CIVIL LAW

OBLIGATIONS

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I. Obligations
A. DEFINITION
Art. 1156. An obligation is a juridical
necessity to give, to do or not to do.
A.1. ELEMENTS OF AN OBLIGATION
(1) ACTIVE SUBJECT (Obligee/Creditor): The
person who has the right or power to
demand the prestation.
(2) PASSIVE SUBJECT (Obligor/Debtor): The
person bound to perform the prestation.
(3) PRESTATION (Object): The conduct
required to be observed by the
debtor/obligor (to give, to do, or not to
do).
(4) VINCULUM JURIS (Juridical or Legal Tie;
Efficient Cause): That which binds or
connects the parties to the obligation. (De
Leon)
A.2. DIFFERENT KINDS OF PRESTATIONS
(1) TO GIVE: real obligation; to deliver either
(a) a specific or determinate thing, or (b) a
generic or indeterminate thing.
(2) TO DO: positive personal obligation;
includes all kinds of work or service.
(3) NOT TO DO: negative personal
obligation; to abstain from doing an act;
includes the obligation not to give.
Requisites of a Prestation:
(1) Possible - physically and juridically;
(2) Assessable - Must have a possible
equivalent in money.
(3) Determinate, or at least, determinable;
Art. 1156 provides the definition of civil
obligations only (…juridical necessity); it does
not cover natural obligations.
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CIVIL LAW
B. CLASSIFICATION OF OBLIGATIONS
1. AS TO SANCTION
(1) CIVIL OBLIGATION (or perfect
obligation) – give a right of action to
compel their performance; the sanction
is judicial process
(2) NATURAL OBLIGATION – midway
between civil and purely moral
obligations; there is a juridical tie, but
performance is left to the will of the
debtor; after voluntary fulfillment by the
obligor, the sanction is the law
(3) MORAL OBLIGATION (or imperfect
obligation) – the sanction is conscience
or morality. These obligations are not
judicially demandable. Moral duty is not
a valid consideration.
Natural Obligations
Art. 1423. Obligations are civil or natural.
Civil obligations give a right of action to
compel their performance. Natural
obligations, not being based on positive law
but on equity and natural law, do not grant
a right of action to enforce their
performance, but after voluntary fulfillment
by the obligor, they authorize the retention
of what has been delivered or rendered by
reason thereof. Some natural obligations
are set forth in the following articles.
Natural obligations are midway between civil
obligations and purely moral obligations. It is
distinguished from moral in that it produces
some juridical effects (ex. Right to retention),
but is distinguished from moral in that it does
not give rise to an action to compel its
performance [Tolentino].
Payment is voluntary when the debtor knows
that the obligation is a natural one.
“Fulfillment” does not refer only to the
delivery of things, but also to the
performance of an act, the giving of security,
and the execution of a document.
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Payment by mistake by a debtor believing the
obligation to be a civil one, may be recovered
on the principle of solutio indebiti [De leon].
The contractor builds additional works, but is
paid the additional cost of such works. Payor
characterizes the payment as a "mistake,"
and not a "voluntary" fulfillment under Art.
1423 of the Civil Code. Hence, it urges the
application of the principle of solution indebiti.
However, it is not enough to prove that the
payments made by payor to contractor were
"not due" because there was no prior
authorization or agreement with respect to
additional works. There is a further
requirement that the payment by the debtor
was made either through mistake or under a
cloud of doubt. In short, for the provisions on
solutio indebiti to apply, there has to be
evidence establishing the fram e of m ind of
the payor at the time the payment was made
[Uniwide v Titan-Ikeda, G.R. No. 126619,
(2006)].
Rules on Natural Obligation:
(1) The promise to perform a natural
obligation is as effective as performance
itself, and converts the natural obligation
to a civil obligation.
(2) Partial payment of a natural obligation
does not make it civil; the part paid
cannot be recovered, but payment of the
balance cannot be enforced. The
exception would be if the natural
obligation is susceptible of ratification.
(3) Guaranties for the performance of a
natural obligation are valid.
(4) Payment of a natural obligation is not
subject to reduction by reason of
inofficiousness, appearance of children or
ingratitude.
Examples of Natural Obligations
Art. 1424. When a right to sue upon a civil
obligation has lapsed by
extinctive prescription, the obligor who
voluntarily performs the contract cannot
recover what he has delivered or the value of
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OBLIGATIONS CIVIL LAW
the service he has rendered.
Requisites under Art 1424 (Prescribed
Civil Obligation – Obligor)
(1) There is a civil obligation
(2) The right to sue upon it has already
lapsed by extinctive prescription
(3) Obligor performs contract voluntarily
Consequence: Obligor cannot recover what
he has delivered or value of the service he
rendered.
Art. 1425. When without the knowledge or
against the will of the debtor, a third person
pays a debt which the obligor is not legally
bound to pay because the action thereon
has prescribed, but the debtor later
voluntarily reimburses the third person, the
obligor cannot recover what he has paid.
Requisites under Art 1425 (Prescribed
Civil Obligation – Payment to 3rd Person)
(1) There is a debt
(2) Action upon the debt has prescribed
(3) A third person, without the knowledge or
against the will of the debtor, pays the
debt
(4) Debtor voluntarily reimburses the third
person
Consequence: Obligor cannot recover what
he has paid.
Art. 1426. When a minor between eighteen
and twenty-one years of age who has
entered into a contract without the consent
of the parent or guardian, after the
annulment of the contract voluntarily
returns the whole thing or price received,
notwithstanding the fact that he has not
been benefited thereby, there is no right to
demand the thing or price thus returned.
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Art. 1427. When a minor between eighteen the payer.

