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Alternative obligation

General Rule= 2 or more prestations are established between the parties from the
moment that the obligation was created.
Full performance of only one will extinguished the obligation and the others cannot be
performed.
As a rule the debtor exercises the right to choose, such right cannot be subject to
abuse and the debtor cannot choose something that is illegal, unlawful, or one that is not
contemplated or intended by the parties to the obligation. If the debtor abuses his right
to choose and to select any of the prestations then the creditor may rescind the
obligation and demand for damages.
In making the choice the debtor has three options as to form. The debtor may
exercise the right of choice by:
1. Express selection- by notifying either by verbally or in writing the creditor of said
choice.
2. Implied selection- as when only one of the prestations is available or can be
performed the others have been extinguished.
3. Constructively- by actual performance of the prestation chosen.
Nonetheless, in exercising the right to selection the debtor has the obligation to notify
and communicate the choice to the creditor and the choice become effective to both
parties only at the moment of said communication. The requirement of the notification is
not for the creditor to oppose or to object or for purpose of obtaining the consent of the
creditor, because the right belongs to the debtor. The only purpose here is to inform the
creditor and afford the creditor an opportunity to question the choice if the same is not in
accordance with the obligation.
Ex.
To convey a condo unit which is 60 sqm
To deliver a specific car
To transfer a specific lot
However the debtor chose to perform the first prestation but only a 15 sqm condo
is being delivered, it was not the same condo unit specified, the right of the creditor is to
question the prestation.
Once the choice has been communicated and is now effective between the parties
the obligation seizes to be alternative became now a simple obligation and from that
moment on creditor may enforce only that obligation. The other prestations are
considered discharged, no longer demandable. Once it became a simple obligation apply
the rule on non-performance or irregular performance for causes of breach.
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It may happen that between the time the obligation was established up to the time of
the fulfillment of the obligation and before a choice is made there may be loss of the
prestation.
Loss before the choice is made:
One or some of the prestations: Due to Fortuitous event: Choose between the remaining
obligation
Due to fault of debtor: same rule applies because after all the
debtor has the right to choose. No liability.
All of the prestations: Due to Fortuitous event: extinguishment
Due to fault of debtor: liability is limited to the value of the prestation that
was lost last.
The right to choose may be given to the creditor on the following circumstances:
1. Stipulation in contract
2. Order of the Court
It is also the duty of the creditor to communicate the choice to the debtor, notice
to the debtor is MANDATORY because its the duty of the debtor to perform the said
obligation. It must be communicated with a practicable manner and a reasonable time
before maturity date of the obligation. Nonetheless, the chosen prestation may be
included in the demand served by the creditor to the debtor. The creditor cannot also
choose what is illegal, impossible, unlawful or that which is not contemplated in the
obligation. The debtor may rescind if the creditor abuses the right to choose.
Loss before the creditor can make a choice
One or some of the prestations: Due to Fortuitous event: limited to the remainder
and without the liability of the debtor.
Due to fault of debtor: 1. Choose from the remainder
2. Choose the last prestation as to its value +
damages
All of the prestations: Due to Fortuitous event: extinguishment
Due to fault of debtor: value of any of the lost prestations
A third person can be given the right to choose on the following manner:
1. By stipulation of parties in the contract, may come in an arbitral clause, the 3 rd
person may now determine the prestation to be performed.
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2. By provision of law
Ex. ADR, Lupong Tagapamayapa
3. By court order- refer to mediation and there the mediator chose the prestation to be
performed.
Once the 3rd person chose the prestation to be performed the decision id
considered final, executory and binding between the parties. Unless, the decision is
rendered with grave abuse of discretion or with bias, if such case, the parties may now
proceed to litigation and the court will now be the one to choose the prestation. The 3 rd
person must notify both parties, without said notice, debtor cannor be compelled to
perform and cannot be liable for any breach.
Facultative Obligations
There is only one prestation due, which we called as principal prestation. From the
moment the principal prestation, the debtor has already given the right to substitute or
replace.
Debtor has the absolute right to choose between the principal prestation or
substitute prestation. Prior to fulfillfment of the obligation, debtor can choose either of
the two preatation.
Loss prior to choice:
Principal or substitute prestation: No liability even if there is fault or negligence.
Principal and substitute prestation: Debtor is liable
Alternative
Have 2 or more prestations
The right to choose belongs to the
debtor, creditor or 3rd persons

Facultative
Only one prestation but susceptible
of substitution
The right to choose ALWAYS belongs
to the debtor

As To Number Of Debtors Or Creditors An Obligation May Either Be:


INDIVIDUAL debtor or creditor: only one
COLLECTIVE debtor or creditor: 2 or more
1. JOINT OBLIGATIONS
- the obligation is divided into as many parties thereof and each part is
separate and distinct from the others.
May be created as follows:
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1. Stipulated in the contract: Joint or pro rata or proportionately or


individually or separately or man commonada.
2. By Law
3. Presumed or by presumption
Effects: depends or WON the joint obligation is among the debtors or creditors
Joint creditors: each creditor is entitled to demand only his proportionate
share in the obligation and in the absence of the stipulation to the contrary share is
equal.
Example:
Promissory note executed by X to A, B and C, the maturity date is
December 31, 2014. X borrowed the amount of P 12 Million to A, B and C. The obligation
is joint so ones share is separate and distinct from the other. A is entitled to 4M, B is also
entitled to 4M and also C is entitled to 4M. Therefore, joint creditors must make separate
demands upon the debtor in order to enforce the obligation. If A makes a demand only
the share of A is being demanded unless B and C authorized A. The liability when default
is only limited to the person who demanded but not with his co-creditors.
If X paid to A the total of 12 Million and B demanded for the payment
from X, X cannot use as an excuse that he already paid to A, he is liable to pay B the
amount due to him. Remedy of X is to run for A for solutio indebiti.
If only A demanded before the prescriptive period, B and C cannot
demand from X saying that they are with A when the demand was given, X can use as a
defense of prescription.
Joint debtors: each debtor is entitled to pay only their proportionate share in
their debts.
Example:
Promissory Note, A, B and C promised to pay X the amount of 12
Million, X should made a separate demand of 4 Million each from A, B and C. If A
committed a breach only A is liable. If B pays to X, A and C are not released from the
obligation. If C is insolvent X cannot demand for payment from A and B.
If the consent of C was vitiated or he was insane at the time the
promissory note was signed, A and B cannot make a defense that they be released from
the obligation due to the condition of C.
2. SOLIDARY OBLIGATIONS

- regardless of the number of the parties, the whole obligation may be


demanded or enforce by or against only one of the parties.
There is a plurality of parties as well as unity of the prestation. The prestation
must be kept intact and therefore not be divided.
Solidarity cannot be presumed.
May be created by:
1. Stipulations of parties in the contract: solidary or in solidarity
or in solidum or joint or several or together.
Example:
Promissory Note, we A and B promise to pay X.
2. Imposed by law
Under the RPC: arising from co-conspirator
Under the NCC: contract of carriage (maritime), liability of owner
and captain
Quasi-delict: employer and employee, hospital and physician and
staff
Labor Code: Corporation and its officers or directors
Corporation Code: Corporation and directors or sub-owners for
violation of the Corporation Code
3. Final judgment- reasonable discretion imposes solidary obligation
2 Kinds of Solidarity:
1. Active Solidarity- exist between or among several creditors.
Example:
By express stipulation the 12 Million loan contracted by X must
be solidary be in favor of A, B and C. There is only one part of obligation. There is already
a mutual representation between A, B and C.
Prior to maturity, A demanded for 12 Million, the demand is
construed for the whole. If payment was received by A for the obligation, the obligation
of X to B and C is already extinguished, but a new relationship is created, A has the
obligation to give B and C their respective shares.

If A demanded for payment but X paid it to B who ran away, A


can sue X for collection of sum of money and X can sue B for recovery of money.
*The mutual agency is created by law for the benefit of the creditors but not to
prejudice the co-creditors.
If A condoned the payment of X, the obligation is extinguished, A
can now be compelled by B and C to give them their shares.
*condonation- pardon or forgive the obligation
If A condoned the payment but a subsequent payment was made
by X to B, is B obliged to give the share? It depends on which act came first, if the
payment was made first, the condonation will be void and B is obliged to give the share
of A. If the condonation came first but a subsequent demand of payment was made the
payment may be recovered by solution indebiti and that such action is against all the
parties not only to the one who demanded such payment.
If X received several and separate demands from each creditor,
the debtor has a right to choose to whom to give the 12 Million.
2. Passive Solidarity- exist between and among several debtors. One
debtor can be made to pay for the whole obligation.
Example:
A, B and C as expressly stipulated borrowed to X the amount of
12 Million. If X demand for the payment, one debtor may be complied to pay the whole
12 Million. A has the right to demand reimbursement against B and C and now compelled
to pay 4 Million each to A with interest. If after demand for reimbursement, C cannot pay
due to insolvency B is now entitled to pay A 6 Million. In solidary debtors there is mutual
guaranty.
If there is a condonation made by X to A, and payment was made
after by B for the amount of 12 Million, B now can recover the money by filing a case for
recovery of sum of money against X.
If payment was made prior to the condonation, the condonation
is void and subject to reimbursement for the one who paid the obligation and sue X for
damages for fraud.
Payment after the obligation had prescribed does not justify
reimbursement. The obligation was already terminated. The one who pays to X can
proceed after X on the basis of solutio indebiti on the defense of natural obligation.
Defenses of a solidary debtor:
1. Inherent in the nature of the obligation
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-through prescription, illegality or res judicata


Example:

- affirmative defense of X that the obligation has been extinguished by


prescription, illegality or res judicata.
- it can be a complete defense available to all the debtors and may be released
from the obligation.
- prescription= duty of the court is to dimissed, subsequent action is barred.
2. Personal to the defendant-debtor
-vise of consent
Example:

-annulment of 3 Million
-balance of 6 Million will be filed against Y and Z.
- the defense of minority or insanity is only partial, it only invalidate the portion of
the defendant, the remainder should be enforced to the other debtors.
3. Purely personal to a co-debtor
Example:

-liability or obligation is reduced.


