U.P.

LAW BOC OBLIGATIONS AND CONTRACTS CIVIL LAW

3. Sources of Obligations
A. GENERAL PROVISIONS
Art. 1157, CC. Obligations arise from:
1. Law;
1. Definition 2. Contracts;
3. Quasi-contracts;
Art. 1156, CC. An obligation is a juridical 4. Acts or omissions punished by law;
necessity to give, to do or not to do. and
5. Quasi-delicts.

An obligation is a juridical relation, whereby a

person (called the creditor) may demand from a. Law
another (called the debtor) the observance of a Obligations arise when imposed by the law
determinative conduct, and in case of breach, itself and cannot be presumed. [Art. 1158, CC]
may obtain satisfaction from the assets of the
latter. [Makati Stock Exchange v. Campos, b. Contracts
G.R. No. 138814 (2009)] Obligations arise from the stipulation of the
parties; it has the force of law and should be
complied with in good faith. [Art. 1159, CC]
2. Elements of an obligation
c. Quasi-Contracts
a. Active Subject (Obligee/Creditor): The Certain lawful, voluntary and unilateral acts
person (natural or juridical) who has the give rise to the juridical relation of quasi-
right or power to demand the prestation. contract to the end that no one shall be
b. Passive Subject (Obligor/Debtor): The unjustly enriched or benefited at the expense
person bound to perform the prestation. of another. [Art. 2142, CC]
c. Prestation (Object): The conduct required
to be observed by the debtor/obligor (to d. Acts or Omissions Punishable by
give, to do, or not to do). Law
Responsibility for fault or negligence under a
Requisites quasi-delict [Art. 2176, CC] is entirely separate
1. Must be possible - physically and and distinct from the civil liability arising from
juridically. negligence under the penal code. But the
2. Must be determinate or at least plaintiff cannot recover damages twice for the
determinable according to pre- same act or omission of the defendant. [Art.
established elements. 2177, CC]
3. Must have possible equivalent in
money e. Quasi-Delicts
Obligations arise from damages caused to
d. Vinculum Juris (Juridical or Legal Tie; another through an act or omission, there being
Efficient Cause): That which binds or fault or negligence but no contractual relations
connects the parties to the obligation. [de exist between the parties. [Art. 2176, CC]
Leon]

It is established by:
1. law
2. bilateral acts (e.g. contracts giving rise
to obligations stipulated therein)
3. unilateral acts (e.g. crimes and quasi-
delicts)

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 B. NATURE AND EFFECT 4. To deliver its even if not
accessions and mentioned
OF OBLIGATIONS accessories [Art. [Art. 1166,
1166, CC] CC]
1. Obligation to give • Accessions – 4. Not to be
everything compelled to
a. Type of things which is receive a
produced by a different one,
Specific/ Generic Limited
thing, or which although of
Determinate Thing Generic
is incorporated the same
Thing Thing
or attached value as, or
Particularly Object is When the thereto, more valuable
designated or designated generic excluding fruits than that
physically only by its objects are • Accessories – which is due
segregated class/ confined to a things designed [Art. 1244,
from all genus/ particular for the CC]
others of the species. class. embellishment, 5. To recover
same class use or damages in
[Art.1460, preservation of case of
CC]; another thing of breach,
Identified by more exclusive or in
individuality. importance addition to
5. To pay damages in specific
Cannot be Can be Can be case of breach [Art. performance
substituted substituted substituted 1170, CC] [Arts. 1165,
against the by any of the by any of the 1170, CC]
obligee’s will. same class same
and same particular
kind. class. To Give a Generic Thing

1. To take care of the 1. To ask that

b. Rights and Duties of Parties thing [Art. 1163, CC] the obligation
2. To deliver a thing of be complied
Duties of the Debtor Rights of the
the quality intended with [Art.
Creditor
by the parties taking 1165, CC]
To Give a Specific Thing into consideration 2. To ask that
the purpose of the the obligation
1. To preserve or take 1. To compel obligation and other be complied
care of the thing due delivery [Art. circumstances [Art. with by a third
with the proper 1165, CC] 1246, CC] person at the
diligence of a good 2. To the fruits 3. Creditor cannot expense of
father of a family from the time demand a thing of the debtor
[Art. 1163, CC] the obligation superior quality; 3. To recover
2. To deliver the to deliver neither can the damages in
thing itself [Art. arises [Art. debtor deliver a case of
1165, CC] 1164, CC] thing of inferior breach [Art.
3. To deliver the 3. To the quality. 1165, CC]
fruits of the thing accessions 4. To pay damages in 4. Not to be
[Art. 1164, CC] and case of breach [Art. compelled to
accessories, 1170, CC] receive a

Page
U.P. LAW BOC OBLIGATIONS AND CONTRACTS CIVIL LAW

different one, 2. To shoulder expense. [Art.

although of cost of undoing 1168, CC]
the same what should not 2. To recover
value as, or have been done damages, where
more valuable [Art. 1168, CC] it would be
than that 3. To pay physically or
which is due damages in legally
[Art. 1244, case of breach impossible to
CC] [Art. 1170, CC] undo what should
not have been
done, because
2. Obligation to do or not to do of:
• the very nature
a. Rights and Duties of Parties of the act itself;
Duties of the Rights of the • rights acquired
Debtor Creditor by third persons
who acted in
Obligation To Do good faith;
• when the effects
1. To do it [Art. 1. To have the of the acts
1167, CC] obligation prohibited are
2. To shoulder executed at definite in
the cost of the cost of character and
execution the debtor will not cease
should he [Art. 1167, even if the thing
fail to do it CC] prohibited be
[Art. 1167, 2. To recover undone.
CC] damages in
3. To undo case of
what has breach [Art. 3. Transmissibility of
been poorly 1170, CC] obligations
done [Art.
1167, CC] Note: The debtor General Rule: All rights acquired by virtue of
4. To pay cannot be compelled an obligation are transmissible. [Art. 1178, CC];
damages in to perform his Contracts take effect only between the parties,
case of obligation. The their assigns and heirs [Art. 1311, CC]
breach [Art. ultimate sanction of
1170, CC] civil obligations is Exception: Nature of obligation, law or
indemnification of stipulation to the contrary provides otherwise
damages. This would [Art. 1178].
be tantamount to
involuntary Only personal obligations, or those identified
servitude. with the persons themselves are extinguished
by death. [Stronghold Insurance Co. v.
Obligation Not To Do
Republic-Asahi Glass Corp., G.R. No. 147561
1. Not to do what 1. To ask to undo (2006)]
should not be what should not
done be done, at the
debtor’s

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U.P. LAW BOC OBLIGATIONS AND CONTRACTS CIVIL LAW

4. Performance of Obligations 5. Breaches of Obligations

a. Definition Those who in the performance of their
Payment means not only (1) the delivery of obligations are guilty of the following are liable
money, but also (2) the performance, in any for damages [Art. 1170, CC]:
other manner, of an obligation. [Art. 1232, CC] a. Fraud (dolo): The fraud contemplated by
the foregoing provision is the deliberate
b. General Rule/Requirement and intentional evasion of the normal
The thing or service in which the obligation fulfillment of obligations.
consists [must be] completely delivered or b. Negligence (culpa): Fault or negligence of
rendered, as the case may be. [Art. 1233, CC] the debtor as an incident in the fulfillment
of an existing obligation.
c. Exceptions c. Delay (mora): Delay in the fulfillment of the
1. Substantial performance obligation. The delay however must be
TRIGGER: The obligation has been imputable to the debtor/obligor.
substantially performed in good faith. d. And those who in any manner contravene
the tenor thereof: Covers any illicit act
EFFECT: The obligor may recover as which impairs the strict and faithful
though there had been a strict and fulfillment of the obligation,
complete fulfillment, less damages
suffered by the obligee. [Art. 1234, CC] a. Failure to Perform
2. Incomplete/irregular performance Effect of Failure to Perform
TRIGGER: Obligee accepts
performance despite knowledge of its Substantial Slight or Casual
incompleteness or irregularity. Breach Breach

1. Total breach 1. Partial breach

EFFECT: The obligation is deemed 2. Amounts to 2. There is partial/
fully complied with. [Art. 1235, CC]
non- substantial
performance, performance in
3. Partial prestation
basis for good faith
General rules: rescission 3. Gives rise to
1. The creditor CANNOT be under Art. liability for
compelled to receive partial 1191 and damages only [Art.
payments. payment of 1234, CC]
2. The debtor CANNOT be required damages
to make partial payments.

Exception: when expressly stipulated. General Rule

[Art. 1248, par. 1, CC] Rescission of a contract will not be permitted
for a slight or causal breach, but only for such
4. Partial liquidation substantial and fundamental breach as would
TRIGGER: The debt is partly liquidated defeat the very object of the parties in
and partly unliquidated. executing the agreement. [Vermen Realty
Corp. v. CA, G.R. No. 101762 (1993)]
EFFECT: The creditor may demand
and the debtor may effect the payment Substantial performance contemplates
of the liquidated debt without waiting • an attempt in good faith to perform,
for the liquidation of the unliquidated without any willful or intentional
debt. departure therefrom

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U.P. LAW BOC OBLIGATIONS AND CONTRACTS CIVIL LAW

• the deviation from the obligation must When demand is not necessary in order
be slight, and the omission or defect that delay may exist [par. 2, Art. 1169, CC]
must be technical and unimportant, 1. When demand would be useless, as
and must not pervade the whole or be when the obligor has rendered it beyond
so material that the object which the his power to perform; such as:
parties intended to accomplish in a a. When the impossibility is caused by
particular manner is not attained. some act or fault of the debtor (e.g.
[International Hotel Corp v. Joaquin, debtor absconded or has destroyed the
G.R. No. 158361 (2013)] thing to be delivered);
b. When the impossibility is caused by a
The question of whether a breach of contract is fortuitous event, but the debtor has
substantial depends upon the attending bound himself to be liable in case of
circumstances and not merely on the such event. [Tolentino]
percentage of the amount not paid. [Cannu v. 2. When from the nature and the
Galang, G.R. No. 139523 (2005)] circumstances of the obligation it appears
that the designation of the time when the
b. Default, Delay, or Mora thing is to be delivered or the service is
to be rendered was a controlling motive
Definition: Failure to perform an obligation for the establishment of the contract (time
on time which constitutes a breach of the is of the essence);
obligation. [de Leon] 3. When the law so provides; or
4. When the obligation expressly so
Rules on Default, Delay, or Mora declares.
Unilateral Obligations Reciprocal Note: It is insufficient that the law or obligation
Obligations fixes a date for performance. It must further
state expressly that after the period lapses,
General Rule: “No Neither party
default will commence.
demand, No delay.” incurs in delay if
the other does not
KINDS OF DELAY
The mere expiration of comply or is not
1. Moral Solvendi;
the period fixed by the ready to comply in
2. Mora Accipiendi;
parties is not enough in a proper manner
3. Compensatio Morae
order that the debtor with what is
may incur in delay. incumbent upon
MORA SOLVENDI
him. From the
Delay on the part of the debtor to fulfil his
Those obliged to deliver moment one of the
obligation either to give (ex re) or to do (ex
or to do something parties fulfills his
persona).
incur in delay from obligation, delay
the time the obligee by the other
Requisites
judicially or begins. [Art. 1169
1. Obligation must be liquidated, due and
extrajudicially par. 3, CC]
demandable
demands from them
2. Non-performance by the debtor within the
the fulfillment of their No delay if neither
period agreed upon
obligation. [Art. 1169 performs.
3. Demand, judicial or extra-judicial, by the
par. 1, CC]
creditor, unless demand is not necessary
under the circumstances enumerated in Art
1169 par (2).

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U.P. LAW BOC OBLIGATIONS AND CONTRACTS CIVIL LAW

Effects Equitable Tempering under Art. 1192 vs.

