UP 2008 Civil Law (Obligations and Contracs)
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OBLIGATIONS & CONTRACTS CIVIL LAW
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Obligations and Contracts
TABLE OF CONTENTS
Title 1.Obligations 121
I. General Provisions 121
II. Effect of Obligations 122
III. Different Kinds of Obligations 128
IV. Extinguishment of Obligations 141
Title 2.Contracts 148
I. General Provisions 148
II. Essential Requisites of a Contract 149
III. Form of Contracts 155
IV. Reformation of Instruments 157
V. Interpretation of Contracts 158
VI. Rescissible Contracts 159
VII. Voidable Contracts 161VIII. Unenforceable Contracts 162
IX. Void or Inexistent Contracts 163
Title 3.Natural Obligations 166
Title 4.Estoppel 166
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TITLE I: OBLIGATIONS
Chapter I: General Provisions
I. Concept
Definition
Art. 1156, NCCAn obligation is a juridical necessity to give, todo or not to do.
The legal relation established between one
party and another, whereby the latter isbound to the fulfillment of a prestation whichthe former may demand of him. (Manresa)
ElementsActive subject (obligee/ creditor)
- the one in whose favor the obligation is
constituted- the person who is entitled to demand
Passive subject (obligor / debtor)- the one bound to the fulfillment- the person who has the duty of giving,
doing or not doing
Prestation(object)- the conduct which has to be observed by
the debtor/obligor- duties of the obligor
Requisites:
1. it must be Licit2. it must be Possible, physically and
judicially3. it must be Determinate or
determinable; and4. it must have aPossible equivalent in
money
Vinculum juris(efficient cause; juridical or legal tie) that which binds or connects the parties to
the obligation. This can be easily known
by knowing the sources of obligations. (deLeon
Distinction between natural and civilobligations
Civil
Obligations(Art. 1156)
Natural Obligations
(Art. 1423)
Based on
positive law
Based on equity and
natural law
Give a right of
action to
compel theirperformance
Do not grant a right
of action to enforce
their performance;but after voluntaryfulfillment by the
obligor, they
authorize theretention of what
has been delivered
or rendered byreason thereof
II. Sources (Art. 1157)
Law
ContractsQuasi-contracts
Delicts
Quasi-delicts
LAW
General RuleObligations derived from law are not
presumed; only those expressly determined in
this Code or in special laws are demandable,and shall be regulated by the precepts of the
law which establishes them; and as to whathas not been foreseen, by the provisions of
this Book. (Article 1158)
*Those imposed by the law itself.
CONTRACTS
DefinitionA contract is a meeting of minds between two
persons whereby one binds himself, withrespect to the other, to give something or to
render some service (1305)
General Rule
The contracting parties may establishsuch stipulations, clauses, terms and
conditions as they may deem convenient,provided they are not contrary to Law,
Morals, Good customs, Public order andPublic policy (1306)
Contracts as force of law betweenparties obligations arising from contracts have the
force of law between the contracting
parties and should be complied with ingood faith (1159)
QUASI-CONTRACTS(LoVe yoU)
Definition
It is the juridical relation resulting from lawful,voluntary, and unilateral acts by virtue of
which the parties become bound to each other
to the end that no one shall be unjustlyenriched or benefited at the expense ofanother (2142)
Lawful Distinguishing it from
crimesVoluntary Differentiating it from
quasi-delict, which arebased on fault and
negligence
Unilateral Distinguishing it fromcontract which is basedon agreement
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Obligations derived from quasi-contracts shallbe subject to the provisions of Chapter 1, Title
XVII of this Book (1160)
Kinds of quasi-contracts
1. Negotiorum gestio (unauthorizedmanagement)
2. Solutio Indebiti (undue payment)
1. Negotiorum Gestio
This takes place when a person voluntarilytakes charge of anothers abandonedbusiness or property without the owners
authority (Article 2144)
This juridical relation does not arise in
either of these instances:
a. When the property or business
is not neglected or abandonedb. If in fact the manager has been
tacitly authorized by the owner
2. Solutio IndebitiThis takes place when something is
received when there is no right to demandit, and it was unduly delivered thru
mistake (2154)
DELICTS (Obligations Ex Delicto)
Governing RulesPertinent provisions of the RPC and other
penal laws subject to Art 2177 Civil Code
Art. 100, RPCEvery person criminally liable for a felony is
also civilly liable
Chapter 2, Preliminary title, on Human
Relations (Civil Code)
Title 18 of Book IV of the Civil Code - on
damages
What civil liability arising from a crimeincludesRestitution
Reparation of damage causedIndemnity for consequential damages
QUASI-DELICTS
DefinitionAn act or omission with fault or negligence
causing damage to another; not a crime nor
contract
Article 2176, New Civil Code
Whoever by act or omission causes damage toanother, there being fault or negligence, isobliged to pay for the damage done. Such
fault or negligence, if there is no pre-existingcontractual relation between the parties, is
called a quasi-delict and is governed by the
provisions of this Chapter.
Governing Rules Obligations derived from quasi-delicts shall
be governed by the provisions of Chapter2, Title XVII of this Book, and by special
laws (1162)
Title XVIII on damages Articles 19-36 on human relations
Chapter II: Effect of Obligations
I. KINDS OF PRESTATION
1. Obligation toGive2. Obligation toDo
3. ObligationNot to do
OBLIGATION TO GIVE:
Specific/
determinatething
Generic thing (1246)
It is identified byits individuality;
hence, it cannotbe substituted
with another
although theintendedsubstitute is of
the same kind
and quality.
It is identified onlyby its specie. The
debtor can giveanything of the same
class as long as it is
of the same kind.
Creditor cannot
demand a thing of
superior quality;neither can the
debtor deliver a
thing of inferiorquality.
*Limited Generic thing when the generic
objects are confined to a particular class, e.g.,an obligation to deliver one of my horses
(Tolentino)
Specific/ Determinate Thing
Duties of the obligor:
1. To preserve or take care of the thing due
(1163)*Standard of care:
that of a good father of a familyunless the law or stipulation requires
another standard of care
2. To deliver the thing itself (1244)
3. To deliver the fruits of the thing (Art.
1164, par. 1)*When does the right to the fruits begin to
exist?From the time the duty to deliver arises:
when there is no term/condition
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from the perfection of thecontract
when there is a term/condition
from the moment the term orcondition arises
4. To deliver the accessions and accessories
of the thing (Art. 1166)*Accessories- those joined to or included with
the principal for the latters better use,
perfection or enjoyment
*Accessions additions to or improvements
upon a thing
5. To pay for damages in case of breach
(1170)
Generic Thing
Duties of the obligor:
1. To deliver a thing which is of the quality
intended by the parties taking intoconsideration the purpose of the obligation
and other circumstances (1246)
2. To be liable for damages in casa of fraud,
negligence, or delay, in the performanceof his obligation, or contravention of thetenor itself (1170)
Personal Right Real RightBefore delivery After delivery
Jus ad rem/ jus inpersonam aright enforceable
only against a
definite passivesubject, thedebtor
jus in re a rightenforceableagainst the world.
Right pertaining to
the person todemand from
another, as adefinite passivesubject, the
fulfillment of aprestation to give,
to do or not to do
Right pertaining to
a person over aspecific thing,
without a passivesubject individuallydetermined against
whom such rightmay be personally
enforced
Rights of a Creditor
Specific Generic
To compel
specificperformance
To ask for
performance of theobligation
To recoverdamages in case
of breach of theobligation,
exclusive or inaddition to
specific
performance
To ask that theobligation be
complied with atthe expense of the
debtor
Entitlement to To recover
fruits, interests
from the time theobligation todeliver arises.
damages in case of
breach ofobligation
OBLIGATION TO DO:
To do it (1167)
To shoulder the cost if someone else does
it (1167) To undo what has been poorly done
(1167)
To pay damages (1170-1172, 2201-2202)
If a person obliged to do something fails to do
it, the same shall be executed at his cost.
This same rule shall be observed if he does itis in contravention of the obligation.
Furthermore, it may be decreed that what hasbeen poorly done be undone. (1167)
*The creditor may demand that the obligation
be performed by the debtor himself or by athird person at the expense of the debtor.However, in cases where the personal
qualifications of the debtor are taken intoaccount, the only remedy of the creditor is anaction for damages. In the Balane notes,there is no action for compliance for an
obligation to do because such would beinvoluntary servitude which is prohibited by
the constitution.
