LAW ON OBLIGATIONS AND CONTRACTS

(Civil Code of the Philippines, Articles 1156 – 1430)

MODULE 1: INTRODUCTION TO OBLIGATIONS (Art. 1156 – 1178)

OBLIGATION

An obligation is a juridical necessity to give, to do, or not to do (Art. 1156, Civil Code of the
Philippines). Juridical Necessity means that the court may be asked to order the performance of an
obligation if the debtor refuses to perform it. A civil obligation is enforceable by court action, unlike
natural obligations.

REQUISITES / ELEMENTS OF AN OBLIGATION:

1. Passive Subject (Debtor/Obligor) – the person who is bound to the fulfillment of the obligation;
he who has a duty.
2. Active subject (Creditor/Obligee) – the person who is entitled to demand the fulfillment of the
obligation; he who has a right.
3. Object or Prestation (Subject matter of the obligation) – the conduct required to be observed by
the debtor. It may consist in giving, doing, or not doing.
4. Juridical or Legal Tie (Efficient cause) – that which binds or connects the parties to the
obligation. It is the source of the obligation.

KINDS OF OBLIGATION ACCORDING TO THE SUBJECT MATTER:

o Real Obligation (Obligation to give) – that in which the subject matter is a thing which the
obligor must deliver to the obligee.
o Personal Obligation (Obligation to do or not to do) – that in which the subject matter is an act
to be done or not to be done. There are two kinds of personal obligation: Positive Personal
Obligation or obligation to do or to render a service and Negative Personal Obligation or the
obligation not to do, which naturally includes the obligation not to give.

SOURCES OF OBLIGATIONS (Art. 1157):

1. Law – it is a rule of conduct, just and obligatory, laid down by legitimate authority for common
observance and benefit.
2. Contracts – it is the meeting of the minds between two or more persons whereby one binds
himself with respect to the other, to give something or to render some service. It has the force of
law between the parties and must be complied with in good faith.
3. Quasi-contracts – they refer to certain lawful, voluntary and unilateral acts giving rise to a
juridical relation to the end that no one shall be unjustly enriched at the expense of another.

Kinds of Quasi-contract:

o Negotiorum Gestio – this refers to the voluntary administration or management of the

property, business or affairs of another without the knowledge or consent of the latter. There
is now the obligation to reimburse the gestor for the necessary and useful expenses.
o Solution Indebiti – this refers to the payment by mistake of an obligation, in excess of what
should have been paid or payment to a person not due to receive it.
4. Delicts – acts or omissions punishable by law; this refers to crimes or felonies defined under the
law to be punishable as such. The rule is that every person criminally liable is also civilly liable.
 Scope of civil liability under delicts:

a. Restitution;
b. Reparation for the damage caused; and
c. Indemnification for consequential damages.

5. Quasi-delicts or Torts – these are acts or omissions that cause damage to another there being
fault or negligence but without any existing contractual relation between the parties. There is
now an obligation to pay for damages.

Requisites of Quasi-delict:

a. There must be an act or omission.

b. There must be fault or negligence.
c. There must be damage caused.
d. There must be a direct relation of cause and effect between the act or omission and the damage;
and
e. There is no pre-existing contractual relation between the parties.

CRIME AND QUADI DELICT DISTINGUISED:

1. In crime, there is criminal or malicious intent or criminal negligence, while in quasi-delict, there
is only negligence.
2. In crime, the purpose is punishment, while in quasi-delict, indemnification of the offended party.
3. Crime affects public interest, while quasi-delict concerns private interest.
4. In crime, there are generally two liabilities: criminal and civil, while in quasi-delict, there is only
civil liability.
5. Criminal liability can’t be compromised or settled by the parties themselves, while the liability
for quasi-delict can be compromised as any other civil liability; and
6. In crime, the guilt of the accused must be proved beyond reasonable doubt, while in quasi-
delict, the fault or negligence of the defendant need only be proved by preponderance (superior
or greater weight) of evidence.
MODULE II: NATURE AND EFFECT OF OBLIGATIONS (Arts. 1163 – 1178)

DETERMINATE THING VS. GENERIC THING

Determinate / Specific thing – a thing is said to be determinate or specific if it is

particularly designated or physically segregated from all other objects of the same class. It is
identified by its individuality. The debtor cannot substitute it with another although it is of the
same kind and quality without the consent of the creditor.

Examples: The Toyota Revo with Plate No. FAR 5678, The necklace I am wearing & My puppy
named Montana.

Indeterminate / Generic thing – a thing is indeterminate or generic when it refers only to a

class or genus to which it pertains and cannot be pointed out with particularity. It is identified only
by its specie. The debtor can give anything of the same class as long as it is of the same kind.

Examples: A 2020 Mitsubishi car, A necklace & A puppy.

DUTIES OF DEBTOR IN OBLIGATION TO GIVE A DETERMINATE THING

1. To take good care of the thing with the diligence of a good father of a family (ordinary
diligence) unless the law or agreement of the parties requires another standard of care (slight
or extraordinary diligence);
2. To deliver the thing;
3. To deliver the fruits of the thing;

Kinds of Fruits:

Natural Fruits – they are the spontaneous products of the soil and the young and other
products of animals.
Examples: grass, all trees and plants on lands produced without the intervention of human labor.

Industrial Fruits – they refer to those produced by land of any kind through cultivation or
labor.
Examples: sugar cane, vegetables, rice, and all products of lands brought about by reason of human
labor.

Civil Fruits – they refer to fruits that are the results of a juridical relation.
Examples: rents of buildings, prices of leases of lands and other property.

NOTE: The creditor has the right to the fruits of a thing from the time the obligation to deliver it
arises (Art. 1164). Prior to delivery, the buyer only possess a personal right over the subject matter.
Upon delivery, the personal right becomes a real right that is now binding against the whole world.

4. To deliver its accessions and accessories even if they have not been mentioned;

Accessions – they are everything that is incorporated or attached to a thing, either naturally or
artificially. Examples: house or tress on a land, air-conditioner in a car, etc.

Accessories – those joined to or included with the principal thing for the latter’s better use,
perfection or enjoyment. Examples: key of a house, frame of a picture, bracelet of a watch, etc.

5. To answer for damages in case of non-fulfillment or breach.

DUTIES OF DEBTOR IN OBLIGATION TO GIVE A GENERIC THING

1. To deliver a thing which is of the quality intended by the parties taking into consideration the
purpose of the obligation and other circumstances; and
2. To be liable for damages in case of fraud, negligence, or delay in the performance of his
obligation or contravention of the tenor thereof.

PERSONAL RIGHT AND REAL RIGHT DISTINGUISED

Personal right – is the right or power of a person (creditor) to demand from another (debtor)
the fulfillment of the latter’s obligation to give, to do, or not to do. In personal right, there is a
definite passive subject. It is therefore binding or enforceable only against a particular person.

Real right – the right or interest of a person over a specific thing (like ownership, possession,
mortgage) without a definite passive subject against whom the right may be personally enforced. In
real right, there is only a definite active subject without any definite passive subject. It is directed
against the whole world.

REMEDIES OF THE CREDITOR

1. If the debtor fails to perform his obligation to deliver a determinate thing:

- To compel the debtor to make the delivery with damages; or
- Cancel the contract with damages; or
- Payment of damages where it is the only feasible remedy.
2. If the debtor fails to perform his obligation to deliver a generic thing:
- To ask that the obligation be complied with (can be performed by a third person)at the expense
of the debtor with damages.
3. If the debtor fails to perform his obligation in obligations to do:
- If the debtor fails to perform the obligation or performs it but contravenes the tenor thereof, the
creditor may have the obligation executed (by himself or by another) at the expense of the debtor
with damages.
- If the debtor perform the obligation but does it poorly, the creditor may have the same be
undone at debtor’s expense with damages.
4. If the debtor does what has been forbidden him:
- The creditor may demand that what has been done be undone with damages.