1. The debtor is liable for damages. [Art. Under Art. 2215 [Ong v. Bognalbal, G.R. No.
1170, CC] 149140 (2006)]
2. For determinate objects, the debtor shall
Art 1192 Art 2215
bear the risk of loss, even if the loss is due
to fortuitous events. [Art. 1165 par. 3, CC] “In case both “In contracts, quasi-
parties have contracts, and quasi-
MORA ACCIPIENDI committed a breach delicts, the court may
Delay on the part of the creditor to accept the of the obligation, equitably mitigate the
performance of the obligation. the liability of the damages under
first infractor shall circumstances other
Requisites be equitably than the case referred
1. Debtor offers performance. tempered by the to in the preceding
2. Offer must be in compliance with the courts. xxx” article, as in the ff.
prestation as it should be performed. instances:
3. Creditor refuses performance without just
cause. (1) That the plaintiff
himself has
Effects contravened the terms
1. The responsibility of the debtor is reduced of the contract xxx”
to fraud and gross negligence.
2. The debtor is exempted from risk of loss of Second infractor Does not appear to
the thing, which is borne by the creditor. not liable for consider which
3. The expenses incurred by the debtor for damages at all; infractor first
the preservation of the thing after the mora only the first committed the breach.
shall be chargeable to the creditor. infractor is liable,
4. If the obligation bears interest, the debtor but with his liability
does not have to pay from the time of delay. mitigated.
5. The creditor is liable for damages.
6. The debtor may relieve himself of the
obligation by consigning the thing. c. Fraud (Dolo) in the
[Tolentino] Performance of the Obligation

COMPENSATIO MORAE Art. 1171, CC. Responsibility arising from

Delay of both parties in reciprocal fraud is demandable in all obligations. Any
obligations. waiver of an action for future fraud is void.

Effects
1. Delay of the obligor cancels delay of Definition: Fraud (dolo) is the deliberate or
obligee (and vice versa) hence it is as if intentional evasion of the normal fulfilment of
there is no default. an obligation. [de Leon]
2. The liability of the first infractor shall be
equitably tempered by the courts. If it
cannot be determined which of the parties
first violated the contract, the same shall be
deemed extinguished, and each shall bear
his own damages. [Art. 1192, CC]

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U.P. LAW BOC OBLIGATIONS AND CONTRACTS CIVIL LAW

Two Types of Fraud d. Negligence (Culpa) in the

Dolo Causante Dolo Incidente Performance of the Obligation
[Art. 1338, par. 1, Art. [par. 2, Art. 1344,
1344, CC] CC] Art. 1172, CC. Responsibility arising from
negligence in the performance of every kind
Definition
of obligation is also demandable, but such
liability may be regulated by the courts,
Those deceptions or Those which are according to the circumstances.
misrepresentations of a not serious in
serious character character and
employed by one party without which the Art. 1173, CC. The fault or negligence of the
and without which the other party would obligor consists in the omission of that
other party would not still have entered diligence which is required by the nature of
have entered into the into the contract. the obligation and corresponds with the
contract. [Tankeh v. [Tankeh v. DBP, circumstances of the persons, of the time
DBP, G.R. No. 171428 G.R. No. 171428 and of the place.
(2013)] (2013)] xxxx
If the law or contract does not state the
When Present diligence which is to be observed in the
performance, that which is expected of a
Deception used by one Deception used
good father of a family shall be required.
party prior to or by one party at the
simultaneous with the time of birth or
contract, in order to perfection, or General Rule: Standard of care required is
secure the consent of performance of diligence of a good father of family.
the other [Tankeh v. the obligation
DBP, G.R. No. 171428 Exceptions (Other standards of care)
(2013)] 1. Common Carriers
They are bound to observe extraordinary
Object diligence in the vigilance over the goods
and for the safety of the passengers
Essential cause of the Some particular or transported by them [Art. 1733, CC]
obligation without which accident of the
the other party would obligation 2. Hotel and inn-keepers
not have entered into The keepers of hotels or inns shall be
the contract. responsible for the deposit of effects, made
by travellers, as depositaries, provided
Effect
that notice was given to them, or their
Voidable and Damages Damages employees of such effects and that they
take precautions relative to the care and
vigilance of their effects [Art. 1998, CC]
Requisites for Fraud to Vitiate a Contract
(Dolo Causante) This responsibility shall include the loss of,
1. It must have been employed by one or injury to the personal property of the
contracting party upon the other; guests caused by the servants or
2. It must have induced the other party to employees of the keepers of hotels or inns
enter into the contract; as well as strangers; but not that which may
3. It must have been serious; and proceed from any force majeure. [Art.
4. It must have resulted in damage or injury to 2000, CC]
the party seeking annulment. [Tolentino]

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U.P. LAW BOC OBLIGATIONS AND CONTRACTS CIVIL LAW

3. Banks Extent of Damages to be Awarded [Art.

Banks have the obligation to treat the 2201, CC]
accounts of its clients ‘meticulously and
Good Faith Bad Faith
with the highest degree of care’. [Poole-
Blunden v. UnionBank, G.R. No. 205838 Obligor is liable for Obligor shall be
(2017)] those that are the responsible for all
natural and probable damages which may
4. Pharmacists consequences of be reasonably
As active players in the field of dispensing the breach of the attributed to the non-
medicines to the public, the highest degree obligation, and performance of the
of care and diligence is expected [Mercury which the parties obligation.
Drug Corporation v. de Leon, G.R. No. have foreseen or
165622 (2008)] could have Any waiver or
reasonably foreseen renunciation made in
Test of Negligence at the time the the anticipation of
“Whether or not the defendant, in doing the obligation was such liability is null
alleged negligent act, observed the reasonable constituted. and void.
care and caution, which an ordinary and
prudent person would have used in the same
situation.” If not, then he is guilty of negligence. e. Contravention of the Tenor of
[Mandarin Villa Inc. v. CA, G.R. No. 119850 the Obligation
(1996)]
“In any manner contravenes the tenor” means
Kinds of Civil Negligence any illicit act, which impairs the strict and
faithful fulfillment of the obligation, or every
Culpa Contractual Culpa Aquiliana
kind of defective performance. [Tolentino]
Negligence is merely Negligence is
incidental in the direct, substantive 6. Remedies available to
performance of an and independent. creditor in cases of breach
obligation.

There is always a pre- There may or may a. Principal remedies of creditors

existing contractual not be a pre- Obligation to Obligation to Give a
relation. existing contractual Give a Specific Generic Thing and
obligation. Thing Obligation to Do

The source of the The source of Alternative Remedies

obligation of the obligation is the
defendant to pay defendant’s Compel the Ask the obligation be
damages is the breach negligence itself. debtor to make complied with at the
or non-fulfillment of the delivery (specific expense of the debtor.
contract. performance) [par. 2, Art. 1165, CC]
[par. 1, Art. 1165,
Proof of the existence The negligence of CC]
of the contract and of the defendant must
its breach or non- be proven. Rescission [Art. If a person obliged to do
fulfillment is sufficient 1191] something fails to do it,
prima facie to warrant the same shall be
recovery. executed at his cost [Art.
1167, CC ]

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[Universal Food Corporation v. CA, G.R. No. L-

What has been poorly
29155 (1970)]
done [may] be undone.
[Art. 1167]
Effect of Rescission under Art 1191
Rescission [Art. 1191] Extinguishes the obligatory relation as if it had
never been created, the extinction having a
Damages in any event retroactive effect. Both parties must surrender
what they have respectively received and
Those who in the performance of their return each other as far as practicable to their
obligations are guilty of fraud, negligence, or original situation. [Tolentino]
delay, and those who in any manner
contravene the tenor thereof, are liable for Rescission may take place extrajudicially, by
damages. [Art. 1170, CC] declaration of the injured party. The party who
deems the contract violated may consider it
Rescission (Resolution in Reciprocal resolved or rescinded, and act accordingly,
Obligations) without previous court action, but it
proceeds at its own risk. For it is only the final
Art. 1191, CC. The power to rescind judgment of the corresponding court that will
obligations is implied in reciprocal ones, in conclusively and finally settle whether the
case one of the obligors should not comply action taken was or was not correct in law. But
with what is incumbent upon him. the law definitely does not require that the
contracting party who believes itself injured
The injured party may choose between the must first file suit and wait for a judgment
fulfillment and the rescission of the before taking extrajudicial steps to protect its
obligation, with the payment of damages in interest. [UP v. Delos Angeles, G.R. No. L-
either case. He may also seek rescission, 28602 (1970)]
even after he has chosen fulfilment, if the
fulfillment of the obligation should become Under Art 1191, the right to rescind an
impossible. obligation is predicated on the violation of the
reciprocity between parties, brought about by a
The court shall decree the rescission breach of faith by one of them. Rescission,
claimed, unless there be just cause however, is allowed only where the breach is
authorizing the fixing of a period. substantial and fundamental to the
fulfillment of the obligation. [Del Castillo Vda
This is understood to be without prejudice to de Mistica v. Naguiat,G.R. No. 137909 (2003);
the rights of third persons who have acquired Cannu v. Galang, G.R. No. 139523 (2005)].
the thing, in accordance with articles 1385
and 1388 and the Mortgage Law. It will not be permitted in casual or slight
breach. [Song Fo v. Hawaiian Philippines, G.R.
Rescission No. 23769, (1925)]
The unmaking of a contract, or its undoing from
the beginning, and not merely its termination
[Pryce Corp v. Pagcor, G.R. No. 157480
(2005)]

Right to Rescind
The rescission on account of breach of
stipulations is not predicated on injury to
economic interests of the party plaintiff but
on the breach of faith by the defendant, that
violates the reciprocity between the parties.

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U.P. LAW BOC OBLIGATIONS AND CONTRACTS CIVIL LAW

Distinguished from Rescission under Art. Right of the creditor to exercise all of the rights
1380 and bring all the actions which his debtor may
have against third persons.
Rescission / Rescission [Art.
Resolution [Art. 1380, CC] In order to satisfy their claims against the
1191, CC] debtor, creditors have the ff. successive rights:
1. To levy by attachment and execution upon
Based on non- Based on lesion or all the property of the debtor, except those
performance or fraud upon creditors. exempt from execution;
non-fulfillment of 2. To exercise all the rights and actions of the
obligation. debtor, except such as are inherently
personal to him; and
Action is instituted Action is instituted by 3. To ask for rescission of the contracts made
only by the injured either party or by a by the debtor in fraud of their rights.
party. third person.
Requisites
Principal action, Subsidiary action, in
1. The person to whom the right of action
retaliatory in the absence of any
pertains must be indebted to the creditor
character. other legal means to 2. The debt is due and demandable
obtain reparation.
3. The creditor must be prejudiced by the
Applies only to Applies to either failure of the debtor to collect his debts due
reciprocal unilateral or reciprocal him from third persons, either through
obligations where obligations even when malice or negligence
one party is guilty the contract has been 4. The debtors assets are insufficient (debtor
of non-fulfillment fully fulfilled. is insolvent)
5. The right of action is not purely personal to
In some cases, Court cannot grant a the debtor
court may grant a period or term within
term for which one must Previous approval of the court is not necessary
performance. comply. to exercise the accion subrogatoria.

Non-performance Non-performance by ACCION PAULIANA

by the other party is the other party is Creditors may also impugn the acts which the
important. immaterial. debtor may have done to defraud them. [Art.
1177, CC]
b. Subsidiary Remedies of
Creditors Par. 3, Art. 1381. The following contracts are
rescissible:
ACCION SUBROGATORIA
(3) Those undertaken in fraud of creditors
Art. 1177, CC. The creditors, after having when the latter cannot in any other manner
pursued the property in possession of the collect the claims due them.
debtor to satisfy their claims, may exercise
all the rights and bring all actions of the latter
for the same purpose, save those which are Requisites [Cheng v. CA, G.R. No. 144169
inherent in his person; they may also impugn (2001)]
the acts which the debtor may have done to 1. There is a credit in favor of the plaintiff
defraud them. prior to the alienation by the debtor
2. The debtor has performed a subsequent
contract conveying patrimonial benefit to
third person/s.