OBLIGATION NOT TO DO:
Not to do what should not be done To shoulder the cost to undo what should
not have been done (1168)
To pay damages (1170, 2201-2202)
*If undoing is not possible, either physicallyor legally, or because of rights acquired by
third persons who acted in good faith, or forsome other reason, his remedy is an actionfor damages caused by the debtors violation
of his obligation. (Manresa)
II. BREACH OF OBLIGATION
Voluntary- the debtor, in the performance ofthe obligation is guilty of fraud, negligence,delay or contravention of the tenor of the
obligation
Involuntary debtor is unable to comply
with his obligation because of a fortuitousevent
A. MODES OF BREACH (1170)
1. Fraud2. Negligence
3. Delay
4. Contravention the tenor thereof
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FRAUD
It is the deliberate or intentional evasion of
the normal fulfillment of an obligation.(Manresa)
It implies some kind of malice or dishonesty
and it cannot cover cases of mistake anderrors in judgment made in good faith. It is
synonymous to bad faith. (Oleary v.
Macondray & Co., Inc., G.R. No. 21383,March 25, 1924)
*Responsibility arising from fraud is
demandable in all obligations (fraud in theperformance)
*Waiver of action for future fraud is void forbeing contrary to law and public policy (Art.
1171) because the advance renunciation ofthe creditor would practically leave the
obligation without effect.
*Past fraud can be renounced. The fraudreferred to is fraud in Article 1170, which is
the malice or bad faith in the performance ofthe obligation.
Kinds of Fraud
Fraud in thePerformance
(Art. 1170)
Fraud in the Execution
CausalFraud
(dolocausante)(Art. 1338)
IncidentalFraud (dolo
incidente)(Art. 1344)
Presentduring the
performanceof a pre-
existing
obligation
Presentduring the
perfectionof a
contract
Presentduring the
perfectionof a
contract
Purpose is
to evade thenormalfulfillment
of theobligation
Purpose is
to securetheconsent of
another toenter intothecontract
Purpose is
to securethe consentof the other
party butthe fraudwas not theprincipal
inducementin makingthe contract
Results inthe breach
of an
obligation
Results invitiation of
consent;
voidablecontract
Does notresult in the
vitiation of
consent
Gives rise toa right in
favor of thecreditor torecover
damages
Gives riseto a right
of aninnocentparty to
annul the
contract
Gives riseto a right of
an innocentparty toclaim for
damages
NEGLIGENCE (fault or culpa)
It is the absence of due diligence.
It is any voluntary act or omission, there
being no malice, which prevents the normalfulfillment of an obligation. (1173, 1174)
Distinction between fraud and negligence
Fraud Negligence
There is
deliberateintention tocause
damage.
There is no deliberate
intention to causedamage.
Liabilitycannot bemitigated.
Liability may bemitigated.
Waiver forfuture fraud is
void.
Waiver for futurenegligence may be
allowed in certain
cases:a) gross can never
be excused inadvance; against
public policyb) simple may be
excused in certain
cases
Diligence Required
1. That agreed upon by the parties2. In the absence of stipulation, that required
by law in the particular case
3. If both the contract and law are silent,diligence of a good father of a family
*Deligence of a Good Father of a Family:
That reasonable diligence which anordinary prudent person would have hadunder the same circumstances.
Test of Negligence
Did the defendant in doing the alleged
negligent act use the reasonable care andcaution which an ordinary and prudent personwould have used in the same situation? If
not, then he is guilty of negligence.
(Mandarin Villa, Inc. v. CA, 257 SCRA538, 1996)
The rule for measuring degree of care andvigilance is dependent upon the circumstancesin which a person finds himself situated.
(Cusi v. Phil. National Railways, 90 SCRA357, 1979)
Kinds of Culpa
1. Culpa Aquiliana (quasi-delict) wrong ornegligence committed independent of
contract and without criminal intent
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2. Culpa Contractual wrong or negligencein the performance of an obligation
3. Culpa Criminal wrong or negligence inthe commission of a crime
DELAY(mora)
It is the non-fulfillment of an obligation with
respect to time.
1st GENERAL RULE: Delay occurs from thetime of creditors judicial or extrajudicial
demand
Exception: Demand is not necessary to
incur in delay when:
obligation or law expressly declares time is a controlling motive
demand would be useless
2nd GENERAL RULE: In reciprocal obligations,delay happens from the moment one party
fulfills his undertaking. (1169) If neither partyperforms his undertaking, neither incurs delay
Kinds of delay
1. Mora solvendi2. Mora accipiendi3. Compensatio morae the delay of the
obligors in reciprocal obligations
1. Mora Solvendi
There is a delay on the part of the debtor tofulfill his obligation (to give or to do)
a) Mora Solvendi Ex re default in real
obligationsb) Mora Solvendi Ex persona default in
personal obligations
Requisites:
The obligation must be liquidated, due anddemandable.
The debtor is guilty of non-performance. There was demand made judicially or
extra-judicially.
Effects when these elements are present:The creditor may ask for damages/ the debtor
is liable for damages
The debtor is liable even if the loss is due tofortuitous events.
The debtor shall bear the risk of loss.
Instance when there is no default or morasolvendi:
a) In negative obligations, because one can
never be late in not doing or not givingsomething
b) In natural obligations, because the
performance is optional or voluntary onthe part of the debtor.
2. Mora Accipiendi
There is a delay on the part of the creditor to
accept the performance of the obligation
Requisites:1. Offer of performance by the debtor who
has the required capacity.2. Offer must be to comply with the
prestation as it should be performed.
3. Creditor refuses the performance withoutjust cause.
Effects when these elements are present:
1. The responsibility of debtor is reduced tofraud and gross negligence.
2. The debtor is exempted from risk of loss
of thing or the creditor bears risk of loss.3. The expenses incurred by the debtor for
the preservation of the thing after themora shall be chargeable to the creditor.
4. If the obligation bears interest, the debtordoes not have to pay from time of delay.
5. The creditor is liable for damages.6. The debtor may relieve himself of
obligation by consigning the thing.
3. Compensatio Morae
It is the delay of the parties or the obligors inreciprocal obligations. The effect is that it is as
if there is no default.
Rules on Mora, Delay or Default
Unilateral
Obligations
Reciprocal
Obligations
General Rule:No demand nodelay. The mere
expiration of the
period fixed by theparties is notenough in order
that the debtormay incur in delay.
One party incurs indelay from the
moment the other
party fulfills hisobligation, whilehe himself does
not comply or isnot ready tocomply in a proper
manner with what
is incumbent uponhim. The generalrule is that
fulfillment by both
parties should besimultaneous.
Exception:
when theobligation or law
expresslydeclares
when time is of theessence in thecontract
when the demandwould be useless
when the debtoracknowledged
When differentdates for the
performance ofobligation is fixed
by the parties.
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that he is in
default
It is not enoughthat there is aspecific date of
performance, thewords withoutthe need of
demand should
appear in the faceof the instrument.
The demand is stillnecessaryonlywhenthe
respectiveobligations are tobe performed on
separate dates.
If neither partycomplies with the
prestation, thedefault on onecompensates the
default of another.
*Delay in payment of money is indemnifiedthrough interest unless a gratuitous mutuum
or simple loan. If no stipulated interest,default interest is (6%) six percent. (2209)
*If obligation consists in payment of a sum of
money, and debtor incurs in delay, the
indemnity for damages, there being nostipulation to the contrary, shall be the
payment of the interest agreed upon, and in
the absence of stipulation, the legal interest,which is six percent per annum. (2209)
*When there is delay, the injured party may
ask for damages. But this benefit arising from
Mora, default or delay may cease upon:- Renunciation of the creditor- Prescription of action- Extension of time for the fulfillment of
the obligation
Bragaza v. CAA contract was entered into for delivery ofmaterials on Dec. 22, 1990 in time for the
aggrieved partys wife who expressly wishedthat she be buried before Christmas day, andwhere, despite knowing this timetable and
having been paid for the materials, thesupplier failed to make the delivery despitepleas and earnest follow-ups by the widower.Supreme Court ruled that time was of the
essence of such contract and the suppliershould be liable for the delay and breach.
N.B. Example of incurring delay without
judicial or extrajudicial demand. (#2)Time isof the essence. Contract was entered into inview of burial before Christmas.
Agcaoili v. GSIS
The parties entered into a contract of sale of agovernment housing unit on the condition that
Agcaoili should occupy the same within threedays from the receipt of notice. Failure toimmediately occupy contractually allowed
GSIS to terminate the contract. Agcaoli uponreceipt of notice, immediately went to theplace and found a house in a state of incompleteness that civilized occupation was
not possible. He made the first monthlyinstallment but refused to make further
payments until and unless GSIS completed
the housing unit. GSIS cancelled the awardand required Agcaoili to vacate the premises.