GROUNDS FOR LIABILITY TO PAY DAMAGES

1. Fraud – it is the deliberate or intentional evasion by the debtor of the normal compliance of his
obligation (Art. 1170).

NOTE: Art. 1170 refers to the fraud committed by the debtor at the time of the performance of the
obligation. Arts 1338 – 1344, on the other hand, refers to fraud employed in obtaining consent.

Kinds of Fraud:

a. Causal Fraud / Dolo Causante – fraud of a serious kind, without which, consent would not
have been given. It renders the contract voidable for it is a defect in one of the essential elements
of a contract.
b. Incidental Fraud / Dolo Incidente – this refers to fraud without which consent would have still
been given but the person giving such consent would have agreed on different terms. It would
not render the contract void but the party committing the fraud shall be liable for damages.
Rules in waiver of Fraud:

o Past Fraud or fraud committed in the past can be waived. Such act is considered as
liberality on the part of the creditor.
o Future Fraud or fraud still to be committed cannot be waived even if there is an agreement
to that effect. Such stipulation is void for being contrary to public policy.
2. Negligence – it is the omission of that diligence which is required by the nature of the obligation
and corresponds with the circumstance of the person, of the time, and of the place. It is the
failure to observe the required degree of care, precaution and vigilance that the circumstances
justly demand.

Kinds of Negligence:

a. Culpa Contractual – negligence in the performance of a contract. It supposes a pre-existing

contractual relationship between the parties. This is negligence in the performance of the
obligation arising from a contract resulting to damages.
b. Culpa Aquiliana – This is civil negligence or tort or quasi-delict. It is where the negligence
itself is the independent source of the obligation.
c. Culpa Criminal – this is criminal negligence. This is negligence that results in the
commission of a crime.

NOTE: Responsibility arising from negligence in the performance of every kind of obligation is
also demandable, but such liability may be regulated by the courts, according to the
circumstances (Art. 1172).

3. Delay / Default / Mora – it is the non-fulfillment of an obligation with respect to time or delay
in the fulfillment of an obligation, contrary to what was agreed upon.

Kinds of Delay:

a. Mora Solvendi – delay on the part of the debtor.

b. Mora Accipiendi – delay on the part of the creditor. It exists when the creditor unjustly
refuses to accept the thing when due.
c. Compensatio Morae – delay in reciprocal obligations, both parties are in default. It is as if
there is no delay.

Kinds of demand:

a. Judicial – with the intervention of the court; or

b. Extrajudicial – without the intervention of the court.

Ordinary Delay vs. Legal Delay or Default

Ordinary Delay – it is merely the failure to perform an obligation on time. There is no demand
yet; hence, it has no consequences under the law. The presumption is the obligee is giving the
obligor an extension of time.

Legal Delay / Default – the failure to perform an obligation on time which failure constitutes a
breach of the obligation. This presupposes the presence of a demand, making the obligor liable for
interest (monetary obligation) or damages (non-monetary obligation).

General Rule: No demand, no delay.

Exceptions:

1. When the law or the obligation so provides – when there is an express provision of the law
or stipulation by the parties that there is no need for a demand for the performance of the
obligation.
2. When the time is of the essence – when the designation of the time for the performance of
the obligation is the controlling motive for the establishment of the obligation.
3. When demand would be useless as when the obligor has rendered it beyond his power to
perform.
4. In reciprocal obligations, from the moment one of the parties fulfills his obligation, delay by
the other begins notwithstanding the absence of a demand.

Effects of delay:

a. On the part of the debtor:

- The debtor shall be liable for the payment of interest or damages; and
- If the obligation consists in the delivery of a determinate thing, he shall be liable even if the
thing is lost due to a fortuitous event.
b. On the part of the creditor:
- He shall bear the risk of loss and shall shoulder the expenses for the preservation of the thing.
- He is liable for damages suffered, if any, by the debtor.
- The debtor may resort to the consignation of the thing due.

FORTUITOUS EVENTS- These are events that could not be foreseen or which, though foreseen, are
inevitable. It is not enough that the event should not be foreseen or anticipated, it must be one
impossible to foresee or avoid.

Requisites of a Fortuitous Event:

1. The event must be independent of the debtor’s will;

2. It must be impossible to foresee, or if it can be foreseen, it is inevitable;
3. It must be of such character as to render it impossible for the debtor to perform his obligation in
a normal manner; and
4. The debtor must be free from any participation in, or the aggravation of, the injury of the
creditor.

General Rule: If the foregoing requisites are present in a case, then the debtor shall not be liable for
non-performance of the obligation. His obligation is extinguished.

Exceptions:

1. When expressly specified by law (delay, fraud, negligence, contravention of the tenor of
the agreement).
2. When the debtor promised the same thing to two or more persons who do not have the
same interest;
3. When the obligation to deliver a specific thing arises from a crime;
4. When the parties stipulate or agree that the debtor will not be exempted from liability
even if non-performance of the obligation is due to a fortuitous event;
5. When the nature of the obligation requires the assumption of risk; and
6. When the thing to be delivered is generic.
PRESUMPTIONS ON RECEIPT OF PRINCIPAL AND INSTALLMENT PAYMENTS (Art. 1176)

1. The receipt of the principal without reservation as to interest, shall give rise to the presumption
that the interest has been paid.
2. The receipt of a later installment, without reservation as to prior installments, shall give rise to
the presumption that prior installments have been paid.

NOTE: The foregoing are mere presumptions, and the creditor may rebut such with clear and
convincing evidence to the contrary.

REMEDIES OF THE CREDITOR TO ENFORCE PAYMENT OF HIS CLAIMS AGAISNT THE

DEBTOR (Art. 1177)

1. Specific Performance – exact fulfillment of the obligation by specific or substitute performance

with a right to damages in either case.
2. Attachment – pursue the property in the possession of the debtor, except those exempted by
law.
3. Accion Subrogatoria – To be subrogated to all the rights and actions of the debtor save those
which are inherent in his person.
4. Accion Pauliana – ask the court to rescind or to impugn all the acts which the debtor may have
done to defraud the creditors.

TRANSMISSIBILTY OF RIGHTS AND INTEREST

General Rule: Rights and obligations are transmissible.

Exceptions:

1. By their nature, as when the special or personal qualification of the obligor constitutes one of
the principal motives for the establishment of the contract;
2. By stipulation of the parties, as when the contract expressly provides that the obligor shall
perform an act by himself and not through another; and
3. By provision of law, as in the case of those arising from a contract of partnership or of agency.

MODULE III: PURE AND CONDITIONAL OBLIGATIONS (Arts. 1179 - 1192)

DIFFERENT KINDS OF OBLIGATIONS

1. Pure and conditional obligations 4. Joint and solidary obligations

2. Obligations with a period 5. Divisible and indivisible obligations
3. Alternative and facultative 6. Obligations with a penal clause
obligations
PURE AND CONDITIONAL OBLIGATIONS

PURE OBLIGATIONS- A pure obligation is one without a term or condition and is demandable at
once.

Example: I promise to give you P5,000. This is immediately demandable since there is no term that
must expire or a condition that must happen for the obligation to be demandable.

CONDITIONAL OBLIGATION- A conditional obligation is one whose demandability or

extinguishment depends upon the happening of a condition.
 Examples:

1. “I will give you my car if you pass the CPA Examination.” The condition here is suspensive. You
may not demand the delivery of my car until you pass the CPA examination.
2. “I will let you use my car until you pass the CPA Examination.” The condition here is resolutory.
You may demand the delivery of my car now but you must return it to me when you pass the
CPA examination.

CONDITION- It is an uncertain event which wields an influence on a legal relationship.