and twenty-one years of age, who has
entered into a contract without the consent
of the parent or guardian, voluntarily pays a Requisites under Art 1429 (Payment
sum of money or delivers a fungible thing in made by Heir)
fulfillment of the obligation, there shall be (1) Decedent incurred in debt during his
no right to recover the same from the lifetime
obligee who has spent or consumed it in
good faith. (2) Heir voluntarily pays debt
(3) Value of debt exceeds value of heir’s
inheritance
Art 1426 and 1427 Distinguished
1426 1427
Consequence: Payment is valid and heir
Presupposes a prior No prior annulment cannot rescind it.
annulment is involved
Refers to any object Refers to money or
Art. 1430. When a will is declared void
fungible things
because it has not been executed in
Consumption in Requires accordance with the formalities required by
good faith is not consumption in good law, but one of the intestate heirs, after the
required faith settlement of the debts of the deceased,
pays a legacy in compliance with a clause in
the defective will, the payment is effective
Art. 1428. When, after an action to enforce and irrevocable.
a civil obligation has failed the defendant
voluntarily performs the obligation, he
cannot demand the return of what he has Requisites under Art 1430 (Payment of
delivered or the payment of the value of the legacy – Will declared Void)
service he has rendered.
(1) There is a will providing for a legacy
(2) The will is declared void because it was
Requisites under Art 1428 (Payment by not executed in accordance with the
Defendant notwithstanding failed action) formalities required by law
(1) There is a civil obligation (3) Heir pays legacy
(2) An action to enforce such has failed
(3) Defendant voluntarily performs the Consequence: Payment is effective and
obligation irrevocable.

Consequence: Defendant cannot demand 2. As to Subject Matter

return of what he has delivered or the (1) REAL – obligation to give
payment of the value of the service
(2) PERSONAL – obligation to do or not to
do
Art. 1429. When a testate or intestate heir
voluntarily pays a debt of the decedent
exceeding the value of the property which he 3. As to the Affirm ativeness or
received by will or by the law of intestacy Negativeness of the Obligation
from the estate of the deceased, the (1) POSITIVE/AFFIRMATIVE – obligation to
payment is valid and cannot be rescinded by give or to do

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(2) NEGATIVE: obligation not to give or not

to do II. Nature and Effect of
Obligations
4. As to Persons Obliged
(1) UNILATERAL – only one of the parties is A. OBLIGATION “TO GIVE”
bound
(2) BILATERAL – both parties are bound
A.1. TYPE OF THINGS:
a. Reciprocal – performance by one is
dependent on the performance by Limited
Generic
the other Specific Thing Generic
Thing
Thing
b. Non-reciprocal – performance by
one is independent of the other Particularly Object is When the
[Paras] designated or designated generic
physically only by its objects are
segregated class/ confined to
Sources of Obligations from all others genus/ a particular
of the same species. class.
Art. 1157. Obligations arise from: class
(1) Law; (Art.1460);
(2) Contracts; Identified by
individuality.
(3) Quasi-contracts; Cannot be Can be
(4) Acts or omissions punished by law; and substituted substituted
against the by any of the
(5) Quasi-delicts. obligee’s will. same class
and same
kind.
A single act or omission may give rise to
different causes of action.
A concurrence of scope in regard to negligent A.2. RIGHTS AND DUTIES OF PARTIES:
acts does not destroy the distinction between
Duties of the Debtor Rights of the Creditor
the civil liability arising from a crime and the
responsibility for cuasi-delitos or culpa extra- To Give a Specific Thing
contractual. The same negligent act causing
1. To preserve or take 1. To compel delivery
damages may produce civil liability arising
care of the thing due (1165)
from a crime... or create an action for cuasi-
(1163)
delito or culpa extra-contractual. [Barredo vs. 2. To recover
Garcia, G.R. No. L-48006, (1942)] 2. To deliver the damages in case of
thing itself (1165) breach, exclusive or
in addition to specific
3. To deliver the fruits
performance (1165;
of the thing (1164)
1170)
4. To deliver its
3. To fruits from the
accessions and
time the obligation to
accessories (1166)
deliver arises (1164)
(a) accessions – 4. Not to be
everything which is compelled to receive
produced by a thing, a different one,
or which is although of the same
incorporated or value as, or more
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Duties of the Debtor Rights of the Creditor Duties of the Rights of the
Debtor Creditor
attached thereto, valuable than that
excluding fruits which is due (1244) (1167) Note: The debtor
cannot be compelled
(b) accessories – 4. To pay damages in
to perform his
things destined for case of breach (1170)
obligation. The
the embellishment,
ultimate sanction of
use or preservation of
civil obligations is
another thing of
indemnification of
more importance
damages. This would
5. To pay damages in be tantamount to
case of breach (1170) involuntary servitude.
To Give a Generic Thing Not To Do
1. To take care of the 1. To ask that the 1. Not to do what 1. To ask to undo
thing (1163) obligation be should not be done what should not be
complied with (1165) done, at the debtor’s
2. To deliver a thing 2. To shoulder cost of
expense. (1168)
of the quality 2. To ask that the undoing what should
intended by the obligation be not have been done 2. To recover
parties taking into complied with by a (1168) damages, where it
consideration the third person at the would be physically
3. To pay damages in
purpose of the expense of the debtor or legally impossible
case of breach (1170)
obligation and other to undo what should
3. To recover
circumstances (1246) not have been done,
damages in case of
because of :
- Creditor cannot breach (1165)
demand a thing of a. the very nature of
4. Not to be
superior quality; the act itself;
compelled to receive
neither can the
a different one, b. rights acquired by
debtor deliver a thing
although of the same third persons who
of inferior quality.
value as, or more acted in good faith;
4. To pay damages in valuable than that
c. when the effects of
case of breach (1170) which is due (1244)
the acts prohibited
are definite in
B. OBLIGATION “TO DO” OR “NOT TO character and will
DO” not cease even if the
thing prohibited be
undone.
B.1. RIGHTS AND DUTIES OF PARTIES:
Duties of the Rights of the C. BREACH
Debtor Creditor
Art. 1170. Those who in the performance of
To Do their obligations are guilty of fraud (dolo),
1. To do it (1167) 1. To have the negligence (culpa), or delay (mora), and
obligation executed those who in any manner contravene the
2. To shoulder the tenor thereof, are liable for damages.
at the cost of the
cost of execution
debtor (1167)
should he fail to do it
(1167) 2. To recover
damages in case of
3. To undo what has
breach (1170)
been poorly done
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C.1. COMPLETE FAILURE TO PERFORM C.2. DEFAULT, DELAY, OR MORA