Held: GSIS had no right to rescind sale. In
reciprocal obligations, neither party incurs indelay if the other does not comply or is not
ready to comply in a proper manner with what
is incumbent upon him. (1169, par. 6)
CONTRAVENTION TO THE TENOR OF THE
OBLIGATION
This is the violation of the terms and
conditions stipulated in the obligation. Andsuch contravention must not be due to a
fortuitous event or force majeure.
In general, every debtor who fails in theperformance of his obligation is bound to
indemnify for the losses and damages causedthereby.
The phrase in any manner contravenes the
tenor means any illicit act, which impairs the
strict and faithful fulfillment of the obligation,or every kind of defective performance.
It is therefore immaterial whether or not the
actor is in bad faith or negligent, what isrequired is that it is his fault or the act done
contravenes their agreement.
B. FORTUITOUS EVENTS
DEFINITION
Events which could not be foreseen, or which
though foreseen are inevitable. (Article 1174)
Act of God
An act of God is defined as an accident, due
directly and exclusively to natural causeswithout human intervention, which by noamount of foresight, pains or care, reasonably
to have been expected, could have beenprevented.(Nakpil v. CA)
Act of Man
In contrast, force majeure is a superior orirresistible force, which is essentially an act of
man, such as wars, strikes, riots, acts of
robbers, pirates, and brigands.
*In our law, acts of man and acts of God are
identical in so far as they exempt an obligorfrom liability because the events happenedindependent of the will of the obligor.
(Republic v. Stevedoring Corp., 21 SCRA279, 1967 and UST v. Descals, 38 Phil.287, 1918)
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Kinds of Fortuitous Events
1. Ordinary those which are common and
which the contracting parties could easilyforesee.
2. Extraordinary those which are
uncommon and which the contractingparties could not have reasonably
foreseen. (see 1680)
General Rule
Except in cases expressly specified by law, or
when it is otherwise declared by stipulation, orwhen the nature of the obligations requires
assumption of risk, no person shall be
responsible for those events which, could notbe foreseen, or which though foreseeable, are
inevitable.
*When a debtor is unable to fulfill hisobligation because of fortuitous events or
force majeure, his obligation to comply isextinguished subject to the following
exceptions:
cases expressly specified by law (i.e.,
552(2), 1165, 1268, 1942, 2147,2148, 2159)
declared by stipulation
nature of the obligation requires the
assumption of risk (1174) when the obligor is in default or has
promised to deliver the same thing to
two or more persons who do not havethe same interests. (1165(3))
Requisites for exemption
1. cause of event or debtors failure
independent of human will
2. impossible to foresee or avoid3. impossible for debtor to fulfill his
obligation in a normal manner4. debtor free from participation in the
aggravation of the injury to the creditor(Nakpil v. CA andLasam v. Smith)
*It must be the ONLY and SOLE cause, notmerely a proximate cause.
Effect of Concurrent Fault
One who negligently creates a dangeroussituation cannot escape liability for the natural
and probable consequences thereof although
an act of God intervened to precipitate theloss. There must be no fraud, negligence,
delay or violation or contravention in any
manner of the tenor of the obligation. (Nakpilv. CA)
When the effect is found to be in part theresult of the participation of man, whetherdue to his active intervention or neglect or
failure to act, the whole occurrence is thenhumanized and removed from the rules
applicable to the acts of God. (NAPOCOR v.
CA, 211 SCRA 162, 1992)
Herbosa v. CA374 SCRA 578 (2002)
PVE, a subsidiary of SD, Inc., was not able tocover the wedding celebration of EH and RH
allegedly due to the gross negligence of the
crew and the lack of supervision from PVEsgeneral manager. Held: PVE or SD, Inc.cannot take refuge under Article 1280 of the
New Civil Code. The defense that they
exercised due care in the selection andsupervision of their employees can only be
availed of when the liability arises from culpa
aquiliana and not from culpa contractual.
C. REMEDIES OF CREDITORS
GENERAL RULE
Rights acquired by virtue of an obligation aretransmissible in character.
Exception
a) when they are not transmissible by theirvery nature (Personal obligation)
b) when there is Stipulation of the parties
that they are not transmissible
c) when they are not transmissible byoperation ofLaw
Rights of Creditor against Debtor (E-PAA,electronic paa/foot or e-foot)
1. Exact fulfillment to demand fulfillment of
the obligation or specific performance either specific, substitute or equivalent
performance
2. Pursue the leviable to attach theproperties of the debtor, except those
exempt by law, from execution.3. Accion subrogatoria
4. Accion Pauliana
Accion Subrogatoria
Definition
Novation via change of creditor (1291, par.
3);
This involves the right of the creditor to
exercise all of the rights and bring all of the
actions which the debtor may have againstthird persons.
Requisites
1. Creditor must have the right of return
against debtor2. The debt is due and demandable
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3. There is a failure of the debtor to collecthis own debt from 3rd persons either
through malice or negligence
4. The debtor's assets are insufficient5. The right of account is not purely personal
Accion Pauliana
Definition
Rescission, which involves the right of thecreditor to attack or impugn by means of arescissory action any act of the debtor which
is in fraud and to the prejudice of his rights as
creditor.
Requisites
1. There is a credit in favor of plaintiff
2. The debtor has performed an actsubsequent to the contract, giving
advantage to other persons3. The creditor has no other legal remedy
4. The debtor's acts are fraudulent5. The creditor is prejudiced by the debtor's
act which are in favor of 3rd parties andrescission will benefit the creditor
Chapter III: Different Kinds
of Obligations
PRIMARY CLASSIFICATION(PaPA, JustDont Preach)
1. Pure and conditional obligations (1179-1192)
2. Obligations with aPeriod (1193-1198)
3. Alternative obligations (1199-1206)
4. Joint and solidary obligations (1207-1222)5. Divisible and indivisible obligations (1223-
1225)
6. Obligations with a Penal clause (1226-1230)
SECONDARY CLASSIFICATION
(U R D PoLiCe)
1. Unilateral and bilateral
2. Real and personal3. Determinate and indeterminate4. Positive and negative
5. Legal and conventional
6. Civil and natural
Classification according to SanchezRoman:
1. Juridical quality and efficaciousness
2. By parties or subject
3. By the object of the obligation orprestation
4. By their juridical perfection and
extinguishment
Juridical quality and efficaciousnessa. Civil obligations
b. Natural obligations
c. Mixed according to natural and civillaw
By the parties or subject
a. Unilateral or Bilateralb. Individual or Collective
c. Joint or Solidary
By the object of the obligation or prestationa. Specific or Generic
b. Positive or Negative
c. Real or Personald. Possible or Impossible
e. Divisible or Indivisible
f. Principal or Accessoryg. Simple or Compound
If compound:Conjunctive (demandable at the same
time)Distributive (alternative or facultative)
By their juridical perfection or fulfillment
a. Pure or Conditionalb. With a Period
I. PURE AND CONDITIONAL OBLIGATIONS
PURE OBLIGATION
The effectivity or extinguishment is not
subject to any condition and no specific dateis mentioned for its fulfillment and is,
therefore, immediately demandable. (1179,par. 1)
CONDITIONAL OBLIGATION
The consequences are subject in one way or
another to the fulfillment of a condition.
Condition
It is a future and uncertain event, upon thehappening of which, the effectivity orextinguishment of an obligation (or rights)
subject to it depends.
Term
A day certain is understood to be that whichmust necessarily come, although it may notbe known when.
*Difference between conditional and those
with a term: There is uncertainty or certaintyof day or time.
If the uncertainty consists in whether the daywill come or not, the obligation is conditional,
and it shall be regulated by the rules of the
preceding section. (1193)
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Pay v. Viuda de PalancaThe debtor issued a promissory note to the
creditor to pay a sum of money payable upon
receipt of a particular sum of money from theestate of a certain deceased person upon
demand. The case for collection on the notewas filed 15 years after its execution. The
Supreme Court ruled that, since theprescriptive period for filing the action was 10
years and considering that the promissory
notes payment constituted a pure obligationand therefore demandable at once, the actionto collect could no longer prosper. It was
deemed pure since satisfaction of credit could
be realized either through the debtor suedreceiving the cash payment from the estate of
the deceased or upon demand.
