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AUF School of Law Obligations and Contract

BOOK IV ---anticheresis, principal amount and


OBLIGATIONS and CONTRACTS interest be specified in writing. (Art. 2134,
TITLE I – OBLIGATIONS CC)
---Donation of immovable property be made
in a public document and the acceptance
Art. 1156. Obligation is a juridical necessity to
be made in the same document or separate
give, to do or not to do.
public document (Art. 749, CC)
Juridical necessity to comply with a prestation- ---contribution of immovable property or
Sanchez Roman real rights to common fund (partnership)
must be in a public instrument with
Legal relation established between one person and attached inventory signed by the parties.
another, whereby the latter is bound to the (Art. 1771, 1773, CC)
fulfillment of a prestation which the former may ---Chattel Mortgage, personal property
demand from him. - Manresa must be recorded in the Chattel Mortgage
Register (Art. 2140, CC)
Civil obligation vs Natural ---sale or transfer of large cattle, such
obligation transfer or sale must be registered. (Sec.
22, Act No. 1147, Art. 1581, CC)
Gives to the obligee effect Cannot be
or creditor the right enforced by court Classifications of obligation
of enforcing it action
Primary Secondary
against the obligor
or debtor in a court pure and conditional legal, conventional,
of justice. with a period penal
(right of action) alternative and real and personal
Positive law source Equity and natural facultative determinate and
law. joint and solidary generic
divisible and indivisible unilateral and bilateral
Requisites of Obligation with a penal clause individual and
juridical or legal tie collective
-bilateral accessory and
-unilateral principal
active subject
passive subject
fact, prestation or service classifications according to Manresa
As to juridical quality -Natural
**As a general rule, the form of the obligation is not -civil
an essential element/requisite. Except (the non- -mixed
compliance of the following formalities would have As to parties -Unilateral and bilateral
the effect of rendering the contract agreement void -individual and
or inexistent): collective
---donation of personal property whose
value exceeds P5,000.00, contract in As to object -Determinate and
writing. (Art. 748, CC) generic
---sale of a piece of land or any interest -simple and multiple
therein through an agent, authority of such -positive and negative
agent be in writing. (Art. 1874, CC) -real and personal
---Interests in a contract of simple loan or -possible and
mutual, agreement with respect to such be impossible
in writing. (Art. 1956, CC) -divisible and divisible

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AUF School of Law Obligations and Contract

-principal and accessory have the force of law between the contracting
As to perfection and -Pure parties and should be complied with in good
extinguishment -conditional faith. (1091a)
-with term or period Contract-meeting of minds between two persons
whereby one binds himself, with respect to the
other, to give something or to render some service.
Art. 1157. Obligations arise from: Consensual contracts- contracts perfected by
law mere consent, and from that moment the parties
contracts are bound not only to the fulfillment of what has
quasi contracts been expressly stipulated but also to all of the
acts or omissions punished by law; and consequences which according to their nature may
quasi-delicts be in keeping with good faith, usage and law.
Real Contracts- perfected upon the delivery of
the obligation.
**The addition of lege has been criticized as
theoretically erroneous. Obligation arises from the moment of
perfection of the contract.
**The enumeration is exclusive. Reciprocal obligation- parties are mutually
Art. 1158. Obligations derived from law are not obliged to do or to give something.
presumed. Only those expressly determined Unilateral obligation- only one party (obligor) is
in this Code or in special laws are obliged to do or to give something.
demandable, and shall be regulated by the
precepts of the law which establishes them; **Obligations arising from contract are governed
and as to what has not been foreseen, by the primarily by the agreement of the contracting
provisions of this Book. (1090) parties.
**obligations derived from law cannot be
Compliance in good faith- performance in
presumed. (unlike other obligations)
accordance with the stipulations, clauses, terms
and conditions of the contract.
**requisites to determine whether an obligation
arises from law or from other sources.
Unjust enrichment
law that establishes or recognizes the obligation
act or condition upon which the obligation is **In default of agreement, the provisions of the
based. Civil Code regulating such obligations are
applicable.
** when the law merely recognizes the existence of
an obligation generated by an act which may General Rule: The contract is the law between the
constitute a contract, quasi-contract, criminal contracting parties.
offense, or quasi-delict an its only purpose is to Ex: Macasaet vs COA
regulate such obligation, then the ACT itself is the
source of the obligation and NOT the law. exception to general rule: Agcaoili vs GSIS
Pelayo vs Llauron-obligation of support between
spouses. Art. 1160. Obligations derived from quasi-
Art. 2014 obligation of the winner in a gambling to contracts shall be subject to the provisions of
return the money to the one who lost. Chapter 1, Title XVII, of this Book. (n)

Art. 1159. Obligations arising from contracts Quasi-contracts- juridical relations arising from
lawful, voluntary, and unilateral acts, by virtue

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AUF School of Law Obligations and Contract

which the parties become bound to each other, 2. independent civil action
based on the principle that no one shall be unjustly 3. other civil actions arising from offense
enriched or benefited at the expense of others.
Effect of Acquittal
Case: Traders Union vs NLRC Ground for effect Evidence
acquittal needed
Negotiorum gestio Solutio indebiti
Guilt not Civil action to Preponderance
Arises whenever a Arises whenever a proven beyond recover of evidence
person voluntarily takes person unduly delivers reasonable damages
charge of the agency or a thing through mistake doubt based on the
management of the to another who has no same act or
business or property of right to demand it. omission MAY
another without still be
authority from the latter instituted
The gestor or officious The person to whom the Non-existence Civil action to
manager shall be delivery has been of facts for the recover
obliged to continue such unduly made shall commission of damages is no
agency or management return the property the offense longer possible.
until the termination of delivered or the money
the affair and its paid. Effect of Independent Civil Action
incidents General rule: The civil action to recover from the
person criminally liable is not independent from the
Presumptive consent- consent given by law if criminal action.
there is no express consent given by the other Separate civil action- the right to file a civil action
party shall depend upon the result of the criminal action.
--gives rise to multiple juridical relations resulting in
obligations for delivery of the thing or rendering of Commencing the civil action prior the criminal
service. action- once the criminal action is instituted, the
action to recover damages shall be suspended.
Art. 1161. Civil obligations arising from
Examples of entirely separate and independent
criminal offenses shall be governed by the
civil action:
penal laws, subject to the provisions of article
• the civil action is based on an obligation
2177, and of the pertinent provisions of
not arising from the act complained of as
Chapter 2, Preliminary Title, on Human
offense or felony.
Relations, and of Title XVIII of this Book,
◦ Such action may proceed
regulating damages. (1092a)
independently of the criminal action
and regardless of the result of the
Art. 100, RPC latter.
except: treason, rebellion, illegal possession of ◦ Culpa contractual- Negligence in the
firearms and gambling. performance of a contract
◦ culpa aquiliana- Negligence as a
Enforcement of civil liability source of obligation (quasi-delict)
1. institution of criminal and civil actions- civil • Law grants to the injured party the right to
action impliedly instituted, except: institute a civil action separate and distinct
i. express waive of the civil action from the criminal action.
ii. reservation of right to institute it ◦ Interferences by public officers or
separately, or
employees or by private individuals
iii. institution of the civil action prior to the
with civil rights and liberties
criminal action.

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AUF School of Law Obligations and Contract

◦ defamation • The State when it acts through a special


◦ fraud agent, but not if the damage shall have
◦ physical injuries been caused by the official upon whom
◦ refusal or neglect of a city or municipal properly devolved the duty of doing the act
police to render aid or protection in performed, in which case the provisions of
case of danger to life or property. the next preceding article shall be
applicable.
Reservation of right to file separate and distinct • Finally, teachers or directors of arts and
civil action- is a substantive right; trades are liable for any damages caused
-procedural requirement under Sec. 2 of by their pupils or apprentices while they are
Rule 111 of the New Rules of Court is not under their custody.
mandatory. The liability shall cease in case the persons
-this was amended by Sec. 3 of Revised Rules of mentioned therein prove that they exercised all the
criminal Procedure 2000. diligence of a good father of a family to prevent the
damage.
Art. 1162. Obligations derived from quasi- Requisites of liability
delicts shall be governed by the provisions of • There exist a wrongful act or omission
Chapter 2, Title XVII of this Book, and by imputable to the defendant by reason of his
special laws. (1093a) fault or negligence.
• There exist a damage or injury which must
Quasi-delict- fault or negligence of a person who, be proved by the person claiming recovery.
by his acts or omission, connected or unconnected • There must be a direct causal connection
with, but independent from, any contractual between the fault or negligence and the
relation, causes damage to another person. damage or injury. (proximate cause)
-covers not only those that are not punished by law
but also those acts which are voluntary and Quasi-delict vs Crime
negligent
4 reasons: cited in Barredo vs Gracia Private right Nature of Public right
right
***A single act can give rise to various obligations violated
Persons liable- the person directly responsible for Compensation Form of Punishment
the damage incurred and: or redress (fine,
• The father, and, in case of his death or indemnification imprisonment, or
incapacity, the mother, are liable for any (reparation of both)
damages caused by the minor children injury suffered
who live with them. by the
• Guardians are liable for damages done by individual)
minors or incapacitated persons subject to
It exist in any Legal basis Exists when there
their authority and living with them.
act or omission of liability are penal laws
• Owners or directors of an establishment or
wherein fault or clearly penalizing
business are equally liable for any negligence such crime
damages caused by their employees while intervenes
engaged in the branch of the service in
which employed, or on occasion of the Civil liability liability Criminal and civil
performance of their duties. liability
• Employers with respect to damages Criminal intent Condition of Criminal intent
caused by their employees and household not necessary the mind necessary
helpers acting within the scope of their
assigned tasks, even though the former are Preponderance evidence Beyond
not engaged in any business or industry. of evidence reasonable doubt