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U.P. LAW BOC OBLIGATIONS AND CONTRACTS CIVIL LAW

3. The debtor’s acts are fraudulent to the

prejudice of the creditor.
C. KINDS OF
4. The creditor has no other legal remedy to OBLIGATIONS
satisfy his claim
5. The third person who received the 1. Pure
property is an accomplice to the fraud.
Art. 1179, CC. Every obligation whose
An accion pauliana thus presupposes the performance does not depend upon a future
following: or uncertain event, or upon a past event
1. A judgment; unknown to the parties, is demandable at
2. the issuance by the trial court of a writ of once.
execution for the satisfaction of the
judgment, and; Every obligation which contains a resolutory
3. the failure of the sheriff to enforce and condition shall also be demandable, without
satisfy the judgment of the court. prejudice to the effects of the happening of
the event.
It requires that the creditor has exhausted the
property of the debtor. The date of the A pure obligation is IMMEDIATELY
decision of the trial court is immaterial. DEMANDABLE, regardless of the presence of
What is important is that the credit of the a condition or a term/period.
plaintiff antedates that of the fraudulent
alienation by the debtor of his property.
After all, the decision of the trial court against 2. Conditional
the debtor will retroact to the time when the Art. 1181, CC. In conditional obligations, the
debtor became indebted to the creditor. [Cheng acquisition of rights, as well as the
v. CA, supra] extinguishment or loss of those already
acquired, shall depend upon the happening
Accion Accion Pauliana of the event which constitutes the condition.
Subrogatoria
A condition is a future AND uncertain event.
Not necessary Credit must exist before the This includes acquisition of proof/knowledge of
that creditor’s fraudulent act [Tolentino] a past event unknown to the parties.
claim is prior to
the acquisition Note: Commentators have Kinds of conditions
of the right by conflicting views on WoN
the debtor new debts contracted by
i. As to Effect
the debtor fall under the
scope of accion pauliana. 1. SUSPENSIVE – Obligation shall only be
No need for Fraudulent intent is effective upon the fulfillment of the condition
fraudulent required if the contract [Art. 1181, CC]. The obligee acquires a mere
intent rescinded is onerous hope or expectancy, protected by law, upon the
constitution of the obligation.
No period for Prescribes in 4 years from
prescription the discovery of the fraud

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U.P. LAW BOC OBLIGATIONS AND CONTRACTS CIVIL LAW

Principle of Retroactivity in Suspensive

Before Fulfillment After Fulfillment
Conditions
The demandability The obligation Par. 1, Art. 1187, CC. The effects of a
and acquisition/ arises or becomes conditional obligation to give, once the
effectivity of the rights effective. condition has been fulfilled, shall retroact to
arising from the the day of the constitution of the obligation.
obligation is The obligor can be Nevertheless, when the obligation imposes
suspended, but the compelled to reciprocal prestations upon the parties, the
creditor may bring the comply with what is fruits and interests during the pendency of
appropriate actions incumbent upon the condition shall be deemed to have been
for the preservation of him. mutually compensated.
his right. [Art. 1188,
CC] Rationale: Obligation is constituted when its
essential elements concur. The condition
Doctrine of Constructive Fulfillment of imposed is only an accidental element.
Suspensive Conditions
Applicability: This applies to consensual
Art. 1186, CC. The condition shall be contracts only.
deemed fulfilled when the obligor voluntarily
prevents its fulfillment. Exception: This does not apply to real
contracts which can only be perfected by
Suspensive condition is deemed fulfilled when: delivery.
1. Obligor intends to prevent obligee from
complying with the condition Effects of the Happening of Suspensive
2. Obligor actually prevents obligee from Conditions
complying with the condition To Give To Do/Not To Do
The two requisites must concur. Mere If reciprocal, the In obligations to do or
intention of the debtor to prevent the happening fruits and interests not to do, the court
of the condition, or to place ineffective shall be deemed to shall determine the
obstacles to its compliance, without actually have been mutually retroactive effect of
preventing the fulfillment, is insufficient. compensated a the condition that has
[International Hotel Corporation v. Joaquin, matter of justice and been complied with
G.R. No. 158361 (2013)] convenience [Art. [Art. 1187, par. 2]
1187, par. 1]
Doctrine does not apply to:
1. Resolutory conditions If unilateral, the The power of the court
2. External contingency that is lawfully debtor shall includes the
within the control of the obligor [Taylor appropriate the determination of
v Uy Tieng, G.R. No. L-16109 (1922)] fruits and interests whether or not there
3. Obligor, in preventing the fulfilment of received, unless will be any retroactive
the condition, acts pursuant to a right from the nature and effect. This rule shall
circumstance it likewise apply in
should be inferred obligations with a
that the intention of resolutory condition.
the persons [Art. 1190, par. 3]
constituting the
same was different.
[Art. 1187, par. 1]

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[Art. 1182, the principle of mutuality of

2. RESOLUTORY – The obligation is
CC] contracts.
demandable at once, without prejudice to the
effects of the happening of the event [par. 2, Exclusively Condition and obligation
Art. 1179, CC]. upon the are valid because in such
Debtor’s Will situation, the position of
Before After Fulfillment in case of a the debtor is exactly the
Fulfillment Resolutory same as the position of the
Condition creditor when the condition
Preservation of Whatever may have [par. 2, Art. is suspensive. It does not
creditor’s rights been paid or delivered by 1179, CC] render the obligation
[par. 1, Art. one or both of the parties illusory.
1188, CC] also upon the constitution of
applies to the obligation shall have
The condition that payment should be made by
obligations with to be returned upon the
Hermosa as soon as he receives funds from
a resolutory fulfillment of the condition
the sale of his property in Spain is a mixed
condition. [par. 1, Art. 1190, CC].
condition. The condition implies that the
There is no return to the
obligor already decided to sell the house
status quo. However,
and all that was needed to make the
when the condition is not
obligation demandable is that the sale be
fulfilled, rights are
consummated and the price thereof
consolidated and they
remitted to the islands. There were still other
become absolute in
conditions that had to concur to effect the sale,
character.
mainly that of the presence of a buyer, ready,
able and willing to purchase the property under
ii. As to Cause/Origin the conditions set by the intestate. [Hermosa
vs. Longara, G.R. No. L-5267 (1953)]
a. POTESTATIVE – The fulfillment of the
condition depends on the sole act or Loss, Deterioration, or Improvement of a
decision of a party. Specific Thing before Fulfillment of
b. CASUAL – The fulfilment of the condition Suspensive Condition in Obligations to
depends upon chance or upon the will of a Give (Art. 1189) or of Resolutory Condition
third person. [Art. 1182, CC] in Obligations to Do or Not to Do [par. 2, Art.
c. MIXED – The fulfilment of the condition 1190, CC]
depends partly upon the will of a party to Loss of a A thing is deemed lost:
the contract and partly upon chance and/or Thing a. When it perishes;
will of a third person. b. When it goes out of
commerce of man; or
Exclusively Condition and obligation c. When it disappears
upon the are valid. in such a manner that its
Creditor’s Will existence is unknown or it
cannot be recovered
Exclusively Condition and obligation
upon the are void because to allow Deterioration Any reduction or impairment
Debtor’s Will such condition would be of a Thing in the substance or value of
in case of a equivalent to sanctioning a thing which does not
Suspensive obligations which are amount to a loss
Condition illusory. It also constitutes
a direct contravention of

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Re: Obligations To Do and Not To Do

Improvement Anything added to,
of a Thing incorporated in, or attached Par. 3, Art. 1190, CC. As for the obligations
to the thing that is due. to do and not to do, the provisions of the
second paragraph of article 1187 shall be
observed as regards the effect of the
Re: Obligation to Deliver a Determinate
extinguishment of the obligation.
Thing
When the conditions have been imposed with
the intention of suspending the efficacy of an
Par. 2, Art. 1187, CC. In obligations to do
obligation to give, the following rules shall be
and not to do, the courts shall determine, in
observed in case of the improvement, loss or
each case, the retroactive effect of the
deterioration of the thing during the pendency
condition that has been complied with.
of the condition [Art. 1189, CC]:

Re: Obligations With a Resolutory

Without With Debtor’s Fault/Act
Condition
Debtor’s
Upon the happening of the resolutory
Fault/Act
condition, the rules of Article 1189 shall be
Loss applied to the party who is bound to return (i.e.
the creditor in the original obligation).
Obligation is Obligation is converted into
extinguished. one of indemnity for Impossible Conditions
damages.
1. Impossible conditions, those contrary to
Deterioration good customs or public policy, and those
prohibited by law shall annul the obligation
Impairment to Creditor may choose which depends upon them.
be borne by between bringing an action 2. The part of a divisible obligation which is
the creditor. for rescission of the not affected by such condition shall be
obligation OR bringing an valid. [Art. 1183, CC]
action for specific
performance, with Positive and Negative
damages in either case.
Conditions
Improvement
Positive [Art. 1184, Negative [Art.
Improvement Improvement by the thing’s CC] 1185, CC]
at the debtor’s nature or by time shall inure
expense, the to the benefit of the The condition that The condition that
debtor shall creditor. some event happen at some event will not
ONLY have a determinate time happen at a
usufructuary shall extinguish the determinate time
rights. obligation shall render the
1. as soon as the obligation effective
time expires or from the moment
2. if it has 1. the time
become indicated has
indubitable elapsed, or
that the event 2. if it has
will not take become evident
place.

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that the event No effect on Gives rise to an

cannot occur. existence of the obligation or
obligation, only its extinguishes one
demandability or already existing
Where no date of fulfilment is stipulated, the
performance
condition must be fulfilled within a reasonable
time or the time probably contemplated No retroactive effect Has retroactive
according to the nature of the obligation [par. 2, unless there is an effect
Art. 1185, CC]. agreement to the
contrary
3. Obligation with a period or a
When it is left When it is left
term exclusively to the will exclusively to the
of the debtor, the will of the debtor, the
1. Obligations for whose fulfillment a day existence of the very existence of the
certain has been fixed ⎯ shall be obligation is not obligation is affected
demandable only when that day affected
comes. [Art. 1193, CC]
2. Obligations with a resolutory period ⎯
take effect at once, but terminate upon Kinds of Period [Art. 1193, CC]
arrival of the day certain. [Art. 1193, 1. Ex die/ Suspensive Period –
CC] Obligation becomes demandable after
3. When the debtor binds himself to pay the lapse of the period.
when his means permit him to do so, 2. In die/ Resolutory period – Obligation
the obligation shall be deemed to be becomes demandable at once but is
one with a period [Art. 1180, CC] extinguished after the lapse of the
period.
Period or Term
Interval of time, which either suspends Effect of Advance Payment or Delivery [Art.
demandability or produces extinguishment. 1195, CC]

A fortuitous event does not interrupt the Trigger: (1) Something has been paid or
running of the period. It only relieves the delivered before the arrival of the period, (2) the
contracting parties from the fulfillment of their obligor being unaware of the period or
respective obligations during the period. believing that the obligation has become due
[Victoria’s Planters v. Victoria Milling Co., G.R. and demandable
No. L-6648 ] Effect: That thing paid or delivered may be
recovered with fruits and interests
Term/Period and Condition Distinguished
Loss, Deterioration, or Improvement of the
Term/Period Condition Thing Before Period Expires [Art. 1194, CC]
Interval of time which Fact or event which
Trigger: In case of loss, deterioration or
is future and certain is future and
improvement of the thing before the arrival of
uncertain
the day certain
Must necessarily May or may not Effect: The rules in Art. 1189 shall apply
come, although it happen
may not be known Benefit of the Period [Art. 1196, CC]
when
Trigger: Whenever in an obligation a period is
designated

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Effect: It is presumed to have been When Courts May Fix Period

established for the benefit of both the creditor General Rule: Courts may fix the period of an
and the debtor obligation when:
1. the obligation does not fix a period but from
Exception: From the tenor of the same or its nature and the circumstances it can be
other circumstances it should appear that the inferred that a period was intended;
period has been established in favor of one or 2. the obligation depends upon the will of the
of the other. debtor.