Classification of Conditions
1. As to effecta. Suspensive
b. Resolutory
2. As to forma. Express the condition is clearly
stated
b. Implied the condition is merelyinferred
3. As to possibility
a. Possibleb. Impossible
4. As to cause or origina. Potestativeb. Casual
c. Mixed
5. As to mode
a. Positive the condition consists in the
performance of an act (1184)b. Negative the condition consists in the
omission of an act
6. As to numbersa. Conjunctive there are several
conditions and all must be fulfilled
b. Disjunctive there are severalconditions and only one or some ofthem must be fulfilled
7. As to divisibilitya. Divisible the condition is susceptible
of partial performance
b. Indivisible the condition is not
susceptible of partial performance
Suspensive and Resolutory (1179)
SUSPENSIVE CONDITION(Condition precedent or condition antecedent)
It suspends the acquisition of rights until theconditions are fulfilled; that is, until the
happening of the uncertain event whichconstitutes the condition.
RESOLUTORY CONDITION(Condition subsequent)
It causes the extinguishment or loss of rights
already acquired upon the fulfillment of thecondition, that is, the happening of the event
which constitutes the condition. In other
words, the fulfillment of which will extinguishan obligation (or right) already existing.
Suspensive Resolutory
When it is fulfilled,
the obligation
arises.
The obligation is
extinguished.
When it takesplace,
the tie of law(juridical or legaltie) does notappear
The tie of law is
consolidated
Until it takes place,
the existence ofthe obligation is a
mere hope
Its effects flow,
but over it, hoversthe possibility of
termination
Effect:The acquisition of
rights
The loss(termination) of
rights alreadyacquired
(Manresa)
Potestative, Casual and Mixed (1182)
POTESTATIVE CONDITION
(facultative condition)
It is a condition which is suspensive in natureand which depends upon the sole will of one
of the contracting parties.
Suspensive
condition
Resolutory
condition
Depends upon thewill of the debtor
The condition andobligation are voidbecause the
validity and
compliance areleft to the will of
the debtor and it
cannot, therefore,be legallydemanded as it
will cause the
debtor not tofulfill the
condition toescape liability.
Except when the
obligation is a pre-
existing one;hence, only the
The condition andobligation are stillvalid because the
debtor is interested
in the fulfillment ofa condition which
causes the
extinguishment orloss of rightsalready acquired
by the creditor.
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condition is void.
Depends upon the
will of the creditorThe condition andobligation are
valid because thecreditor isinterested in the
fulfillment of the
obligation as itwill benefit him.
CASUAL CONDITION
The condition depends upon chance or the will
of a third person.
MIXED CONDITION
The condition depends partly on the will of aparty and partly on chance or the will of a 3rd
person.
The obligation is valid if the suspensivecondition depends partly upon chance and
partly upon the will of a third person. (Naga
Telephone, Co., Inc. v. CA, 230 SCRA 351,1994)
Possible and Impossible Conditions
(1183)
*Applies to suspensive conditions.
POSSIBLE CONDITIONS
The condition is capable of fulfillment, legallyand physically.
IMPOSSIBLE CONDITIONS
The condition is not capable of fulfillment,
legally or physically.
Two Kinds
1. Physically impossible conditions those, inthe nature of things, cannot exist orcannot be undone.
2. Legally impossible conditions those
which are contrary to law, morals, goodcustoms, public order and public policy.
General Rule
They shall annul the obligation which dependsupon them
Exceptions
1. pre-existing obligation2. divisible obligations3. simple or remuneratory donations4. testamentary dispositions
5. in case of conditions not to do animpossible thing
Effect
It renders the conditional obligation void sincethe obligor knows that his obligation cannot
be fulfilled; thus, showing that he has nointention to comply with his obligation.
Effects of Impossible and Illegal Conditions
If the condition is:
1. To do an impossible or illegal thing, the
condition and the obligation are void.2. Negative (not to do an illegal thing), the
condition and the obligation are valid.
3. Negative (not to do the impossible thing),disregard the condition, however, the
obligation remains.
Positive and Negative Conditions
POSITIVE CONDITION(suspensive)
The obligation is extinguished:
a) as soon as the time expires without theevent taking place
b) as soon as it has become indubitable that
the event will not take place although the
time specified has not yet expired (1184)
NEGATIVE CONDITION
(suspensive)
The obligation becomes effective:
a) from the moment the time indicated haselapsed without the event taking place; or
b) from the moment it has become evident
that the event cannot occur, although thetime indicated has not yet elapsed (1185)
Constructive Fulfillment (1186)
For Suspensive Conditions
Requisites
1. The condition is suspensive;
2. The obligor actually prevents the
fulfillment of the condition; and3. He acts voluntarily.
For Resolutory Condition
This also applies to a resolutory condition
when the debtor is bound to return what he
has received upon fulfillment of the condition.
Effects of Suspensive Conditions
1. Before the condition is fulfilled, thedemandability and acquisition or effectivity
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of the rights arising from the obligation issuspended.
2. After the condition has been fulfilled, the
obligation arises or becomes effective.3. The effects of a conditional obligation to
give, once the condition has been fulfilledshall retroact to the day the obligation was
constituted.
*The law allows retroactivity because the
condition is not an essential requisite of anobligation.
1. When the obligation imposes reciprocal
prestations upon the parties, the fruits andinterests shall be deemed to have been
mutually compensated (this assumes a
simultaneous performance of prestations).
*The fruits are mutually compensated forconvenience.
2. In a unilateral obligation, the debtor shall
appropriate the fruits and interestsreceived unless the intention constituting
such was different.3. In obligations to do or not to do, the court
shall determine the retroactive effect of
the condition that has been complied with.
Rights Pending Fulfillment of a Suspensive
Condition
Of the creditor Of the debtor
He may take orbring appropriateactions for the
preservation of hisright, as the debtormay render
nugatory the
obligation upon thehappening of thecondition.
He is entitled torecover what hehas paid by
mistake prior tothe happening ogthe suspensive
condition.
Loss, Deterioration or ImprovementPending the Happening of the Condition
(1189)
Requisites for 1189 to apply
6. The obligation is a real obligation;7. The object is a specific or determinate
thing;
8. The condition is subject to a suspensivecondition;
9. The condition is fulfilled; and10. There is loss, deterioration, or
improvement of the thing during thependency of the the condition.
LOSS
Kinds of loss
1. Physical loss (the thing perishes)2. Legal loss (the thing goes out of
commerce)
3. Civil loss (the thing disappears and theexistence is unknown or unrecoverable as
a matter of fact or of law)
Rules
1. When the thing is lost without the debtors
fault, the obligation is extinguished.2. When the thing is lost with the debtors
fault, the debtor pays for damages.
DETERIORATION
Rules
1. When the thing deteriorates without the
debtors fault, the creditor will suffer thedeterioration of impairment.
2. When the thing deteriorates with thedebtors fault, the creditor may choose
between:a. Rescission (cancellation) of the
obligation with indemnity for damages,or
b. Fulfillment of the obligation also with
damages
IMPROVEMENT
Rules
1. When the thing is improved by nature or
by time, the improvement shall inure tothe benefit of the creditor.
2. When the thing is improved at the expense
of the debtor, the debtor shall have no
other right than that granted to ausufructuary.
Effect of the Fulfillment of Resolutory
Conditions (1190)
1. Extinguishment of the obligation2. Mutual restitution (the parties restore to
each other what they have received
including the fruits and interest)3. Art. 1189 applies to whoever has the duty
to return in case of loss, deterioration or
improvement of the thing
4. If the obligation is to do or not to do, thecourts determine the retroactivity of thefulfillment of the condition as stated in
1187
Kinds of Obligation according to the
Person Obliged
UNILATERAL OBLIGATION
It is when only one party is obliged to complywith a prestation.
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BILATERAL OBLIGATION
It is when both parties are mutually bound to
each other making them both the debtors andcreditors of each other.
It may be:
reciprocal, or non-reciprocal
Reciprocal Obligations
Those which arise from the same cause and in
which each party is debtor and creditor of the
other.
Implied Condition
There must be compliance by the other with
the duties incumbent upon him as party to thedebt.
In reciprocal obligations, a party cannot
demand unless he complies or is ready tocomply with obligations (inferred from 1169).
*This is subject to same rules on interim
obligations and interim remedies.
Non-Reciprocal Obligations
Those which do not impose simultaneous and
correlative performance on both parties. Theperformance of one party does not depend
upon the simultaneous performance of
another.
Remedies in Reciprocal Obligations
RESCISSION IN ARTICLE 1191
The power to rescind means the right to
cancel or to resolve the contract in case ofnon-fulfillment of the obligation on the part of
one of the parties.
It is the breach of faith committed by theperson who is supposed to comply withobligation. It is not the rescission in 1380
which involves damage or lesion, or injury tothe economic interest of a person.