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AUF School of Law Obligations and Contract

Can be compromise Can never be be committed in view of the manner in which the
compromised compromised. contract is violated.
“Neglect or malfeasance of the
carrier's employees could give
Quasi-delict covers not only acts not punishable by
ground for an action for damages.
laws but it also includes acts which are criminal in
Damages here are proper because
character, whether intentional, voluntary or
the stress of respondent's action is
negligent. (Elcano vs Hill)
placed upon his wrongful
expulsion, which is a violation of a
Two distinct faults
public duty by petitioner- air carrier
(Padua vs Robles, Justice Barredo)
— a case of quasi-delict.” (Air
• culpa criminal- civil liability arising from
France vs Carrascoso, G.R. No. L-
crimes
21438. September 28, 1966.)
• culpa-aquiliana- liability arising from civil
negligence.
-recovery of damages twice for the same negligent Chapter 2
act is omission is precluded. NATURE AND EFFECTS OF OBLIGATION
-the extinction of the civil liability referred in Par (e) Art. 1163-1166 Obligation to Give
of Sec. 3, Rule 111 refers exclusively to liability
founded on Art. 100 of RPC, whereas the civil “diligence of a good father of a family”
liability for the same act considered as quasi delict - standard normal state of diligence
is not extinguished even by a declaration in the -ordinary diligence
criminal case that the criminal act charged has not -
happened or has not been committed by the obligations to give
accused.(Elcano vs Hill) • determinate- the object is particularly
designated or physically segregated from
all others of the same class (Art. 1163
Diligence of employers:
applies particularly to determinate object)
Quasi-delict Crimes • generic- the object is merely designated
Art. 2180 of CC Art. 103 of RPC by its class or genus without any particular
designation or physical segregation from all
Primary liability Subsidiary liability others of the same class. (e.g. money)
Employer can avoid Liability is absolute and
liability after proving that cannot be avoided by ***Art. 1163 is a guaranty that the debtor will
he exercised due proof of diligence. comply with the obligation.
diligence
Nature of right of the creditor
Applies to all employers Applies only to
--The obligee/creditor has the right to the
whether they are employers engaged in
thing which is the object of the obligation as
engaged in enterprise some kind of business
well as the fruits thereof from the time the
or not. or industry.
obligation to deliver it arises. (Art. 1164)

ubi jus ibi remedium- unvindicated civil wrongs

--The death of the accused after arraignment and


Obligation When obligation to
during the pendency of the criminal action shall
deliver arises
extinguish the civil liability arising from the delict.
Those arising from The specific provisions
**Although the relation between the contracting • law of law determine when
parties is purely contractual a quasi-delict can still • quasi-delicts the delivery should be

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AUF School of Law Obligations and Contract

• quasi-contracts made. by reason of delay,


• crimes fraud, negligence or
contravention of the
• contracts Moment of perfection of tenor thereof.
the contract. (Art. 1537)
Generic obligations
• Subject to a From the moment the
suspensive condition happens. 1. to ask for 1. To deliver a thing
condition performance of which is neither of
the obligations superior nor inferior
• With suspensive Upon the expiration of 2. to ask that the quality.
term or period the term or period obligation be 2. To be liable for
complied with at damages in case of
Personal right- a right pertaining to a person to the expense of breach of obligation
demand from another the fulfillment of a prestation the debtor.
to give, to do, or not to do. 3. To recover
– (jus ad rem) right enforceable only damages for the
against a definite person or group breach of
of persons obligation.
– before delivery in obligations to
give None exemption from liability because of caso
fortuito:
Real right- right pertaining to a person over a delay
specific thing, without passive subject individually reason: There would have been no loss if the
determined against whom such right may be debtor had complied with the obligation to deliver
personally forced. (ownership, possession, the object without delay.
easement)
– (jus in re) right enforceable against the promise to two or more different persons
whole world reason: It would be impossible to comply with both
– acquired once the thing and the fruits obligations therefore the debtor already made
are delivered. himself liable for damages.

Rights of Creditor Obligations of Debtor Accessions- all of those things which are
produced by the object of the obligation as well as
determinate obligations all of those which are naturally or artificially
1. to compel specific 1. to perform the attached thereto.
performance obligation • Accession discreta- natural, industrial and
2. to recover damages specifically civil fruits
for breach of the 2. to take care of the • accession industrial – building, planting,
obligation. things with proper and sowing
3. Entitlement to fruits diligence of a good • accession natural- allusion, alvusion,
and interests of the father of a family. abandoned river beds, and islands formed
thing at the time 3. To deliver all in navigable rivers.
the obligation to accessions and • Accession with respect to movable
deliver it arises. accessories of the property.
things even though
they may not have Accessories- all of the things which have for their
been mentioned. object the establishment, use or preservation of
4. To be liable for another thing which is more important and to which
damages in case of they are not incorporated or attached.
breach of obligation – embellishments

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**The liability of debtor for damages in case of obligor (Art. 1168)


breach of obligation, extends only to breach which exception (cannot be undone):
is voluntary in character and not to one which is ◦ effects of the act are definite in
involuntary (fortuitous event) character.
◦ physical and legal impossibility
**Only a determinate thing can be destroyed by a • to ask for damages (Art. 1170)
fortuitous event, generic things can never perish. ◦ mora is not applicable
(genus nunquam peruit)
**In obligation not to do, the obligation is either
Art. 1167. fulfilled or not fulfilled
Obligation to Do
(positive personal obligation)
Art. 1169.
**If the obligor fails to do what he has obligated Delay in the fulfillment of obligation
himself to do, the obligee can have the obligation
performed or executed at the expense of the latter
and recover damages . Voluntary Involuntary
Default (mora), Inability to comply
**This type of obligation recognizes individual deceit/fraud (dolo), because of an
freedom, the obligor cannot be compelled to do negligence (culpa), or in unforeseen event, or
what he has obligated himself to do. manner that which though foreseen
Remedy for obligee/creditor: performance of the contravenes the tenor is inevitable.
obligation at the expense of the obligor thereof
Obligor is liable for Obligor has no liability
**If the object of the prestation is the personal and
damages for damages
special qualification (i.e. artist) of the obligor, the
remedy for the obligee is to recover damages
under Art. 1170 of the Civil Code. General Rule: Unless there is no demand there is
no delay.
Rights available to the obligee
(in case there has been a performance of the ***In reciprocal obligation, the moment the other
obligation but in contravention of the tenor thereof) party complied with his obligation failure to comply
• to have the obligation performed at the will cause the other party to be in delay
expense of the obligor
• to ask that what has been poorly done be Default(mora)- signifies delay in the fulfillment of
an obligation with respect to time.
undone
• to recover damages for breach of
***The mere stipulation of a date when the
obligation
obligation is due does not by itself dispense with
Case:
the necessity of a demand, unless there is an
Chavez vs Gonzales
express stipulation (either by law or contract) that
Tanguilig vs Court of Appeals
the debtor will incur delay without need of a
demand.
Article 1168.
Kinds of mora
Obligation NOT to Do
• mora solvendi- default on the part of the
(negative personal obligation)
debtor
-fulfilled or realized so long the obligor does not do
kinds of mora solvendi
what is forbidden
◦ ex re-refers to obligation to give
Remedy for obligee in case of breach: ◦ ex persona- refers to obligation to do
• to have it undone at the expense of the • mora accipiendi- default on the part of the

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AUF School of Law Obligations and Contract

creditor to accept the delivery of the object Fraud (dolo)- consist in the conscious and
of the obligation intentional proposition to evade the normal
• compensatio morae- default of both parties fulfillment of an obligation
in reciprocal obligations -present at the time of birth of an
obligations
Requisites to declare in default
◦ that the obligation be demandable and kinds of fraud
already liquidated • criminal fraud
◦ that the debtor delays performance • civil fraud
◦ that the creditor requires the Fraud in the vs Fraud in the
performance judicially or extra judicially performance of constitution or
an obligation establishment of
**In positive obligation, default arises from the an obligation
moment the creditor demands the performance of
During the When At the time of the
the obligation.
performance of an present birth of an
• Judicially- through a complaint
existing obligation obligation.
• extra-judicially- oral or written demand
Evading normal purpose Securing the
When demand not necessary fulfillment of an consent of the
• when there is an express stipulation to that obligation other party to
effect enter into the
• where the law so provides contract
• when the period is the controlling motive or Non-fulfillment or result Vitiation of the
the principal inducement for the creation of breach of the consent of the
the obligation (when time is of the essence) obligation other party
• where demand would be useless
Recover damages Remedy Causal fraud-
from the for the Annulment of the
**Negative obligations are not subject to delay. debtor/obligor innocent contract.
party Incidental fraud-
Reciprocal obligation-created or established at recover damages
the same time, out of the same cause and which
results in the mutual relationship of creditor and
debtor between the parties. ***Malice or dishonesty is implied as a ground for
-obligations which are conditioned upon damages.
each other
-conditional obligation ***Fraud or dolo is synonymous with bad faith.

