rights.
EXCEPTION:
The assignment is allowed if it is with the
consent of ALL the other solidary creditors.
 PAYMENT OR PERFORMANCE TO
SOLIDARY CREDITORS
• Art. 1214, NCC
GENERAL RULE:
The debtor may pay any one of the solidary creditors.
EXCEPTION:
If a demand, judicial or extrajudicial, has been made
by one of the solidary creditors, payment should be
made to him.
 EFFECTS OF NOVATION, COMPENSATION,
CONFUSION OR REMISSION OF DEBT IN
SOLIDARY OBLIGATIONS
• Art. 1215 in relation to Art. 1231, 1291, 1278, 1275 and 1270,
NCC
Art. 1231, NCC – refers to the modes of extinguishing
obligations.
a. Novation (Art. 1291, NCC);
b. Compensation (Art. 1278, NCC);
c. Confusion or Merger of Rights (Art. 1275, NCC); and,
d. Remission or Condonation (Art. 1270, NCC)
 NOVATION

DEFINITION: It is a mode of extinguishing an

obligation by changing the object, or
principal conditions, or by substituting the
person of the debtor, or by subrogating a
third person in the rights of the creditor.
 COMPENSATION

DEFINITION: A mode of extinguishing

obligation wherein it shall take place
when two persons, in their own right
are creditors and debtors of each
other.
NB: Also known as SET-OFF.
 CONFUSION OR MERGER OF
RIGHTS
DEFINITION: The obligation is
extinguished from the time the
characters of the debtor and creditor
are merged in the same person.
 REMISSION OR CONDONATION
DEFINITION: an act of liberality by virtue of which the obligee,
without receiving any price or equivalent, renounces the
enforcement of the obligation, as a result of which it is
extinguished in its entirety or in that part or aspect of the
same to which it refers.
Essentially gratuitous, and requires the acceptance by the
obligor.
HOWEVER, remission or condonation effected AFTER FULL
PAYMENT is of NO EFFECT as there is nothing more to remit or
condone. (Art. 1219, NCC)
 ENFORCEMENT AGAINST
SOLIDARY DEBTORS
• Art. 1216, NCC
• The creditor may proceed against any one of the solidary
debtors or some or all against them simultaneously.
EFFECTS:
• The choice is left to the solidary creditor to determine
against whom he will enforce collection.
• The creditor may sue any of the solidary debtors; he need
not implead all of them as they are not indispensable
parties.
 ENFORCEMENT AGAINST
SOLIDARY DEBTORS
• The creditor may also choose to collect only part of
the debt from some of the solidary debtors, and the
remaining part from the other solidary debtors. Such
course of action does not convert the solidary
obligation into a joint one.
• The demand against one of them shall not be an
obstacle to those which may subsequently be
directed against the others, so long as the debt has
not been fully collected.
 PAYMENT BY SOLIDARY DEBTORS
• Art. 1217, NCC
• Payment made by one of the solidary debtors extinguishes
the obligation.
• If two or more solidary debtors offer to pay, the creditor may
choose which offer to accept.
• The paying solidary debtor can demand reimbursement
from his co-debtors for their proportionate share with legal
interest from the time of payment.
• The receiving creditor is jointly liable to the others for their
corresponding shares.
 RIGHT OF DEBTOR-PAYOR TO
REIMBURSEMENT
RULE: He who made the payment may claim from his co-
debtors only the share which corresponds to each with
interest for the payment already made.
1. If payment is made before the debt is due, no interest for
the intervening period may be demanded.
2. When one of the solidary debtors cannot, because of his
insolvency, reimburse his share to the debtor paying the
obligation, such share shall be borne by all his co-debtors,
in proportion to the debt of each.
 EFFECT OF PAYMENT AFTER
OBLIGATION HAS PRESCRIBED OR
BECOME ILLEGAL
• Art. 1218, NCC
RULE: The debtor-payor is NOT ENTITLED to
reimbursement from his co-debtors if his
payment is made after the obligation has
PRESCRIBED or become ILLEGAL.
 EFFECT OF REMISSION
• REMISSION OF A SHARE AFTER PAYMENT (Art. 1219, NCC)
The debtor whose share was “remitted” must still pay his share
to reimburse the debtor-payor.
• REMISSION OF THE ENTIRE DEBT (Art. 1220,NCC)
The remission of the whole obligation, obtained by one of the
solidary debtors, does not entitle him to reimbursement from
his co-debtors.
The debtor who obtained the remission did not pay or lose
anything.
 RULES IN CASE OF LOSS OR
IMPOSSIBILITY OF PERFORMANCE
• Art. 1221, NCC
A. WITHOUT FAULT OR DELAY – Obligation is extinguished.
B. WITH FAULT OR DELAY – ALL of the solidary debtors shall be
liable to the creditor for the price and the payment of
damages and interest.
HOWEVER, this is without prejudice to their action against the
guilty or negligent debtor.
C. WITHOUT FAULT BUT ONE SOLIDARY DEBTOR INCURS DELAY –
same as letter B.
 DEFENSES OF SOLIDARY DEBTORS