Characteristics
1. It only exists in reciprocal obligations.2. It can be demanded only if the plaintiff is
ready, willing and able to comply with his
own obligation and the other is not.(Seva v. Berwia, 48 Phil. 581)
General Rule
Judicial approval is necessary for rescission,
except:a. When the object is not yet delivered
b. When, even if there has been delivery, thecontract states that either party can
rescind the same or take possession of the
property upon non-fulfillment of theobligation by the other party.
By one party: (1191)
1. Implied in reciprocal obligations, when the
other does not comply
2. Power to rescind plus damages3. Compel fulfillment and then rescind if such
becomes impossible
4. The Court decrees rescission unless just
cause for authorizing a period5. Must be without prejudice to third persons
who have acquired the thing, in
accordance with articles 1385 and 1388and the Mortgage Law.
By both parties: (1192)
In case both parties have committed a breach
of the obligation, the liability of the firstinfractor shall be equitably tempered by the
courts. If it cannot be determined which ofthe parties first violated the contract, the
same shall be deemed extinguished, and each
shall bear his own damages.
1. Rule against the first infractor, as
tempered by courts
2. If first infractor cannot be determined,obligation extinguished
*Rescission should be done judicially unlessstipulated in the contract. Rescission will onlybe granted if breach of the obligation is
substantial and not mere occasional
malfunction of the machine without even anallegation of loss of income. (Philippine
Amusement Enterprises, Inc. v.
Natividad)
*Injured party has the power to rescindbut only through the courts in proper
proceedings.(Ocejo v. International BankingCorp.)
UP v. de los AngelesThe parties stipulated rescission of loggingagreements without the need for any judicial
pronouncement.
N.B. Judicial pronouncement of rescission wasunnecessary as it was clearly expressed in
their contract. No law prohibits parties from
entering agreements wherein violation of theterms of contract would cause cancellation
even without court intervention. Rescission on
account of infractions by the other party byone of the parties must be made known tothat other party who in turn can seek for
judicial remedy should he feel that rescissionis unjustified.
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Obligations Rendered Void By CertainConditions
Annulling conditions:
a. Potestative only if suspensive conditionis solely upon the will of the debtor (1182)
b. Impossible Conditions (1183)c. those contrary to law, good customs,
morals, public order or public policy
(1183)d. Not to do an impossible thing not agreed
upon (1183, par. 2)
Lao Lim v. CAThe stipulation that the lessee has the right to
renew contract of lease as long as he needs
the premises and he can pay for the same isinvalid. It would leave the lessee, Dy, the sole
power to determine whether the lease shouldcontinue or not. The lease contract is deemed
extinguished at the end of a year, subject torenewal by means of a new agreement but
since the lessor did not want to renew, thereis no more lease.
Romero v. CA
This case shows that one cannot rescind a
contract on account of ones own failure tofulfill an obligation.
Ducusin v. CA
Only that which is dependent on the sole willof the debtor is invalid. No one is supposed to
have sole power. In this case, since the
condition is dependent on the will of thirdpersons, the condition was held to be valid.
II. OBLIGATIONS WITH A TERM
Those whose consequences are subjected in
one way or another to the expiration of a
period or term. (Manresa, Lirag Textiles,Inc. v. CA, 63 SCRA 374, 1975)
PERIOD or TERM
It is a future and certain event upon the
arrival of which the obligation (or right)
subject to it either arises or is terminated.
*The demandability is suspended by the term,
not the acquisition of the right or theeffectivity of the obligation.
*Fortuitous events do interrupt the running of
the period.
Distinguishing a period from a condition
Period/ Term Condition
As to fulfillment
Certain event Uncertain event
As to timeRefers only to the
May also refer to apast event
future unknown to parties
As to influence onthe obligation Merely fixes
the time for theefficaciousnessof the
obligation.
If suspensive,it cannotprevent the
birth of theobligation indue time.
If resolutory, it
does not annul,even in fiction,the fact of its
existence.
It causes an
obligation to ariseor be terminated.
As to effect, whenleft to the debtorswill
Depends upon
the will of thedebtor
empowers the
court to fix itsduration
Depends upon thesole will of the
debtor, thus,
invalidates theobligation
As to retroactivityof effects
Unless
stipulated, thearrival of aperiod has no
retroactiveeffect.
The happening of
the condition hasretroactive effect.
Classifications of Term/ Period
1. According to effecta. suspensive period (ex die) obligation
becomes demandable only upon the
arrival of a certain day
b. resolutory period (in diem) obligationis valid up to a day certain and
terminated upon the arrival of period.
2. According to sourcea. legal period provided for by law
b. conventional/ voluntary period
agreed to by the partiesc. judicial period fixed by the court
3. According to definitenessa. definite period fixed or the coming of
which is known
b. indefinite period not fixed or thecoming of which is not known (usually,the law empowers the courts to fix the
period)
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1. When after contracting the obligation, thedebtor suffers from insolvency, unless he
gives guaranties or securities for the debt
2. When the debtor does not furnishpromised guaranties or securities he
promised3. When by his own act, the debtor has
impaired established guaranties orsecurities and when through a fortuitous
event they disappear, unless he gives new
ones equally satisfactory when the debtorviolates any undertaking in considerationof which the creditor agreed to the period
4. When the debtor attempts to abscond.
*IN ALL THE CASES ABOVE, DESPITE THE FACT
THAT THE PERIOD HAS NOT YET LAPSED, THEOBLIGATION SHALL BECOME IMMEDIATELY
PAYABLE OR DEMANDABLE.
*THE WORD INSOLVENT DOES NOT REQUIRE A
JUDICIAL DECREE OF INSOLVENCY. IT SHOULD BEUNDERSTOOD IN ITS ORDINARY MEANING WHICH
MAY EMBRACE DIFFERENT DEGREES OF FINANCIAL
EMBARRASSMENT. THE INSOLVENCY MUST HAVE
OCCURRED AFTER THE OBLIGATION WAS
CONSTITUTED.
Gaite v. FonacierPayment of obligation was secured by twosurety bonds: one from a mining company
and its stockholders and the other from a
bonding company. The obligor was obliged topay the indebtedness from the time it
received the proceeds of the sale of iron ore,
the Supreme Court ruled that the obligor inthis case lost its right to the period. Failure torenew an expired surety with the bonding
company constituted an impairment of the
securities or guaranties. Thus, Fonacier losthis right to the period, i.e. time to sell the iron
ore, unless he immediately gives new ones
equally satisfactory.
III. ALTERNATIVE OBLIGATIONS
Kinds of Obligation according to Object
1. Simple obligation one where there is
only one prestation2. Compound obligation one where there
are two or more prestations
a. Conjunctive obligation one wherethere are several prestations and all ofthem are due
b. Distributive obligation one where one
of two or more of the prestations is
due
*A distributive obligation may be alternative (1199), or facultative (1206)
ALTERNATIVE OBLIGATION
It is one wherein various prestations are due
but the performance of one of them issufficiently determined by the choice which,
as a general rule, belongs to the debtor.(Manresa)
FACULTATIVE OBLIGATION
It one where only one prestation has been
agreed upon but the obligor may renderanother in substitution.
Distinguising Alternative and Facultative
Obligations
Alternative Facultative
Number ofprestations
Severalprestations aredue but
compliance with
one is sufficient
Only one
prestation is duealthough thedebtor is allowed
to substitute
another
Right of choiceMay be given to
the creditor or to
a third person
The right to make
the substitution is
given only to thedebtor
Loss through afortuitous event
The loss of one or
more of thealternatives doesnot extinguish
the obligation
The loss of the
thing dueextinguishes theobligation.
Loss throughfault of debtora) Does not
render the debtor
liableb) Where thechoice belongs to
the creditor, the
loss of onealternative gives
rise to liability
a) The debtor is
liable
b) The loss of thesubstitute before
the substitution
does not renderthe debtor liable
Nullity ofprestationa) The nullity of
one prestation
does notinvalidate theothers
b) the debtor orcreditor should
choose fromamong theremainder
a) The nullity ofthe prestation
agreed upon
invalidates theobligationb) the debtor is not
bound to choosethe substitute
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Right of Choice
General Rule
The right of choice belongs to the debtor.
Except:
When expressly granted to the creditor, or
When expressly granted to a third person
*A right of choice becomes a simple obligationwhen a person who has a right of choice has
communicated his choice and that one choice
is the only practicable one (i.e., the othersmay have become illegal or impossible).