**In case of delay, the liability of the obligor subsist ***Waiver or renunciation of liability made in
even if the thing which constitutes the object of anticipation of the fraud is VOID. (Art. 1171)
obligation may have been destroyed or lost
through fortuitous events. ***Waiver or renunciation of liability made after the
fraud has already been committed is VALID.
The moment the other party has complied with his
obligation, delay on the other begins. ***What is renounced is the effect of fraud or the
Exception: If there are different dates for the right of the party to indemnity.
performance of the obligation, apply the general
rule in 1169 (demand is needed). Extent of recoverable damages:
• all damages which may be attributable to
(Art. 1170-1173) the breach or non-fulfillment of the
obligation, regardless of whether such
consequences are natural or unnatural,

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probable or improbable, foreseeable or evade the


unforeseeable. fulfillment of an
• Moral and exemplary damages obligation

Negligence (culpa)- omission of that diligence Art. 1173 (if the Governing rule Art. 1173, par.1
which is required by the nature of the obligation negligence
and corresponds with the circumstances of the shows bad faith)
person, the time, and of the place. Valid (unless the Waiver of Void
-absence of due care required by the nature of the action (future)
nature of the obligation waiver is against
public policy)
***Diligence of good father of a family (pater
familias) is the standard diligence required if the
contract does not state the diligence which is to be
observed in the performance of the obligation. proximate cause- cause which is a natural and
logical consequence uninterrupted by an
Kinds of negligence intervening cause, without which the damage will
Culpa vs Culpa not have happened.
contractual aquiliana
Negligence in definition Negligence as a Negligence
the performance source of Bad faith Good faith
of a contract obligation.
(quasi-delict) If present, the Liability will only be on
provisions of Art. 1173 natural and probable
Incident of the characteristi Substantive and and Art 2201, par.2 will consequences of the
performance of c independent apply. breach of obligation
an obligation
***Damages resulting from negligence is reduced
Pre-existing Party There may or or mitigated if there was contributory negligence of
contractual relationship may not be a the obligee.
relation pre-existing Other circumstances that can mitigate the
contractual damages:
relationship • when the plaintiff himself contravenes the
Breach of Source of Defendant's terms of the contract;
contract obligation negligent act or • where the plaintiff has derived some benefit
omission as a result of the contract;
• in cases where exemplary damages are to
Existence of the What needs Negligence of
be awarded, where the defendant acted
contract and its to be proven the defendant
upon advice of counsel;
breach
• where the loss would have resulted in any
Proof of Availability Prof of diligence event;
diligence is not of diligence is a valid • where upon filing of the action, the
a defense defense defendant has done his best to lessen the
plaintiff's loss or injury.
Negligence vs Fraud ***If the negligent act of the obligee is the
Negligence vs Fraud proximate cause of the event which led to the
damage or injury complained of, he cannot
Culpa Dolo recover.
Voluntary act or characteristic Conscious and
omission intentional ***The phrase “in any manner that contravenes
proposition to the tenor” of the obligation includes not only any

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illicit act which impairs the strict fulfillment of the 3. that the event must be of such a character
obligation but also every kind of defective as to render it impossible for the obligor to
performance. fulfill his obligation in a normal manner;
4. that the obligor must be free from any
Test of negligence: participation in the aggravation of the injury
Use the reasonable care and caution which an to the obligee.
ordinary prudent person would have used in the
same situation. ***expiration of agreement:
(Art. 1174) The case of Bacolod-Murcia vs CA compared
Fortuitous event (caso fortuito)- event which and contrasted with PhilComSat vs Globe.
could have not been foreseen, or though foreseen,
were inevitable. ***Southeastern College vs CA- typhoon is a caso
Act of God Force majeure fortuito
Independent of human events that arise from ***Co vs CA- carnapping of a vehicle is not
intervention legitimate or illegitimate considered a caso fortuito.
acts of persons other
than the obligor. ***Tanguilig vs CA – windmill case
As to foreseeability
(Art. 1175)
Ordinary extraordinary Usury- contracting for or receiving something in
excess of the amount allowed by law for the loan
General rule: If the reason for the non-compliance or forbearance of money, goods or chattels.
in the obligation is a fortuitous event, the obligor is -taking of more interest for the use of money,
exempted from liability whatsoever. goods, or chattels or credits than the law allows.
EXCEPT:
1. where such liability is expressly specified Usury Law (Act No. 2655) and other laws
by law; amending it- special law referred to in Art. 1175.
2. where it is declared by stipulation of the
parties; Central Bank Circular No. 224 (Dec. 1, 1982)- no
3. where the nature of the obligation requires more ceiling in interest rates on loans.
the assumption of risk.
-(volenti non fit injuria) no wrong is ***Loan or forebearance of money-12% interest in
done to one who consents the default of interest stipulated by law or the
parties, 6% interest for obligation not involving
***Art. 1174 applies only to determinate obligations forebearance or loan.
and not to generic ones.

***res ipsa loquitur ***12% interest per annum from the time the
judgment has become final if t.
***The caso fortuito must me the SOLE and
proximate cause of the incident, to avail of it as a (Art. 1176)
defense. ***There is a presumption that the interests has
been paid if on the face of the receipt that the
***Co-mingling negligence on the part of the creditor issued to the obligor that the principal has
obligor forfeits the defense of caso fortuito. been paid without reservation with respect to the
interest. (in accordance with Art. 1253)
Essential conditions for Art. 1174 to apply:
1. that the event must be independent of the ***If the debtor is issued a receipt by the creditor
will of the obligor; acknowledging payment of a latter installment
2. that the event must be either foreseeable without reservation to prior installments, there is
or inevitable;

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also a presumption that such prior installments 2. where there are stipulations by the parties
have already been paid. that they are not transmissible;
3. where they are not transmissible by
***For the presumption to arise, the receipt should operation of law.
clearly state that the payment is for the installment
for a latter installment or as payment for the CHAPTER THREE
interest. (Manila Trading vs Medina) DIFFERENT KINDS OF OBLIGATIONS

(Art. 1177) Sec. 1. - Pure and Conditional Obligations


Remedies of creditor to protect credits:
1. to exhaust the property in possession of (Art. 1179)
the debtor;(Art. 2236, CC) Pure Obligation- one whose effectivity or
2. to be subrogated to all of the rights and extinguishment does not depend upon the
actions of the debtor to save those which fulfillment or non-fulfillment of a condition or upon
are inherent in hi person. (accion the expiration of a term or period;
subrogatoria) – characterized by the quality of
Conditions: immediate demandability, but there
– that the debtor is indebted to the must be a reasonable period of grace.
creditor;
– the creditor must be prejudiced by Condition- future and uncertain fact or event upon
the inaction of the debtor to which an obligation is subordinated or made to
proceed against the third person; depend.
– the creditor must have first pursued Term/period- a term will surely pass and may or
all of the properties of the debtor may not know when exactly; characterized by
which are not exempt from futurity and certainty
execution. condition- it may or may not happen
3. to impugn all of the acts which the debtor
may have done to defraud him. (accion Conditional obligations- one whose effectivity is
pauliana) subordinated to the fulfillment or non-fulfillment of a
future and uncertain act or event.
Accion subrogotoria- the right of the creditor to
exercise all of the rights of the debtor to bring all of Kinds of conditional obligation:
the actions against third persons. 1. Suspensive vs Resolutory
-the creditor merely acts in the name and for the (Art. 1181)
account of the debtor.
EXCEPTION: Rights which are purely personal in
the sense that they are inherent n the person of the Suspensive Resolutory
debtor. (i.e. family rights)
Condition precedent Condition subsequent
Accion pauliana- impugning or attacking fraud Results in the Results in the
directly by means of a rescissory action at the acquisition of rights extinguishment of rights
instance of the creditors who are prejudiced. arising out of the arising out of the
-subsidiary in character. obligations obligations
The happening of the The happening of the
(Art. 1178)
condition gives birth to condition extinguishes
General rule: Rights of obligations or those rights
the obligation. obligation
which are acquired by virtue of an obligation are
transmissible in character. If the condition is not If the condition is not
Exceptions: fulfilled, no juridical tie is fulfilled, juridical relation
1. where they are not transmissible in their created. is consolidated.
very nature (i. e. purely personal rights); What is acquired by the What is acquired by the

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obligee in the obligee in the Simple potestative - valid; presupposes not just
constitution of the constitution of the the manifestation of the will but also the realization
obligation is only mere obligation are rights that of an external act.
hope and expectancy, are subject to threat or
protected by law. danger of extinction. pure potestative – void; envisioned by Art. 1182

3. Possible vs Impossible
2. Potestative, casual, and mixed
(Art. 1183)
(cause upon which the fulfillment depends)
(Art. 1182) Possible Impossible
Potestative casual mixed when the condition is when the condition is
capable of realization not capable of
fulfillment of fulfillment of the fulfillment of the
according to nature, realization according to
the obligation condition obligation
law, public policy, or nature, law, public
depends upon depends upon depends upon
good customs. policy, or good customs.
the will of a chance/or upon the will of a
(contrary to good
party to the the will of a party to the
customs or public policy,
obligations third person obligation and
illicit, illegal)
partly upon
chance and/or Effects
will of a third
The obligation and the Annulment of the
person.
condition is valid and obligation that are
Effects enforceable. dependent of such
impossible condition
dependent on The obligation The obligation
**but is there is a pre-
the creditor- and the and the
existing obligation,
condition and condition shall condition shall
therefore not dependent
obligation, take effect. take effect.
upon the fulfillment of
VALID (valid and (valid and
the obligation for its
enforceable) enforceable)
perfection, only the
dependent on
CONDITION is void, not
the debtor-
the obligation.
condition and
obligation,
VOID ***If the impossible condition is attached to an
obligation, the obligation itself is Void.
***The precept in the first sentence of Art. 182 is
***If the impossible condition is attached to a
applicable only to a suspensive condition. Hence,
simple donation or testamentary disposition, the
Resolutory + Potestative = VALID obligation and
condition is not imposed, although the donation
condition (explanation at pp.114, Jurado)
or testamentary disposition itself is valid.
***to avoid illusory obligation- Reason for the
***Total Absence of seriousness- reason why the
invalidity of potestative condition dependent on the
law invalidate the impossible condition & the
debtor.
dependent obligation.
EXCEPTION: gratuitous disposition/donation;
***Payment for previous indebtedness/pre-existing
because the moving force here is the generosity of
obligation although the condition is purely
the donor.
potestative, affects the validity of the condition but
keeps the validity of the obligation because the
***The impossibility of the condition should be
obligation is not dependent upon the condition.
determined at the time the obligation is made or
constituted.
4. Positive vs Negative

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(Art. 1185) – does not necessarily always


Positive Negative involves court action in spite the
wordings of the law.
condition involves the condition involves the i.e. registration
performance of an act omission of an act.
The event will happen The event will NOT Art. 1188, par. 2- protection for the debtor
or take place. happen or take place. Obligation subject to Obligation subject to
Effects suspensive condition period/term

The obligation is The obligation is There is no certainty if It is certain that the


extinguished as soon rendered effective from the obligation will be obligation will be fully
as the time expires or if the moment the time fulfilled demandable and
it becomes indubitable indicated has elapsed, enforceable.
that the event will not or if it has become Interests and fruits shall Interests and fruits shall
take place. evident that the event also be delivered when also be delivered when
cannot occur. the debtor the debtor
paid/delivered by paid/delivered by
***The intention of the parties, taking into mistake. mistake.
consideration the nature of the obligation, shall
govern if no time has been fixed for the fulfillment
of the condition. The same rule applies to Reason for retroactivity: The condition is only
POSITIVE CONDITION. accidental, not essential element of the obligation.