Period for the benefit of either creditor or Exceptions: If the Court determines that one
debtor of the 3 circumstances [below] are present, it
must decide the period “probably contemplated
Creditor Debtor
by the parties” [Araneta v. Phil. Sugar Estates,
Creditor may Debtor may oppose any G.R. No. L-22558 (1967)]
demand the premature demand on 1. obligation does not fix a period, but from its
fulfillment or the part of the obligee for nature and circumstances, it can be
performance of the performance of the inferred that a period was intended
the obligation at obligation, or if he so 2. the period is void, such as when it depends
any time but the desires, he may upon the will of the debtor
obligor cannot renounce the benefit of 3. If the debtor binds himself when his means
compel him to the period by performing permit him to do so.
accept payment his obligation in advance.
before the Courts shall determine such period as may
expiration of the have been probably contemplated by the
period. parties [Art. 1197, CC]
Application: When a period was intended by
the parties [Macasaet v. Macasaet, G.R. Nos.
If the period is for the benefit of the debtor 154391-92 (2004)]
alone, he shall lose every right to make use General Rule: Once fixed by the courts, the
of it: period cannot be changed by them.
(a) When after the obligation has been Exception: The rule does not apply to contract
contracted, he becomes insolvent, unless of services and to pure obligations. [Tolentino]
he gives a guaranty or security for the debt;
(b) When he does not furnish to the creditor
the guaranties or securities which he has
4. Alternative or facultative
promised;
(c) When by his own acts he has impaired said Alternative and Facultative Conditions
guaranties or securities after their Distinguished
establishment, and when through a Alternative Facultative
fortuitous event they disappear, unless he Obligations Obligations
immediately gives new ones equally
satisfactory; Of the two or more Of the two or more
(d) When the debtor violates any undertaking, prestations, several prestations, only
in consideration of which the creditor are due. one is due, while the
agreed to the period; other/s may be
(e) When the debtor attempts to abscond [Art. performed in
1198, CC] substitution of the
(f) When required by law or stipulation; one due.
(g) If parties stipulated an acceleration clause
[Tolentino]

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May be complied May be complied Form of notice

with by performance with by performance Notice of selection or choice may be in any
of one of the of another prestation form provided it is sufficient to make the other
prestations which in substitution of party know that the selection has been made.
are alternatively that which is due. It can be:
due. 1. oral
2. in writing
The right of choice Choice of prestation 3. tacit
belongs to the pertains only to the 4. any other equivocal means [Tolentino]
debtor, unless it debtor.
has been expressly Consent of other party
granted to the The law does not require the other party to
creditor. [Art. 1200, consent to the choice made by the party
CC] entitled to choose. The only possible exception
is when the debtor has chosen a prestation
Loss/impossibility of Loss/impossibility of which could not have been the object of the
all prestations due the prestation due obligation; the creditor’s consent would bring
to a fortuitous event to a fortuitous event about a novation of the obligation [Ibid.]
shall extinguish the is sufficient to
obligation. extinguish the Debtor cannot make a choice, or delays
obligation. selection
If through the creditor's acts the debtor cannot
Loss/impossibility of Loss/impossibility of make a choice according to the terms of the
one of the the substitute/s obligation, the latter may rescind the
prestations does does not extinguish contract with damages. [Art. 1203, CC]
not extinguish the the obligation,
obligation. provided the If the debtor does not select at the time
obligation which is when performance should be effected, the
due subsists choice can be made for him by the creditor
by applying Art. 1167
Culpable loss of any Culpable loss of the
In obligations to do (debtor considered to have
of the objects object which the
waived his right, subject to equity
alternatively due debtor may deliver in
considerations) [Tolentino].
before the choice is substitution before
made may give rise the substitution is
Effect of notice of choice
to liability on the effected does not The effect of the notice is to limit the obligation
part of the debtor. give rise to any
to the object or prestation selected. The
liability on the part of
obligation is converted into a simple obligation
the debtor.
to perform the prestation chosen. Once a
selection has been communicated, it is
Right of Choice [Art. 1200, CC] irrevocable [Ibid.]
General Rule: Belongs to the debtor
Instances when obligation is converted into
Exceptions a simple obligation
1. it is expressly granted to the creditor 1. The person with the right of choice has
2. it is expressly granted to a third person communicated his choice [Arts. 1201 and
par. 1, 1205, CC]
2. Only one prestation is practicable [Art.
1202, CC]

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Loss of Specific Things or Impossibility of

shall choose without a right to
Performance of Prestations in an
from among the damages OR price/value
Alternative Obligation
remainder. of the thing lost, with right
to damages.
If Debtor’s Choice [Art. 1204, CC]
Fortuitous Debtor’s Fault One prestation remains
Event
Debtor to Creditor may claim the
All prestations lost/impossible perform that remaining thing without a
which remains. right to damages OR the
Debtor is Creditor shall have a price/value of the thing
released from right to indemnity for lost with right to
the obligation. damages based on the damages.
value of the last thing
which disappeared or
Facultative Obligations
service which become
Only one prestation is agreed upon, but the
impossible, plus
obligor may render another in substitution. [Art.
damages other than the
1206, CC]
value may also be
awarded
Loss or deterioration of Substitute in
Some prestations lost/impossible Facultative Obligations [Art. 1206, CC]
Before After Substitution is
Debtor to Debtor to perform that Substitution is Made
perform that which the debtor shall Made
which he shall choose from among the
choose from remainder, without If due to bad faith The loss or deterioration
among the liability for damages. or fraud of of the substitute on
remainder. obligor: obligor is account of the obligor’s
liable. delay, negligence, or
One prestation remains fraud, renders the obligor
If due to the liable because once the
Debtor to Debtor to perform that
negligence of the substitution is made, the
perform that which remains.
obligor: obligor is obligation is converted
which remains.
not liable. into a simple one with the
substituted thing as the
If Creditor’s Choice [Art. 1205, CC] object of the obligation.
Fortuitous Debtor’s Fault
Event 5. Joint and Solidary
All prestations lost/impossible Obligations
Debtor is Creditor may claim the Joint Obligations
released from price/value of any of
the obligation. them, with indemnity for The whole obligation, whether capable of
damages. division into equal parts or not, is to be paid or
performed by several debtors (joint debtors)
Some prestations lost/impossible and/or demanded by several creditors (joint
creditors).
Debtor to deliver Creditor may claim any
that which he of those subsisting

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Each debtor is liable only for a proportionate JOINT INDIVISIBLE OBLIGATION

part of the debt, and each creditor is entitled
Art. 1209, CC. If the division is impossible,
only to a proportionate part of the credit.
the right of the creditors may be prejudiced
[Tolentino]
only by their collective acts, and the debt can
be enforced only by proceeding against all
Presumption of Joint Obligation [Article
the debtors. If one of the latter should be
1207, CC]
insolvent, the others shall not be liable for his
General Rule: An obligation is presumed joint
share.
if there is a concurrence of several creditors, or
of several debtors, or of several creditors and
debtors in one and the same obligation When there are several debtors or creditors,
but the prestation is indivisible, the obligation is
Exceptions joint, unless solidarity has been stipulated
1. When the obligation expressly states [Tolentino]
that there is solidarity
2. When the law requires solidarity, i.e. When Indivisible [Art. 1225, CC]
quasi-delicts [Art. 2194, CC], joint 1. Obligations to give definite things
payees by mistake [Art. 2157, CC], 2. Obligations not susceptible of partial
acts under articles 19-22 if committed performance
by two or more persons acting jointly 3. Indivisibility is provided by law or intended
3. When the nature of the obligation by the parties, even though the object or
requires solidarity service may be physically divisible
4. When a charge or condition imposed 4. In obligations not to do, when character of
upon heirs or legatees, and the prestation requires indivisibility
testament expressly makes the charge
or condition in solidum Summary: in case of breach
5. When the solidary responsibility is Joint Divisible Joint Indivisible
imputed by a final judgment upon Obligations Obligations
several defendants
In case of In case of breach where
Presumption of Divisibility in Joint breach of one of the joint debtors
Obligations [Art. 1208, CC] obligation by fails to comply with his
Credit or debt shall be presumed to be divided one of the undertaking, the
into as many equal shares as there are debtors, obligation can no longer
creditors or debtors, the credits or debts being damages due be fulfilled or performed.
considered distinct from one another. must be borne Thus, the action must be
by him alone. converted into one for
JOINT DIVISIBLE OBLIGATION indemnity for damages,
One where a concurrence of several creditors, with each debtor liable
or of several debtors, or of several creditors only for his part in the
and debtors, by virtue of which, each of the price or value of the
creditors has a right to demand, and each of prestation.
the debtors is bound to render compliance with
his proportionate part of the prestation which
constitute the object of the obligation. Solidary Obligations

An obligation where there is concurrence of

several creditors, or of several debtors, or of
several creditors and several debtors, by virtue
of which, each of the creditors has the right to
demand, and each of the debtors is bound to

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render, entire compliance with the prestation KINDS OF SOLIDARY OBLIGATIONS

which constitutes the object of the obligation.
As to Source
The indivisibility of an obligation does not 1. Legal – imposed by law
necessarily give rise to solidarity. Nor does 2. Conventional – agreed upon by
solidarity of itself imply indivisibility. [Art. 1210, parties
CC] 3. Real – imposed by the nature of the
obligation
Solidarity may exist although the creditors and
the debtors may not be bound in the same As to Parties Bound
manner and by the same periods and 1. Active (solidarity among creditors) –
conditions. [Art. 1211, CC] Each creditor has the authority to claim
and enforce the rights of all, with the
Solidarity Indivisibility resulting obligation of paying everyone
what belongs to him.
Refers to the legal tie Refers to the 2. Passive (solidarity among debtors) –
(vinculum juris), and prestation that is not Each debtor can be made to answer for
consequently to the capable of partial the others, with the right on the part of
subjects or parties of performance the debtor-payor to recover from the
the obligation others their respective shares.
3. Mixed (solidarity among creditors and
More than one Exists even if there is debtors) – The creditor can commence
creditor or more than only one creditor an action against anyone of the debtors
one debtor (plurality and/or one debtor for the compliance with the entire
of subjects) obligation minus the portion or share
which corresponds to the debtor
Each creditor may Each creditor cannot affected by the condition or period. [Art.
demand the entire demand more than 1211, CC]
prestation and each his share and each
debtor is bound to debtor is not bound ACTIVE SOLIDARY OBLIGATION (among
pay the entire to pay more than his creditors)
prestation share

Effect of breach: Effect of breach: Art. 1214, CC. The debtor may pay any one
Solidarity remains Obligation is of the solidary creditors; but if any demand,
converted to judicial or extrajudicial, has been made by
indemnity for one of them, payment should be made to
damages him.