• Art. 1222, NCC

• A solidary debtor may, in actions filed by the
creditor, avail himself of the following defenses:
A. DEFENSES WHICH ARE DERIVED FROM THE NATURE OF
THE OBLIGATION (TOTAL DEFENSE)
Defenses which pertain to the validity or
enforceability of the obligation.
 DEFENSES OF SOLIDARY DEBTORS
B. DEFENSES WHICH ARE PERSONAL TO HIM OR
PERTAIN TO HIS OWN SHARE (TOTAL OR PARTIAL
DEFENSE)
C. DEFENSES WHICH PERSONALLY BELONG TO
THE OTHER DEBTORS (or pertains to their share)
(PARTIAL DEFENSE)
DIVISIBLE AND
INDIVISIBLE
OBLIGATIONS
 IN GENERAL
A. DIVISIBLE OBLIGATION
An obligation is divisible when it can be validly
performed in parts without the essence of the
obligation being changed.
B. INDIVISIBLE OBLIGATION
An obligation is indivisible when it cannot be validly
performed in parts, whatever may be the nature of
the thing which is the object thereof.
 DISTINGUISHED FROM DIVISIBILITY
OF THINGS
A. DIVISIBLE THING
A thing is divisible when if separated into parts, the
essence is not changed or its value is not decreased
disproportionately.
B. INDIVISIBLE THING
A thing is indivisible when if separated into parts, its
essence is changed or its value is decreased
disproportionately.
KINDS OF DIVISION
 THREE KINDS OF DIVISION

A.QUANTITATIVE DIVISION
The division is quantitative when the thing
can be materially divided into parts and
such parts are HOMOGENOUS to each
other.
QUANTITY RATHER THAN QUALITY
 THREE KINDS OF DIVISION

B. QUALITATIVE DIVISION
The thing can be materially divided,
but the parts are not homogenous to
each other.
QUALITY RATHER THAN QUANTITY
 THREE KINDS OF DIVISION

C. IDEAL OR INTELLECTUAL DIVISION

When the thing can only be separated
into ideal or undivided parts, not
material parts.
 JOINT INDIVISIBLE OBLIGATIONS

•Art. 1224, NCC

REVIEW:
a.Definition;
b.Characteristics; and,
c.Remedy in case of Breach.
 DETERMINING DIVISIBILITY

A. OBLIGATIONS ARE DEEMED INDIVISIBLE:

1. Obligations to give definite things.
2. Obligations which are not susceptible of partial
fulfillment.
3. Obligations provided by law to be indivisible even if
the thing or service is physically divisible.
4. Obligations intended by the parties to be indivisible
even if the thing or service is physically divisible.
 DETERMINING DIVISIBILITY