Constructive Fulfillment of Suspensive *** The principle of retroactivity must be tempered


Condition- The condition shall be deemed fulfilled by principles of justice and practicability.
when the obligor voluntarily prevents [the obligee • In obligations to give
from] its fulfillment [of the condition].(Art. 1186) ◦ the principal obligation as well as the
-applicable only to Suspensive conditions fruits should be delivered
and not to Resolutory conditions. ◦ in unilateral obligations, the debtor shall
appropriate the fruits and interests
***The prevention must have been done for the received, unless there is a contrary
precise purpose of preventing the condition. intention on his part
• in obligations to do or not to do
Effects of Suspensive Condition (Art. 1188)
◦ Courts shall determine in each case the
Before Fulfillment After Fulfillment retroactive effect of the condition that
Demandability as well The obligation arises has been complied with.
as the acquisition or and becomes effective.
effectivity of rights ***In reciprocal obligations the fruits and interest
arising from the must be equally compensated between the parties.
obligation is suspended.
***In unilateral obligation, the debtor shall
The right of the creditor The right of the creditor
appropriate the fruits and interests received unless
is mere hope & is perfected. (becomes
the intention is different.
expectancy. effective & demandable)
Effects are retroactive ***In personal obligations, the courts will have to
(applicable only to determine in each case the retroactive effect of the
consensual contracts) condition that has been complied.

Art. 1188, par. 1- Protection for the creditor Effect of Loss, Deterioration, or Improvement
– file an injunction to stop the debtor (Art. 1189)

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1. If the thing is lost without the fault of the ***The debtor cannot ask for reimbursement for
debtor, the obligation shall be expenses incurred for useful improvements or
extinguished; improvements for pleasure.
2. If the thing is lost through the fault of the
debtor, he shall be obliged to pay ***the debtor may have the right to remove such
damages; it is understood that the thing is improvements provided it is possible to do so
lost when it perishes, or goes out of without damage to the thing or property.
commerce, or disappears in such a way
that its existence is unknown or it cannot Effect of Resolutory Condition:
be recovered; Before Fulfillment After Fulfillment
3. When the thing deteriorates without the
fault of the debtor, the impairment is to be The obligation is subject The rights vested in the
borne by the creditor; to the threat of obligation is
4. If it deteriorates through the fault of the extinction. extinguished.
debtor, the creditor may choose between Placed in the same Whatever is paid or
the rescission of the obligation and its position with creditor in delivered to any of the
fulfillment, with indemnity for damages obligation with parties should be
in either case; suspensive condition. returned (return to
5. If the thing is improved by its nature, or by status quo)
time, the improvement shall inure to the
benefit of the creditor; ***There are no exceptions in the retroactive effect
6. If it is improved at the expense of the of resolutory condition; what was delivered need to
debtor, he shall have no other right than be returned.
that granted to the usufructuary.
***The fulfillment of a resolutory condition signifies
***Rule in Art. 1189 are natural consequences of the nonexistence of the obligation, what is
the principle of retroactivity. nonexistent must no give rise to any effect
whatsoever.
***Predicated on the fulfillment of the condition.
******There is no provision of mutual compensation
***Refer only to conditional obligations to give a of fruits and interests but in connection with the
determinate thing concept of justice, restitution in Art. 1190 carries
with it the consequence of reimbursement for all
usufruct- right or enjoyment of a thing, the the expenses incurred for the production,
property of which is vested in another and to draw gathering, and preservation of the fruits.
from the same all the profit, utilities, and advantage
it may produce without altering the form/substance ***Mutual restitution is absolute in resolutory
of the thing. conditions because the obligation is extinguished,
and it ceases to have effect thus does not carry
Loss with it fruits and interests.
a thing is considered lost when it:
1. perishes; ***In obligations to do or not to do, the retroactive
2. goes out of commerce – impossible to effects shall depend upon the discretion of the
legally transfer or re-acquire courts.
3. disappears in such a way that its existence
is unknown or it cannot be recovered ***Art. 1189 is also applicable with regard the
effects of loss, deterioration, and improvements of
Improvements things during the pendency of resolutory condition.
natural accessions: alluvion, avulsion,
abandoned river beds, island formed ***In Resolutory condition the “debtor” is the
person obliged to return while the “creditor” is the

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AUF School of Law Obligations and Contract

person to whom the thing must be returned.


***Art. 1191 is not applicable to contracts of
Reciprocal obligations partnership. There are special provisions that
(Art. 1191) govern the latter, thus the general provision will not
remedy for the injured party: rescission or prevail. The same applies to sales of real property
fulfillment (Recto Law) and sales of personal property by
installment (Maceda Law).
Reciprocal obligation-created or established at
the same time, out of the same cause and which ***Rescission will only be rendered when the
results in the mutual relationship of creditor and breach is substantial so as to defeat the object of
debtor between the parties. the parties in entering into the agreement.
-characterized by reciprocity; one obligation Case: Song Fo & Co. vs Hawaiian-Philippine
is correlative of the other. Co.
-bilateral in character.
-tacit resolutory condition. Alternative remedies to the injured party:
--fulfillment of the obligation with payment for
***General rule: If one of the parties fails to damages (Specific performance with damages)
comply with what is incumbent upon him,there is a --rescission of the obligation with payment for
right on the part of the other to rescind (or resolve) damages (resolution with damages)
the obligation. Case: Songcuan vs IAC

Right of rescission- belongs to the injured party ***The injured party can still seek the rescission or
alone. resolution of the obligation even if he has opted to
-must be invoked judicially by filing the choose the fulfillment of such obligation if
proper action of rescission. fulfillment should become impossible.
– not absolute; the court is given the Case: Ayson-Simon vs Adamos
discretionary power to fix a period
within which the obligor in default may
be permitted to comply with what is
incumbent upon him. ***In awarding damages...
– implied in reciprocal obligations(Art. In case or only those elements of
1191, par. 1) rescission damages can be admitted that
are compatible with the idea of
***If the contract contains a resolutory provision by rescission.
virtue of which the obligation may be canceled or
In case of specific Only the elements of damages
extinguished by the injured party in case of breach
performance can be admitted which are
of obligation, judicial permission to cancel or
compatible with the idea of
rescind the contract is no longer necessary. But the
specific performance.
Court may confirm such extra judicial rescission.

***If there is no express provision of rescission in Effects of Rescission:


the contract, rescission should be invoked • it is the duty of the court to require the
judicially. parties to surrender whatever they may
have received from the other (without
***The termination of a contract must not be prejudice to the obligation of the party who
contrary to law, morals, good customs, public was not able to comply with what is
order, or public policy. incumbent upon him).
• Rescission can no longer be demanded
***Notice is always important in rescission so the when he who demands is no longer in the
alleged infractor can question the propriety of the position to return whatever he may be
rescission. obliged to restore; neither can it be

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AUF School of Law Obligations and Contract

demanded when the thing which is the produces its extinguishment.


object of the contract is already in the
possession of a 3rd party who obtained it in Obligations with a period- obligations whose
good faith. demandability or extinguishment is subject to the
◦ Remedy for the latter will be an action expiration of a term or a period.
for the transfer or conveyance for
damages. Term/Period Condition
• If 3rd person obtained the property in bad
Interval of time requisites Refers to a fact
faith, the injured party can still go after the
which is future or event which is
property.
and certain future and
◦ If it can't really be recovered, the
uncertain
remedy is for the injured party to
proceed against 3rd person who acted Interval of time fulfillment A future and
in bad faith for damages. that must uncertain fact or
necessarily event that may
***There can be partial rescission or fulfillment come, although it or may not
under Art. 1191. may not be happen.
Case: Central Bank vs CA known when
Merely exerts an Influence Exerts an
***Rescission calls for mutual restitution. (Laperal influence upon on influence upon
vs Solid Homes) the time of the obligation the very
demandability or existence of the
***If there is arbitration in the contract, arbitration extinguishment of obligation itself.
should be resorted to before asking for rescission an obligation.
(Korean Technology vs Lerma)
No retroactive Retroactive Has retroactive
effects unless effects effects
there is an
Effect of breach by both parties agreement to the
(Art. 1192) contrary.
Rules: When a term or a Effect of When a
1. the liability of the first infractor shall be period is left will of the condition is left
equitably tempered by the courts. exclusively to the debtor on the exclusive
-fair to both parties because the will of the debtor, will of the debtor,
second infractor also derived, or the existence of the existence of
thought he would derive, some the obligation is the obligation is
advantage for his own act or not affected affected (Void)
neglect (potestative term (potestative
2. If it cannot be determined which of the or period) condition)
parties first violated the contract, the same
shall be deemed extinguished, and each
Classification of term or period
shall bear his own damages
1. suspensive or resolutory
-it is presumed that both at about
a) suspensive (ex die) - demandable only
the same time tried to reap some
upon the arrival of a day certain.
benefit
b) resolutory (in diem) – demandable at
once, although it is terminated upon the
Sec. 2. - Obligations with a Period
arrival of a day certain
***day certain- which must necessarily
Term or Period- interval of time, which exerting an
come, although it may not be known when.
influence on an obligation as a consequence of a
2. legal, conventional, or judicial
juridical act, either suspends its demandability or
a) legal- term or period granted by law