Slight or Casual Failure to perform an obligation on time
Substantial Breach
Breach which constitutes breach of the obligation.
[De Leon]
1. Total breach 1. Partial breach
2. Amounts to non- 2. There is partial/
Rules on Default, Delay, or Mora
performance, basis substantial
for rescission performance in good Reciprocal
Unilateral Obligations
(resolution) under faith Obligations
Art. 1191 and 3. Gives rise to
General Rule: Neither party incurs
payment of damages liability for damages
in delay if the other
only (1234) “No demand, No
does not comply or is
delay.”
not ready to comply
Art. 1234. If the obligation has been in a proper manner
substantially performed in good faith, the The mere expiration with what is
obligor may recover as though there had of the period fixed by incumbent upon him.
been a strict and complete fulfillment, less the parties is not From the moment
damages suffered by the obligee. enough in order that one of the parties
the debtor may incur fulfills his obligation,
in delay. delay by the other
In order that there may be substantial begins. (1169 par. 3)
performance of an obligation, there must Those obliged to
have been an attempt in good faith to deliver or to do
perform, without any willful or intentional something incur in No delay if neither
departure therefrom. The deviation from the delay from the time performs.
obligation must be slight, and the omission the obligee judicially
or defect must be technical and unimportant, or extrajudicially
and must not pervade the whole or be so demands from them
material that the object which the parties the fulfillment of
intended to accomplish in a particular their obligation.(1169
manner is not attained. The non-performance par 1)
of a material part of a contract will prevent
the performance from amounting to a Exceptions:
substantial compliance… The compulsion of Demand is not
payment is predicated on the substantial necessary in order
benefit derived by the obligee from the partial that delay may exist
performance. Although compelled to pay, the under the
obligee is nonetheless entitled to an circumstances listed
allowance for the sum required to remedy in Art 1169 par 2, (1)-
omissions or defects and to complete the (3).
work agreed upon. [International Hotel Corp v
Joaquin, G.R. 158361 (2013)] Demand may be judicial or extrajudicial.

W hen demand is not necessary in

The question of whether a breach of contract
is substantial depends upon the attending
circumstances and not merely on the
percentage of the amount not paid. [Cannu v
Galang, G.R. No. 139523, (2005)]
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order that delay m ay exist (Art. 1169
par 2)
(1) When demand would be useless, as when
the obligor has rendered it beyond his
power to perform. OR
(2) When from the nature and the
circumstances of the obligation it
appears that the designation of the time
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when the thing is to be delivered or the Mora accipiendi – Delay on the part of the
service is to be rendered was a controlling creditor to accept the performance of the
motive for the establishment of the obligation
contract; OR
(3) When the law or the obligation expressly
Requisites:
so declare;
(1) Debtor offers performance.
Note: It is insufficient that the law or
obligation fixes a date for performance. (2) Offer must be in compliance with the
It must further state expressly that after prestation as it should be performed.
the period lapses, default will
(3) Creditor refuses performance without
commence;
just cause.

Kinds of Delay; Requisites and Effects

Effects:
(1) Mora Solvendi
(1) The responsibility of the debtor is reduced
(2) Mora Accipiendi
to fraud and gross negligence.
(3) Compensatio Morae
(2) The debtor is exempted from risk of loss
of the thing, which is borne by the
Mora solvendi – Delay on the part of the
creditor.
debtor to fulfil his obligation either to give (ex
re) or to do (ex persona). (3) The expenses incurred by the debtor for
the preservation of the thing after the
mora shall be chargeable to the creditor.
Requisites:
(4) If the obligation bears interest, the debtor
1. Obligation must be liquidated, due and does not have to pay from the time of
demandable delay.
2. Non-performance by the debtor within (5) The creditor is liable for damages.
the period agreed upon
(6) The debtor may relieve himself of the
3. Demand, judicial or extra-judicial, by the obligation by consigning the thing.
creditor, unless demand is not necessary [Tolentino]
under the circumstances enumerated in
Art 1169 par (2).
Compensatio morae – Delay of both
parties in reciprocal obligations.
There is no mora solvendi in:
a) Negative obligations because delay is
impossible [De Leon] Effects:
b) Natural obligations [Tolentino] 1. Delay of the obligor cancels delay of
obligee (and vice versa) hence it is as if
there is no default.
Effects:
2. The liability of the first infractor shall be
1. The debtor is liable for damages. [Art. equitably tempered by the courts. If it
1170] cannot be determined which of the
parties first violated the contract, the
2. For determinate objects, the debtor shall
same shall be deemed extinguished, and
bear the risk of loss, even if the loss is due
each shall bear his own damages. [Art.
to fortuitous events. [1165 par 3]
1192]

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Cessation of the Effects of Mora: C.3. FRAUD (DOLO) IN THE