CLASSIFICATON:

1. Suspensive – this is a condition the happening of which will give rise to the obligation. Here, the
demandability of the obligation is suspended until the happening of the condition.
2. Resolutory – this is a condition the happening of which extinguishes the obligation. The
obligation is demandable at once but it shall be extinguished upon the happening of the
condition.
3. Potestative – a condition that depend upon the will of one of the contracting parties.

A. Potestative on the part of the debtor (condition depends upon the will of the debtor):

If suspensive – the obligation is void because it is not demandable (Art. 1182). Example: I will pay
you if I want.

If resolutory – the obligation is valid. The position here of the debtor is like that of a creditor.
Example: I will lend you my car until I return from Baguio.

B. Potestative on the part of the creditor – the obligation is valid whether the condition is
suspensive or resolutory. Examples: “I will give you P5,000 if you go to Baguio.” “I will lend
you my car until you return from Baguio.”
4. Casual – a condition that depends upon chance or upon the will of a third person. Examples: I
will give you P5,000 if you win the first price in the lotto today.” Here, the condition depends
upon chance. “I will give you P5,000 if your math teacher does not enter the class today.” Here,
the condition depends upon the will of a third person.
5. Mixed – a condition that depends partly upon chance and partly upon the will of a third person.
Example: “I will give you P5,000 if you win the first price in the lotto today and if your math
teacher does not enter the class today.”
6. Possible – one that is capable is capable of fulfillment in its nature and by law.
7. Impossible – one that is not capable of fulfillment in its nature, such as “I will give you P5,000 if
you can fly like a bird,” or due to the operation of law, such as I will give you P5,000 if you kill
Pedro.”
8. Positive – this is a condition that some event happens at a determinate time. Here, the obligation
is extinguished as soon as the time expires or it has become indubitable that the event will not
take place ((Art. 1184). Example: Pedro is to give Juan P5,000 if Juan will marry Juana on or
before June 30, 2020. The obligation will be extinguished on July 1, 2020 if Juan has not yet
married Juana as of June 30, 2020. If Juan dies on June 1, 2020 before Juan has married
Juana, then the obligation is extinguished on such date because there is no more doubt that the
marriage will not take place.
9. Negative – this is a condition that some event will not happen at a determinate time. Here, the
obligation becomes effective as soon as the time indicated has elapsed or it has become evident
 that the event will not occur (Art. 1185). Example: Pedro is to give Juan P5,000 if Juan will not
marry Juana on or before June 30, 2020. The obligation becomes effective on July 1, 2020 if
Juan has not yet married Juana as of June 30, 2020. If Juana dies on June 1, 2020 before
Juan has married her, then the obligation becomes effective on such date because there is no
more doubt that the marriage will not take place.

CONSTRUCTIVE FULFILLMENT OF SUSPENSIVE CONDITION (Art. 1186)

REQUISITES:

1. The condition is suspensive;

2. The obligor actually prevents the fulfillment of the condition; and
3. The obligor acts voluntarily.

Example: X agreed to give Y a 5% commission if the latter could sell the former’s land at a certain
price. Y found a buyer who definitely decided to buy the property upon the terms prescribed by X.
To evade the payment of the commission agreed upon, X, himself, sold to the buyer the property at
a lower price without the aid of Y.

In this case, it can be said that the due performance by Y of his undertaking, the condition
for the payment of the commission, was purposely prevented by X, and is deemed fulfilled. Hence, X
has to give Y the 5% commission agreed upon.

EFFECT OF FULFILLMENT OF SUSUPENSIVE CONDITION (Art. 1187)

General Rule: The effect of the fulfillment of the suspensive condition retroacts to the day of
the constitution of the obligation.

Exceptions: there shall be no retroactive effect with respect to the fruits and interests as
follows:

1. In receiprocal obligations, the fruits and interests shall be deemed to have been mutually
compensated. Each party shall keep the fruits and interests received by him prior to the
fulfillment of the condition.

Example: on May 1, 2018, S agreed to sell his land to B and B agreed to pay the price of P50,000 if
X finishes his accounting degree on March 15, 2020. X finished his accounting degree as stipulated.
It was as if S was entitled to the price and B to the land beginning on May 1, 2018. However, S shall
keep the fruits on the land and B the interest on the price during the pendency of the condition.

2. In unilateral obligations, the debtor keeps the fruits and interests received before the
fulfillment of the condition.

Example: On May 1, 2018, S promised to give B his land if B passed the Bar Examination in May
2020. B passed the bar examination as stipulated. It was as if B was entitled to the land beginning
on May 1, 2018. However, S will keep the fruits on the land during the pendency of the condition.

RIGHTS OF THE PARTIES BEFORE THE FULFILLMENT OF THE CONDITION (Art. 1188)

1. Creditor – He may bring the appropriate actions for the preservation of his right, such as
registering his claim with the Register of Deeds, if appropriate, to notify all third persons, or
asking the debtor to provide a security if the debtor is about to become insolvent.
2. Debtor – He may recover what he has pain by mistake.

RULES IN CASE OF LOSS, DETERIORATION, OR IMPROVEMENT OF DETERMINATE THING

BEFORE THE FULFILLMENT OF THE SUSPENSIVE CONDITION (Art. 1189)

1. Loss of the Thing

a. Without debtor’s fault – obligation is extinguished.
b. With debtor’s fault – debtor is obliged to pay damages.

Concept of Loss

A thing is lost when it perishes, or goes out of commerce or disappears in such a way that its
existence is unknown or though known it cannot recovered.

Example:

D is obliged to give C a specific house if C passes the CPA Examination. If the house is
destroyed in a fire without the fault of D before C passes the CPA examination, D’s obligation is
extinguished even if C, thereafter, passes the CPA Examination. But if the house is destroyed
through the fault of D such as when he placed inside the house highly flammable chemicals which
caused the fire, then D shall be obliged to pay damages should C pass the CPA Examination.

2. Deterioration of the thing

a. Without debtor’s fault – the impairment shall be borne by the creditor and no liability on
the part of the debtor to pay damages.
b. With debtor’s fault – the creditor may choose between rescission with damages and
fulfillment of the obligation also with damages.

Concept of deterioration

A thing deteriorates when its value is reduced or impaired with or without the fault of the debtor.

Example:

D is obliged to give a specific car to C if C finishes his economics degree. The deterioration of
the car due to wear and tear before C finishes his economics degree will be borne by C if C later
finishes the said degree. However, if the car is damaged in an accident due to D’s fault, C, if he
finishes his economics degree, may rescind the contract and ask for damages or ask D to deliver the
car in its deteriorated condition plus damages.

3. Improvement of the thing

a. Improvement of thing by nature or by time – the improvement shall inure to the benefit of
the creditor.
b. Improvement of thing at expense of debtor – the debtor will have the rights granted to a
usufructuary.

Concept of improvement

A thing is improved when its value is increased or enhanced by nature or by time or at the
expense of the debtor or creditor.
Concept of Usufructuary

It is the right to enjoy the use and fruits of a thing belonging to another. The usufructuary
may make improvements on the property but he shall have no right to be indemnified therefore. He
may, however, remove such improvements should it be possible to do so without damage to the
property.

The usufructuary may set off the improvements he may have made on the property against
any damages to the same.

Examples:

a. D is obliged to give his violin to C if C finished his course in music. If the quality of the tome
produced by the violin had improved, the improvement shall inure to the benefit of C.
b. D is obliged to give his only car to C if C finishes his economics degree. D had the car
repainted. In this case, D can continue using the car in its improved condition. D cannot
remove the paint because it will cause damage to the car. However, if he has caused a dent to
the car due to his fault, he may set off the cost of damage brought by such dent against the
cost of repainting.

