OBLIGATIONS AND CONTRACTS Article 1223-1240 Prepared by: Mark Anthony S. Rico Article 1223.

The divisibility or indivisibility of the things that are the object of obligations in which there is only one debtor and only one creditor does not alter or modify the provisions of Chapter 2 of this Title. (1149) y DIVISIBLE & INDIVISIBLE Divisible Obligation - the delivery or performance of which is capable of partial fulfillment. Indivisible Obligation - the delivery or performance of which is not capable of partial fulfillment. Test of DISTINCTION In determining whether the prestation would be divisible or not, we must not confine our definition to merely the possibility of the prestation to be divisible or not. A more precise approach would be to consider the ³purpose of the obligation´ and the ³Intention of the parties´, such that, even if the object or service may be physically divisible, it CAN be considered INDIVISIBLE if so provided by LAW or INTENDED BY THE PARTIES. However, if the obligation is NOT physically divisible, or the service is not succesceptible of partial performance, the obligation is always INDIVISIBLE, the intention of the parties to the contrary notwithstanding. Application: 1. A agreed to pay B P2,000 in four equal monthly payment. The obligation of A is a divisible one because its capable of partial performance. 2. Lets say, in reference to the example, A is bound to pay B the same amount, on a certain date. The obligation now becomes indivisible on the sense that even though money is a divisible thing, the parties intended for the indivisible performance of the whole amount of P 2,000 on the agreed upon date. B. 1. A obliged himself to deliver to B a specific car on January 1. The obligation is an indivisible one because it is not capable of partial performance. The car must be delivered at one time and as a whole. 2. Supposed that the agreement is that A will deliver half the car January 1 and the other half January 30. Even if it would be inconceivable that B would agree to the stipulation, let¶s just assume that he did, will the obligation be divisible or indivisible? Answere: The obligation is still indivisible and A must deliver the car on Jan 1or Jan 30, a definite thing like the car cannot be severed into parts without altering its essence or destroying its value Kinds of Division 1. Qualitative 2. Quantitative 3. Ideal or Intelectual division Kinds of Indivisibility 1. Legal 2. Conventional 3. Natural

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Article 1224. A joint indivisible obligation gives rise to indemnity for damages from the time anyone of the debtors does not comply with his undertaking. The debtors who may have been ready to fulfill their promises shall not contribute to the indemnity beyond the corresponding portion of the price of the thing or of the value of the service in which the obligation consists. (1150) y Effects of non-compliance by a debtor in a joint-indivisible obligation If anyone of the debtors does not comply with his undertaking in a joint indivisible obligation, the obligation is converted into one for damages ( to pay money). The creditor cannot ask for specific performance or rescission because there is no cause of action against the other debtors who are willing to fulfill their promises.

Article 1225. For the purposes of the preceding articles, obligations to give definite things and those which are not susceptible of partial performance shall be deemed to be indivisible.

If A is guilty of fraud. The penalty would not be demandable when the breach of the obligation resulted from a fortuitous event. Here. failed to construct the sari-sari store and B suffered 40k damages. (1152a) y y Meaning of Penal Clause -A penalty stipulated from which derives security of compliance for an obligation. the obligation not to sell should be fulfilled CONTINOUSLY during a certain period. If A refuses to pay penalty. . The penalty substitutes the indemnity for the damages of 40k. SECTION 6. However. the obligation is divisible because the forbearance here is not continous. In obligations with a penal clause. A. y When Penalty may be enforced The penalty may be enforced when it is demandable in accordance with the provisions of the civil code. In obligations not to do. then B can recover legal interest from A. Penalty substitute for damages and interest -as a general rule the penalty taked the place of the indemnity for damages and the payment of interest in case of non-compliance When Creditor may recover damages. In this case the penalty of 50k must be paid to B. B would pay penalty of 50k. unless this right has been clearly granted him. in which case B may still recover damages proved by him. the interest represents new damages brought about by A¶s nonpayment of penalty. Application A promises to construct a sari-sari store for B. being a stipulation in a contract. B cannot recover more than the 50k even if he declared 60k damages. or analogous things which by their nature are susceptible of partial performance. save in the case where this right has been expressly reserved for him. even though the object or service may be physically divisible. 1. 1. The debtor cannot exempt himself from the performance of the obligation by paying the penalty. the penalty shall substitute the indemnity for damages and the payment of interests in case of noncompliance. unless there is a stipulation to the contract that B can recover penalty +damages. an obligation is indivisible if so provided by law or intended by the parties. 1227. 1226. Nevertheless. The penalty may be enforced only when it is demandable in accordance with the provisions of this Code. their contract carried with it a penal clause. divisibility or indivisibility shall be determined by the character of the prestation in each particular case.When the obligation has for its object the execution of a certain number of days of work. (1151a) y Divisibility or indivisibility in obligations not to do. Neither can the creditor demand the fulfillment of the obligation and the satisfaction of the penalty at the same time. 2. Meaning the penalty. it shall be divisible. whereas in case of non-compliance. the accomplishment of work by metrical units. When obligor refuse to pay the penalty 3. Indivisible obligation and Divisible Obligation ± A obliged himself to B. . Because the forbearance here is continous. can be demanded upon breach of the obligation and such is not contrary to law. if there is no stipulation to the contrary. ± But if the obligation of A is not to sell drugs on B¶s area only during Tuesdays and Sundays. not to sell drugs on B¶s area for one year. damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation. When the obligor is guilty of fraud in the fulfillment of the obligation. When stipulated by parties. y y Art. then B will be also awarded for damages as provided for by Article 1171.Obligations with a Penal Clause Art.