PERFORMANCE OF THE OBLIGATION
(1) Express or implied renunciation by the
creditor; Art. 1171. Responsibility arising from fraud
is demandable in all obligations. Any waiver
(2) Prescription. [Tolentino]
of an action for future fraud is void.
Fraud (dolo) is the deliberate or intentional
Equitable Tem pering under Art. 1192 evasion of the normal fulfilment of an
vs. Under Art. 2215 [Ong v Bognalbal, obligation. [De Leon]
2006]
A waiver of future fraud is void but past fraud
Art 1192 Art 2215 may be subject of a valid waiver by the
aggrieved party. [De Leon]
“In case both parties “In contracts, quasi-
have committed a contracts, and quasi-
breach of the delicts, the court
Distinguished from Causal Fraud
obligation, the may equitably
liability of the first mitigate the Fraud in the Causal Fraud
infractor shall be damages under (dolo causante and
Performance
equitably tempered circumstances other dolo incidente)
by the courts. xxx” than the case [Art. 1170]
[Arts. 1338, 1344]
referred to in the
preceding article, as Definition
in the ff. instances: The deliberate and Every kind of
(1) That the plaintiff intentional evasion of deception for the
himself has the normal fulfilment purpose of leading
contravened the of obligations. another party into
terms of the contract [International error and execute a
xxx” Corporate Bank v particular act.
Gueco, 2001]
Second infractor not Does not appear to
liable for damages at consider which W hen Present
all; only the first infractor first During the During the time of
infractor is liable, but committed the performance of a birth or perfection of
with his liability breach pre-existing the obligation
mitigated obligation
Purpose
Articles 1192 and 2215 are not irreconcilably To evade normal To secure consent of
conflicting. The plaintiff referred to in Article fulfilment of another to enter the
2215(1) should be deemed to be the second obligation contract(dolo
infractor, while the one whose liability for causante)
damages may be mitigated is the first
infractor. Furthermore, the directions to To influence a party
equitably temper the liability of the first regarding an incident
infractor in Articles 1192 and 2215 are both to the contract (dolo
subject to the discretion of the court, despite incidente)
the word "shall" in Article 1192, in the sense Result
that it is for the courts to decide what is Breach of the Vitiation of consent
equitable under the circumstances. (Ong v obligation
Bognalbal, 2006)
Remedy
Obligee may recover Innocent party may
damages (1344) annul the contract(if
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dolo causante)
Damages (both dolo
causante or
incidente)
Obligation Involved
Valid obligation Voidable obligation
(if dolo causante)
Valid obligation (if
dolo incidente)
Dolo Causante – that which determines or
is the essential cause of the contract
Dolo Incidente – refers only to some
particular or accident of the obligation
In order that fraud may vitiate consent, it
must be the dolo causante and not merely the
dolo incidente, inducement to the making of
the contract. The false representation was
used by plaintiff to get from defendant a
bigger share of net profits. This is just
incidental to the matter in agreement...
because despite plaintiff’s deceit, respondent
would have still entered into the contract.
[Woodhouse vs. Halili, 1953]
Requisites for Fraud to Vitiate
Contract:
(1) It must have been employed by one
contracting party upon the other;
(2) It must have induced the other party to
enter into the contract;
(3) It must have been serious; and
(4) It must have resulted in damage or injury
to the party seeking annulment.
[Tolentino]
C.4. NEGLIGENCE (CULPA) IN THE
PERFORMANCE OF THE OBLIGATION
Art. 1172. Responsibility arising from
negligence in the performance of every kind
of obligation is also demandable, but such
liability may be regulated by the courts,
according to the circumstances.
The fault or negligence of the obligor consists
in the omission of that diligence which is
required by the nature of the obligation and
OBLIGATIONS CIVIL LAW
corresponds with the circumstances of the
persons, of the time and of the place. [Art.
1173]
Diligence Required [De Leon]
(1) By stipulation of the parties
(2) By law, in the absence of stipulation
(3) Diligence of a good father of a family, if
both the contract and law are silent. (1173
par 2)
(4) Future negligence may be waived except
in cases where the nature of the
obligation or the public requires another
standard of care (i.e. common carriers)
Note: Only future simple negligence
may be waived. Future gross
negligence may not be waived since
such negligence amounts to fraud.
Exceptions:
Common Carriers
Art. 1733. Common carriers, from the
a nature of their business and for reasons of
public policy, are bound to observe
extraordinary diligence in the vigilance over
the goods and for the safety of the
passengers transported by them, according
to all the circumstances of each case.
Such extraordinary diligence in the vigilance
over the goods is further expressed in
articles 1734, 1735, and 1745, Nos. 5, 6, and
7, while the extraordinary diligence for the
safety of the passengers is further set forth
in articles 1755 and 1756.
Hotel and Inn-keepers
Art. 1998. The deposit of effects made by
travellers in hotels or inns shall also be
regarded as necessary. The keepers of hotels
or inns shall be responsible for them as
depositaries, provided that notice was given
to them, or to their employees, of the effects
brought by the guests and that, on the part
of the latter, they take the precautions which
said hotel-keepers or their substitutes
advised relative to the care and vigilance of
their effects.
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Art. 1999. The hotel-keeper is liable for the defendant to pay defendant’s
vehicles, animals and articles which have damages is the negligence itself.
been introduced or placed in the annexes of breach or non-
the hotel. fulfillment of the
contract.
Art. 2000. The responsibility referred to in
Proof of the existence The negligence of the
the two preceding articles shall include the
of the contract and of defendant must be
loss of, or injury to the personal property of
its breach or non- proved.
the guests caused by the servants or
fulfillment is
employees of the keepers of hotels or inns as
sufficient prima facie
well as strangers; but not that which may
to warrant recovery.
proceed from any force majeure. The fact
that travellers are constrained to rely on the Proof of diligence in Proof of diligence in
vigilance of the keeper of the hotels or the selection and the selection and
inns shall be considered in determining the supervision of the supervision of the
degree of care required of him. employees is NOT employee is a
available as defense. defense.
Art. 2001. The act of a thief or robber, who
has entered the hotel is not deemed force Extent of Dam ages to be Awarded
majeure, unless it is done with the use of
arms or through an irresistible force. [Art. 2201]
Good Faith Bad Faith
Art. 2002. The hotel-keeper is not liable
for compensation if the loss is due to the Obligor is liable for Obligor shall be
acts of the guest, his family, servants or those that are the responsible for all
visitors, or if the loss arises from the natural and damages which may
character of the things brought into the probable be reasonably
hotel. consequences of the attributed to the
breach of the non-performance of
obligation, and the obligation.
Test of Negligence which the parties
“Whether or not the defendant, in doing the have foreseen or
Any waiver or
alleged negligent act, used the reasonable could have
renunciation made
care and caution, which an ordinary and reasonably foreseen
in the anticipation of
prudent person would have used in the same at the time the
such liability is null
situation” If not, then he is guilty of obligation was
and void.
negligence. [Mandarin Villa Inc. vs. CA, 1996] constituted.