RULE IN CASE OF FULFILLMENT OF RESOLUTORY CONDITION (Art. 1190)

1. Upon the fulfillment of the resolutory condition, the obligation is extinguished.

2. The parties shall return to each other what they have received.
3. In case of loss, deterioration, or improvement of the thing, the provisions in Art. 1189
shall be applied to the party who is bound to return.

Concept of Reciprocal Obligation

A reciprocal obligation is one that arises from the same cause and in which each party is a
debtor and creditor of the other, such that the obligation of one is dependent upon the obligation of
the other. Reciprocal obligations are to be performed simultaneously so that the performance of one
is conditioned upon the simultaneous fulfillment of the other.

Example: S sold his Toyota car to B for P20,000. The delivery of the Car by S is dependent
upon the payment of the price by B and vice-versa.

Remedies of the injured in reciprocal obligation

1. Rescission with damages.

2. Fulfillment of the obligation with damages.

These remedies may be availed of by the injured party in the alternative. He cannot ask for
both. If he has chosen rescission of the obligation, he can no longer ask for fulfillment. However, he
may also seek rescission even after he has chosen fulfillment, if the latter becomes impossible.

RULE WHERE BOTH PARTIES ARE GUILTY OF BREACH (Art. 1192)

1. First infractor known – one party violated his obligation; subsequently, the other also
violated his part of the obligation. The liability of the first infractor shall be equitably
reduced.
 2. First infractor cannot be determined – one party violated his obligation followed by the
other, but it cannot be determined which of them was the first infractor. The rule is that
the contract shall be deemed extinguished and each shall bear his own damages.

Example: S sold his TV to B. the agreement is that the TV shall be delivered on Nov. 1, 2020
at the house of B and payment shall be made by B upon delivery. S did not deliver the TV on Nov. 1
in spite of a demand made by B. Five days later, S delivered the TV but B incurred in delay in
paying the purchase price.

The liability of S for damages shall be equitably tempered by the court, taking into
consideration the breach also of the obligation on the part of B.

If it cannot be determined who of the two is the first infractor, the contract shall be deemed
extinguished and each shall bear his own damages. This means that the contract shall not be
enforced.
MODULE IV: OBLIGATIONS WITH A PERIOD (Arts. 1193 – 1198)

OBLIGATIONS WITH A PERIOD, CONCEPT

An obligation with a period is one whose consequences are subjected in one way or another
to the expiration of said period or term.

MEANING OF PERIOD

A period is a future and certain event upon the arrival of which the obligation (or right)
subject to it either arises or is terminated. It is a day certain which must necessarily come (like the
year 2025; next Christmas), although it may not be known when, like the death of a person.

PERIOD AND CONDITION DISTINGUISHED

1. As to fulfillment – a period is certain event which must happen sooner or later at a date known
beforehand, or at a time which cannot be determined, while a condition is an uncertain event;

2. As to time – a period refers only to the future, while a condition may refer also to a past event
unknown to the parties;

3. As to effect, when left to the debtor’s will – a period which depends upon the will of the debtor
empowers the court to fix the duration thereof, while a condition which depends upon the sole
will of the debtor invalidates the obligation; and

4. As to retroactivity of effects – unless there is an agreement to the contrary, the arrival of a period
does not have any retroactive effect, while the happening of a condition has retroactive effect.

KINDS OF PERIOD OR TERM

1. Suspensive period (Ex die) – the obligations begin only from a day certain upon the arrival of
period;

Example: I will pay you 30 days from today.

2. Resolutory Period (In diem) – the obligation is valid up to a day certain and terminates upon
arrival of the period.

Example: I will give you P500.00 a month until the end of the year.

Problem:

“I will pay you when my means permit me to do so.” Is this an obligation with a period or with a
condition?

Answer:
This is an obligation with a period. Here, the remedy of the creditor is to ask the court to fix
the period (Arts. 1180, 1197). Once court has fixed the period, it may no longer change it as it
becomes a part of the agreement by the parties.

EFFECTS OF LOSS, DETERIORATION, OR IMPROVEMENT BEFORE ARRIVAL OF PERIOD (Art.

1194) Refer to the discussion in Article 1189.
PAYMENT BEFORE ARRIVAL OF PERIOD (Art. 1195)
Anything paid or delivered before the arrival of the period, the obligor being unaware of the period
or believing that the obligation has become due and demandable, may be recovered, with the fruits
and interest.

Example: D owes C P10,000 which was supposed to be paid on December 31 this year. By mistake,
D paid his obligation on December 31 last year.

Assuming that today is June 30, D can recover the 10,000 plus the legal interest. But D cannot
recover, except the interest, if the debt has already matured.

Neither can D recover if he had knowledge of the period. D is deemed to have impliedly renounced
the period.

PRESUMPTION AS TO WHO HAS THE BENEFIT OF THE PRIOD (Art. 1196)

Whenever in an obligation a period is designated, it is presumed to have been established for
the benefit of both the creditor and the debtor, unless from the tenor of the same or other
circumstances, it should appear that the period has been established in favor of one or of the other.

Therefore, the debtor cannot be compelled to perform, and the creditor cannot be compelled
to accept performance, before the term expires.

Example: D borrowed P10,000 from C on January 2020. The loan bears interest at 10% per annum
with both principal and interest being due on December 31, 2020. Before December 31, 2020, C
cannot compel D to pay and deprive him of the use of the money until the said date. Neither may D
compel C to accept payment before December 31, 2020 and deprive C of the interest for the
remaining term.

Exception to Article 1196:

1. Term is for the benefit of the debtor alone – he cannot be compelled to pay prematurely, but
he can, if he desires to do so.
Example: D borrowed from C P1,000 to be paid within one year without interest. In this case, the
period of one year should be deemed intended for the benefit of D only. Therefore, he can pay any
time but he cannot be compelled to pay before one year.

2. Term id for the benefit of the creditor – he may demand fulfillment even before the arrival of
the term but the debtor cannot require him to accept payment before the expiration of the
stipulated period.
Example: D borrowed from C P1,000 payable on December 31, 2020 with the stipulation that D
cannot make payment before the lapse of the period but C may demand fulfillment even before said
date. Here, C can demand payment at any time but D cannot shorten the one year period without
the consent of C. Ordinarily, there must be a stipulation granting the benefit of the term to only the
creditor.

WHEN THE COURT MAY FIX THE PERIOD ( Art. 1197)

1. If the obligation does not fix a period, but from its nature and circumstances it can be
inferred that a period was intended.
Example: D is obliged to construct the mansion of C. However, no period was indicated in the
agreement as to when D must complete the construction of the mansion. Here, it is clear that a
period was intended since the construction of the mansion will take some time to complete. C may
thus go to the court and ask it to fix the duration of the construction of the mansion.

2. When the duration of the period depends upon the will of the debtor.
Example: I will pay you when my means permit me to do so. Here, the creditor may go to the court
and ask it to fix the duration of payment.

WHEN OBLIGATION CAN BE DEMANDED BEFORE LAPSE OF PERIOD (Art. 1198)

General Rule: Obligation is not demandable before the lapse of the period.

Exceptions: Based on the fact that the debtor might not be able to comply with his obligation.

1. When debtor becomes insolvent

Example: D owes C P1,000 due and payable on December. If D becomes insolvent, say on
September 10, C can demand immediate payment from D before maturity unless D gives
sufficient guaranty or security.

2. When debtor does not furnish guaranties or securities promised

Example: Suppose in the same example, D promised to mortgage his house to secure the
debt. If he fails to furnish said security as promised, he shall lose his right to the period.

3. When guaranties or securities given have impaired or have disappeared

Example: If the debt is secured by a mortgage on the house of D, but the house was
burned through his fault, the obligation also becomes demandable unless D gives a new
security equally satisfactory. In this case, the house need not be totally destroyed as it is
sufficient that the security be impaired by the act of D. But in case of a fortuitous event, it
is required that the security must disappear.