- partial defense for obligation only but not to defendant
- balance of 6 Million liable to X and subject to reimbursement to Z.
-partial defense for the obligation only but not to the defendant.
Effect of loss of prestations for solidary debtors:
Loss due to Fortuitous event: obligation is dissolved or extinguished
Fault or negligence of all of them: obligation is converted for one of indemnification=
measured through the value of loss + damages due to negligence or fault
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Fault or negligence of ONLY one of them: creditor may proceed against any of them
even to the innocent debtor.
Fortuitous event but after delay, and delay is cause by ONLY ONE of them=
additional liability will be imposed upon the guilty debtor.
Solidarity is not destroyed even if parties is bound by different terms and conditions
Example:

- if one is already fulfilled all of them are still liable.


- reimbursement is only upon the perfection of condition; if not yet only pay the one due.

Divisible or indivisible obligations


Divisible obligations- this kind of obligations refer to the prestation and not to the
thing that is the subject matter of the prestation. One that is susceptible of partial
performance.
The question that should be the basis is WON the prestation is capable of being perform
in parts without incurring a breach.
Kinds:
1. Quantitative- performance is in metrical units or specified number of days
- a system of measurement is used in determining
Example:
Contract of labor or services specifying the number of days
Salary- twice per month
Wage- daily
2. Qualitative- arises in obligation to deliver inheritance to the heirs
-same class= equal shares in quality
3. Ideal- takes place in co-ownership
- entitled to one undivided interest- ideal shares is not translate to an actual
physical share to a property.
Example:

- not a single co-owner can claim; no actual division took place / determined.
- ideal may later on be converted to qualitative or quantitative.

In debts payable by installment, the General rule is in case there is a breach on the
part he is not obliged to pay but an exception is when there is an acceleration clause
pertaining to the failure to pay the installment part the whole is payable and subject to
interest and penalty.
Performance of one part will not extinguished the obligation.
Performance of all parts will dissolve the obligation.
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Indivisible obligations- the prestation cannot be divided into parts it should be


perform completely at once.
Kinds:
1. Conventional- stipulated in the contract = performance
Presumption: contract is silent on how many parts it should be performed
once in its entirety.
2. Legal- by law
Specific real obligation- indivisible by legal profession
Example: A car cannot be delivered in parts
3. Natural- by nature of obligation it cannot be performed in parts
Example: Damages in quasi-delicts
Once divisible is adjudged as indivisible, latter govern and cannot be change by
the parties, the judgment of court prevails over the contract of the parties, unless
accepted by the creditor.
Partial performance in divisible obligations= no breach
Partial performance in indivisible obligations= there is breach
Obligations with a penal clause or penalty- the obligation is subject to an
undertaking accessory to comply with the additional prestation normally in case of
breach.
Penal Clause- is an accessory obligation impossible to one who is guilty from breach
arising from fraud, negligence, malice, etc.
Penalty- same nature as the principal or different nature as the principal
If penalty is void, principal is also void, vice-versa
General rule= penalty is merely a substitute or subsidiary for the principal obligation
and can be demanded by the creditor when the debtor is guilty of breaching the principal
obligation.
Substitute means that the debtor can perform the penalty subsidiarily to the
principal.
Performance of the principal is the performance of the penalty.
If the performance failed due to fortuitous event, the penalty cannot be imposed it can
only be demanded if due to culpable loss.
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In case of breach, the debtor is liable for additional damages.


1. In case of fraud, the non-fulfillment of obligation
2. If creditor has impose penalty but creditor refused to pay.
Exceptions to General Rule:
1. Penalty is joint and cumulative to principal obligation= conjunctive obligation,
creditor can demand both if expressly given the right
2. Alternative- stipulation can choose between the performance of penalty or
obligation, choice is not anchored in default.
3. Facultative- right to choose is given to the debtor
Purposes of Penalty:
1. To provide coercive power in favor of creditor against the debtor
2. To punish debtor in making breach = sanction
3. To compensate the creditor for any injury suffered due to breach penalty serve
to liquidate the damages.
Penalty- mutually binding, however if penalty is found to be excessive or usurious the
courts may reduce or annul the stipulated penalty.
Usurious= question of fact: relevant considerations are as follows:
1. partial performance by the debtor
2. reduction or annulment of the regular performance
-penalty is only valid if stipulation is in writing
As a rule the rate in penalty is binding between the parties.
If there is no rate agreed upon or the rate is excessive the court will apply the legal
rate.
The legal rate is 6% per annum
Prior to July 2013 the legal rate is 12% per annum due to forbearance of money or
credit or due to judgment based thereon.
Forbearance is the time which the creditor is unable to enjoy the money.
Other sources: 6% per annum

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