Kinds of Civil Negligence C.5. CONTRAVENTION OF THE TENOR OF

THE OBLIGATION
Culpa Contractual Culpa Aquiliana
This refers to a violation of the terms and
Negligence is merely Negligence is conditions stipulated in the obligation, which
incidental in the substantive and must not be due to a fortuitous event or force
performance of an independent. majeure. [De Leon]
obligation.
“In any manner contravenes the tenor”
There is always a pre- There may or may means any illicit act, which impairs the strict
existing contractual not be a pre-existing and faithful fulfillment of the obligation, or
relation. contractual every kind of defective performance.
obligation. [Tolentino]
The source of The source of
obligation of obligation is the
D. LEGAL EXCUSE FOR BREACH:
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(8) the object is a generic thing, i.e. the

genus never perishes
(1) “FORTUITOUS EVENT” OR
Note: ‘Genus nunquam perit’ only
(2) “ACTS OF THE CREDITOR”
pertains to physical perishing. The
Art. 1174. Except in cases expressly genus may still perish legally. [Labitag]
specified by the law, or when it is otherwise
declared by stipulation, or when the nature
of the obligation requires the assumption of Requisites of Exemption Based on
risk, no person shall be responsible for those Force Majeure
events which could not be foreseen, or (1) The event must be independent of the
which, though foreseen, were inevitable. debtor’s will (fraud or negligence).
(2) The event must be unforeseeable or
1. Fortuitous Event - a happening inevitable.
independent of the will of the debtor and
(3) The event renders it impossible for debtor
which makes the normal fulfillment of the
to fulfill his obligation in a normal
obligation impossible. [De Leon]
manner.
(1) Act of God: An accident, due directly or
(4) The debtor must be free from any
exclusively to natural causes without
negligence or participation in the
human intervention, which by no amount
aggravation of the injury to the creditor
of foresight, pains or care, reasonably to
[Tolentino, 1987; De Leon, 2003]
have been expected, could have been
prevented. (5) It must be the sole cause, not merely a
proximate cause.
(2) Act of Man: Force majeure is a superior or
irresistible force, which is essentially an
act of man; includes unavoidable
2. Act of Creditor: The debtor is also
accidents, even if there has been an
released from liability when the non-
intervention of human element, provided
performance of the obligation is due to the
that no fault or negligence can be
act of the creditor himself. [Tolentino]
imputed to the debtor.
Liability in case of Fortuitous Event
No person shall be responsible for fortuitous E. REMEDIES AVAILABLE IN CASE OF
events, UNLESS: BREACH
(1) expressly specified by law [Arts. 552 (2);
1942, 2147, 2148, 2159] E.1. ACTION FOR SPECIFIC PERFORMANCE
(IN OBLIGATION TO GIVE SPECIFIC THING)
(2) liability specified by stipulation
The creditor has a right to compel the debtor
(3) the nature of the obligations requires to perform the prestation.
assumption of risk [Art. 1174]
(4) debtor is guilty of concurrent or Art . 1165, Par. 1 – When what is to be
contributory negligence delivered is a determinate thing, the
(5) debtor has promised to deliver the same creditor, in addition to the right granted
thing to two or more persons who do not him by Art. 1170 (indemnification for
have the same interest [Art. 1165 par. 3] damages), may compel the debtor to
(6) the thing is lost due to the obligor’s fraud, make the delivery.
negligence, delay or contravention of the
tenor of the obligation [Art. 1170]
(7) the obligation to deliver a specific thing
arises from a crime [Art. 1268]
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E.2. ACTION FOR SUBSTITUTED
PERFORMANCE (IN OBLIGATION TO GIVE
GENERIC THING)
Art . 11 65, Par . 2 – If the thing is
indeterminate or generic, he may ask that
the obligation be complied with at the
expense of the debtor.
A third person may perform another’s
obligation to deliver a generic thing or an
obligation to do, unless it is a purely
personal act, at the expense of the debtor.
Debtor cannot avoid obligation by paying
damages if the creditor insists on
performance.
E.3. RESCISSION (RESOLUTION IN
RECIPROCAL OBLIGATIONS)
Art. 1191. The power to rescind obligations
is implied in reciprocal ones, in case one of
the obligors should not comply with what is
incumbent upon him.
The injured party may choose between the
fulfillment and the rescission of the
obligation, with the payment of damages in
either case. He may also seek rescission,
even after he has chosen fulfilment, if the
latter should become impossible.
The court shall decree the rescission
claimed, unless there be just cause
authorizing the fixing of a period.
This is understood to be without prejudice to
the rights of third persons who have
acquired the thing, in accordance with
articles 1385 and 1388 and the Mortgage
Law.
Rescission
The unmaking of a contract, or its undoing
from the beginning, and not merely its
termination [Pryce Corp v Pagcor, G.R. No.
157480, 2005]
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OBLIGATIONS CIVIL LAW
Effect of Rescission under Art 1191
Extinguishes the obligatory relation as if it
had never been created, the extinction having
a retroactive effect. Both parties must
surrender what they have respectively
received and return each other as far as
practicable to their original situation.
[Tolentino]
Rescission may take place extrajudicially, by
declaration of the injured party. But if the
debtor impugns the declaration of rescission,
it shall be subject to judicial determination. If
the debtor does not oppose the extrajudicial
declaration of rescission, such declaration
will produce legal effect.
The party who deems the contract violated
may consider it resolved or rescinded, and act
accordingly, without previous court action,
but it proceeds at its own risk. For it is only
the final judgment of the corresponding court
that will conclusively and finally settle
whether the action taken was or was not
correct in law. But the law definitely does not
require that the contracting party who
believes itself injured must first file suit and
wait for a judgment before taking
extrajudicial steps to protect its interest. [UP
v Delos Angeles, 1970]
Under Art 1191, the right to rescind an
obligation is predicated on the violation of
the reciprocity between parties, brought
about by a breach of faith by one of them.
Rescission, however, is allowed only where
the breach is substantial and fundamental to
the fulfillment of the obligation. [Del Castillo
Vda de Mistica v Naguiat, 2003; Cannu v
Galang, 2005].
It will not be permitted in casual or slight
breach. [Song Fo v. Hawaiian Philippines]
Distinguished from Rescission under
Art. 1380
Rescission / Resolution
Rescission [Art. 1380]
[Art. 1191]
Based on non- Based on lesion or
performance or non- fraud upon creditors.
fulfillment of
obligation.
UP LAW BOC OBLIGATIONS CIVIL LAW