(1202)
Limitations on the Debtors Right of Choice
1. The debtor cannot choose those
prestations which are impossible, unlawfulor which could not have been the object of
the obligation. (1200)2. The debtor has no more right of choice
when among the prestations whereby he isalternatively bound, only one is
practicable.
3. The debtor cannot choose the part of oneprestation and part of another.
The Right of Choice belongs to the Debtor
As a general rule, in alternative obligations,
the right of choice belongs to the debtor.
However, the debtor may expressly give theright of choice to the creditor.
Rules in Alternative Obligations
Debtors
choice
Creditors
choice
Due to a Fortuitous Event
All Extinguish Extinguish
Some Deliver any ofthe remaining Deliver any ofthe remaining
One Deliver Deliver
Debtors Fault
All Value of thelast thing lost
and damages
Value of any ofthe things and
damages
Some Deliver any of
the remaining,
no damages
Value of the
thing lost,
damages orany of theremaining
One Deliver, no
damagesLoss of Last Thing
Extinguish Value of any of
the things lostdue to the
creditors fault
and damages
Rules in Facultative Obligations
BeforeSubstitution
After Substitution
Loss of the Principal
Fortuitous Event
The obligation isextinguished
The debtor is not
liable whatever maybe the cause
Fault of DebtorThe debtor is
liable for
damages
Loss of the Substitute
The debtor is not
liable whetherthe loss is due to
the fault of thedebtor or to a
fortuitous event.
Fortuitous Event
The obligation isextinguished
Fault of DebtorThe debtor is liable
for damages
IV. JOINT AND SOLIDARY OBLIGATIONS
JOINT OBLIGATIONS
Obligacion Mancomunada
It is an obligation where the whole liability isto be paid or fulfilled proportionately by the
different debtors; and/or is to be demandedproportionately by the different creditors.
SOLIDARY OBLIGATION
Obligacion Solidaria
It is an obligation where each one of the
debtors is bound to render, and/ or each oneof the creditors has a right to demandcompliance with the prestation. (1207)
*In a joint obligation, each debtor shallbe liable only for his part of the debtpresumed to be equal with the other debtors.
The above provision is consistent with the rulethat a joint obligation is presumed in case ofplurality of debtors or creditors for solidary
obligation exists only when the law soprovides, when expressly stipulated by theparties or when called for by the nature of theobligation. (Jurado) (see 1208)
General Rule
By default, collective obligations are presumed
to be joint if there is concurrence of two ormore debtors and/ or creditors.
Solidarity exists only
1. When Stipulated by the parties using such
words like jointly and severally, in
solidum, I promise to pay in a notesigned by two or more debtors, or similarwords.(conventional solidarity)
2. When solidary liability is provided by Law,hence, civil liability arising from crimes,
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negotiorum gestio, commodatum or quasi-delict shall be solidary. (legal solidarity)
3. When the Nature of the obligation requiressolidarity.
4. When a charge or condition is imposed
upon heirs or legatees, and the Testamentexpressly makes the charge or condition
in solidum.
5. When a solidary responsibility is imputedby a Final judgment upon several
defendants.
Some Features of Joint Liability
1. Insolvency of one debtor does not makethe others liable.
2. Vitiated consent on the part of one debtordoes not affect the others.
3. Demand made to one of the debtors is nota demand to all because the debt of one is
distinct from the others.
*In a given contract, wherein a partysigns as a surety but the agreement states
joint and several liabilities, there is a solidary
obligation. (Jaucian v. Querol)
Kinds of Solidarity (PAMela Anderson)
1. Passive Solidarity2. Active Solidarity
3. Mixed Solidarity solidarity among
creditors and debtors
Passive
Solidarity
Active
Solidarity
Solidarity
of debtors
Solidarity of
creditors
Any one ofthe debtors canbe made liable for
the fulfillment ofthe entireobligation, withthe consequent
right to demandfrom the otherstheir
corresponding
shares in theliability.
Any one of the creditors maydemand fulfillment
of the entireobligation.
It is in the
nature of a
mutual guaranty.
Its essential
feature is that of
mutual
representation.
Joint Indivisibility
A joint indivisible obligation is one inwhich the object or prestation is indivisible,
not susceptible of division; while the tie
between the parties is joint, that is, liable onlyto a proportionate share. (1209)
*In a joint indivisible obligation, theliabilities of the debtors or the rights of the
creditors are joint, but they are indivisible asto compliance. (1224) The concurrence of all
the creditors is necessary for demandingcompliance due to the indivisibility of the
obligation. The same is inversely true as
regards the debtors. The concurrence of allthe creditors is also necessary for acts whichare prejudicial. But an act beneficial to all like
interruption of prescription may be performed
by one of the creditors.
Indivisible obligations are not necessarily
solidary (1210)
Indivisibility Solidarity
Refers to theprestation
Refers to the legalor juridical tiebinding the parties
Only the debtor
who is guilty ofbreach of
obligation is
liable fordamages, therebyterminating the
agency.
All of the debtors
are liable for thebreach of
obligation
committed by anyone of the debtrs.
Can exist even ifthere is only one
debtor or onecreditor
Can only existwhen there is at
least two debtorsor creditors
The others are
not liable in caseof insolvency ofone debtor
The others are
proportionatelyliable in case of insolvency of one
debtor
Characteristics
1. Demand must be made to all the jointdebtors.2. The creditor must proceed against all the
joint debtors, because the compliance of
the obligation is possible only if all of the
joint debtors would act together.3. If one of the debtors is insolvent, the
other(s) shall not be liable for his share.
4. If one of the debtors cannot comply, theobligation is converted into monetaryconsideration. One who is ready and
willing to comply will pay his proportionate
share, and the other not willing shall pay
his share plus damages when his financialcondition improves.
5. If there is more than one creditor, deliverymust be made to all, unless one isauthorized to receive for the others.
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RULES1. GIVES RISE TO INDEMNITY FOR DAMAGES:
NON-COMPLIANCE WITH UNDERTAKING
(1224)2. DEBTORS READY TO FULFILL SHALL NOT BE
LIABLE(1224)
*AS ALREADY STATED, IN A JOINT INDIVISIBLEOBLIGATION, A SUIT FOR SPECIFIC PERFORMANCE
MUST BE DIRECTED AGAINST ALL THE DEBTORS
AND IF ANY ONE OF THEM IS NOT WILLING TO
FULFILL, THE ACTION SHALL BE CONVERTED INTOONE FOR DAMAGES WHERE THE DEBTORS SHALL BE
LIABLE FOR THEIR RESPECTIVE SHARES WHILE THE
UNWILLING DEBTOR SHALL PAY HIS SHARE PLUS
DAMAGES FOR HE ALONE SHALL BE LIABLE FOR
DAMAGES, THE OTHER DEBTORS BEING WILLINGTO DELIVER.
3. Prejudiced only by collective acts of ALLcreditors / enforced against ALL debtors
(1209)
*Article 1209 contemplates anobligation which is joint as to the parties but
indivisible as to compliance. The concurrenceof all the creditors is necessary for demanding
compliance due to the indivisibility of the
obligation. The same is inversely true asregards the debtors. The concurrence of allthe creditors is also necessary for acts which
are prejudicial. But an act beneficial to all like
interruption of prescription may be performedby one of the creditor.
Inchausti & Co. v. YuloSix brothers and sisters admitted solidaryliability. Gregorio Yulo was sued for
payment of entire indebtedness.
However, solidary debtors Francisco,Manuel and Carmen entered into a
compromise agreement with plaintiff.
Gregorio was ordered to pay the part ofthe reduced indebtedness, only insofar as
such is demandable. Greg Yulo wassolidarily liable, he benefited from the
remission, but not the extension of theperiod for payment, thus there waspartial demandability.
Debtor/ Passive Solidarity Distinguished
From Suretyship
By guaranty a person, called the guarantor,binds himself to the creditor to fulfill the
obligation of the principal debtor in case the
latter should fail to do so. A solidary guarantyis suretyship.
Suretyship
If a person binds himself solidarily with the
principal debtor, the provisions of Section 4,Chapter 3, Title I of this Book shall be
observed. In such case the contract is calleda suretyship. (2047)
Distinguishing Suretyship fromSolidarity
1. A surety does not have an actual loan of
his own, solidary debtor is also liable forhis own debt in addition to that of others.
2. After paying the debt, a surety has right to
collect from principal debtor, while asolidary debtor has right to collect fromsolidary co-debtor.
3. Most importantly, an extension of time
would benefit the surety and such wouldnot benefit solidary co-debtors who did not
know or consent to an extension of time.