4. When debtor violates an undertaking

Example: In the same example, suppose that C agreed to the period in consideration of
the promise of D to repair the piano of C. The violation of the undertaking by D gives C
the right to demand immediate payment of the loan.

5. When debtor attempts to abscond

Example: Before the due date of the obligation, D changed his address without informing
C and with the intention of escaping from his obligation. This act of D is a sign of bad
faith which results in the loss of his right to the benefit of the period stipulated. A mere
attempt or intent to abscond is sufficient.
MODULE V: ALTERNATIVE AND FACULATATIVE OBLIGATIONS (Art. 1199 – 1206)

KINDS OF OBLIGATION ACCORDING TO THE NUMBER OF PRESTATIONS

1. Simple- one where there is only prestation.

2. Compound- one where there are several prestations.

ALTERNATIVE OBLIGATION, CONCEPT- An alternative obligation is one where several prestations

are due but the complete performance of one of them is sufficient to extinguish the obligation (Art.
1199).

Example: D is obliged to give a specific ring, a specific watch or a specific bracelet to C. The delivery
of any of the three articles will extinguish the obligation.

RIGHT TO CHOOSE PRESTATION - The right of choice belong to the debtor, unless it has been
expressly given to the creditor (Art.1199).

LIMITATIONS ON DEBTOR’S RIGHT TO CHOOSE

1. The debtor must completely perform the prestation chosen. He cannot compel the creditor to
receive part of one prestation and part of another prestation (Art.1199).

Example: D borrowed from C P10,000. It was agreed that D could comply with his obligation by
giving C P10,000, or a color television set, or by painting the house of C.

The delivery of the P10,000, or the color television set, or the painting of the house of C, is
sufficient to comply with the obligation. Performance must be complete. C cannot be compelled to
accept, for instance, P5,000 and half of the television, thereby establishing a co-ownership between
them or P5,000 and the painting of a part of his house.

2. He cannot choose those prestations which are impossible, unlawful or which could not have
been the object of the obligation (Art.1199).

Examples:

Impossible – S promised to deliver to B 10 sacks of rice, or a watch, or soil from Jupiter. S cannot
choose to deliver soil from Jupiter as it is physically impossible.

Unlawful – S obliged himself to deliver to B a kilo of a dangerous drug, or a parcel of land, or a 2-

carat diamond ring, or to kill C. S can choose only the parcel of land or the 2-carat diamond ring.

Could not have been the object of prestation – D borrowed from C P30,000. It was agreed that D
would give his horse, or P30,000, or his German piano. Now D has two horses – a race horse worth
P30,000 and a horse for calesa that cannot be sold for more than P5,000. D cannot choose the
horse for calesa as it could not have been the object of prestation.

WHEN THE OBLIGATION CEASES TO BE ALTERNATIVE AND BECOMES A SIMPLE

OBLIGATION

1. When the debtor has communicated his choice to the creditor (Art. 1201).
2. When among the prestations whereby the debtor is alternatively bound, only one is practicable
(Art. 1202).
3. When the creditor has communicated his choice to the debtor, if the creditor has been expressly
given the right of choice (Art. 1205).

RULES IN CASE OF LOSS OF THINGS WHICH ARE ALTERNATIVELY THE OBJECT OF THE
OBLIGATION BEFORE THE CHOICE IS COMMUNICATED

1. When the right of choice is with the debtor (Art. 1204)

a. If only one or some are lost through a fortuitous event or through the debtor’s fault, the debtor
may deliver any of the remainder, or that which remains if only one subsists.
b. If all are lost through a fortuitous event, the obligation is extinguished (based on the rule that no
person shall be responsible for fortuitous event).
c. If all are lost through the debtor’s fault, the debtor shall pay the value of the last thing that was
lost plus damages.
d. If all except one are lost through the debtor’s fault, and the remaining item is subsequently lost
through a fortuitous event, then the debtor’s obligation is extinguished.
e. If all except one are lost through the fortuitous event, and the remaining item is subsequently
lost through the debtor’s fault, the debtors shall pay damages.

Examples: D is to give C a specific ring, a specific bracelet, or a specific wristwatch. The obligation
is silent as to who will choose the item to be delivered. Therefore, the right of choice belongs to D.

a. If the ring is lost through a fortuitous event, D may deliver the bracelet or the wristwatch.
The same rule applies if the ring is lost through the fault of D. In the case of the latter, D
shall have no liability for damages because he can still performed his obligation by
choosing to deliver the bracelet or the wristwatch.
b. If the ring and the bracelet are lost through a fortuitous event, or through D’s fault, the
obligation is converted into a simple obligation to deliver the wristwatch. There is no
liability for damages for the part of D even if the loss is due to his fault because he can
still perform his obligation. It was as if D chose to deliver the wristwatch.
c. If all things are lost to a fortuitous event, D’s obligation is extinguished.
d. If the ring and the bracelet are lost through a fortuitous event, the obligation becomes a
simple obligation to deliver the wristwatch. If the wristwatch is thereafter lost due to the
fault of D, D shall pay damages.
e. If the ring, the bracelet, and the wristwatch are lost one after the other due to D’s fault, D
shall pay the value of the wristwatch, the last item that was lost plus damages.
f. If the ring and the bracelet are lost through D’s fault, the obligation becomes a simple
obligation to deliver the wristwatch. If the wristwatch is thereafter lost through a
fortuitous event, D’s obligation is extinguished.

2. When right of choice is expressly granted to the creditor (Art.1209)

a. If only one or some are lost through a fortuitous event, the debtor shall deliver that which
the creditor should choose among the remainder, or that which remains if only one
subsists.
b. If all are lost through a fortuitous event, the obligation shall be extinguished.
c. If only one or some are lost through the debtor’s fault, the creditor may claim any of those
subsisting or the price of any of those which were lost through the debtor’s fault plus
damages.
d. If all are lost through the debtor’s fault, the creditor may claim the price of any of them
plus damages.
Examples: D is to give C a specific ring, a specific bracelet or a specific wristwatch. The parties
agreed that C shall have the right of choice.

a. If the ring is lost through a fortuitous event, D shall deliver either the bracelet or the
wristwatch at the choice of C.
b. If all are lost through a fortuitous event, D’s obligation is extinguished.
c. If the ring and the bracelet are lost through a fortuitous event, D shall deliver the
wristwatch which is the remaining item. The obligation becomes a simple obligation to
deliver the wristwatch. If the wristwatch is thereafter lost due to D’s fault, D shall pay
damages.
d. If the ring and the bracelet are lost due to D’s fault, the obligation does not become a
simple obligation to deliver the wristwatch. C can still choose from the payment of the
price of the ring or the bracelet with damages, or the delivery of the wristwatch.
e. If all are lost due to the fault of D, C may claim the price of any of them plus damages.

FACULTATIVE OBLIGATION- An obligation where only one prestation is due but the debtor may
render another in substitution.

Example: D is obliged to give a specific ring to C with the agreement that D may deliver a specific
watch as a substitute.

RULES IN CASE OF LOSS OF PRINCIPAL THING AND SUBSTITUTE

1. Before substitution (i.e., before the debtor has informed the creditor of the substitution)
a. Principal thing
1.) If lost due to fortuitous event, the obligation is extinguished.
2.) If lost due to the debtor’s fault, debtor shall pay damages.
b. Substitute

The loss of the substitute whether through a fortuitous event or through the debtor’s fault
imposes no additional obligation on the debtor because it is not due. The debtor has still to deliver
the principal thing. However, the obligation ceases to be facultative obligation and becomes a simple
obligation to deliver the principal thing.

Examples: S will give B item one or if S wants, item two. If:

Item one is lost through a fortuitous event – the obligation of s is extinguished.

Item one is lost through the fault of S – S is liable for damages.