B. OBLIGATIONS ARE DEEMED DIVISIBLE:

1. Obligations which have for their object the
execution of a certain number of days of work.
2. Obligations which have for their object the
accomplishment of work by metrical units.
3. Obligations which by their nature are susceptible of
partial fulfillment.
 DIVISIBILITY OR INDIVISIBILITY OF
OBLIGATIONS NOT TO DO
RULE:
Character of the prestation in each
particular case shall determine
divisibility or indivisibility.
OBLIGATIONS WITH A
PENAL CLAUSE
 PENAL CLAUSE

DEFINITION: An accessory obligation which the

parties attach to a principal obligation for the
purpose of insuring the performance thereof by
imposing on the debtor a special prestation in
case the obligation is not fulfilled or is irregularly
or inadequately fulfilled.
 FUNCTIONS OF A PENAL CLAUSE

A penal clause serves:

a.To strengthen the coercive force of the
obligation;
b.To provide for liquidated damages resulting
from a breach of the obligation; and,
c.To punish the obligor.
 EFFECT OF NULLITY

• Art. 1230, NCC

• The nullity of the penal clause does NOT carry
with it that of the principal obligation.
• The nullity of the principal obligation carries
with it that of the penal clause.
 WHEN IS PENALTY DEMANDABLE?

RULE:
A penalty is demandable in case of NON-
PERFORMANCE or LATE PERFORMANCE or
IRREGULAR or INADEQUATE FULFILLMENT of
the main obligation.
KINDS OF PENALTY
 AS TO ORIGIN

A.LEGAL PENALTY
When it is provided for by law.
B. CONVENTIONAL PENALTY
Constituted by agreement of the
parties.
 AS TO PURPOSE

A. COMPENSATORY PENALTY
Established for the purpose of indemnifying the actual
damages suffered by the obligee or creditor in case
of breach of the obligation.
B. PUNITIVE PENALTY
Established for the purpose of punishing the obligor or
debtor in case of breach of obligation.
 AS TO EFFECT

A.SUBSIDIARY PENALTY
Only the penalty may be demanded in case of
breach.
B. JOINT PENALTY
When the injured party may demand the
enforcement of both the penalty and the
principal obligation.
 EFFECT OF PENALTY

GENERAL RULE:
In obligations with a penal clause, the penalty shall
SUBSTITUTE the indemnity for damages and the
payment for interest in case of non-compliance.
NB: Proof of actual damages suffered by the creditor
is not necessary in order that penalty may be
demanded. (Art. 1228, NCC)
 EFFECT OF PENALTY

EXCEPTIONS: PENALTY AS CUMULATIVE REMEDY

Damages may still be demanded (in addition to
penalty) in the following exceptional cases:
1. When there is a stipulation to the contrary;
2. When the obligor refuses to pay the penalty; or,
3. When the obligor is guilty of fraud in the fulfillment
of the obligation (Art. 1226, NCC)
 LIMITATIONS

A. ON THE PART OF THE DEBTOR:

A debtor cannot exempt himself from the
performance of the obligation by paying the penalty
agreed upon.
Penalty is NOT a substitute for the performance of the
principal obligation.
EXCEPTION: Save in the case where the right has
been EXPRESSLY reserved for the debtor.
 LIMITATIONS
B. ON THE PART OF THE CREDITOR
The creditor cannot demand the fulfillment of the obligation
and the satisfaction of the penalty at the same time. (Art.
1227, NCC)
EXCEPT: If the right has been clearly granted to the creditor.
HOWEVER, if after the creditor has decided to require the
fulfillment of the obligation, the performance thereof should
become impossible, without his fault, the penalty may be
enforced.
 REDUCTION OF PENALTY
PENALTY MAY BE REDUCED BY THE COURTS IF THERE IS:
A. PARTIAL OR IRREGULAR COMPLIANCE
The judge shall equitably reduced the penalty when the
principal obligation has been partly or irregularly complied
with by the debtor.
B. INIQUITOUS OR UNCONSCIONABLE PENALTY
Even if there has been no performance, the penalty may also
be reduced by the courts if it is iniquitous or unconscionable.
 FACTORS IN FIXING THE AMOUNT
OF PENALTY
a.The type, extent and purpose of the penalty;
b.The nature of the obligation;
c.The mode of the breach and its
consequences;
d.The supervening realities; and,
e.The standing relationship of the parties.
 INTEREST