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AUF School of Law Obligations and Contract

b) conventional- stipulated by the parties of both the creditor and the debtor.
c) judicial- fixed by the courts Case: de Leon vs Syjuco
3. definite or indefinite
a) definite- the date or time is known ***If the tenor of the obligation or from other
beforehand circumstances that the term or period has been
b) indefinite- can only be determined by established in favor of the creditor or of the debtor,
an even which must necessarily come the general rule will not apply.
to pass, although it may not be known
when Judicial term or period
(Art. 1197)
effects of term or period:
suspensive the demandability of the obligation Judicial term or period- when fixed by a
term or period is extinguished, not the acquisition competent court, the period can no longer be
of right or the effectivity of the judicially changed (Art. 1197, par. 3).
obligation. -becomes a law governing the contract
between the party
Resulotory The fulfillment or performance of
term or period the obligation is demandable at Cases when court can fix term:
once, but it is extinguished or • if the obligation does not fox a period, but it
terminated upon the arrival of the can be inferred that a period was intended
day certain or the expiration of the by the parties
term. ◦ cannot be applied to contract for
Case: PNB vs Lopez Vito services in which no period was fixed
by the parties. In such contracts the
***Acceleration clause is a clause where upon period of employment is understood to
default of the debtor with one or more payment will be implicitly fixed, in default of express
make the whole obligation demandable. This is a stipulation, by the period of the
valid provision in contracts. payment of the salary of the employee,
in accordance with the custom
Effect of fortuitous event- relieve the contracting universally observed throughout the
parties from the fulfillment of their respective world.
obligations during the term or period. ◦ cannot be applied to pure obligations
Case: Victoria's Planters vs Victorias Milling • if the duration of the period depends upon
Co. the will of the debtor
◦ just and logical, because otherwise,
effect of advance payment or delivery- obligor
there would always be the possibility
can recover what he has paid or delivered with
that the obligation will never be fulfilled
fruits or interests. (Art. 1195)
or performed.
-applicable only to obligations to give
• if the debtor binds himself to pay when his
***There can be no right of recovery if the obligor means permit him to do so.
delivers the thing voluntarily or with knowledge of Case: Gonzales vs Jose
the period or term or the fact that the obligation has
not yet become due and demandable. ***No other action can prosper unless the court
has fixed the duration of the term or period.

(Art. 1196) ***In potestative term or period, in order to prevent


the obligation contracted from becoming ineffective
General rule: a period designated for the by non fulfillment, the courts must fix the duration
performance or fulfillment of an obligation is of the term or period.
presumed to have been established for the benefit
***So long as such period has not been fixed by

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AUF School of Law Obligations and Contract

the court, legally there can be no possibility of any obligation pure and without any
breach of contract or of failure to perform the condition, and consequently, the loan
obligation. Such cannot be raised for the first time become due and demandable.
on appeal.
(3) When by his own acts he has impaired said
***Art. 1197 applies to a lease agreement, where a guaranties or securities after their
contract of lease clearly exists. establishment, and when through a
fortuitous event they disappear, unless he
***It is not necessary that the creditor will expressly immediately gives new ones equally
ask in the complaint for the court to fix the period, satisfactory;
such may be granted although the complaint does (a) there is a difference between effects of
not ask for such relief. impairment and effects of
disappearance
***Two ultimate facts that need to be alleged in the 1. if the guaranty or security is
complaint to describe an obligation with an impaired through the fault of the
indefinite period. debtor, he shall lose his right to the
1. Facts showing that the contract was benefit of the period;
entered imposing on one of the parties an 2. if it is impaired without his fault, he
obligation in favor of the other shall retain his right;
2. facts showing that the performance of the 3. if the guaranty or security
obligation was left to the will of the obligor, disappears through any cause,
or clearly showing, or from which an even without the fault of the debtor,
inference can be reasonably drawn that a he shall lose his right to the benefit
period was intended. of the period
4. in either case of impairment or
***The action recognized by Art. 1197 may also disappearance, the debtor will not
prescribe like any ordinary civil action. (Gonzales lose his right to period if he gives a
vs Jose) new guaranty or security which is
equally satisfactory.
Extinguishment of Debtor's right to Period
(Art. 1198) (4) When the debtor violates any undertaking,
in consideration of which the creditor
(1) When after the obligation has been agreed to the period;
contracted, he becomes insolvent, unless
he gives a guaranty or security for the debt; (5) When the debtor attempts to abscond.
(a) insolvency needs no judicial (a) Mere attempt of the debtor disappear
declaration or run away from his obligation.
(b) includes any case in which it would be
impossible financially for the debtor to Sec. 3. - Alternative and Facultative Obligations
comply with his obligations
(c) such insolvency must not be pre- 5. Conjunctive vs Alternative
existing; arose after the constitution of Conjunctive Alternative
the obligation
(d) if there is a guaranty or security for the there are several there are several
debt, the debtor, in spite of insolvency, conditions, all of which conditions but only one
does not lose his right to the period. must be realized must be realized.

(2) When he does not furnish to the creditor


the guaranties or securities which he has Conjunctive obligation- all of the objects of the
promised; obligation are demandable at the same time
(a) such failure renders the original

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AUF School of Law Obligations and Contract

distributive obligation- when only one object of ***Par. 2 of Art. 1200 contemplates a case in which
the obligation is demandable. the right to choose or select is NOT lost or
• Alternative- comprehends several objects extinguished altogether.
or prestation which are due, but it may be
complied with by the delivery or
performance of only one of them. (Art. 1201)
◦ Performance of one of the obligation is ***Applicable to cases in which the choice is
sufficient dependent on the debtor, creditor, or third person.
• Facultative- comprehends only one object
or prestation which is due, but it may be ***Communication is needed to make the choice
complied with by the delivery of another effective.
object or the performance of another
prestation in substitution. ***No special form for the communication or
notification of choice, although it is always better to
Alternative Obligations make the notification either in a notarized
(Art. 1200) document or in any other authentic writing.

General rule: The right of choice belongs or ***Debatable: Can the creditor to whom the
pertains to the debtor. selection has been duly communicated impugn
such selection?
***Once the debtor has made the choice, and such
choice is duly communicated to the creditor, the
obligation becomes simple. ***Once the choice is made by the debtor (or
creditor, or 3rd person) and such selection has been
communicated, the obligation ceases to be
Exceptions: alternative. The loss of the object of prestation
• when the right of choice belongs or chosen and communicated extinguishes the
pertains to the creditor liability.
• when it has been expressly granted to a
third person. (Art. 1202)

Limitation to the right of choice: ***When only one prestation is practicable, the
• debtor cannot choose those prestations or debtor loses his right of choice altogether. The
obligation becomes simple.
undertakings that are impossible, unlawful,
or which could not have been the object of
the obligation. Art. 1202 Art. 1200, par. 2
Only one prestation There are still two or
“Prestations which could not have been the object which can be performed more prestations that
of prestation” can be performed.
• undertakings that are not included among
Obligation is converted The obligation is still
others those from which the obligor may
to a simple one alternative because the
select, or
because the debtor debtor can still exercise
• those which are not yet due and
loses his right of his right of election.
demandable at the time the selection is
election
made, or
• those by reason of accident or some other
cause, have acquired a new character
distinct or different from that contemplated ***When the debtor's right of choice is rendered
by the parties when the obligation was ineffective through the creditor's fault, the only
constituted. possible remedy for the debtor is to bring an action
for the rescission of the contract with damages.

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AUF School of Law Obligations and Contract

(Art. 1203) Does not give Effect of May give rise to


rise to liability on culpable a liability on the
Art. 1204 Art. 1205 the part of the loss part of the debtor
debtor
Right of choice of Right of choice of
debtor Creditor
General rule exception ***Art. 1201 is applicable by analogy with respect
to the time or moment when the substitution will
Factors to consider in knowing the effect of loss of take effect.
the object of prestation
• to whom the right of choice belong? ***Communication is needed to make the
• What is the cause of the loss of the object substitution effective.
of prestation? (fortuitous event or fault of
the debtor) ***Whatever may be the cause of the loss or
deterioration of the thing intended as a substitute,
(for Summary of Effects of Loss of Obligation, see such loss shall not render the debtor liable. - Dean
Annex “A” ) Capistrano

Facultative Obligations ***Once the substitution has been made, the


(Art. 1206) debtor shall be liable for the loss or deterioration of
the substitute on account of his delay, negligence,
Facultative obligation- obligation wherein only or fraud.
one object or prestation has been agreed upon by
the parties to the obligation, but which may be ***Once the substitution is made, the obligation is
complied with by the delivery of another object or converted into a simple one.
the performance of another prestation in
substitution. Sec. 4. - Joint and Solidary Obligations