(Villa v. Garcia Bosque) (Jurado)
Rights of solidary creditor/s
1. Do only what is useful to others, nothing
prejudicial to co-creditors. (1212)2. There is no assignment without the
consent of others (1213)
*The consent of the other co-solidary
creditors is necessary because they may nottrust the new creditor who would thereby beentitled to collect the entire debt. (Jurado)
3. Anyone has right to receive the payment;but the first one to demand receives the
payment. (1214)
*Payment made by the debtor to anyone of the solidary creditors extinguishes the
obligation. If one of the solidary creditors
demands payment of the debt, he has theright to do so and payment must be made to
him. (Jurado)
Quiombing v. CAOnly one of the solidary creditors filed
a suit for collection against the solidarydebtors. The debtors moved for the dismissalof the suit on the ground that the other
solidary creditors should have been includedin the case. The Supreme Court rejected thedismissal of the suit invoking Art. 1212 and
stated that recovery of the contract price was
surely a useful act and can be done even byone solidary creditor. Furthermore, thequestion as to who should sue was a personal
issue among the solidary creditors.
N.B. As to who sues for recovery of
the obligation should not matter to the
debtors as they are wholly obligated to eitherone of the solidary creditors.
4. Action against and payment by solidarydebtor.
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a. Proceed against anyone, some, or all ofthem simultaneously (1216)
b. Demand against one: not obstacle for
demand against another, unless paid(1216)
Effect of Loss or Impossibility
1. Without any fault of any of the debtors:
Extinguishment (1221)2. With fault of any of the debtors: all are
responsible but co-debtors have a right
against negligent debtor
3. Due to a fortuitous event, but with delay:all are responsible with right of action
against the negligent debtor
Rules of Payment in Solidary Obligations
1. The creditor may proceed against any one
of the solidary debtors or some or all ofthem as long as the debt has not been
fully collected. (1316)2. Payment made by one of the solidary
debtors extinguishes the obligation.(1217)
3. If two or more debtors offer to pay, the
creditor may choose which offer to accept.(1217)
4. The paying debtor may ask for
reimbursement with interest from his co-
debtors. (1217)5. The share of the insolvent debtor shall be
borne by all his co-debtors, pro-rata.
(1217)6. There shall be no reimbursement if the
solidary debtor paid AFTER the obligation
has prescribed or has become illegal.
(1218)
Rights of Solidary Debtor
1. Set-up all defenses
2. Right of action against solidary co-debtors
Set-up Defenses (1222)
a. Defenses derived from the nature of
the obligation available to all debtorsas a defense to compliance with theentire obligation;
b. Defenses personal to the debtor like
minority, insanity, civil interdiction,etc. not available to the other debtorsso as to free the latter from their
liability for their own shares in the
obligation;c. Defenses that pertain to his co-
debtor(s), like the existence of a period
or condition available only as regardsthe share of such co-debtor(s) forsolidarity may exist even if the debtors
are bound under different periods orconditions.
Imperial Insurance, Inc. v. DavidHusband and wife bound themselves
solidarily in favor of obligee for a sum of
money and when the husband died, theobligee demanded payment from the wife who
resisted payment, claiming that the obligeesclaim is barred by its failure to file a claim in
the intestate proceeding of the deceasedhusband. The Supreme Court ruled that the
obligee can properly claim from the wife as
the nature of the obligation is solidary.N.B. If obligation were solidary, the
entire obligation is demandable from anyone
of the solidary obligors.
Right of action against solidary co-debtors
The payor of the obligation may claim
from each co-debtor his share of the debt withinterest, unless paid before debt is due or
demandable (with no interest). (1217)
V. DIVISIBLE & INDIVISIBLE
OBLIGATIONS
The indivisibility of an obligation does not
necessarily give rise to solidarity. Nor doessolidarity of itself imply indivisibility. (1210)
DIVISIBLE OBLIGATIONS
Those obligations whose objects are capable
of partial performance in their delivery or
performance.
INDIVISIBLE OBLIGATIONS
Those obligations whose objects are notcapable of partial fulfillment in delivery or
performance.
Test for Distinction
The determining factor is the purpose of theobligation or the intention of the parties and
NOT the possibility or impossibility of partial
prestation. (1225)
Presumptions
1. INDIVISIBLE: DEFINITE THINGS, NOT PARTIALPERFORMANCE
2. DIVISIBLE: PARTIAL PERFORMANCE; BY DAYSOF WORK, METRICAL UNITS, OR ANALOGOUS
THINGS
3. PHYSICALLY DIVISIBLE: SUBJECT TO LAW OR
WHAT IS INTENDED BY THE PARTIES
4. NOT TO DO: DETERMINED BY CHARACTER OFPRESTATION
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KINDS OFINDIVISIBILITY OF ANOBLIGATION
a. LEGAL INDIVISIBILITY - BY LAW, AS WHENTAXES ARE TO BE PAID IN FULL BECAUSE THE
LAW DOES NOT PERMIT PAYING THE SAME BY
INSTALLMENTS
b. CONVENTIONAL INDIVISIBILITY - BY
STIPULATION OF THE PARTIES OR INTENTION
BY THEM TO TREAT THE THINGS AS
INDIVISIBLE EVEN IF THEY ARE ACTUALLY
DIVISIBLE
c. NATURAL INDIVISIBILITY - BY THE NATUREOF THE OBLIGATION
Quantum MeruitPrinciple
Divisible Obligation
If only partially performed, the obligorcan enforce his right in proportion to the
services performed.
Indivisible Obligation
If obligor fails to perform the workcompletely, he cannot recover on this
principle because in indivisible obligations,partial performance is equivalent to non-
performance.
This principle allows recovery of thereasonable value of the work done regardless
of any agreement as to the value. It entitles
the party to as much as he reasonablydeserves as distinguished from quantum
valebant or to as much as what is reasonably
worth. The sellement of claim under thisprinciple requires application of judgment anddiscretion and cannot be adjusted by simple
arithmetical process. (F.F. Manocop v. CA,
GR 122196, Jan. 15, 1997)
VI. OBLIGATIONS WITH A PENAL CLAUSE
In an obligation with a penal clause, the
penalty shall substitute the indemnity fordamages and the payment of interest in caseof non-compliance, if there is no stipulation tothe contrary. A penal clause is an accessory
undertaking to assume greater liability in case
of breach.
Principal and Accessory Obligations
PRINCIPAL OBLIGATION
That which can stand by itself and does not
depend upon other obligations for its validity
and existence.
ACCESSORY OBLIGATION
That which contains an accessory undertaking
to pay a previously stipulated indemnity in
case of breach of the principal prestationintended primarily to induce its fulfillment.
Purposes of Penalty
1. Funcion coercitiva or de garantia - to
ensure performance of the obligation2. Funcion liquidatoria - to substitute a
penalty for the indemnity of damages andthe payment of interest in case of non-
compliance.3. Funcion estrictamente penal - to punish
the debtor for the non-fulfillment of his
obligation.
Penalty as a Substitute for Damages
General Rule
The penalty fixed by the parties is a
compensation or substitute for damages incase of breach.
Exceptions
1. When there is a stipulation to the contrary2. When the debtor is sued for refusal to pay
the agreed penalty3. When the debtor is guilty of fraud
Distinguishing a Penal Clause from a
Condition
Penal Clause Condition
There isobligation through
an accessory
No obligationthrough an
accessoryMay become
demandable indefault of anunperformed
obligation and
sometimes jointlywith it
Is never
demandable
(Manresa)
Kinds of Penal Clause
As to originLegal penal clause provided by lawConventional penal clause provided for
by stipulation of the parties
As to its purposeCompensatory penal clause the penalty
takes the place of damagesPunitive penal clause the penalty is
imposed merely as a punishment forbreach
As to its dependability or effect
Subsidiary or alternative penal clause only the penalty can be enforced
Joint or cumulative penal clause both the
principal obligation and the penalclause can be enforced (Manresa)
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Effect of Nullity of the Penal Clause
If only the penal clause is void, the principal
obligation remains valid and demandable.(1230)
Nullity of the Principal Obligation
If the principal is void, the penal clause is also
void because the penal clause cannot stand
along without the principal obligation to whichit is subordinated.
However, if the nullity of the principal
obligation is due to the debtors fault whoacted in bad faith, and by reason of which the
creditor suffered damages on equitable
grounds, the penalty may be enforced.