Item two is lost with or without the fault of S – S is still liable to deliver item one. He is not
liable for damages for the loss of item two as it is not due.

2. After substitution
a. Principal thing

The loss of the principal thing whether through a fortuitous event or through the debtor’s
fault imposes no additional obligation on the debtor because the thing due is already the substitute.
After the substitution has been communicated, the thing due is the substitute. The obligation also
ceases to be a facultative obligation and becomes a simple obligation.
 b. Substitute
1.) If lost through a fortuitous event, the obligation is extinguished.
2.) If lost through the debtor’s fault, the debtor shall pay damages.

Examples: Based on the preceding example, if:

Item one is lost with or without the fault of S – S is not liable for its loss since his obligation is to
deliver item two.

Item two is lost trough a fortuitous event – obligation of S is extinguished.

Item two is lost through the fault of S – S is liable for damages.

ALTERNATIVE AND FACULTATIVE OBLIGATION DISTINGUISHED

Alternative obligation Facultative obligation

1. Several prestations are due, but the 1. Only one prestation, the principal
performance of one is sufficient to obligation, is due
extinguish the debt.
1 If there are void prestations, the other may 2. If the principal obligation is void, the
still be valid, hence, the obligation debtor is not required to give the
remains. substitute.
2 The right of choice is with the debtor, 3. The right of choice belongs to the debtor
unless expressly given to the creditor. only.
3 If all prestations are impossible except one, 4. If the principal obligation is impossible, the
that which is possible must still be given. debtor is not required to give the
substitute.
MODULE VI: JOINT AND SOLIDARY OBLIGATIONS (Arts. 1207 – 1222)

JOINT AND SOLIDARY OBLIGATIONS- In a joint or solidary obligation, three is a concurrence of

two or more debtors and /or two or more creditors in one and the same obligation.

In a joint obligation, each debtor is liable only for a proportionate part of the debt, and each
creditor is entitled only to a proportionate part of the credit.

Examples:

1. A and B are indebted to X for P10,000.00, A is liable only for P5,000; B is liable only for P5,000.

2. A owes X and Y P8,000.00, X can collect only P4,000.00; Y can collect only P4,000.00.

In a solidary obligation, each debtor is liable for the whole obligation, and each creditor is entitled
to demand payment of the whole obligation. (Please see succeeding topics for examples.)

KINDS OF SOLIDARY OBLIGATION

1. Passive solidarity - This is solidarity on the part of the debtors.

Example: A and B, solidary debtors, are indebtedness to X for P10,000.00. X can demand
payment of P10,000.00 from either A and B. If A pays X P10,000.00, the obligation is extinguished.
A can demand reimbursement of P5,000.00 from B representing the latter’s share in the debt.

2. Active solidarity- This is solidarity on the part of the creditors.

Example: A owes X and Y, solidary creditors, P8,000.00. Either X and Y may demand payment
of P8,000.00 from A. If A pays X P8,000.00, the obligation is extinguished. X must give P4,000.00
to Y representing the latter’s share in the credit.

3. Mixed solidarity - solidarity on the part of both debtors and creditors.

Example: A and B, solidary debtors, owe X and Y, solidary creditors, P12,000.00. X or Y may
collect from A or B the total sum of P12,000.00. If A pays X P12,000.00, the obligation is
extinguished. B must reimburse A P6,000.00. On the other hand, X must give P6,000.00 to Y.

OTHER TERMS FOR SOLIDARY OBLIGATIONS

1. Joint and severally 4. Mancomunada solidaria

2. Individually and collectively 5. Juntos o Separamendente
3. In solidum
OTHER TERMS FOR JOINT OBLIGATIONS

1. Proportionately 3. Mancomunada
2. Pro rata 4. Mancomunada Simple
RULE IF THERE IS CONCURRENCE OF TWO OR MORE DEBTORS AND / OR TWO OR MORE
CREDITORS IN ONE AND THE SAME OBLIGATION

As a general rule, the obligation is presumed to be joint when there is a concurrence of two or
more debtors and/or two or more creditors in one and the same obligation. There is solidary liability
only in the following cases:
 1. When the obligation expressly so states.
2. When the law requires solidarity.

Examples:

a. When two or more persons have appointed an agent for a common transaction or undertaking,
they shall be solidary liable for the consequences of the agency (Art.1915).
b. Where the instruments containing the word “I promise to pay” is signed by two or more persons,
they are deemed to be jointly and severally liable thereon.
c. The responsibility of two or more persons who are liable for a quasi-delict is solidary (Art. 2194).

Illustrative case:

Ruks Konsult and Construction vs. Adworld Sign and Advertising Corp., G.R. No. 204866,
January 21, 2015

Facts: Transworld contracted the services of Ruks for the construction of the billboard structure
of the former. Both Transworld and Ruks knew that the billboard had a weak and poor foundation,
and yet they allowed the construction to push through. Later, the billboard structure collapsed
causing damage to the adjacent billboard structure owned by Adworld. Adworld now demand the
payment of damages for the impaired billboard and loss of rental income.

Issues: (a) Are Transworld and Ruks guilty of negligence? (b) May Adworld hold either
Transworld or Ruks liable for the obligation to pay damages and loss of rental?

Held: (a) Yes Transworld and Ruks are guilty of negligence in the construction of the collapsed
billboard as they knew that the foundation supporting the same was weak and would cause danger
to the safety of the motorists and the adjacent properties, such as that of Adworld’s billboard, and
yet they did not do anything to remedy the situation. Both are negligent because of their “failure to
observe for the protection of the interests of another person that degree of care, precaution and
vigilance which the circumstances justly demanded, whereby such others persons suffer injury.” (b)
Yes, since the liability of two or more persons who are guilty of quasi-delict is solidary.

3. When the nature of the obligation requires solidarity

Examples: SG, a security guard of AB partnership, was killed by criminal elements in line of duty.
The heirs of the SG demanded compensation under Workmen’s Compensation Law (WCL) for the
whole amount from A, partner. A claimed that he should be liable only for one half shared, the
other half to be shouldered by B, his partner, since their liability is only joint as law was silent to
the nature of liability. The court ruled that the partners liability is solidary since the nature of their
obligation requires solidarity, the evident intention of the WCL is to give full protection to workers.
This purpose would be defeated if the employers’ liability were only joint.

A, B and C, joint debtors, are obliged to give X, Y and Z, solidary creditors, P18,000.00. How
much may X collect and from whom?

Answer: X, being a solidary creditor, may collect the sum of P18,000.00. However, since the
debtors are joint debtors, he may collect only P6,000.00 from each of them. After collecting the sum of
P18,000.00, X must give Y and Z’s share of P6,000.00 each.

A, B and C, solidary debtors, are obliged to give X, and Y and Z, joint creditors, P18,000.00.
How much may A be held liable?
 Answer: A, being a solidary debtor, may be held liable for P18,000.00. However, since the
creditors are joint creditors, each of them may collect only P6,000.00 from A. If A pays the whole
amount of P18,000.00 to the creditors, A can demand reimbursement of P6,000.00 each from B and C.

A, B and C, solidary debtors, are obliged to give X, Y and Z, solidary creditors, P18,000.00.
How much may Z collect and from whom?

Answer: Z may collect P18,000.00 from any of the solidary debtors each of whom may be held
liable for the entre obligation. If Z collects P18,000.00 from A, Z must give X and Y P6,000.00 each. A,
on the other hand, can demand reimbursement from B and C at P6,000.00 each.

A and B are solidary debtors of X and Y, solidary creditors, in the amount of P20,000.00.