All debtors are liable Only the debtors

Effects of Active Solidarity [Tolentino]
for breach committed guilty of breach of
1. Death of solidary creditor does not transmit
by a co-debtor obligation is liable for
solidarity to his heirs but rather to all of
damages
them taken together (joint)
All debtors are Other debtors are 2. Each represents the other in receiving
proportionately liable not liable if one payment and all other advantageous acts
for insolvency of one debtor is insolvent (i.e. interrupt prescription and render the
debtor debtor in default for the benefit of all
creditors)
3. Each one of the solidary creditors may do
whatever may be useful to the others, but

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not anything which may be prejudicial to can recover from the co-debtors their
the latter. [Art. 1212, CC] respective shares
4. One creditor does NOT represent all others 2. Each debtor may set up his own claims
in acts such as novation (even if against the creditor as payment of the
advantageous), compensation and obligation
remission. In this case, even if the debtor is 3. Remission of the entire debt affects all
released, the other creditors can still debtors, but when remission is limited
enforce their rights against the creditor who to the share of one debtor, the other
made the novation, compensation or debtors are still liable for the balance of
remission [par. 2, Art. 1215, CC] the obligation
5. The creditor who collects the debt, shall be a. The remission of the whole obligation,
liable to the others for the share in the obtained by one of the solidary debtors,
obligation corresponding to them. [par. 2, does not entitle him to reimbursement
Art. 1215, CC] from his co-debtors. [Art. 1220, CC]
6. The credit and its benefits are divided b. The remission made by the creditor of
equally among them, unless agreement to the share which affects one of the
the contrary. solidary debtors does not release the
7. Debtor may pay any one of the solidary latter from his responsibility towards
creditors; but if any demand, judicial or the co-debtors, in case the debt had
extrajudicial, has been made by one of been totally paid by any one of them
them, payment should be made to him who before the remission was effected. [Art.
demanded [Art. 1214, CC] 1219, CC]
4. All debtors are liable for the loss of the
PASSIVE SOLIDARY OBLIGATION thing due, even if only one of them is at
fault, or after incurring delay it is lost by
General Rules fortuitous event
1. The creditor may proceed against any 5. Interruption of prescription as to one
one of the solidary debtors or some or debtor affects all others, but
all of them simultaneously...so long as renunciation of prescription already
the debt has not been fully collected had does not prejudice the others.
[Art. 1216, CC] (Reason: prescription extinguishes the
2. Payment made by one of the solidary mutual representation among solidary
debtors extinguishes the obligation. If debtors)
two or more solidary debtors offer to 6. Interests due by delay of one is borne
pay, the creditor may choose which by all of them
offer to accept. [Art. 1217, CC]
3. A solidary debtor may, in actions filed DEFENSES AVAILABLE TO A SOLIDARY
by the creditor, avail himself of all DEBTOR [Art. 1222, CC]
defenses which are derived from the
nature of the obligation and of those 1. Those derived from the nature of the
which are personal to him, or pertain to obligation
his own share. For defenses which Defenses inherent in an obligation include
personally belong to the others, such non-existence of the obligation because of
debtor may avail himself thereof only absolute simulation or illicit object, nullity
as regards that part of the debt for due to defect in capacity or consent of all
which the latter are responsible. [Art. debtors, unenforceability, non-
1222, CC] performance of suspension condition or
non-arrival of period, extinguishment of the
Effects of Passive Solidarity [Tolentino] obligation, res judicata, and prescription.
1. Each debtor can be required to pay the
entire obligation, but after payment he

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2. Those personal to him Loss of the thing or impossibility of

Personal defenses such as minority, performance of the passive/mixed solidary
insanity, fraud, violence, or intimidation will obligation [Art. 1221, CC]
serve as a complete exemption of the
defendant debtor from liability to the
Without The obligation shall be
creditor fault of extinguished.
the
3. Those pertaining to his own share debtors

4. Those personally belonging to other co- With fault All debtors shall be responsible to
debtors but only as regards that part of of any of the creditor, for the price and the
the debt for which the latter are the payment of damages and interest,
responsible. debtors without prejudice to their action
against the guilty or negligent
Comparing demand upon Solidary Debtor debtor.
and Payment by a Solidary Debtor
Through All debtors shall be responsible to
Demand Upon a Payment by a a the creditor, for the price and the
Solidary Debtor Solidary Debtor fortuitous payment of damages and interest,
event without prejudice to their action
The demand made Full payment made after one against the guilty or negligent
against one of them shall by one of the incurred debtor.
not be an obstacle to solidary debtors in delay
those which may extinguishes the
subsequently be directed obligation [Art.
against the others so 1217, CC]. 6. Obligations with a penal
long as the debt has not
been fully collected [Art. clause
1216, CC].
Penal Clause
The creditor may If two or more An accessory undertaking to assume greater
proceed against any one solidary debtors liability in case of breach. It is generally a sum
of the solidary debtors or offer to pay, the of money, but it can be any other thing like an
all simultaneously [Art. creditor may act or abstention. [Tolentino]
1216, CC]. choose which offer
to accept [Art. If the principal obligation is void, the penal
1217, CC]. clause shall also be void. However, the nullity
of the penal clause does not carry with it the
A creditor’s right to The solidary debtor
nullity of the principal obligation [Art.1230, CC].
proceed against the who made the
surety exists payment shall have
Rules on Penalty
independently of his right the right to claim
to proceed against the from his co-debtors
a. The penalty shall substitute the
principal. the share which indemnity for damages and payment of
corresponds to interest in case of non-compliance [Art.
them with interest, 1226, CC], unless:
UNLESS barred by i. There is an express provision
prescription or to that effect
illegality [Art. 1218, ii. The obligor refuses to pay the
CC]. penalty
iii. The obligor is guilty of fraud in
non-fulfillment

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b. Debtor cannot exempt himself from the 3. If the penalty is iniquitous or

performance of the principal obligation unconscionable, even if there has been no
by paying the stipulated penalty unless performance.
this right has been expressly reserved
for him [Art. 1227, CC]. The question of whether a penalty is
c. Creditor cannot demand the fulfillment reasonable or iniquitous can be partly
of the principal obligation and subjective and partly objective. Its resolution
demanding the satisfaction of the would depend on such factors as, but not
penalty at the same time unless the necessarily confined to, the type, extent and
right has been clearly granted to him purpose of the penalty, the nature of the
[Art. 1227, CC]. A tacit or implied grant obligation, the mode of breach and its
is admissible. consequences, the supervening realities, the
i. If the creditor chooses to standing and relationship of the parties, and
demand the satisfaction of the like, the application of which, by and large,
the penalty, he cannot is addressed to the sound discretion of the
afterwards demand the court. [Ligutan v CA, G.R. No. 138677 (2002)]
fulfillment of the obligation.
ii. If there was fault on the part
of the debtor, creditor may
D. EXTINGUISHMENT OF
demand not only the OBLIGATIONS
satisfaction of the penalty but
also the payment of damages. Modes of extinguishing obligations
iii. If the creditor has chosen to
demand the fulfillment of the Art. 1231, CC. Obligations are extinguished:
principal obligation and the 1. By payment or performance;
performance thereof 2. By the loss of the thing due;
becomes impossible without 3. By the condonation or remission of
his fault, he may still demand the debt;
the satisfaction of the penalty. 4. By the confusion or merger of the
rights of creditor and debtor;
Enforcement of the Penalty 5. By compensation;
The enforcement of the penalty can be 6. By novation.
demanded by the creditor only when the non-
performance is due to the fault or fraud of the Other causes of extinguishment of
debtor. However, the creditor does not have to obligations, such as annulment, rescission,
prove fault or fraud, since the non-performance fulfillment of a resolutory condition, and
gives rise to the presumption of fault. prescription, are governed elsewhere in this
[Tolentino] Code.

Proof of Actual Damage 1. Payment or performance

Proof of actual damage suffered by the creditor
is not necessary in order that the penalty may
be enforced [Art. 1228, CC].
a. Payment

When Penalty may be Reduced [Art. 1229, The delivery of money OR

CC]: The performance of obligation [Art. 1232,
1. If the principal obligation has been partly CC]
complied with.
2. If the principal obligation has been
irregularly complied with.

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OBJECT OF PAYMENT 2. Debtor may not be required to make partial

payments
1. Integrity of Prestation
Exception:
General Rule: A debt is understood to have 1. There is an express stipulation that permits
been paid when the thing or service in which partial performance.
the obligation consists has been completely 2. When the debt is in part liquidated and in
delivered or rendered [Art. 1233, CC] part unliquidated, the creditor may demand
and the debtor may effect the payment of
2. Identity of Prestation the former without waiting for the
liquidation of the latter.
For obligations to give: The debtor of a thing
cannot compel the creditor to receive a BY WHOM
different one, although the latter may be of the
same value as, or more valuable than that Payor must have (1) free disposal of the
which is due. [Art. 1244, CC] thing due and (2) capacity to alienate it. [Art.
1239, CC]
For obligations to do or not to do: an act or
forbearance cannot be substituted by another Free disposal of the thing due means that the
act or forbearance against the obligee's will. thing to be delivered must not be subject to any
[Art. 1244, CC] claim or lien or encumbrance of a third person.
Capacity to alienate means that the person is
Exceptions to Art. 1244, CC: not incapacitated to enter into contracts [Arts.
a. If the obligation is facultative [Art. 1206, 1327, 1329, CC] and for that matter, to make a
CC] disposition of the thing due. [de Leon]
b. If the creditor agrees (Dation in payment)
[Art. 1245, CC] Payor may either be:
c. Substantial Performance by Debtor 1. The debtor or his duly authorized agent
(Creditor only has a right to damages) [Art. 2. The debtor’s heir or successor in
1234, CC] interest
3. A third person interested in the
If the obligation has been substantially fulfillment of the obligation (i.e. co-
performed in good faith, the obligor may debtor, guarantor) whether the debtor
recover as though there had been a strict consents to it or not, and even without
and complete fulfillment, less damages debtor’s knowledge [Art. 1302, CC]. This
suffered by the obligee. includes payment by a joint debtor [Monte
de Piedad y Caja de Ahorros de Manila v.
d. When the obligee accepts the Rodrigo, G.R. No. L-42928 (1936)] but not
performance, knowing its a solidary co-debtor.
incompleteness or irregularity, and 4. A third person not interested in the
without expressing any protest or obligation; but the creditor is not bound to
objection, the obligation is deemed fully accept payment by him, unless there is a
complied with. [Art. 1235, CC] stipulation to the contrary [Art. 1236, CC].

Necessity of Complete Performance [Art. Payment by a third person

1248, CC] General Rule: The creditor is not bound to
accept payment or performance by a third
General Rules: person who has no interest in the fulfillment
1. Creditor cannot be compelled partially to of the obligation [Art. 1236, CC]
receive the prestations in which the
obligation consists.

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Exception: Stipulation to the contrary [Art. interest; or any person authorized to

1236, NCC] receive it [Art. 1240, CC]
2. Payment to a person who is
Reimbursement for Payment Made by a
incapacitated to administer his property
Third Person
shall be valid:
The third party The third party pays 3. if he has kept the thing delivered, OR
pays with the without the 4. insofar as the payment has been
consent of the knowledge or consent beneficial to him. [Art. 1241 par 1, CC]
debtor of the debtor 5. Payment made in good faith to any
person in possession of the credit shall
The third party The third party may only release the debtor. [Art. 1242, CC]
may claim claim insofar as the 6. Payment to a third person
reimbursement payment has been 7. Payment made to the creditor by the debtor
for the full beneficial to the debtor. after the latter has been judicially ordered
amount. [Art. [Art. 1236, CC] to retain the debt shall not be valid. [Art.
1236, CC] 1243, CC]

The third party is The third party cannot General Rule

presumed to be compel the creditor to 1. Valid insofar as it has redounded to the
legally subrogate him on his benefit of the creditor [par. 2, Art. 1241, CC]
subrogated [Art. rights. [Art. 1237, CC] 2. Proof that such payment has redounded to
1302, CC] the benefit of the creditor is required.