Facultative vs Alternative Joint obligation - obligation where there is a


concurrence of several creditors, or of several
Only one object Object due Several objects debtors, or of several creditors and debtors, by
By the delivery compliance By the delivery of virtue of which each of the creditors has a right to
of another object one of the demand, and each of the debtors is bound to
or by the objects or by the render, compliance with his proportionate part of
performance of performance of the prestation which constitutes the obligation
another one of the – obligacion mancomunada
prestation in prestations which
substitution are alternatively Solidary obligation – obligation where there is a
due. concurrence of several creditors, or of several
debtors, or of several creditors and debtors, by
Pertains only to choice May pertain to virtue of which each of the creditors has a right to
the debtor the debtor, or demand, and each of the debtors is bound to
creditor, or third render, entire compliance with the prestation which
person constitutes the obligation
Loss or Effect of Loss of all the – obligacion solidaria
impossibility of fortuitous objects of
the object loss prestation is Collective Obligations
extinguishes the necessary to (Art. 1207)
obligation extinguish the
obligation General rule: If there is a concurrence of several
creditors, or of several debtors, or of several

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AUF School of Law Obligations and Contract

creditors and debtors,the presumption is that the debtors, although each is necessary for the
obligation is JOINT and not solidary. for his own share enforcement of the
Exceptions: obligation.
1. when the obligation expressly states that
there is solidarity; The obligation can be Not susceptible of
➢ “jointly and severally” enforced only by partial fulfillment.
proceeding against all
➢ “individually and collectively”
the debtors
2. when the law requires solidarity; and,
➢ Art. 927, 1824, 1911, 1915, 2146,
***If one of the joint debtors fails to comply with his
2157, and 2194 NCC
undertaking, the obligation can no longer be
➢ Art. 110, RPC
fulfilled or performed.
3. when the nature of the obligation requires
solidarity.
***The debtors who are ready to fulfill what was
➢ Obligations arising from criminal
incumbent upon them shall not contribute to the
offenses or torts indemnity beyond the corresponding portion of the
price of the thing or of the value of the service in
Joint Divisible Obligations which the obligation consists. (Art. 1224)
(Art. 1208)
***Each creditor can demand only for the payment ***If one of the joint debtors be insolvent, the
of his proportionate share of the credit, while the others shall not be liable for his share.
debtors can be held liable only for the payment of
his proportionate share of the debt. ***Debatable: If there are two or more creditors or
debtors, will the claim of a creditor addressed to a
***Joint creditor cannot act in representation of the single debtor or the acknowledgment made by one
others; neither can debtor be compelled to answer of the debtors in favor of one or more creditors be
for the liability of the others. sufficient to interrupt the period of prescription?
***The payment or acknowledgement by one of the
joint debtors will not stop the running of the period ***Indivisibility and solidarity are NOT identical.
of prescription as to the others.
Indivisibility vs Solidarity
Joint Indivisible Obligations Prestation nature Legal tie or
(Art. 1209) which vinculum, and
constitute the consequently to
-midway between joint and solidary obligations object of the the parties of
characteristics: obligation. the obligation.
• no creditor can act in representation of the
Plurality of requisites Plurality of
other subjects not subjects is
• no debtor can be compelled to answer for required indispensable.
the liability of the others.
Terminated Effect of Remains even
– joint with respect of the parties when the breach though there is
– indivisible with respect the fulfillment of the obligation is a liability on the
obligation converted into part of the
one of debtors
indemnity for because of
2 or more debtors 2 or more creditors damages breach.
The fulfillment of or The concurrence or
compliance with the collective act of all the Kinds of solidarity
obligation requires the creditors, although • active – among creditors
concurrence of all the each for his own share,

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AUF School of Law Obligations and Contract

◦ tie or vinculum existing among several Liable for the payment Liable for the debt of
creditors of one and the same of the debt of another another.
obligations by virtue of which each of but also for the payment
them, in relation to his co-creditors, of a debt which is
possesses the character of a creditor properly his own.
only with respect to his share of the
obligation but in relation to other debtor If he pays the entire If the surety pays the
or debtors, represents all other obligation, he has a entire obligation, he
creditors. right to demand acquires a right to
◦ Mutual representation reimbursement from his reimbursement from the
co-debtor of their share principal debtor of the
• passive – among debtors
in the obligation. entire amount he has
◦ tie or vinculum existing among several paid.
debtors of one and the same
obligations by virtue of which each of An extension of time An extension of time
them, in relation to his co-debtors, granted by the creditor granted by the creditor
possesses the character of a debtor to one of the solidary to the principal debtor
only with respect to his share of the debtors without the would release the
obligation, but in relation to other knowledge of the other surety from the
creditor or creditors, represents all solidary debtors would obligation.
other debtors. not have the effect of
◦ each solidarity debtors, as far as the releasing the latter from
creditors are concerned, is the debtor their obligation.
to the entire amount
• mixed – among creditors and debtors
***Uniform bond or tie- when the creditors and
debtors are bound in the same manner and by the
fundamental effect of active solidarity- creation same conditions or periods.
of a relationship of mutual agency among
solidary creditors by virtue of which the creditor is ***Varied bond or tie- when the creditors and
empowered against the debtor or debtors not only debtors are not bound in the same manner and by
the rights which corresponds to him, but also all the same conditions or periods.
the rights which correspond to the other creditors,
with the consequent obligation to render an ***In Art. 1211, the right of the creditor is limited to
accounting of his acts to such creditors. the recovery of the share owed by the debtor
(equal mutual representation) whose obligation has become mature leaving in
suspense his right to recover the shares
***relationship of mutual agency, basis of the corresponding to the debtors whose obligations
difference of the rules in Art. 1212 and 1215. have not yet matured.
Case: Inchausti & Co. vs Yulo
fundamental effect of passive solidarity- liability
of each debtor for the payment of the entire (Art. 1212)
obligation, with the consequent right to demand
reimbursement from the others for their Effects of Prejudicial acts of a creditor to...
corresponding shares, once payment has been • debtor/debtors – valid and binding because
made. of the principle of mutual representation
which exists among the creditors
Passive solidary Surety • solidary creditors – the creditor who
debtor performed the act shall incur the obligation
of indemnifying the others for damages.
Both are solidarily liable to the creditor for the
payment of the entire obligations ***Art. 1212 refers to effect of prejudicial acts upon

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AUF School of Law Obligations and Contract

the relationship of the creditor among themselves.

***Art. 1215 refers to the effect of prejudicial acts (Art. 1215)


upon the entirely different relationship of the Novation – change or substitution of an obligation
creditors with the debtor or debtors. Shall result in by another, resulting in its extinguishment or
the extinguishment of the obligation modification, either by...
• changing its object or principal condition, or
***Prejudicial acts: ◦ if prejudicial – the creditor who effected
• novation the novation shall reimburse the others
• compensation for damages incurred by them
• confusion ◦ if beneficial – the creditor who effected
• remission the novation is able to secure
performance of the new obligation,
***The act of extinguishment, which is prejudicial to such creditor shall be liable to the
the co-creditors, will be valid so as to extinguish others for the share which corresponds
the claim against the debtors, but not with respect to them, not only in the obligation, but
to the co-creditors whose right subsists and can be also in the benefits.
enforced against the creditor who performed the • substituting another in place of the debtor,
act alone. or creditor shall be liable to the acts of the
Assignment of right new debtor in case there is a deficiency in
(Art. 1213) performance or in case damage is incurred
by the other solidary creditors
***Consent of other creditors in the assignment of • subrogating a third person in the rights of
rights by another solidary creditor is needed. the creditor.
◦ The obligation of the debtor and
***mutual agency creditor is not in reality extinguished.
Effects if assigned without the consent: ◦ If effected by subrogating a third
1. if assigned to another co-creditor, there is person in the rights of all the solidary
no violation of the precept stated in Art. creditors, the creditor liable for such
1213; Valid assignment novation is liable to the creditors for the
2. if the assignment is made to a third person, share which corresponds to them in the
there is a violation of the precept in Art. obligation.
1213; Invalid assignment
– extinguishes the obligation but it creates a
new one in lieu of the old.
(Art. 1214)
– The co-creditor who does not participate in
***Any creditor may demand (judicial or extra
the novation of the obligation can have a
judicial) the payment or performance of the
share in the benefits of the modification but
obligation from one, some, or all of the debtors.
not in possible losses.
***Payment to be made on the creditor who made
General rule: Extension of time for the payment of
the demand and to no other. If there is no demand,
the obligation does not constitute novation.
payment may be made by the debtor to anyone of
the solidary creditors.
***needed in order that an obligation may be
extinguished by another which substitutes it.
***In mixed solidarity, judicial or extra judicial
• Express declaration of novation
demand prohibits the debtor upon whom the
demand is made from making payment to any • incompatibility of the old and new
creditor other than to the one who made the obligation.
demand; does not extend to other debtors upon
whom no demand has been made. ***In suretyship, extension of time given to the

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AUF School of Law Obligations and Contract

principal debtor by the creditor without the consent the creditors proceed against any one
of the surety extinguishes the latter's liability, of the solidary debtors for the payment
except when the surety is liable for different of the entire obligation.
payments or upon series of installments.
***Such rules cannot be applied if the debt had
Compensation – weighing two obligations already been totally paid by anyone of the solidary
simultaneously in order to extinguish them to the debtors before the remission is effected.
extent that the amount of one is covered by the
amount of the other. ***If one of the solidary creditor was able to collect
the entire amount from one or some, or all of the
Confusion – refers to the merger of the qualities of solidary debtors, the obligation is totally
creditor and debtor in one and the same person extinguished and that creditor must render an
with respect to one and the same obligation. account to his co-creditors.