Action is instituted Action is instituted E.4. DAMAGES, IN ANY EVENT

only by the injured by either party or by
Art. 1170. Those who in the performance of
party. a third person.
their obligations are guilty of fraud,
Applies only to Applies to either negligence, or delay, and those who in any
reciprocal obligations unilateral or manner contravene the tenor thereof, are
where one party is reciprocal liable for damages.
guilty of non- obligations even
fulfillment when the contract
has been fully E.5. SUBSIDIARY REMEDIES OF
fulfilled CREDITORS

In some cases, court Court cannot grant a (a) Accion Subrogatoria

may grant a term for period or term within Art. 1177. The creditors, after having
performance. which one must pursued the property in possession of the
comply. debtor to satisfy their claims, may exercise
Non-performance by Non-performance by all the rights and bring all actions of the
the other party is the other party is latter for the same purpose, save those
important. immaterial. which are inherent in his person; they may
also impugn the acts which the debtor may
have done to defraud them.
Distinguished from Term ination [Pryce
Corp v PAGCOR, 2005] Right of the creditor to exercise all of the
rights and bring all the actions which his
debtor may have against third persons.
Rescission Termination
The creditors, after having pursued the
May be effected: May be effected by property in possession of the debtor to satisfy
mutual agreement or their claims, may exercise all the rights and
(a) by both parties by
by one party bring all the actions of the latter for the same
mutual agreement,
exercising one of its purpose, save those which are inherent in his
or
remedies as a person. [Art.1177]
(b) unilaterally by consequence of the
one of them In order to satisfy their claims against the
default of the other
declaring a rescission debtor, creditors have the ff. successive
without the consent rights:
of the other if a (1) To levy by attachment and execution
legally sufficient upon all the property of the debtor,
ground exists or if a except those exempt from execution;
decree of rescission is
(2) To exercise all the rights and actions of
applied for before the
the debtor, except such are inherently
courts
personal to him; and
Requires mutual The parties are not
(3) To ask for the rescission of the contracts
restitution to restore restored to their
made by the debtor in fraud of their
the parties to their original situation;
rights.
original situation prior to termination,
parties are obliged to
comply with their Requisites
contractual
(1) The person to whom the right of action
obligations
pertains must be indebted to the creditor
(2) The debt is due and demandable

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(3) The creditor must be prejudiced by the An accion pauliana thus presupposes the
failure of the debtor to collect his debts following:
due him from third persons, either
1) A judgment;
through malice or negligence
2) the issuance by the trial court of a writ of
(4) The debtors assets are insufficient
execution for the satisfaction of the judgment,
(debtor is insolvent)
and;
(5) The right of action is not purely personal
3) the failure of the sheriff to enforce and
to the debtor
satisfy the judgment of the court.
It requires that the creditor has exhausted the
Previous approval of the court is not property of the debtor. The date of the
necessary to exercise the accion decision of the trial court is immaterial. What
subrogatoria. is important is that the credit of the plaintiff
antedates that of the fraudulent alienation by
the debtor of his property. After all, the
(b) Accion Pauliana decision of the trial court against the debtor
will retroact to the time when the debtor
became indebted to the creditor. [Cheng v CA,
Art. 117 7. …they may also impugn the acts 2001]
which the debtor may have done to defraud
them.
Accion Subrogatoria Accion Pauliana