Exceptions: [par. 2, Art. 1241, CC]

Reimbursement & Subrogation
1. If after the payment, the third person
Distinguished
acquires the creditor's rights
Reimbursement Subrogation (SUBROGATION);
2. If the creditor ratifies the payment to the
third person (RATIFICATION);
Personal action to Includes 3. If by the creditor's conduct, the debtor has
recover amount paid reimbursement, but been led to believe that the third person
also the exercise of had authority to receive the payment
other rights attached (ESTOPPEL). [Art. 1241, CC]
to the original
obligation (e.g. PLACE OF PAYMENT
guaranties,
securities) 1. In the place designated in the obligation.
2. In the absence of stipulation—
a. If obligation is to deliver a determinate
Art. 1238, CC. Payment made by a third thing: wherever the thing might be at
person who does not intend to be the moment the obligation was
reimbursed by the debtor is deemed to be a constituted.
donation, which requires the debtor's b. In any other case: domicile of debtor
consent. But the payment is in any case valid [Art. 1251]
as to the creditor who has accepted it.
TIME OF PAYMENT
TO WHOM
General Rule: Upon demand
1. The person in whose favor the obligation
has been constituted; orHis successor in

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Exceptions: b. Application of Payments

1. When time is of the essence
2. When the debtor loses the benefit of the
period Art. 1252, par. 1, CC. He who has various
3. When the obligation is reciprocal debts of the same kind in favor of one and
the same creditor, may declare at the time of
FORM OF PAYMENT making the payment, to which of them the
same must be applied. Unless the parties so
stipulate, or when the application of payment
Art. 1249, CC. The payment of debts in is made by the party for whose benefit the
money shall be made in the currency term has been constituted, application shall
stipulated, and if it is not possible to deliver not be made as to debts which are not yet
such currency, then in the currency which is due.
legal tender in the Philippines.
The delivery of promissory notes payable to
order, or bills of exchange or other Requisites
mercantile documents shall produce the 1. There is a plurality of debts
effect of payment only when they have been 2. Debts are of the same kind
cashed, or when through the fault of the 3. Debts are owed to the same creditor and
creditor they have been impaired. by the same debtor
In the meantime, the action derived from the 4. All debts must be due, UNLESS parties so
original obligation shall be held in the stipulate, or when application is made by
abeyance. the party for whose benefit the term has
been constituted
5. Payment made is not sufficient to cover all
When payment is made in money/ legal debts [Art. 1252, CC]
tender
General Rule: pay in the currency stipulated Rules on Application of Payments
1. Preferential right of debtor - debtor has the
Exception: payment not possible in such right to select which of his debts he is
currency, then pay in legal tender. paying. [Art. 1252, CC]
2. The debtor makes the designation at the
Legal Tender time he makes the payment.
Such currency which in a given jurisdiction can 3. If not, the creditor makes the application,
be used in the payment of debts, and which by so stating in the receipt that he issues,
cannot be refused by the creditor. unless there is cause for invalidating the
contract.
When payment is not in legal tender 4. If neither the creditor nor debtor exercises
General Rule: The creditor may refuse to the right to apply, or if the application is not
accept payment (e.g. checks) not made in legal valid, the application is made by operation
tender [Philippine Airlines v. Court of Appeals, of law. (see no. 6)
G.R. No. L-49188 (1990)]. 5. If debt produces interest, the payment is
not to be applied to the principal unless the
Extraordinary Inflation or Deflation interests are covered. [Art. 1253, CC]
Art. 1250, CC. In case an extraordinary 6. When no application can be inferred from
inflation or deflation of the currency the circumstances of payment, it is applied:
stipulated should supervene, the value of the (a) to the most onerous debt of the debtor;
currency at the time of the establishment of or (b) if debts due are of the same nature
the obligation shall be the basis of payment, and burden, to all the debts in proportion.
unless there is an agreement to the contrary. [Art. 1254, CC]

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7. Rules on application of payment may not proceeds thereof, the latter may obtain
be invoked by a surety or solidary payment of their credits.
guarantor.
Requisites
Exceptions 1. There is a plurality of debts
1. Rules on application of payment cannot be 2. There is a plurality of creditors
made applicable to a person whose 3. Partial or relative insolvency of debtor
obligation as a mere surety is both 4. Acceptance of the cession by the
contingent and singular. There must be full creditors [Art. 1255, CC]
and faithful compliance with the terms of 5. Debtor is released only for the net
the contract. [Reparations Commission v. proceeds unless there is a stipulation to the
Universal Deep Sea Fishing Corp, G.R. contrary.
Nos. L-21901 and L-21996 (1978)]
2. The debtor’s right to apply payment can be Cession and Dation Distinguished
waived and even granted to the creditor if
Cession Dacion en pago
the debtor so agrees [Premiere
Development v. Central Surety, G.R. No. Plurality of creditors One creditor
176246 (2009)]
Debtor must be Debtor not
Limitations partially or relatively necessarily in state
1. Right of creditor to refuse partial payment insolvent of financial difficulty
[Art. 1248, CC]
2. Rule on satisfaction of interest before the Universality of Thing delivered is
Principal. [Art. 1453, CC] property is ceded equivalent of
3. Debtor cannot apply payment to a debt performance
which is not yet liquidated
4. He cannot choose a debt with a period Merely releases Extinguishes
(established for the creditor’s benefit) debtor for the net obligation to the
before the period has arrived. proceeds of things extent of the value
5. Stipulation as to preference of payment. ceded or assigned, of the thing
[Tolentino] unless there is delivered, as
contrary intention agreed upon,
c. Dation in Payment proved or implied
from the conduct of
Delivery and transmission of ownership of the creditor
a thing by the debtor to the creditor as an
Involves all Does not involve all
accepted equivalent of the performance of the
properties of debtor properties of debtor
obligation (dacion en pago).
Creditor does not Creditor becomes
Requisites become owner of the owner
1. Existence of a money obligation ceded property
2. Alienation to the creditor of a property by
the debtor with the creditor’s consent
3. Satisfaction of the money obligation e. Tender of Payment and
Consignation
d. Payment by Cession
Tender of payment
Special form of payment where the debtor Manifestation made by the debtor to the
assigns/abandons ALL his property for the creditor of his desire to comply with his
benefit of his creditors in order that from the obligation, with offer of immediate

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performance. [Del Carmen v. Sps. Sabordo, Unless there is an unjust refusal by a creditor
G.R. No. 181723 (2014)] to accept payment from a debtor, Article 1256
cannot apply. [Llobrera v. Fernandez, G.R. No.
Tender of payment must be made in the lawful 142882 (2006)].
currency. The tender of a check to pay for an
obligation is not a valid tender of payment What constitutes valid consignation
thereof. [Soco v. Militante, G.R. No. L-58961, In order that the consignation of the thing due
(1983)] may release the obligor, it must first be
announced to the persons interested in the
Consignation fulfilment of the obligation. The consignation
Deposit of the object of obligation in a shall be ineffectual if it is not made strictly in
competent court in accordance with the rules consonance with the provisions which regulate
prescribed by law whenever the creditor payment. [Art. 1257, CC]
unjustly refuses payment or because of some
circumstances which render direct payment to How consignation is made
the creditor impossible or inadvisable. Consignation shall be made by depositing the
things due at the disposal of judicial
Requisites of consignation authority, before whom the tender of payment
1. There is a debt due shall be proved, in a proper case, and the
2. Consignation is made because of some announcement of the consignation in other
legal cause cases. The consignation having been made,
a. There was tender of payment and the interested parties shall also be notified
creditor refuses without just cause thereof.
to accept it
b. Instances when consignation alone Who bears the expenses
would suffice as provided under The expenses of consignation, when properly
Art. 1256 made, shall be charged against the creditor.
3. Previous notice of consignation was [Art. 1259, CC]
given to those persons interested in the
performance of the obligation. Previous Effects of Consignation
notice is essential to the validity of the If accepted by the creditor or declared properly
consignation and its lack invalidates the made by the Court:
same. [Soco v. Militante, G.R. No. L- 1. Debtor is released in same manner as if
58961, (1983)] (1st notice) he had performed the obligation at the time
4. Amount or thing due was placed at the of consignation
disposal of the court 2. Accrual of interest is suspended from
5. After the consignation has been made, the moment of consignation.
the persons interested were notified 3. Deterioration or loss of the thing or
thereof (2nd notice) amount consigned, occurring without the
fault of debtor, must be borne by creditor
When tender and refusal not required [Art. from the moment of deposit
1256, CC]
1. Creditor is absent or unknown, or does Withdrawal of Consigned Amount by the
not appear at the place of payment. Debtor
2. Creditor is incapacitated to receive the 1. Before approval of the court or acceptance
thing due at the time of payment. of the creditor- Obligation remains in force.
3. Without just cause, creditor refuses to [par. 2, Art. 1260, CC]
give receipt. 2. After approval of the court or acceptance
4. Two or more persons claim the same by the creditor, with the consent of the latter
right to collect (i.e. Interpleader) - Obligation remains in force, but
5. Title of the obligation has been lost. guarantors and co-debtors are liberated.

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Preference of the creditor over the thing is When the legal excuse of fortuitous
lost. [Art. 1261, CC] event is not applicable, in cases of:
3. After approval of the court or acceptance 1. Delay or promise to deliver thing
by the creditor, and without creditor’s to two or more persons. [Art.
consent - debtor can no longer withdraw 1165 (3), CC]
the consigned amount since the obligation 2. Nature of the Obligation
has already been extinguished [Pabugais Requires Assumption of Risk
v. Sahijwani, G.R. No. 156846 (2004)] [Art. 1174, CC]
4. If the creditor authorizes the debtor to 3. Liability of a Bailee in fortuitous
withdraw, third persons who were events. [Art. 1942 , CC]
benefited by the consignation are not 4. Liability of a depositary in
prejudiced by the revival of the obligation. fortuitous events. [Art. 1979, CC]
5. Liability of the officious manager
2. Loss of determinate thing due in fortuitous events. [Art. 2147,
CC]
or impossibility or difficulty of
performance 2. Loss of Generic Things

Loss Obligation is NOT Extinguished: In an

obligation to deliver a generic thing, the
1. Loss of Determinate Things loss or destruction of anything of the same
kind does not extinguish the obligation.
General Rule: Loss of determinate things [Art. 1263 , CC]
extinguishes the obligation when: [Par.
1, Art. 1262 CC]. 3. Partial Losses
a. An obligation which consists in the
delivery of a determinate thing Upon the Determination of the Court: The
b. Thing is lost or destroyed courts shall determine whether, under the
c. Debtor is without fault circumstances, the partial loss of the
d. Delay not incurred object of the obligation is so important as to
extinguish the obligation. [Art. 1264, CC]
However, the obligor is still liable for
damages when the following requisites 4. Presumption of Fault
concur: [Par. 2, Art. 1262 CC].
When Presumption Applies [Art. 1265,
e. There is law or a stipulation for CC]:
fortuitous events or the nature of a. Thing is lost while in the
the obligation requires an possession of the debtor
assumption of risk b. No proof of fortuitous event
f. The thing is lost
Effect: It is presumed that loss was due to
Exceptions (When the Loss Does Not his fault.
Extinguish)
a. When the obligation to deliver a Exceptions [Art. 1265, CC]
determinate object arises from a a. There is proof to the contrary
criminal act. [Art. 1268, CC] b. In case of earthquake, flood, storm
b. Acceptance of payments in bad or other natural calamity.
faith. [Art. 2159, CC]
5. Loss in Obligations to Give With
Resolutory Conditions