Partial compensation or confusion:


• there may be some doubt as to the part of
the obligation to which the confusion or
compensation shall be applied.
• Apply the rules on Application of payment
(Art. 1216)
Total compensation or confusion:
• obligation is extinguished altogether and ***Creditor may proceed against any one, or some,
what is left is the ensuing liability for or all of the solidary debtors simultaneously.
reimbursement within each group
***Bringing of an action against the principal debtor
Remission – act of pure liberality by virtue of to enforce the payment of the obligation is not
which the creditor, without having received any inconsistent with, and does not preclude the
compensation or equivalent, renounces his right to bringing of another to compel the surety to fulfill hid
enforce the obligation, thereby extinguishing the obligation under the surety agreement.
same either in its entirety or in the part or aspect
thereof to which the remission refers. ***A creditor's right to proceed against the surety
exist independently of his right to proceed against
Effects: the principal.
• covers entire obligation:
◦ total extinguishment of the obligation. ***if the obligation is joint and several, the surety
◦ the entire juridical relation is terminated has the right to proceed even against the surety
alone.
• for the benefit of one of the debtors and
covers his entire share of the obligation. ***obligation of the surety is the same as that of a
◦ Totally releases the debtor from the principal.
creditors.
◦ But the debtor is still bound to his co- ***The surety is not entitled, as a matter of right, to
debtors be given notice of the principal's default.
• for the benefit of one of the debtors and Commencement of the suit is a sufficient demand.
covers only a part of his share of the
obligation. (Art. 1217)
◦ His character as a solidary debtor is not
affected ***Where payment is made by one of the solidary
• covers the entire share of a solidary debtor debtors, the effect is either the total of partial
in the obligation or only part thereof. extinguishment depending upon whether the entire
◦ Partial remission is a valid defense if amount of the debt is paid or only part thereof.

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AUF School of Law Obligations and Contract

***The creditor/s may proceed against any of the


***Once payment is made by one of the solidary solidary debtors or all of them simultaneously for
debtors of the entire obligation,, there arises the payment of the obligation, but whether only one
immediately a consequent right of such debtor to or all of the solidary debtors are sued jointly, any
claim from his co-debtors the share which soliadary debtor may interpose against the claim of
corresponds to them, with interest for the payment the creditor or creditors:
already made.
Defenses available to a solidary debtor
***the right is not available to a debtor who makes • defenses derived from the very nature of
the payment after the obligation has prescribed or the obligation
has become illegal. ◦ payment or performance; res judicata;
prescription; those which invalidate the
***The interest shall be computed not from the time contract such as mistake, violence,
payment was made, but from the time the debt undue influence, fraud, etc...
became due. • defenses personal to him or pertaining to
his own share
If one of the solidary debtors become insolvent, his ◦ minority; insanity, etc..
share shall be borne by all his co-debtors, in • defenses personal to the others, but only
proportion to the debt of each. (par. 3, Art. 1217) as regards that part of the debt for which
the latter are responsible.
(Art. 1219 – 1221) ◦ Merely a partial defense
Effect of Loss or Impossibility of Performance
Sec. 5 – Divisible and Indivisible Obligations
1. NOT due to the fault of the solidary
debtors
6. Divisible vs Indivisible
• Obligation is extinguished
2. Due to the fault of one of the solidary Divisible Indivisible
debtors condition is susceptible condition is not
• the obligation is converted into an of partial realization or susceptible to partial
obligation of indemnity for damages, performance without the realization or
but the solidary character of the obligation in essence performance because,
obligation remains being changed. otherwise, the essence
3. Fortuitous event of the obligation will be
• the obligation is converted into an changed.
obligation of indemnity for damages, If separated into parts, If separated into parts,
but the solidary character of the its essence is not its essence is changed
obligation remains changed or its value is or its value decreased
not decreased disproportionately.
unjust enrichment – reason or philosophy behind disproportionately,
Art. 1220 because each of the
parts into which it is
***a solidary debtor who paid the entire amount of divided are
the obligation does not step into the shoes homogeneous and
(subrogation) of the creditors because he does not analogous to each
acquire the same right to collect the entire amount other as well as the
of the obligation from his co-debtors. He is only thing itself.
entitled to the proportionate share of each of the
co-debtors.
The divisibility of the [performance] obligation IS
NOT divisibility of the thing or the prestation which
(Art. 1222) constitutes the object of the obligation.

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AUF School of Law Obligations and Contract

***The divisibility or indivisibility of the object itself (Art. 1224)


is a very important factor, probably the most Breach of joint indivisible obligation
important, in determining whether the prestation – the obligation can be enforced only by
which constitutes the object of the obligation is proceeding against all of the debtors
susceptible to partial performance, or not. – if any of the debtors fails or refuse to
comply with the obligation, it is converted
***For a thing to be considered divisible, it is into indemnity for damages
important that it must be possible for reconstruction – the debtor who failed or refused to comply
into its condition prior the division, by uniting the with his obligation shall bear the burden of
different parts into which it had been divided. paying all of the damages suffered by the
creditors
Three kinds of Division – the other debtor may also recover for
• Quantitative – when the thing can me damages form the debtor at fault.
materially divided into parts and such parts
are homogeneous to each other.
◦ Movable- parts are actually separated (Art. 1225)
from each other True test of divisibility: WON the obligation is
◦ immovable- the limits of the parts are susceptible of partial compliance.
fixed by metes and bounds
• Qualitative – the thing can be materially ***The susceptibility of partial compliance should
divided but the parts are not exactly be understood in the sense of the possibility of
homogeneous. (i.e inheritance) realizing the end or purpose which the obligation
• Ideal/Intellectual – the thing can only be seeks to attain. (Applies to obligations to give, to
do, or not to do)
separated into ideal or intellectual parts,
not material parts. (i.e. co-ownership)
To give
The divisibility or indivisibility of the obligation is the
(Art. 1223)
most important factor.
One debtor one creditor- the divisibility is of little
significance. • definite & indivisible object- not susceptible
General Rule: the creditor cannot be compelled to of partial fulfillment (Absolute rule)
partially receive the prestation in which the • divisible object- susceptible of partial
obligation consists; neither may the debtor may the performance. except:
required to make partial fulfillment. ◦ when the law provides for its
Exceptions: indivisibility which may be inferred or
• when the obligation expressly stipulates presumed either;
the contrary ▪ from the fact that although the
• when the different prestations constituting object of the obligation can be
the objects of the obligation are subject to separated in parts, yet each part
different terms and conditions. constitutes a necessary
• When the obligation is in part liquidated complement of the other parts
and in part unliquidated. ▪ from the very purpose of the
obligation itself
Plurality of debtors and creditors- the effect of the ◦ it is so intended by the parties
divisibility or indivisibility of the obligation shall ▪ express
depend whether the obligation is joint or solidary. ▪ implied
• Joint –
◦ Divisible- Art. 1208 shall apply To Do
◦ Indivisible- Art. 1209 and 1224 • indivisible prestation- not susceptible of
• Solidary – Art. 1211- 1222 shall apply partial fulfillment (Absolute rule)

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AUF School of Law Obligations and Contract

◦ In order to determine whether the Kinds of penalty


prestation is divisible or not, the object As to origin
or purpose of the obligation must
always be considered Legal Conventional
▪ it is divisible when it has for its Constituted by law Constituted by
object... agreement of the
1. the execution of a certain number or parties
days of work, As to purpose
2. the accomplishment of work by
metrical units; or Compensatory Punitive
3. the accomplishment of analogous (for reparation)
things which by their nature are Established for the Established for the
susceptible of partial performance. purpose of indemnifying purpose of punishing
the damages suffered the the obligor or debtor
• Divisible prestation- susceptible of partial by the obligee or in case of breach
fulfillment, with certain qualifications. creditor in case of
◦ when the law provides for its breach
indivisibility
As to Effect
◦ it is so intended by the parties
Subsidiary/Alternative Joint/Cumulative
Not to Do Only the penalty may be both the penalty and the
• The determination of the character of the demanded in case of principal obligation may
obligation will depend upon the sound breach be demanded
discretion of the court
(Art. 1226)
***Penalty may be considered as reparation or
Sec. 6 – Obligations with Penal Clause
substitute for damages or as a punishment in case
– one in which an accessory undertaking is
of breach of the obligation.
attached for the purpose of insuring its
performance by virtue of which the obligor Reparation – the question of damage is resolved,
bound to pay a stipulated indemnity or since the stipulated indemnity or prestation
perform a stipulated prestation in case of represents a legitimate estimate made by the
breach. contracting parties of the damages caused by the
– Penalty or penal clause is an accessory breach of the obligation.
obligation attached to the principal – proof of actual damage is not needed
obligation – general rule
Purposes of penalty:
Punishment – the question of damage is not yet
• insure the performance of the obligation resolved
(funcion coercitiva o de garantia); general – the right to damages, aside from
purpose penalty, still subsists
• liquidate the amount of damages to be – if the injured party desires to recover the
awarded to the injured party in case of damages actually suffered by him in
breach of the principal obligation (funcion addition to the penalty, he must prove such
liquidatoria); compensatory; pre-agreed damages.
amount for the damages – Exception to the general rule
• to punish the obligor in case of breach of
the principal obligation (funcion General Rule: the penalty is fixed by the parties as
estrictamente penal); punitive a compensation or substitute for damages in case
of breach.