by reason that the creditor suffered damages. When penalty is excessive ± even if non performance Art. If a did not perform the said obligation. y Effect of Nullity of the Principal Obligation -If the principal obligation is void. Here only the penalty is void because of its nature. 1230. the penalty may be enforced. the principal obligation remains valid and demandable. if a delivered the bag of candy after delay. the penalty may also be reduced by the courts if it is iniquitous or unconscionable. the penalty is also void. if B chooses to receive penalty. Penal Clause is always presumed SUBSIDIARY to the principal prestation. A cannot just pay the 1k penalty as substitute for non compliance of the principal obligation. Art. who acted in bad faith. provided in their agreement that in case of default. the penalty may be enforced. the performance thereof should become impossible without his fault. The penal clause is just disregarded. If the debtor is allowed just to pay the penalty. B on the other hand may choose between requiring fulfillment or satisfaction of the penalty as agreed. The debtor can only exempt himself from the non-fulfillment of the obligation on when ³this right has been expressly reserved for him. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. But if the nullity of the principal obligationis due to the fault of the debtor. Exept when expressly granted to him by B. . he may not subsequently require the fulfillment of the obligation. and B Accepted the delivery.However. If B chooses fulfillment of the obligation. However. (1153a) y Penalty not substitute for performance Generally. A will kill B¶s best friend. y Effect of Nullity of Penal Clause -If only the penal clause is void. the penalty cannot also be demanded unless such right is expressly given to the creditor. 1228. The nullity of the penal clause does not carry with it that of the principal obligation. he may not subsequently demand penalty unless fulfillment should become impossible without his fault. the debtor cannot just pay the penalty instead of performing the obligation. Even if there has been no performance. A shall pay penalty of 1k.´ y Application A is required to deliver a bag of candy to B otherwise. if after the creditor has decided to require the fulfillment of the obligation. 1229. B can still demand performance of the obligation should S not pay the penalty. in-effect the obligation becomes an alternative one. Example: A agreed to sell merchandise to B. The injured party may recover damages in case of non-performance as if no penalty has been stipulated. And vice versa. With and without Performance: In the preceeding example. Under the above article. (1154a) y When penalty may be reduced by the courts 1. When there is partial performance 2. Because the object of the penalty is to secure compliance with the obligation. (n) Note: Article 1228 only applies when penalty is fixed by the parties to substitute indemnity for damages. Art. Proof of actual damages suffered by the creditor is not necessary in order that the penalty may be demanded.

