Obligations and Contracts 2/20/19
 Exercise all the rights like the rights to redeem and bring all
Performance of the Obligation
>Irregularity in the Performance
>> Other Provisions, NCC 1175, 1957, 1413, 1961, 1176
Art. 1175. Usurious Transactions shall be governed by special laws
 Usury is contracting for or receiving interest in excess of the
amount allowed by law for a loan.
 One of the requisites for recovery of monetary interest is
that the interest must be lawful (aside from the payment of
interest must be expressly stipulated; and the agreement
must be in writing)
 A stipulation for the payment of usurious interest is void
Art. 1413. Interest paid in excess of the interest allowed by the usury
laws may be recovered by the debtor, with interest thereon from the
date of the payment.
 Any rate of interest in excess of the maximum allowed
under the Usury Law is usurious and may be recovered.
 This is for the whole interest, no deductions from the
allowable interest rates.
 According to Central Bank Circular 905, there is no more
ceiling on the rate of interest
 Even if the interest stipulation is void, the obligor is not
relieved from the obligation to pay the principal
>> Remedies of Creditors
>>> Levy and Execution, NCC 1177, 2236
Article 1177. The creditors, after having pursued the property in
possession of the debtor to satisfy their claims, may exercise all the
rights and bring all the actions of the latter for the same purpose, save
those which are inherent in his person; they may also impugn the acts
which the debtor may have done to defraud them.
 Three remedies to satisfy claim by the creditor:
o Specific Performance with damages
o Pursue the leviable
o Exercise all the rights (right to redeem and collect) of
the debtor except those inherent in or personal
o Rescind or impugn acts or contracts which the debtor
have made to defraud the creditor
 The debtor is liable with all his property, present and future,
for the fulfillment of his obligations.
>>> Action Subragatoria, 1177, 772
the actions of the debtor
 The creditor exercises the rights of the debtor in the latter’s
name
>>> Accion Pauliana, 1177, 1380-1389
 Ask the court to rescind or impugn acts or contracts which
the debtor may have done to defraud him when he cannot
in any other manner recover his claim
 It is essential that the creditor has no other legal remedy to
satisfy his claim against his debtor
 Action to rescind in fraud of creditors is known as accion
pauliana
 Remedy of rescission may be availed of by a third person
 Following requisites:
o There must be an existing credit prior to the contract to
be rescinded even though it is not yet due or
demandable
o The subsequent contract made by the debtor which may
be presumed or proved
o There must be fraud on the part of the debtor which
may be presumed or proved
o The creditor has no other legal remedy to satisfy his
claim but it is not required that the debtor be insolvent
>>> Accion Directa, 1652, 1729, 1608, 1893
>> Transmissibility, 1178
Article 1178. Subject to the laws, all rights acquired in virtue of an
obligation are transmissible, if there has been no stipulation to the
contrary.
 All rights are generally transmissible, with the exceptions of
the following:
o Prohibited by law – Like the rights in partnership,
agency, and commodatum (delivery of something not
consumable so that the latter may use; essentially
gratuitous) which are purely personal in character
o Prohibited by stipulation of parties – As stipulated in
contract but should not be contrary to public policy.
Kinds of Obligations
> According to Demandability, 1179 - 1192
Article 1179. Every obligation whose performance does not depend
upon a future or uncertain event, or upon a past event unknown to the
parties, is demandable at once.
Every obligation which contains a resolutory condition shall also
be demandable, without prejudice to the effects of the happening of
the event.
>> Pure obligations
 A pure obligation is one which is not subject to any
condition and no specific date is mentioned for its fulfillment
and is, therefore, immediately demandable.
>> Conditional obligations
 Conditional obligation is one whose consequences are
subject in one way or another to the fulfillment of a
condition
 Condition is a future and uncertain event, upon the
happening of which, the effectivity or extinguishment of an
obligation (or rights) subject to it depends
o Future and uncertain
o Past but unknown
o Must not be impossible
 Article 1181. In conditional obligations, the acquisition of
rights as well as the extinguishment or loss of those already