1. If X renounces or remits the whole obligation without the consent of Y, will the obligation be
extinguished?

Answer: Yes, because the remission made by any solidary creditor extinguishes the whole
obligation (Art.1215). However, X has to give Y’s share of P10,000.00 since a solidary may not do
anything prejudicial to his solidary creditors (Art. 1212). A solidary creditor who has caused the
extinguishment of the obligation by remission, compensation or confusion, or has collected the debt,
shall be liable to the others for the shares corresponding to them (Art.1215).

2. Supposed the remission of the whole obligation was shared by A, may A demand
reimbursement from B?

Answer: No, because the remission of the whole obligation obtained by one of the solidary debtors
does not entitle him to reimbursement from his co-debtors (Art.1220), remission being the gratuitous
abandonment by the creditors of their right to the obligation.

3. Suppose that X renounces or remits A’s share amounting to P10,000.00. However, it turned
out that B had already paid P20,000.00 to Y two days before. May B still collect P10,000.00
from A representing A’s share?

Answer; Yes, B may still collect from A P10,000.00. The remission made by the creditor of the
share which affect one of the solidary debtors does not release the latter from responsibility to his co-
debtors, in case the debt has been totally paid by anyone of them before the remission was affected
(Art. 1219). A’s remedy will be after X or Y to collect the sum he paid to B.

PAYMENT TO ANY OF THE SOLIDARY CREDITORS (Art. 1214)

The rule is that the debtor may pay any one of the solidary creditors. But when a demand,
judicial or extrajudicial, has been made by one of them, payment should be made to him; otherwise,
the obligation will not be extinguished except insofar as the creditor-payee’s share is concerned.

Example: A is indebted to X, Y and Z, solidary creditors, for P24,000.00. Suppose X makes a

demand against A, to whom shall A pay?

Answer: A must pay to X. If A pays to another solidary creditor, say Y, the sum of
P24,000.00, the payment, as a rule, is valid only with respect to Y’s share of P8,000.00. Thus, if X
and Z do not receive their respective share from Y, A can still be held for P16,000.00.
RIGHT OF CREDITOR TO PROCEED AGAINST ANY SOLIDARY DEBTOR (Art. 1216)

The creditor may proceed against any of the solidary debtors or some or some or all of them
simultaneously. The demand made against one of them, shall not be an obstacle to those which
may subsequently be directed against the others, so long as the debt has not been fully collected.

EFFECTS OF PAYMENT BY A SOLIDARY DEBTOR (Art. 1217)

Payment made by one of the solidary debtors extinguishes the obligation. If two or more
solidary debtors offers to pay, the creditor may choose which offer to accept.

He who made the payment may claim from his co-debtors only the share which corresponds
to each, with the interest for the payment already made. If the payment is made before the debt is
due, no interest for the intervening period may be demanded.

When one of the solidary debtors cannot, because of his insolvency, reimburse his share to
the debtor paying the obligation, such share shall be borne by all his co-debtors, in proportion to
the debt of each.

Example: A, B, and C are jointly and severally liable to D and E in the amount of P3,000 due on
January 5.

If both A and B offer to pay D on January 5, the latter may choose which offer to accept. If A
pays the entire amount of P3,000 on January 5, the obligation is extinguished.

The payment by A gives him the right to demand reimbursement from B and C P1,000 each
with interest from the date of payment. But A is not entitled to reimbursement nor to interest for
any payment made before January 5. The obligation of B and C to reimburse him with interest will
arise only from January 5.

If C is insolvent, both A and B shall bear his insolvency in proportion to their shares. Hence,
A can still ask B to pay an additional sum of P500. A and B can later recover from C should the
latter’s finances improve.

EFFECT OF PAYMENT AFTER OBLIGATION HAS PRESCRIBED OR BECOME ILLEGAL (Art.

1218)

Payment by a solidary debtor shall not entitle him to reimbursement from his co-debtors if
such payment is made after the obligation has prescribed or become illegal.

Examples:

1. A and B are solidarily indebted to C in the amount of P1,000. The debt prescribed.

If A, nevertheless, paid the debt, he cannot collect from B the share corresponding to the latter.
Neither can A recover from C.

2. A and B are solidarily bound to deliver 10 carabaos to C for slaughter purposes. Later, the
lawmaking body passed law which prohibits the slaughter of carabaos.
 If, nevertheless, A delivered the carabaos knowing that the slaughter of carabaos is already
prohibited by law, he cannot get any reimbursement from B because payment was made after the
obligation has become illegal.

RULES IN CASE THING HAS BEEN LOST OR PRESTATION HAS BECOME IMPOSSIBLE (Art.
1221)

A, B C and D are solidary liable to X for the delivery of a specific ring valued at P20,000.00.
What is the rule if the ring is lost:

1. Through a fortuitous event

Answer: the obligation shall be extinguished. This is in accordance with the rule that no person
shall be responsible for a fortuitous event.

2. Through the fault of D

Answer: The solidary debtors shall be liable for the payment of the price of the ring plus
damages and interest. However, the solidary debtors making the payment can recover what he has
paid from the guilty debtor. Thus, if X goes after A and A pays the price of the ring, and the
damages and interest, A can demand reimbursement of P20,000.00 plus damages and interest from
D the guilty or negligent debtor.

EXISTENCE OF SOLIDARITY DESPITE DIFFERENT PERIODS AND CONDITIONS (Art. 1211)

Solidarity exists although the creditors and the debtors may not be bound by the same
periods and conditions.

Example: A, B and C are solidarily liable to X for P9,000.00, The parties stipulated that the
share of A is payable on demand, the share of B on the Christmas day next year, and the share C, if
X passes the Bar Examination.

X may demand payment of the share of A of P3,000.00 anytime from either A, B or C. On

Christmas day next year, X may demand payment of the share of B of P3,000.00 from either A, B or
C, when X passes the Bar Examination, he may demand payment of the share of C of P3,000.00
from either A, B or C.

EFFECT OF UNAUTHORIZED ASSIGNMENT OF CREDITOR’S RIGHT (Art. 1213)

The solidary creditors are bound by mutual trust and confidence. Hence, a solidary creditor cannot
assign his right to a third person without the consent of the other solidary creditors because the
assignee may not enjoy the trust and confidence of the non-assigning creditors.

If the assignment is without the consent of the co-creditors, the assignment is not valid as to them.
Accordingly, they can recover their respective shares from the assigning creditor in case the
assignee who collected the debt fails to give them their shares.

DEFENSE AVAILABLE TO SOLIDARY DEBTORS (Art. 1222)

1. Those derived from the nature of the obligation (such as prescription of the obligation,
illegality of cause)
Example: A and B are solidarily liable to C in the amount of P4,000. The entire debt of A and B was
paid by D. In an action by C against A, the latter can raise the defense of payment by virtue of
which the obligation was extinguished.

2. Those personal to the debtors being sued, or those that pertain to his own share (such as
incapacity of the debtor or non-fulfillment of a suspensive condition as to his share)

Example: If the action by C is against B, and B was insane at the time the obligation was
contracted, B can put up the defense of insanity with respect to the entire obligation. This defense
is personal to B alone. It is complete defense. Other examples are incapacity, mistake, violence,
minority, etc.

Assume now that the potion of the obligation affecting B is subject to a suspensive condition which
has not yet happened. In this case, the non-fulfillment of the condition is a partial defense as it
can be set up by B only with respect to his share. C can demand from B the portion of the
obligation pertaining to A because B is solidarily liable.

3. Those personal to the other debtors with respect to their own share (such as incapacity of
another debtor or non-fulfillment of a suspensive condition with respect to the other debtors’
shares)

Example: in the two preceding examples, the defense of insanity or non-fulfillment of the
suspensive condition is not available to A as to release hm from his liability for his share in the
obligation. In other words, A may avail himself thereof only as regards that part of the debt for
which B is liable. Hence, having only a partial defense, A is still liable for P2,000, his share in the
obligation.