are governed elsewhere in this Code. (n) y y In this case of acceptance. 1233. 1234. (1157) Art.Payment or Performance Art. Payment means not only the delivery of money but also the performance. 1235. Note that in this situation A is willing to comply with his obligation but the worldwide market does not permit him to do so. A was only able to deliver to B 9 Apples due to the shortage within the Philippine market of apples resulted from the monstrous increase in demand of apples worldwide. must show that he attempted in good faith to do good with his obligation. as the case may be. such as annulment. CHAPTER 4 EXTINGUISHMENT OF OBLIGATIONS GENERAL PROVISIONS Art. (n) y Requisites for the Aplication of Article 1234 1. A debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been completely delivered or rendered. The obligor must be in good faith. (4) By the confusion or merger of the rights of creditor and debtor. and without expressing any protest or objection. The Creditor accepts the performance without accepting any protest or objection. 1231. A can recover as though there had been complete delivery of the obligation less the price of 1 apple. (1156a) SECTION 1. A will pay B 1k for penalty. Here the principal is void because of it¶s illegal nature as well as the penalty even if the penalty is valid. less damages suffered by the obligee. (6) By novation. (n) Art. the law considers that the creditor waived his right and the whole obligation is extinguished. fulfillment of a resolutory condition. Requisites: 1. . When the obligee accepts the performance. Application A obliges himself to deliver to B 10 apples on or before Feb 4. knowing its incompleteness or irregularity. If the obligation has been substantially performed in good faith. the obligation is deemed fully complied with. the obligor may recover as though there had been a strict and complete fulfillment. (5) By compensation. in any other manner. provided in their agreement that in case of default. and prescription. Other causes of extinguishment of obligations. The Creditor knows that the performance is incomplete or irregular 2. On Feb 4. of an obligation. . Obligations are extinguished: (1) By payment or performance: (2) By the loss of the thing due: (3) By the condonation or remission of the debt. A however. y Art.Example: A agreed to sell illegal merchandise to B. There must be substantial performance 2. 1232. rescission.

the third person entitled by reason of payment has merely the bare right to be refunded to the extent of the amount beneficial to the debtor. But the payment is in any case valid as to the creditor who has accepted it. which requires the debtor's consent. (n) y y y Embodies the idea that ³no one should be compelled to accept the generosity of another´ A donation should be accepted If the creditor accepts the payment. Creditor may refuse payment by a third person." (1160a) y y FREE DISPOSAL OF THE THING DUE ± the thing to be delivered should be free from any claims lien or encumbrances. 1240. 1. The debtor 2. or any person authorized to receive it. unless there is a stipulation to the contrary Whoever pays for another may demand from the debtor what he has paid. Art. 1238. 1.Art. there is no real extinction of the obligation. C can only collect 5k from A and the other 5k to B. 1239. If the payment made by C was without consent of A. (1158a) y Whom the Creditor is bound to receive payment 1. but only change of creditor. Effect of payment made by third person. 2. If made without the knowledge or against the will of the debtor ± the recovery if only up to the extent or amount of the debt at the time of payment. however. kt shall be valid as to him and the payor although the debtor did not give his consent to the donation. or his successor in interest. payment made by one who does not have the free disposal of the thing due and capacity to alienate it shall not be valid. If the payment made by C was with the knowledge and consent of A. Payment shall be made to the person in whose favor the obligation has been constituted. In subrogation. In obligations to give. Suppose B accepts the payment. If made with the knowledge of the debtor ± the payer shall have the right of reimbursement and subrogation. if the outstandaing debt is only 5k and C paid B 10k. y Subrogation and reimbursement. y y y Art. except that if he paid without the knowledge or against the will of the debtor. 1236. CAPACITY TO ALIENATE ± the person is not incapacitated to enter into a contract and for that matter to make disposition to the thing due. C a stranger offers to pay B. he can recover only insofar as the payment has been beneficial to the debtor. the right of C to recover from A depends upon whether the payment was made with knowledge or consent of A. Any person who has an interest in the obligation(guarantor). whereas B was erroneously benefited. but lets say. (1162a) . C can recover from A 10k with all the rights of subrogation. that is to recover what he has paid and to acquire all rights of the creditor. In reimbursement. if the total debt is 10k and c paid B the complete amount of 10k. 3. The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation. Application A owes B the sum of 10k. A third person who has no interest in the obligation when there is stipulation that he can make payment. Art. 1. 2. without the right to the guarantees and securities of the original obligation. without prejudice to the provisions of Article 1427 under the Title on "Natural Obligations. Payment made by a third person who does not intend to be reimbursed by the debtor is deemed to be a donation. C can reimburse 10k from A.

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