• CIRCULAR NO. 799, July 5, 2013

The rate of interest for loan or forbearance of any
money, goods or credits and the rate allowed in
judgments, in the absence of an express contract as
to such rate of interest is 6% per annum
NB: Once it becomes DUE and DEMANDABLE – 12%
per annum
 LARA’S GIFTS & DECORS, INC. VS. MIDTOWN
INDUSTRIAL SALES, INC. (G.R. NO. 225433,
AUGUST 28, 2019).
MODIFIED THE GUIDELINES ON THE IMPOSITION OF INTEREST
With regard to an award of interest in the concept of actual and compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, goods, credits or judgments, the interest
due shall be that which is stipulated by the parties in writing, provided it is not
excessive and unconscionable, which, in the absence of a stipulated reckoning date,
shall be computed from default, i.e., from extrajudicial or judicial demand in
accordance with Article 1169 of the Civil Code, UNTIL FULL PAYMENT, without
compounding any interest unless compounded interest is expressly stipulated by the
parties, by law or regulation. Interest due on the principal amount accruing as of
judicial demand shall SEPARATELY earn legal interest at the prevailing rate prescribed
by the Bangko Sentral ng Pilipinas, from the time of judicial demand UNTIL FULL
PAYMENT.
2. In the absence of stipulated interest, in a loan or forbearance of
money, goods, credits or judgments, the rate of interest on the principal
amount shall be the prevailing legal interest prescribed by the Bangko
Sentral ng Pilipinas, which shall be computed from default, i.e., from
extrajudicial or judicial demand in accordance with Article 1169 of the
Civil Code, UNTIL FULL PAYMENT, without compounding any interest
unless compounded interest is expressly stipulated by law or regulation.
Interest due on the principal amount accruing as of judicial demand
shall SEPARATELY earn legal interest at the prevailing rate prescribed by
the Bangko Sentral ng Pilipinas, from the time of judicial demand UNTIL
FULL PAYMENT.
3. When the obligation, not constituting a loan or forbearance of money, goods,
credits or judgments, is breached, an interest on the amount of damages awarded
may be imposed in the discretion of the court at the prevailing legal interest
prescribed by the Bangko Sentral ng Pilipinas, pursuant to Articles 2210 and 2011 of
the Civil Code. No interest, however, shall be adjudged on unliquidated claims or
damages until the demand can be established with reasonable certainty.
Accordingly, where the amount of the claim or damages is established with
reasonable certainty, the prevailing legal interest shall begin to run from the time the
claim is made extrajudicially or judicially (Art. 1169, Civil Code) UNTIL FULL PAYMENT,
but when such certainty cannot be so reasonably established at the time the demand
is made, the interest shall begin to run only from the date of the judgment of the trial
court (at which time the quantification of damages may be deemed to have been
reasonably ascertained) UNTIL FULL PAYMENT. The actual base for the computation of
the interest shall, in any case, be on the principal amount finally adjudged, without
compounding any interest unless compounded interest is expressly stipulated by law
or regulation.
 ESCALATION CLAUSE V.
ACCELERATION CLAUSE
ESCALATION CLAUSE
Stipulation that allows the raising of the interest rates if
a market ceiling for interest rates are met.
ACCELERATION CLAUSE
A clause in a contract that states that if a payment is
missed, or some other default occurs, then the
contract is fully due immediately.