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AUF School of Law Obligations and Contract

Except: irregularly complied with


1. when there is a stipulation to the contrary ◦ all the prestations were complied with
2. when the obligor is sued for refusal to pay but not in accordance with the tenor of
the agreed penalty the agreement
3. when the obligor is guilty of fraud ◦ refers to the form
◦ (see Art. 1170) • if the penalty is iniquitous or
(the purpose of the penalty is to punish the obligor) unconscionable.
***The obligee can recover from the obligor not
only the penalty, but also the damages or interests ***The creditor cannot recover more than the
resulting from the breach of the principal obligation penalty stipulated even if he proves that the
damage suffered by him exceed in amount such
where both parties were unable to comply with penalty.(the amount is already agreed upon)
their obligation (fortuitous event), th penal clause
cannot be invoked by anyone of them to the (Art. 1230)
prejudice of the other. ***If the principal obligation is void, the penal
clause is also void.
(Art. 1227)
***The debtor cannot exempt himself form the ***if the penal clause is void, the principal
performance of the principal obligation by paying obligation is not affected.
the stipulated penalty. Unless the right has been
expressly and clearly granted to him. Chapter 4
EXTINGUISHMENT OF OBLIGATIONS
***(what happens to the obligation if the right to
choose to pay the penalty in substitute of the (Art. 1231)
principal obligation has been granted to the debtor, modes of extinguishing obligations
is the obligation converted to facultative obligation • payment or performance
or does it remain an obligation with a penal • loss of the thing due
clause?) • condonation or remission of the debt
• confusion
***The creditor cannot demand the fulfillment of the
• compensation
principal obligation and the satisfaction of the
stipulated penalty at the same time. Unless the • novation
right must be clearly granted to him. • annulment
– if there is fault on the part of the debtor, the • rescission
creditor can demand not only the • fulfillment of a resolutory condition
satisfaction of the penalty but also the • prescription
payment for damages. • --renunciation or waiver by the creditor
• compromise
(Art. 1228) • expiration of the resolutory term or
***Applicable only to the general rule in Art 1226 condition
and not to the exceptions. • death of one of the contracting parties
(personal obligations)
(Art. 1229) • will of one of the contracting parties
the penalty may be reduced: • mutual assent or dissent
• if the principal obligation has been partly
complied with Sec. 1 – Payment or Performance
◦ some but not all the prestation are
complied with by the debtor (Art. 1232)
◦ refers to the quantity or quality of the Payment –
performance • fulfillment of the obligation either voluntarily
• if the principal obligation has been or involuntarily, including its extinguishment

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AUF School of Law Obligations and Contract

by any means or modes person who pays the redemption price in


• consists in the normal and voluntary sales with right to repurchase, because a
fulfillment of the obligation by the vendor a retro is not a debtor within the
realization of the purpose for which it meaning of the law.
was constituted.
◦ Includes performance in any other Rights of a 3rd person
manner, of an obligation. (with the knowledge and consent of the debtor)
• Fulfillment of the obligation by the delivery • right of reimbursement – recover from the
of a sum of money. debtor the entire amount which he has
paid.
(Art. 1233-1235) • right of subrogation
General Rule: there should be complete (without the knowledge and consent of the debtor)
performance. (Art. 1233) • right of reimbursement – recover only
Except: insofar as the payment has been beneficial
• substantial performance in good faith to the debtor
◦ the debtor may recover as though there ***If the obligation has been previously
has been a strict and complete extinguished by any mode, the 3 rd person may
fulfillment, less damages suffered by proceed against the creditor based on the principle
the creditor. (Art. 1234) of unjust enrichment.
◦ Case: Diesel Construction vs UPSI
• When the obligee accepts the performance Gratuitous payments – payments effected by a
knowing its incompleteness or irregularity, third person who does not intend to be reimbursed
without expressing any objection or protest. by the debtor.
(Art. 1235) – consent of the debtor is
◦ Based on the principle of estoppel necessary. There is no gift if the
• when the obligation has been converted gift was not accepted by the
into an indemnification (falls under Art. debtor.
1233) – If the consent is SECURED
rules on ordinary donation will
(Art. 1236-1238) apply
General Rule: Creditor is not bound to accept – if the consent is NOT
payment or performance by a third person. This is SECURED, Art. 1236 and 1237
because the creditor may not have confidence in will apply.
the honesty of the 3rd person who might deliver a – Such gratuitous payments are
defective thing or pay with a check which may not valid as far as the creditor is
be honored. concerned.(Art. 1238) so the 3rd
Except: person who offered the gift but
• when it is made by a 3 rd person who has was declined by the debtor can
interest in the fulfillment of the obligation. compel the debtor to reimburse
(joint debtor, guarantor, surety) him (3rd person) the amount
• when there is a stipulation to the contrary accepted by the creditor.

(Art. 1239)
persons who may pay obligation:
***It is essential that the person who pays the
• the debtor himself or his legal
obligation should have the necessary legal
representatives capacity to effect such payment.
• any third person who have an interest in – free disposal of the thing due
the fulfillment of the obligation. (subject to
– capacity to alienate the thing
some juridical effects)
effect of absence of one or another will effect the
invalidity of payment
– Art.1236-1237 are not applicable to a third

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AUF School of Law Obligations and Contract

***Even if the creditor has already accepted the


payment, it may still be annulled by proper action (Art. 1241)
in court, subject to the exception provided in Art. payment to incapacitated person is valid:
1427.(But such provision has already been • if he has kept the amount or thing paid or
modified when the age of majority has been delivered
lowered to 18 y.o ) • insofar as the payment has been beneficial
(Art. 1240) to him.
to whom payment must be made ◦ The payment is beneficial to him
• person in whose favor the obligation has (incapacitated) when that which has
been constituted been paid or delivered is applied or
• his successor in interest spent for some rational, necessary or
• any person authorized to receive payment useful purpose for his benefit.
◦ by the creditor himself (conventional ***These rules are applicable only to obligations to
authority) give.
◦ by law or legal authority (guardian,
executor or administrator of the estate (Art. 1243)
of a deceased person, assignee or ***Payment by the debtor to the creditor after
liquidator of a partnership or having been judicially ordered to retain the debt is
corporation) invalid.
General rule:payment to unauthorized person is – such payment must be made to the proper
invalid. Exceptions: officer of the court issuing the writ of
• payment made to a 3rd person, provided attachment or garnishment in conformity
that it has redounded to the benefit of the with the Rules of Court.
creditor. This can be invoked through the
following proofs: (Art. 1241) (Art. 1244-1246)
◦ if after payment, the 3rd person obligation to give specific or determinate thing –
acquires the creditor's rights the debtor cannot fulfill his obligation by delivering
◦ if the creditor ratifies the payment to the a thing which is different from what is due although
3rd person such may be of the same value or even more
◦ if by the creditor's conduct, the debtor valuable than that which is due.
has been led to believe that the 3 rd
person has authority to receive the Obligation to do or not to do – the obligor cannot
payment fulfill his obligation by substituting another act or
forbearance.
• Payment made to the possessor of the
credit, provided that it was made in good ***if the creditor or obligor accepts the delivery or
faith. (Art. 1242) substitution, such acceptance shall give the same
◦ Valid payment to the possessor of the effect as a fulfillment or performance of the
credit does not refer to possessor of obligation.
the document evidencing it.
◦ the remedy of the creditor would be to Dation in payment (dacion en pago) –
proceed against the possessor if credit transmission of the ownership of a thing by the
to whom payment was improperly debtor to the creditor as an accepted equivalent of
made. the performance of the obligation.
– Property is alienated to the creditor in
***Although the payment is not valid because it is satisfaction of a debt in money;
not made to a person authorized to receive – law on sales shall govern (Art. 1245);
payment, nevertheless it is clear that the vendee – exception in Art. 1244
had acted in good faith; he can not therefore be
said to have incurred in delay; consequently, the (Art. 1247)
vendor cannot ask for rescission of the contract. extra judicial expenses – for the account of the

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AUF School of Law Obligations and Contract

debtor – in the Phil., legal tender would be notes


judicial costs – Rules of Court will govern and coins issued by the Central Bank.
– Promissory notes payable to order or bills
***If the debtor changed his domicile in bad faith or of exchange, checks, etc. are not legal
after he has incurred in delay, the additional tender
expenses shall be borne by him.
Rule: the debtor cannot compel the creditor to
(Art. 1248) accept a check or draft. Except:
3 conditions or characteristics of payment: • when the document has been cashed
• identity – only the prestation agreed upon • when it had been impaired through the fault
and no other must be complied with of the creditor.
• completeness – the thing or service in
which the obligation consists must be (Art. 1250)
completely delivered or rendered ***In case of extraordinary inflation or deflation, the
• indivisibility – the payment or performance value of the currency at the time of the
must be indivisible establishment of the obligation would be the basis
of payment.
General Rule: Art. 1248 is applicable only to
obligation where there is one debtor and one Extraordinary inflation or deflation\
creditor. Exceptions: – unusual or beyond the common fluctuation
• when the obligation expressly states the in the value of the currency which the
contrary parties could not have been foreseen when
• when the different prestations which the obligation was established. (Tolentino)
constitutes the objects of the obligation are – uncommon decrease or increase in the
subject to different terms and conditions purchasing power of the currency which
• when the obligation is in part liquidated and could not have been reasonably foreseen.
in part unliquidated. (Dean Capistrano)
***Art. 1250 is applicable only to contractual
(Art. 1249) obligations and not to obligations arising from torts.
***A judgment awarding an amount in US dollar
may be made with its equivalent amount in local ***requisites for Ballantyne schedule to apply:
currency in the conversion rate prevailing at the • obligation should have been contracted
time of payment. The trial court should determine during the Japanese occupation
the the conversion rate if the parties cannot agree • it could have been paid during the
on the same. (Zagala vs Jimenez) Japanese occupation
RA 529 – An Act to assure the uniform value of • it could have been paid with Japanese
Philippine Coins and Currency. military notes
– the rule that payment of debts imoney shall
be made in the currency stipulated was (Art. 1251)
completely abrogated. Place of payment:
RA 4100 – amending RA 529 Obligation Place of payment
– the law prohibiting stipulations in domestic
monetary obligations purporting to give the deliver a determinate Place where the thing
obligee the right to require payment in thing might be at the time the
currency other than the Phil. currency does obligation was
not apply to transactions listed on pp. 246, constituted
Obligations and Contracts, Jurado. Any other case Domicile of the debtor
(unilateral obligations)
Legal tender – currency which may be used for the
payment of all debts, whether public or private

jmvdg 31 2nd Semester/2009-2010