JOINT INDIVISIBLE OBLIGATION, CONCEPT AND CHARACTERISTICS (Art. 1209)

A joint invisible obligation is an obligation where the debtors and creditors are jointly bound but the
prestation or object is invisible. It has the following characteristics:

1. The creditors must act collectively, meaning, all of them must take the demand unless one is
specifically authorized to act for the others. A demand made by one or some but not all the
creditors will not be effective;
2. The demand must be made against all the debtors since compliance is possible only if they
act together;
3. The right of the creditors may be prejudiced only by their collective acts. Thus, a
renunciation made by a joint creditor extinguishing only his own share. The obligation,
however, is converted into an obligation to pay the value of the thing. If all joint creditors
make the renunciation, the obligation is extinguished;
4. If one of the debtors does not comply with his undertaking, the obligation is converted into a
monetary obligation to pay damages. The debtors who may have been ready to comply shall
not contribute to the indemnity beyond the corresponding price of the thing or the value of
the service in which the obligation consists; and
5. If one of the debtors is insolvent, the other shall not be liable for his share.

Illustration:

A, B and C are jointly indebted to deliver a specific car valued at P900,000.00 to X, Y and Z.
 1. X, Y and Z must make a demand against A, B and C for the delivery of the car.
2. If A is not ready to comply his undertaking, the obligation to deliver the car is converted to an
obligation to pay its value (monetary obligation) plus damages. B and C shall be obliged to
pay P300,000.00 each. A, defaulting debtor, shall be liable for P300,000.00 plus damages.
3. If A is insolvent, B and C shall be liable only for their respective shares of P300,000.00 each.
4. If X renounces his right to the obligation without the consent of Y and Z, then only his
proportionate share is extinguished. The obligation, however, is converted into an obligation
to pay P600,0000.00 which must be given to Y at P300,000.00 and Z at P300,000.00by A, B
and C who will give P200,000.00 each.

INDIVISIBILITY AND SOLIDARITY, CONCEPT AND DISTINCTIONS (Art. 1210)

The indivisibility of an obligation refers to the subject matter or object being susceptible of
partial performance, solidarity, on the other hand, refers to tie between parties. One therefore does
not imply, or give rise, to the other. Thus, there may be the following obligations:

1. Joint divisible obligation

Example: A and B are jointly obliged to give P10,000 to C.

2. Joint indivisible obligation

Example: A and B are jointly obliged to give a specific horse to C.

3. Solidary divisible obligation

Example: A and B are solidarily liable to pay C P10,000.00 in two equal installments.

4. Solidary indivisible obligation

Example: A and B are solidarily liable to give a specific horse to C.
MODULE VII: DIVISIBLE AND INDIVISIBLE OBLIGATIONS (Arts. 1223 – 1225)

DIVISIBLE OBLIGATION

A divisible obligation is one capable of partial performance (such as the obligation to deliver 10
sacks of rice). The following obligations are deemed divisible:

1. When the obligation has for its object the execution of a certain number of days of work such
as an obligation to work for 1 week.
2. When the obligation has for its object the accomplishment of work by metrical units such as
the obligation to construct a pavement which is 10 meters long and 2 meters wide.
3. Analogous things which by their nature are susceptible of partial performance.

INDIVISIBLE OBLIGATION

An indivisible obligation is one not capable of partial performance (such as the obligation to
deliver a specific car). The following obligations are deemed indivisible:

1. Obligations to give definite things such as the obligation to give a specific horse.
2. Those not susceptible of partial performance such as the obligation of a singer to sing one
song in a program.
3. Those where the object or service is physically divisible but it is indivisible by provision of law
such as where the obligation is to pay a sum of money but the law provides that the sum
must be paid in full as in the case of certain taxes.
4. Those where the object or service is physically divisible but it is indivisible to the intention of
the parties such as where the obligation is to pay a sum of money but the parties agreed that
the sum must be paid in fully.
MODULE VIII: OBLIGATION WITH A PENAL CLAUSE (Arts. 1226 – 1230)

OBLIGATION WITH A PENAL CLAUSE, CONCEPT

An obligation with a penal clause is one which provides for a greater liability on the part of
the debtor in case of non-compliance. The necessary undertaking on the part of the debtor is called
the penal clause. The penal clause is generally undertaken to ensure performance and works as
either or both punishment and reparation.

Example: D is obliged to construct a commercial building for C within a period of three months.
The parties agreed that should D fail to finish the construction of the building within the said period
, D shall pay C P1,000 for every day of delay as penalty.

FUNCTION OF PENAL CLAUSE

1. To insure performance of the obligation;

2. To substitute a penalty for the indemnity for damages and the payment of interests in
case of non-compliance (reparation); or to punish the debtor for the non-fulfillment or
violation of his obligation.

PROOF NOT REQUIRED FOR ACTUAL DAMAGES SUFFERED IF THERE IS A PENALTY

Proof of actual damages suffered by the creditor is not necessary in order that the penalty may be
demanded. The obligor is bound to pay the stipulated indemnity without the necessary of proof of
the existence and the measure of damages caused by the breach.

RULE IN CASE OBLIGATION HAS A PENAL CLAUSE

General rule: The penalty takes the place of the damages and interest in case of non-compliance.

Exceptions: Aside from the penalty, damages and interest may also be demanded in the following
cases:

1. When there is a stipulation to that effect

A stipulation for the payment of interest and penalty apart from interest in case of delay is not
contrary to law, morals, good customs or public policy. For as long as the amount stipulated are not
exorbitant, not unconscionable or contrary to morals and public policy, the courts will sustain the
amounts agreed upon because obligation arising from contracts have the force of law between the
parties and should be complied with in good faith.

2. When the debtor refuses to pay the penalty;

3. When the debtor is guilty of fraud in the performance of the obligation. This is so because
there can be no waiver of an actions for future fraud.

PENALTY NOT SUBSTITUTE FOR PERFORMANCE (Art. 1227)

Illustration: D is obliged to deliver 10 sacks of rice to C on May 10. The parties agreed that if D
fails to deliver on due date, he will pay a penalty of P500.00.

1. Supposing that D failed to deliver on due date, may he just pay the penalty of P500.00?
Answer: No, because the debtor cannot exempt himself from the performance of the obligation by
just paying the penalty, except when this right has been expressly reserved for him (Art. 1227).

2. May C demand the delivery of 10 sacks of rice and the payment of the penalty at the same
time upon default of D?

Answer: No, the creditor cannot demand the fulfillment of the obligation and the payment of the
penalty at the same time except when this right has been clearly granted to him, or if after requiring
fulfillment of the obligation, the performance thereof becomes impossible without his fault, he may
also enforce the penalty (Art. 1227).

WHEN THE COURT MAY REDUCE THE PENALTY (Art. 1229)

1. When the obligation has been partly complied with by the debtor;
2. When the obligation has been irregularly complied by the debtor; or,
3. When the penalty is iniquitous or unconscionable even if there has been no performance (Art.
1229).

EFFECT OF NULLITY OF PRINCIPAL OBLIGATION

1. The nullity of the principal obligation carries with it the nullity of the penal clause. This is so
because the penal clause, being just an accessory undertaking, cannot stand by itself.

Example: S agreed to deliver to B two grams of prohibited drugs. The contract carries a penal
clause to the effect that in case of non-compliance with the obligation, S would pay a penalty of
P10,000. Here, the nullity of the principal obligation carries with it that of the penal clause
although it is itself valid.

2. The nullity of the penal clause does not carry with it that of the principal obligation. This is
so because the principal obligation can stand by itself.

Example: S agreed to sell merchandise to B. It is provided in their agreement that in case of

default, S will deliver a prohibited drug as penalty. Here, the obligation to sell merchandise is valid
but the penalty to deliver the prohibited drug is void. For failure of S to comply with his obligation,
B may recover damages (instead of the penalty as the latter is void).