Chapter IV: Extinguishment ofObligations
Classification of the Modes ofExtinguishment of Obligations
1. Novation2. Compensation3. Merger or confusion4. Remission or condonation
5. Payment or performance6. Loss of the thing due
7. Prescription8. Rescission9. Fulfillment of the Resolutory condition10. Annulment
I. PAYMENT OR PERFORMANCE
The delivery of money, the delivery of the
thing (other than money), the doing of an act,or not doing of an act.
Elements
The elements of payment are analyzed into:1. persons- who may pay to whom payment
may be made2. thing or object in which the payment must
consist
3. the cause thereof
4. the mode or form thereof5. the place and time in which it must be
made
6. the imputation of expenses occasioned byit
7. the special parts which may modify the
same and the effects they generallyproduce
Requisites for Valid Payment
With respect to prestation itself:(1) identity
(2) integrity or completeness
(3) indivisibility
With respect to parties
This must be made by the proper party to the
proper party
(1) Payor
(a)Payor - the one performing, he can bethe debtor himself or his heirs or
assigns or his agent, or anyone
interested in the fulfillment of theobligation; can be anyone as long as itis with the creditor's consent
(b)3RD person pays/performs - only thecreditor's consent;
If performance is done also withdebtor's consent - he takes the place
of the debtor. There is subrogationexcept if the 3rd person intended it to
be a donation
(c) 3rd person pays/performs with consentof creditor but not with debtor's
consent, the repayment is only to theextent that the payment has been
beneficial to debtor
(2) Payee
(a)payee - creditor or obligee or successor
in interest of transferee, or agent
(b)3rdperson- if any of the ff. concur:
i. it must have redounded to theobligee's benefit and only to the
extent of such benefit
ii. it falls under art 1241, par 1,2,3 -
the benefit is total so, performance
is total
(c) anyone in possession of the credit- butwill apply only if debt has not been
previously garnished
Payment made to an Incapacitated Person
It is valid when:1. The incapacitated person kept the thing
delivered, or
2. Insofar as the payment has been beneficialto him
Payment to a 3rd party not authorized, valid ifproved & only to the extent of benefit
Presumed if:1. After payment, 3rd person acquires the
creditors rights
2. Creditor ratifies payment to 3rd person3. By creditors conduct, debtor has been led
to make the payment (estoppel)
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Payment made in good faith to a person inpossession of credit shall release debtor
Requisites:1. Payment by debtor must be made in good
faith2. Creditor must be in possession of the
credit & not merely the evidence ofindebtedness
With respect to time and place ofpayment
Where payment should be made
1. In the place designated in the obligation
2. If there is no express stipulation and theundertaking is to deliver a specific thing
at the place where the thing might be atthe moment the obligation was constituted
3. In other cases in the place of the
domicile of the debtor
Time of paymentThis is the time stipulated by the parties.
Effect of paymentThe obligation is extinguished.
Except in an order to retain the debt.
Substantial Performance
1. Attempt in Good Faith to perform withoutwillful or intentional departure
2. Deviation is slight
3. Omission/Defect is technical orunimportant
4. Must not be so material that intention of
parties is not attained
Effect of Substantial performance in good faith
1. Obligor may recover as though there hasbeen strict and complete fulfillment, lessdamages suffered by the obligee
2. Right to rescind cannot be used for slightbreach
Currency
Stipulated(1249)
Philippine legal tenderThe payment of debts in money shall be made
in the currency stipulated, and if it is not
possible to deliver such currency, then in thecurrency which is legal tender in thePhilippines. (1249)
Mercantile documents, payable to order:only when cashed or impaired by
creditor.
The delivery of promissory notes payable toorder, or bills of exchange or other mercantile
documents shall produce the effect ofpayment only when they have been cashed,
or when through the fault of the creditor theyhave been impaired. (1249)
*Impairment contemplates an issuance by athird party, otherwise, creditor can just askfrom creditor again but without interest as
there was no delay. (Jurado, Balane)
During encashment: action in abeyance.
In the meantime, the action derived from the
original obligation shall be held in theabeyance. (1170)
Extraordinary inflation/ deflation
Stipulation(1250)
Currency value at time of agreement.In case an extraordinary inflation or deflation
of the currency stipulated should supervene,
the value of the currency at the time of theestablishment of the obligation shall be thebasis of payment, unless there is an
agreement to the contrary. (1250)
Expenses:
Unless it is otherwise stipulated, the
extrajudicial expenses required by thepayment shall be for the account of thedebtor. With regard to judicial costs, the
Rules of Court shall govern. (1247)
Special Rules/Forms Of Payment
Application of Payments the designation
of the debt which payment shall be made, outof 2 or more debts owing the same creditor:
1. May be made according to the stipulationof the parties or application of party given
benefit of period;2. For the application to be valid, it must be
debtors choice or w/ consent of debtor
Requisites for the Application of payment1. Various debts of the same kind2. Same debtor
3. Same creditor
4. All debts must be due
Exception: there may be application of
payment even if all debts are not yet dueif:a) parties so stipulate
b) when application of payment is madeby the party for whose benefit the termhas been constituted
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5. Payment is not enough to extinguish alldebts
How the application is made:1. Debtor makes the designation
2. If not, creditor makes it by so statingin the receipt that he issues, unless
there is cause for invalidating thecontract
3. If neither the debtor nor creditor has
made the application or if theapplication is not valid , thenapplication, is made by operation of
law
Who makes the application:
General Rule: Debtor
Exception:Creditor
a) Debtor without protest accepts receiptin which creditor specified expressly
and unmistakably the obligation towhich such payment was to be applied
*The debtor in this case renounced the
right of choice
b) When monthly statements were made
by the bank specifying the applicationand the debtor signed said statementsapproving the status of her account as
thus sent to her monthly by the bank
In case no application has been made
1. Apply payment to the most onerous2. If debts are of the same nature and
burden, application shall be made to all
proportionately
Dacion en Pago
The mode of extinguishing an obligationwhereby the debtor alienates in favor of the
creditor property for the satisfaction ofmonetary debt; extinguish up to amount of
property unless w/ contrary stipulation;
A special form of payment because 1 element
of payment is missing: IDENTITY.
*Governed by the law on sales
Conditions for a valid dacion:
1) If creditor consents, for a sale
presupposes the consent of both
parties
2) If dacion will not prejudice the other
creditors
3) If debtor is not judicially declared
insolvent
Cession/Assignment in Favor of creditorsThe process by which debtor transfer all the
properties not subject to execution in favor of
creditors is that the latter may sell them andthus, apply the proceeds to their credits;
extinguish up to amount of net proceeds (unless w/ contrary stipulation )
Kinds
1. Legal governed by the insolvency law2. Voluntary agreement of creditors
Requisites for voluntary assignment
a) More than 1 debt
b) More than 1 creditor
c) Complete or partial insolvency of debtord) Abandonment of all debtors property not
exempt from executione) Acceptance or consent on the part of the
creditors
Effects
a) Creditors do not become the owner; theyare merely assignees with authority to sell
b) Debtor is released up to the amount of thenet proceeds of the sale, unless there is astipulation to the contrary
c) Creditors will collect credits in the order ofpreference agreed upon, or in default of
agreement, in the order ordinarily
established by law
Consignation
Tender -the act of offering the creditor whatis due him together with a demand that the
creditor accept the same (When creditor
refuses w/o just cause to accept payment, hebecomes in mora accepiendi & debtor is
released from responsibility if he consigns thething or sum due)
Consignation the act of depositing thething due with the court or judicial authorities
whenever the creditor cannot accept orrefuses to accept payment; generally requiresprior tender of payment
Requisites of valid consignation:
1. Existence of valid debt
2. Consignation was made because of some
legal cause - previous valid tender wasunjustly refused or under circumstances
making previous tender exempt.
3. Prior Notice of Consignation had beengiven to the person interested inperformance of obligation (1st notice)
4. Actual deposit/Consignation with properjudicial authorities
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5. Subsequent notice of Consignation (2nd
notice)
Effects: Extinguishment of obligation
(1) Debtor may ask judge to ordercancellation of obligation
(2) Running of interest is suspended(3) Before creditor accepts or before judge
declares consignation has been properly
made, obligation remains (debtor bearsrisk of loss at the meantime, afteracceptance by creditor or after judge
declares that consignation has been
properly made risk of loss is shifted tocreditor)
Consignation w/o prior tender
This is allowed when:
a. creditor absent or unknown/ does notappear at the place of payment
b. incapacitated to receive payment at thetime it is due
c. refuses to issue receipt w/o just caused. 2 or more creditor claiming the same right
to collect
e. title of obligation has been lost
II. LOSS OF THE THING DUE
This is partial or total which includes theimpossibility of performance.
CONCEPT
Meaning o