Art. 13 81 (par 3 .) The following contracts Not necessary that Credit must exist
creditor’s claim is before the fraudulent
are rescissible:
prior to the act [Tolentino]
(3) Those undertaken in fraud of creditors acquisition of the
when the latter cannot in any other manner I.
right by the debtor
Note: Commentators
collect the claims due them.
have conflicting
views on WoN new
Rescission, which involves the right of the debts contracted by
creditor to attack or impugn by means of the debtor fall under
rescissory action any act of the debtor which the scope of accion
is in fraud and to the prejudice of his rights as pauliana.
creditor.
No need for Fraudulent intent is
fraudulent intent required if the
Requisites [Cheng v CA, 2001] contract rescinded is
onerous
(1) There is a credit in favor of the plaintiff
prior to the alienation by the debtor No period for Prescribes in 4 years
prescription from the discovery of
(2) The debtor has performed a subsequent the fraud
contract conveying patrimonial benefit to
third person/s. (c) Other Specific Rem edies
(3) The debtor’s acts are fraudulent to the
prejudice of the creditor. Accion Directa
(4) The creditor has no other legal remedy to Subsidiary liability of sublessee to the lessor
satisfy his claim for rent due from the lessee
(5) The third person who received the
property is an accomplice to the fraud.

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Art. 1652. The sublessee is subsidiarily
liable to the lessor for any rent due from the
lessee. However, the sublessee shall not be
responsible beyond the amount of rent due
from him, in accordance with the terms of
the sublease, at the time of the extra-judicial
demand by the lessor.
Payments of rent in advance by the
sublessee shall be deemed not to have been
made, so far as the lessor's claim is
concerned, unless said payments were
effected in virtue of the custom of the place.
Vendor has right of action against possessor
whose right is derived from the vendee
Art. 1608. The vendor may bring his action
against every possessor whose right is
derived from the vendee, even if in the
second contract no mention should have
been made of the right to repurchase,
without prejudice to the provisions of the
Mortgage Law and the Land Registration
Law with respect to third persons.
Laborer/materialsman has right of action
against owner of piece of work up to the
amount owed by the latter to the contractor.
Article 1730. If it is agreed that the work
shall be accomplished to the satisfaction of
the proprietor, it is understood that in case
of disagreement the question shall be
subject to expert judgment.
If the work is subject to the approval of a
third person, his decision shall be final,
except in case of fraud or manifest error.
Principal has right of action against
substitute of agent in cases when the agent is
liable for acts of appointed substitute
Art. 1893. In the cases mentioned in Nos. 1
and 2 of the preceding article, the principal
may furthermore bring an action against the
substitute with respect to the obligations
which the latter has contracted under the
substitution.
Petitioner cannot invoke the credit of a
different creditor to justify the rescission of
the subject deed of donation, because the
only creditor who may benefit from the
rescission is the creditor who brought the
action; those who are strangers to the action
cannot benefit from its effects. [Siguan vs.
Lim, 1999]

Art. 1729. Those who put their labor upon

or furnish materials for a piece of work
undertaken by the contractor have an action
against the owner up to the amount owing
from the latter to the contractor at the time
the claim is made. However, the following
shall not prejudice the laborers, employees
and furnishers of materials:
(1) Payments made by the owner to the
contractor before they are due;
(2) Renunciation by the contractor of
any amount due him from the
owner.
This article is subject to the provisions of
special laws.

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III. Kinds of Civil (a) Suspensive – Obligation shall only

be effective upon the fulfillment of
Obligations the condition [1181]. The obligee
acquires a mere hope or expectancy,
protected by law, upon the
constitution of the obligation.
A. PURE OBLIGATIONS
Art. 1179. Every obligation whose
Before Fulfillment After Fulfillment
performance does not depend upon a future
or uncertain event, or upon a past event The demandability The obligation arises
unknown to the parties, is demandable at and acquisition/ or becomes effective.
once. effectivity of the
II. The obligor can be
Every obligation which contains a resolutory rights arising from
compelled to comply
condition shall also be demandable, without the obligation is
with what is
prejudice to the effects of the happening of suspended.
incumbent upon him.
the event. The creditor may
bring the appropriate
actions for the
Its effectivity or extinguishment does not preservation of his
depend upon the fulfillment or non- right. Anything paid
fulfillment of a condition or upon the by mistake may be
expiration of a term or period. A pure recovered [Art 1188].
obligation is IMMEDIATELY DEMANDABLE. However, this
excludes fruits and
interests.
B. CONDITIONAL OBLIGATIONS

B.2. DOCTRINE OF CONSTRUCTIVE

Art. 1181. In conditional obligations, the FULFILLMENT OF SUSPENSIVE
acquisition of rights, as well as the
CONDITIONS
extinguishment or loss of those already
acquired, shall depend upon the happening Art. 1186. The condition shall be deemed
of the event which constitutes the condition. fulfilled when the obligor voluntarily
prevents its fulfillment.

A condition is a future and uncertain event.