acquired shall depend upon the happening of the event that
constitutes the condition
 Article 1186. The condition shall be deemed fulfilled when
the obligor voluntarily prevents its fulfillment
>>> Types of Conditions
>>>> As to effect on obligation
>>>>> Suspensive (condition precedent)
 Fulfillment of condition will give rise to an obligation (or
right).
 The demandability of the obligation is suspended until the
happening of a future and uncertain event that constitutes
the condition.
o The birth, perfection, or effectivity of the contract
subject to a condition can take place only if and when
the condition happens or is fulfilled
o There can be no rescission of an obligation that is still
non-existent, the suspensive condition not having been
fulfilled
>>>>> Resolutory (condition subsequent)
 Fulfillment of the condition will extinguish the obligation
already existing.
 Difference of the two – the outcome, one extinguishes
contract the other gives rise to it; the tie, if one does not
take place there is no juridical tie while the other the tie of
law is consolidated; until suspensive takes place the
existence of the obligation is a mere hope whereas in
resolutory it gives the possibility of termination of the
obligation.
>>>> As to cause or origin
>>>>> Potestative
 The condition depends upon the will of one of the
contracting parties
 If Suspensive in nature:
o This type of conditional obligation is void if it is on the
sole will of the debtor as it depends on the will of the
debtor, thus it cannot be demanded
 There is no burden on the debtor and
consequently, no juridical tie is created
 The debtor will not just fulfill the condition
 If it is based on the sole will of the creditor, then it is valid.
 If resolutory in nature:
o Obligation is valid even if it’s fulfillment depends upon
the will of the debtor.
o Fulfillment of the condition merely causes the
extinguishment or loss of rights already acquired.
>>>>> Casual
 The condition depends upon chance or upon the will of a
third person; it is valid
 Example is insurance or guarantees
 When the fulfillment of the condition does not depend on
the will of the obligor but that on a third person who can in
no way be compelled to carry it out, and the obligor has
done all in his power to comply with his obligation, his part
of the contract is deemed complied with and he has a right
to demand performance of the contract by the other party.
>>>>> Mixed
 The condition depends partly upon chance and partly upon
the will of a third person; it is valid
>>>> As to possibility
 Possible – the condition is capable of fulfillment legally and  Article 1188. The creditor may, before the fulfillment of the
physically condition, bring the appropriate actions for the preservation
 Impossible – the condition is not capable of fulfillment of his right. The debtor may recover what during the same
o Impossible conditions shall annul the obligation that time he has paid by mistake in case of a suspensive
depends upon them. If the obligation is divisible, that condition.
part thereof which is not affected by the impossible or
unlawful condition shall be valid
o The condition not to do an impossible thing shall be
considered as not having been agreed upon
o The previous bullets only apply to cases where the
impossibility already existed at the time the obligation
was constituted. If the impossibility arises after the
creation of the obligation, article 1266 governs.
o Impossible conditions annul the obligation which
depends upon them
o If the obligation is a pre-existing obligation, and,
therefore, does not depend upon the fulfillment of the
condition that is impossible, for its existence, only the
condition is void.

>>>> As to mode
 Positive – The condition consists in the performance of an
act
 Negative – The condition consists in the omission of an act
o Condition that an event will not happen at a determinate
time. The obligation becomes effective and binding:
 From the moment the time indicated has elapsed
without the event taking place
 From the moment it has become evident that the
event cannot occur, although the time indicated
has not yet elapsed

>>>> As to expression

Additional
 Retroactive effects of fulfillment of suspensive condition - In
obligations to give – An obligation to give subject to a
suspensive condition becomes demandable only upon the
fulfillment of the condition. However, once the condition is
fulfilled, its effects shall retroact to the day when the
obligation was constituted.
 Retroactive effects as to fruits and interests in obligations to
give – none in reciprocal and unilateral obligations