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When the conditions have been imposed Impossibility at Constitution and

with the intention of suspending the Subsequent Impossibility Distinguished
efficacy of an obligation to give, the
Impossibility at Impossibility which
following rules shall be observed in case of
the Time the Supervenes at the Time
the improvement, loss or deterioration of
Obligation was of Performance [Art.
the thing during the pendency of the
Constituted 1266]
condition:
[Art. 1348, CC]
a. If the thing is lost without the fault of
the debtor, the obligation shall be Brings about the Brings about a
extinguished; nullity of the modification or
b. If the thing is lost through the fault of contract extinguishment of the
the debtor, he shall be obliged to pay obligation, depending on
damages; it is understood that the whether or not it is
thing is lost when it perishes, or imputable to the debtor
goes out of commerce, or
disappears in such a way that its
existence is unknown or it cannot be TYPES OF IMPOSSIBILITY
recovered. [Art. 1189, CC] a. Physical and Legal
Physical Impossibility: There is
Effects of Loss [Arts. 1262-1263, CC] physical impossibility when the act, by
reason of its nature, cannot be
Obligation to Obligation to Deliver a accomplished. [Tolentino]
Deliver a Generic Thing
Specific Thing Legal Impossibility: There is legal
impossibility when, the act, by
Obligation is Loss of a generic thing
subsequent law, is prohibited.
extinguished if does not extinguish an
[Tolentino]
the thing was obligation, EXCEPT in
destroyed case of delimited generic
b. Subjective and Objective
without fault of things, where the kind or
Objective Impossibility: There is
the debtor and class is limited itself, and
objective impossibility when the act or
before he has the whole class
service in itself, without considering the
incurred delay. perishes.
person of the obligor, becomes
impossible. [Tolentino]
Impossibility or Difficulty of
Performance Subjective Impossibility: There is
subjective impossibility when the act or
1. Impossibility service cannot be done by the debtor
himself, but it can be accomplished by
The debtor in obligations to do shall also be others. [Tolentino]
released when the prestation becomes legally Partial Impossibility: The rule in Art.
or physically impossible without the fault of 1264 (Partial Loss) may be applied.
the obligor. [Art. 1266, CC] Thus the Courts shall determine
whether it is so important as to
Triggers extinguish the obligation. If the debtor
a. Obligation to do has performed part of the obligation
b. Becomes legally or physically when impossibility occurred, the
impossible creditor must pay the part done as long
as he benefits from it. [Tolentino]

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2. Unforeseen Difficulty normal

manner
When the service has become so difficult as to
be manifestly beyond the contemplation of Fault Without May be Without
all the parties, the obligor may also be fault with or Fault
released therefrom, in whole or in part. [Art. without
1267, CC]. fault

Requisites Effect Non- If without Release

a. The event or change in circumstances liability for fault, from the
could not have been foreseen at the delay/ extinguish obligation
time of the execution of the contract; damages es the in whole or
obligation; in part
b. It makes the performance of the
If with
contract extremely difficult but not
fault,
impossible;
liability for
c. The event must not be due to the act damages
of any of the parties; and
d. The contract is for a future prestation.
[Tagaytay Realty Co, Inc. v. Gacutan Creditors’ rights
G.R. No. 160033, July 01, 2015] Art. 1269, CC. The obligation having been
extinguished by the loss of the thing, the
Doctrine of Unforeseen Events creditor shall have all the rights of action
The parties to the contract must be presumed which the debtor may have against third
to have assumed the risks of unfavorable persons by reason of the loss.
developments. It is therefore only in
absolutely exceptional changes of
circumstances that equity demands Requisites:
assistance for the debtor. [PNCC v. CA, G.R. a. Obligation is extinguished
No. 1116896 May 5, 1997.] b. Extinguishment is due to the loss of the
thing
Fortuitous Events, Loss/Impossibility, and
Unforeseen Difficulty Distinguished Effect: Creditor shall have all rights of action
which the debtor may have against third
Fortui- Loss/ Unfor- persons by reason of the loss.
tous Impos- seen
Events sibility Difficul-ty
3. Condonation or remission of
Eleme Could not Perishes, Could not debt
nts have been goes out have been
forseen or of forseen. Definition and General Rule
forseen commerce Service
but or has
General Rules
inevitable. disappear become so
Causes s difficult but
1. Condonation or remission is essentially
loss of the not gratuitous, and
thing or impossible. 2. requires the acceptance by the
obligation obligor.
could not 3. It may be made expressly or
be impliedly.
complied 4. One and the other kinds shall be
with in the subject to the rules which govern
inofficious donations. Express

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U.P. LAW BOC OBLIGATIONS AND CONTRACTS CIVIL LAW

condonation shall, furthermore, comply b. Implied Condonation

with the forms of donation. [Art. 1270,
CC] It is inferred from the acts of the parties.

Requisites [Tolentino] 2. As to Extent

1. The debt must be existing and a. Total - extinguishes the entire
demandable; obligation; or
2. The renunciation must be gratuitous; b. Partial - refers to only a particular
and aspect of the obligation, i.e. amount of
3. The debtor must accept the remission. indebtedness or an accessory
obligation. [Tolentino]
Effect: The obligation is extinguished.
3. As to Manner
Definition a. Inter vivos - effective during the
Remission is an act of liberality, by virtue of lifetime of the creditor; or
which, without receiving any equivalent, the b. Mortis Causa - effective upon the
creditor renounces the enforcement of the death of the creditor.
obligation. The obligation is extinguished either
in whole or in such part of the same to which Rules and Form
remission refers. [Tolentino]
1. Express Remission
If 2nd Requisite not Met
If the renunciation is not gratuitous, the nature Art. 1270 (2), CC: One and the other kinds
of the act changes and it may become: shall be subject to the rules which govern
1. Dation in payment – when the creditor inofficious donations. Express condonation
receives a thing different from that shall, furthermore, comply with the forms of
stipulated; donation.
2. Novation – when the object or
principal conditions of the obligation The law subjects express remission to the
have changed; or same formalities as donations.
3. Compromise – when the matter
renounced is in litigation or dispute and Express Remission of Movable or Personal
in exchange of some concession which Property
the creditor receives. [Tolentino] The donation of a movable may be made orally
or in writing.
Kinds of Remission
An oral donation requires the simultaneous
1. As to Form delivery of the thing or of the document
a. Express Condonation representing the right donated.

It is formally: in accordance with forms of If the value of the personal property donated
ordinary donations. [Art. 1270, CC] exceeds five thousand pesos, the donation
and the acceptance shall be made in writing.
An express remission must be accepted in Otherwise, the donation shall be void. [Art. 748,
order to be effective. CC]

When the debt refers to movable or Express Remission of Immovable or Real

personal property, Art. 748 will govern; if it Property
refers to immovable or real property, Art. In order that the donation of an immovable
749 applies. may be valid, it must be made in a public
document, specifying therein the property

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donated and the value of the charges which the

donee must satisfy. Presumption of Delivery
Whenever the private document in which the
The acceptance may be made in the same debt appears is found in the possession of the
deed of donation or in a separate public debtor, it shall be presumed that the creditor
document, but it shall not take effect unless it delivered it voluntarily, unless the contrary is
is done during the lifetime of the donor. proved. [Art. 1272, CC]

If the acceptance is made in a separate Trigger: The private document in which the
instrument, the donor shall be notified thereof debt appears is found in the possession of the
in an authentic form, and this step shall be debtor.
noted in both instruments. [Art. 749, CC]
Effect: There is a presumption that it has been
2. Implied Remission voluntarily delivered by the creditor.

Presumption of Renunciation Exception: The contrary is proved.

The delivery of a private document evidencing
a credit, made voluntarily by the creditor to the 3. Partial Remission
debtor, implies the renunciation of the action
which the former had against the latter [Art. Renunciation of the principal debt shall
1271, CC] extinguish the accessory obligations, but
remission of the latter leaves the principal
Trigger: (1) Delivery of a private document obligation in force. [Art. 1273, CC]
evidencing a credit; and (2) delivery was made
voluntarily by the creditor to the debtor Trigger: The remission was only to the extent
of the accessory obligation
Effect: There will be implied renunciation. Effect: The principal obligation remains in
force
Exception: The contrary is proved.
4. Other Rules on Donation Applicable to
Note: If in order to nullify this waiver it should Remission
be claimed to be inofficious, the debtor and
his heirs may uphold it by proving that the Condonation or remission is essentially a
delivery of the document was made in virtue of donation. It is a bilateral act which requires
payment of the debt. [Art. 1271, CC] acceptance by the debtor. It is therefore
subject to the rule on donations with respect to
Presumption of Renunciation of Accessory acceptance, amount and revocation; where
Obligation donor refers to the creditor, and donee to the
Accessory obligation of pledge has been debtor, and donation to the remission.
remitted when the thing after its delivery is [Tolentino]
found in the possession of the debtor or third
person. [Art. 1274, CC] On Acceptance
1. The donee must accept the donation
Triggers: (1) A thing is pledged; (2) there has personally, or through an authorized
been a delivery of such thing to the creditor; or person with a special power for the
(3) the thing pledged is found in the possession purpose, or with a general and sufficient
of the debtor, or of a third person who owns the power; otherwise, the donation shall be
thing. void. [Art. 745, CC]
2. Acceptance must be made during the
Effect: It is presumed that the accessory lifetime of the donor and of the donee.
obligation of pledge has been remitted. [Art. 746, CC]

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guarantors. Confusion which takes place in the

On Amount person of any of the latter does not extinguish
1. The donation may comprehend all the the obligation.
present property of the donor, or part
thereof, provided he reserves, in full c. In case of joint or solidary obligations
ownership or in usufruct, sufficient
Confusion in Confusion in
means for the support of himself, and
Joint Obligation Solidary
of all relatives who, at the time of the
Obligation
acceptance of the donation, are by law
entitled to be supported by the donor. Confusion DOES NOT Extinguishes the
Without such reservation, the donation extinguish a joint entire obligation,
shall be reduced on petition of any obligation EXCEPT as but the other
person affected. [Art. 750, CC] regards the share of debtors may be
2. The provisions of Art. 750 the person in whom liable for
notwithstanding, no person may give or the two characters reimbursement if
receive, by way of donation, more than concur [Art. 1277, CC] payment was made
he may give or receive by will. The prior to remission.
donation shall be inofficious in all that it
may exceed this limitation. [Art. 752,
CC] Obligation is not extinguished when confusion
takes place in the person of subsidiary debtor
Effect: Renunciation of the principal debt shall (i.e. guarantor), but merger in the person of the
extinguish the accessory obligations, but principal debtor shall benefit the former.
remission of the latter leaves the principal
obligation in force. [Art. 1273, CC] Note: Where, however, the mortgagee
acquires ownership of the entire mortgaged
property, the mortgage is extinguished; but this
4. Confusion does not necessarily mean the extinguishment
of the obligation secured thereby, which may
Definition
become an unsecured obligation.
The meeting in one person of the qualities of
creditor and debtor of the same obligation.
[Tolentino] 5. Compensation

Requisites Definition [Art. 1278, CC]

a. It should take place between principal Compensation shall take place when two
debtor and creditor; persons, in their own right, are creditors and
b. The very same obligation must be involved; debtors of each other.
and
c. The confusion must be total, i.e. as regards Requisites [Art. 1279, CC]
the whole obligation. [Valmonte v. CA, G.R. a. Each obligor is bound principally, and at
No. L-41621, February 18, 1999] the same time a principal creditor of the
other;
Effects b. Both debts must consist in a sum of money,
a. In general or if the things due are consumable, of the
The obligation is extinguished from the time the same kind and quality;
characters of the debtor and creditor are
merged in the same person. [Art. 1275, CC] Note: The term ‘consumable’ is
erroneously used in Art 1279. The
b. Confusion among the Guarantors appropriate term is ‘fungible’. [Tolentino]
A merger which takes place in the person of the
principal debtor or creditor benefits the c. Both debts are due;

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d. Debts are liquidated and demandable; and

There are two persons There is only one
e. There must be no retention or controversy
who are mutually person whom the
over either of the debts, commenced by
debtors and creditors characters of the
third persons and communicated in due
of each other in two creditor and debtor
time to the debtor.
separate obligations, meet.
each arising from the
To warrant the application of set off under
same cause.
Article 1278 of the Civil Code, the debtor’s
admission of his obligation must be clear
and categorical and not one which merely Compensation Payment
arise by inference or implication from the
customary execution of official documents in
assuming the responsibilities of a predecessor Capacity to dispose Requires capacity
[Bangko Sentral v. COA, G.R. No. 168964 and receive the thing to dispose of the
(2006)] is unnecessary since thing paid and
compensation capacity to receive
Nature and Effects operates by law

General Rule May be partial Must be total

When all requisites mentioned in Art. 1279 are performance
present, compensation takes effect by
operation of law, and extinguishes both
debts to the concurrent amount, even
though the creditors and debtors are not aware Compensation Counterclaim
of the compensation. [Art. 1290, CC]
Takes place by Must be pleaded to
By Operation of Law operation of law be effectual
Compensation takes place by operation of law,
even though the debts may be payable at
different places, but there shall be an indemnity Kinds of Compensation
for expenses of exchange or transportation to
the place of payment. [Art. 1286 CC] As to extent [Art. 1281, CC]
1. Total – when two debts are of the same
Compensation takes effect by operation of law amount
even without the consent or knowledge of 2. Partial - when the two obligations are of
the parties concerned when all the different amounts and a balance remain
requisites mentioned in Article 1279 of the
Civil Code are present. [Trinidad v. Acapulco, As to cause
G.R. No. 147477, June 27, 2006.] 1. Legal
2. Voluntary
Compensation Distinguished from Other 3. Judicial
Modes of Extinguishment 4. Facultative
Compensation Confusion
LEGAL COMPENSATION
Takes place by operation of law from the
There must always be Involves only one moment all requisites are present.
two obligations. obligation.
Since it takes place ipso jure, when used as a
defense, it retroacts to the date when all its
requisites are fulfilled.

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This kind of compensation can only be set up

Art. 1290, CC. When all the requisites
at the option of a creditor, when legal
mentioned in article 1279 are present,
compensation cannot take place because
compensation takes effect by operation of
some legal requisites in favor of the creditor are
law, and extinguishes both debts to the
lacking.
concurrent amount, even though the
creditors and debtors are not aware of the
Obligations which cannot be compensated
compensation.
[Arts. 1287-1288, CC]
1. Contracts of depositum
Legal compensation may apply to: 2. Contracts of commodatum
1. Awards of attorney’s fees, against the 3. Future support due by gratuitous title
litigant and not his lawyer [Gan Tion v. CA, 4. Civil liability arising from a penal offense
G.R. No. L-22490 (1969)] 5. Obligations due to the government
2. Bank deposits, against the accounts of a 6. Damage caused to the partnership by a
depositor whose checks were dishonored partner
[BPI v. CA, G.R. No. 116792 (1996)]
Right of a Guarantor
VOLUNTARY COMPENSATION A guarantor may set up compensation as
Takes place when parties who are mutually regards what the creditor may owe the principal
creditors and debtors of each other agree to debtor. [Art. 1280, CC]
compensate their respective obligations even
though one of the requisites of compensation Effect of Assignment of Rights by the
may be lacking. Creditor to a Third Person [Art. 1285, CC]
With Debtor cannot set up against
Art. 1282, CC. The parties may agree upon debtor’s assignee compensation
the compensation of debts which are not yet consent pertaining to him against
due. assignor UNLESS he
reserved such right at the time
The only requisites of conventional he gave his consent
compensation are (1) that each of the parties
With Debtor may set up
can dispose of the credit he seeks to
debtor’s compensation of debts
compensate, and (2) that they agree to the
knowledge previous to the assignment
mutual extinguishment of their credits
but but not of subsequent ones
[United Planters v. CA, G.R. No. 126890
without
((2009)].
consent
JUDICIAL COMPENSATION Without Debtor may set up
Takes place by judicial decree. debtor’s compensation of all credits
knowledge prior and also later to the
Art. 1283, CC. If one of the parties to a suit assignment until he had
over an obligation has a claim for damages knowledge of the assignment
against the other, the former may set it off by
proving his right to said damages and the Order of Compensation
amount thereof. If a person should have against him several
debts which are susceptible of compensation,
FACULTATIVE COMPENSATION the rules on application of payments shall apply
When it can be claimed by one of the parties to the order of the compensation. [Art. 1289
who, however, has the right to object to it. CC]

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6. Novation void: No void: No

novation. novation.
Obligations may be modified by:
a. Changing their object or principal b. Original B. New
conditions; obligation obligation
b. Substituting the person of the debtor; and voidable: voidable:
c. Subrogating a third person in the rights of Effective if Novation is
the creditor. [Art. 1291, CC] contract is effective.
ratified before
Unlike other modes of extinguishment, it is a novation.
juridical act of dual function—it
extinguishes an obligation, and at the same
Accessory Obligations
time, it creates a new one in lieu of the old. It
Accessory obligations are also extinguished,
operates as a relative, not an absolute,
but may subsist only insofar as they may
extinction.
benefit third persons who did not give their
consent to the novation. [Art. 1296, CC]
Requisites:
a. A previous valid obligation
Accidental Modifications
b. Agreement of all the parties to the new
The extension or shortening of the period for
obligation
the performance of the obligation is generally
c. Animus novandi or intent to novate
considered as merely accidental and does not
d. Substantial difference between old and
bring about a novation. [Tolentino]
new obligations and, consequently,
extinguishment of the old obligation
Original or new obligation with suspensive
e. Validity of the new obligation
or resolutory condition
Effects Art. 1299, CC. If the original obligation was
subject to a suspensive or resolutory
In General If Original If New
condition, the new obligation shall be under
Obligation is Obligation
the same condition, unless it is otherwise
Void is Void
stipulated.
Old Novation is New
obligation is void if the obligation is
Compatible Incompatible
extinguished original void, the old
and obligation was obligation Conditions Conditions
replaced by void, EXCEPT subsists, a. Fulfillment of both a. Original
the new one when UNLESS the conditions: new obligation is
stipulated. annulment parties obligation becomes extinguished, while
may be intended
demandable. new obligation exists.
claimed only that the
by the debtor, former b. Fulfillment of b. Demandability
or when relations condition concerning shall be subject to
ratification shall be the original fulfillment/
validates acts extinguished obligation: old nonfulfillment of the
that are in any event obligation is revived; condition affecting it.
voidable [Art. [Art. 1297,
new obligation loses
1298, CC] CC] force.
a. Original a. New
obligation is obligation

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c. Fulfillment of AS TO ESSENCE OR OBJECT

condition concerning
the new obligation: Objective/Real Subjective/Personal
no novation;
requisite of a 1. Change 1. Substitution of
previous valid and of the subject debtors
effective obligation matter; a. Expromision
lacking. 2. Change b. Delegacion
of cause or 2. Subrogation of a third
consideration; or person to the rights of
Kinds of Novation 3. Change the creditor
of the principal a. Conventional
AS TO FORM conditions or b. Legal
1. Express – declared in unequivocal terms terms
2. Implied – the old and new obligations are
on every point incompatible with each other
1. Substitution of Debtors
Novation is not presumed
In the absence of an unequivocal declaration of Expromision Delegacion
extinguishment of the pre-existing obligation,
only proof of incompatibility between the old
and new obligation would warrant a novation Initiative for change Debtor
by implication. [California Bus Line v. State does not emanate from (delegante)
Investment, G.R. No. 147950 (2003)] the debtor, and may offers or initiates
even be made without the change, and
Test of Incompatibility his knowledge. the creditor
The test of incompatibility is whether or not the (delegatorio)
two obligations can stand together, each one accepts a third
having its independent existence. If they person
cannot, they are incompatible and the latter (delegado) as
obligation novates the first. consenting to the
substitution.
The incompatibility must take place in any of
the essential elements of the obligation, such Requisites
as its object, cause or principal conditions
thereof; otherwise, the change would be 1. Consent of the Consent of
merely modificatory in nature and insufficient to creditor and the new 1. old debtor;
extinguish the original obligation [Quinto v. debtor; and 2. new debtor;
People, G.R. No. 126712 (1999)] 2. Knowledge or and
consent of the old debtor 3. creditor.
AS TO ESSENCE OR OBJECT is not required.
1. Objective/Real
Effects
2. Subjective/Personal

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original agreement. [Molino v. Security Diners

1. Old debtor is 1. Insolvency of
International Corp, G.R. No. 136780 (2001)].
released the new debtor
2. Insolvency of revives the
2. Subrogation
the new debtor obligation of the
does not revive old debtor if it was
Transfers to the person subrogated the credit
the old anterior and
with all the rights thereto appertaining, either
obligation in public, and
against the debtor or against third persons, be
case the old known to the old
they guarantors or possessors of mortgages,
debtor did not debtor.
subject to stipulation in a conventional
agree to 2. New debtor
subrogation. [Art. 1303, CC]
expromision. can demand
3. If with the reimbursement of
Effects
knowledge and the entire amount
consent of the he has paid from Total Partial
old debtor, the the original
new debtor can debtor. He may Transfers to the A creditor, to whom
demand compel the person partial payment has been
reimbursement creditor to subrogated, the made, may exercise his
of the entire subrogate him to credit with all the right for the remainder,
amount paid and all of his rights. rights thereto and shall be preferred to
with subrogation appertaining, the person subrogated in
of creditor’s either against his place in virtue of the
rights. the debtor or partial payment.
4. If without third persons.
knowledge of
the old debtor, Conventional Subrogation – takes place by
the new debtor agreement of parties
can demand
reimbursement Difference between Conventional
only up to the Subrogation and Assignment of Credit
extent that the [Licaros v. Gatmaitan, G.R. No. 142838
latter has been (2001)]
benefited
without Conventional Assignment of credit
subrogation of subrogation
creditor’s rights.
Debtor’s consent Debtor’s consent is not
is necessary. required.
For subjective novation, it is insufficient that
the juridical relation between the parties to Extinguishes an Refers to the same
the original contract is extended to a third obligation and right which passes from
person. If the old debtor is not released, no gives rise to a new one person to another,
novation occurs and the third person who has one. without modifying or
assumed the debtor’s obligation becomes extinguishing the
merely a co-debtor or surety or co-surety. obligation.
[Conchinyan, Jr. v. R&B Surety and Insurance
Company, G.R. No. L-47369, (1987)] Defects/vices in Defects/vices in the old
the old obligation obligation are not
An accessory surety may not be released if he are cured. cured.
expressly waives his discharge from the
obligation in case of change or novation in the

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Legal Subrogation
The stage to The stage to
Takes place by operation of law.
look at to look at to
determine the determine
Legal subrogation is not presumed, except
status of the whether
in the following circumstances:
contract (i.e., there has
a. When creditor pays another creditor
valid, voidable, been a
who is preferred, even without the
void, breach of
debtor’s knowledge
unenforceable) the contract
b. When a third person not interested in
the obligation pays with the express or
tacit approval of the debtor 2. Classification
c. When, even without the knowledge of
the debtor, a person interested in the a. To their subject matter
fulfillment of the obligation pays, • Things, e.g. sale, deposit, pledge
without prejudice to the effects of • Services, e.g. agency, lease of
confusion as to the latter’s share [Art. services
1302, CC]
d.
b. To formation or perfection
• Consensual – consent is sufficient to
CONTRACTS perfect the contract [Art. 1315, CC]
• Real – delivery, actual or constructive,
is required in addition to consent [Art.
A.GENERAL 1316, CC]
PROVISIONS • Solemn or formal – where special
formalities are required for perfection
[Art. 1356, CC]

1. Stages of Contracts c. To relation to other contracts

• Principal – may exist alone; e.g. lease
a. Preparation (conception or “generation” or • Accessory – depends on another
negotiation) – begins from time the parties contract for its existence, e.g. guaranty
manifest their interest and ends prior to the • Preparatory – a preliminary step
moment of agreement towards the celebration of a
b. Perfection (or birth) – when the parties subsequent contract; e.g. agency
agreed upon essential elements of contract
c. Consummation (or death) - when parties d. To form
fulfill or perform the agreement • Common or informal – may be
entered into in whatever form as long
Preparation Perfection Consum- as there is consent, object and cause
mation • Special or formal – required by law to
be in a certain specified form
Exchanges Parties come Parties
of offers and to an perform e. To cause/by equivalence of prestations
counter- agreement. their • Onerous – there is an exchange of
offers. obligations correlative values, e. g. sale
All the under the • Remuneratory – where the
No contract essential contract outstanding prestation is premised
yet, thus no requisites upon services or benefits already
binding concur received
effect

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