This includes acquisition of proof/knowledge Suspensive condition is deem ed
of a past event unknown to the parties. fulfilled when:
(1) Obligor intends to prevent obligee from
complying with the condition
B.1. KINDS OF CONDITIONS
1) As to effect on the obligation (2) Obligor actually prevents obligee from
complying with the condition
a. Suspensive
Doctrine does not apply to:
b. Resolutory
2) As to cause/ origin (1) Resolutory conditions

a. Potestative (2) External contingency that is lawfully

b. Casual within the control of the obligor [Taylor v
c. Mixed Uy Tieng, 1922]
(3) Obligor, in preventing the fulfilment of
(1) As to effect the condition, acts pursuant to a right

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B.3. PRINCIPLE OF RETROACTIVITY IN [Art. 1187 par 1]

SUSPENSIVE CONDITIONS
Art. 1187, par 1.The effects of a
conditional obligation to give, once the (b) Resolutory – The obligation is
condition has been fulfilled, shall retroact demandable at once, without
to the day of the constitution of the prejudice to the effects of the
obligation. Nevertheless, when the happening of the event (1179 par 2).
obligation imposes reciprocal prestations The rights are immediately vested to
upon the parties, the fruits and interests the creditor but always subject to the
during the pendency of the condition shall threat or danger of extinction by the
be deemed to have been mutually happening of the resolutory condition
compensated. If the obligation is [Tolentino].
unilateral, the debtor shall appropriate the
fruits and interests received, unless from
Before Fulfillment After Fulfillment
the nature and circumstances of the
obligation it should be inferred that the Preservation of Whatever may have
intention of the person constituting the creditor’s rights [Art. been paid or
same was different. 1188, par. 1] also delivered by one or
Rationale: Obligation is constituted when its applies to obligations both of the parties
essential elements concur. The condition with a resolutory upon the constitution
imposed is only an accidental element. condition. of the obligation
shall have to be
This applies to consensual contracts only. returned upon the
This does not apply to real contracts which fulfillment of the
can only be perfected by delivery. condition (Art. 1190
par 1). There is no
return to the status
B.4. EFFECTS OF THE HAPPENING OF quo. However, when
SUSPENSIVE CONDITIONS the condition is not
To Give To Do/Not To Do fulfilled, rights are
consolidated and
If reciprocal, the In obligations to do they become
fruits and interests or not to do, the court absolute in character.
shall be deemed to shall determine the
have been mutually retroactive effect of
compensated a the condition that (2) As to Cause/Origin
matter of justice and has been complied a. Potestative – The fulfilment of the
convenience with condition depends on the sole act or
[Art. 1187, par. 1] [Art. 1187, par. 2] decision of a party.

If unilateral, the The power of the b. Casual – The fulfilment of the

debtor shall court includes the condition depends upon chance or
appropriate the fruits determination of upon the will of a third person. (1182)
and interests whether or not there c. Mixed – The fulfilment of the
received, unless from will be any condition depends partly upon the
the nature and retroactive effect. will of a party to the contract and
circumstance it This rule shall partly upon chance and/or will of a
should be inferred likewise apply in third person.
that the intention of obligations with a
the persons resolutory condition
constituting the [Art. 1190 par. 3]
same was different.

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Loss, Deterioration, or Im provem ent

of a Specific Thing Before Fulfillm ent
Exclusively Condition and obligation are
of Suspensive Condition (Art. 1189) or
upon the valid.
of Resolutory Condition in Obligations
Creditor’s
to Do or Not to Do [Art. 1190 par 3]
Will
Art. 1189.When the conditions have been
Exclusively Condition and obligation are
imposed with the intention of suspending
upon the void because to allow such
the efficacy of an obligation to give, the
Debtor’s Will condition would be equivalent
following rules shall be observed in case of
in case of a to sanctioning obligations
the improvement, loss or deterioration of
Suspensive which are illusory. It also
the thing during the pendency of the
Condition constitutes a direct
condition:
contravention of the principle
(Art. 1182)
of mutuality of contracts. (1) If the thing is lost without the fault of
There is nothing to demand the debtor, the obligation shall be
until the debtor wishes to. extinguished;
Exclusively Condition and obligation are (2) If the thing is lost through the fault of
upon the valid because in such the debtor, he shall be obliged to pay
Debtor’s Will situation, the position of the damages; it is understood that the
in case of a debtor is exactly the same as thing is lost when it perishes, or goes
Resolutory the position of the creditor out of commerce, or disappears in
Condition when the condition is such a way that its existence is
suspensive. It does not render unknown or it cannot be recovered;
(Art. 1179,
the obligation illusory. (3) When the thing deteriorates without
par. 2)
the fault of the debtor, the impairment
is to be borne by the creditor;
Defendant executed an endorsement saying (4) If it deteriorates through the fault of
that she’ll pay her debt if the house in which the debtor, the creditor may choose
she lives is sold. Such condition depended between the rescission of the
upon her exclusive will; thus, it is void. obligation and its fulfillment, with
[Osmeña vs. Rama, 1909] indemnity for damages in either case;
(5) If the thing is improved by its nature,
The condition that payment should be made or by time, the improvement shall
by Hermosa as soon as he receives funds inure to the benefit of the creditor;
from the sale of his property in Spain is a (6) If it is improved at the expense of the
mixed condition. The condition implies that debtor, he shall have no other right
the obligor already decided to sell the house than that granted to the usufructuary.
and all that was needed to make the
obligation demandable is that the sale be
consummated and the price thereof remitted
Art. 1190, par 3. As for the obligations to
to the islands. There were still other
do and not to do, the provisions of the
conditions that had to concur to effect the
second paragraph of article 1187 shall be
sale, mainly that of the presence of a buyer,
observed as regards the effect of the
ready, able and willing to purchase the
extinguishment of the obligation.
property under the conditions set by the
intestate. [Hermosa vs. Longara, 1953]

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Positive and Negative Conditions

Without Debtor’s With Debtor’s Positive [Art. 1184] Negative [Art. 1185]
Fault/Act Fault/Act
The condition that The condition that
Loss some event happen some event will not
III. Obligation IV. is Obligation is at a determinate time happen at a
extinguished. converted into one of shall extinguish the determinate time
indemnity for obligation shall render the
damages. obligation effective
(a) as soon as the
from the moment
Deterioration time expires or
(b) if it has become (a) the time
V. Impairment toVI. be Creditor may choose indubitable that indicated has
borne by the creditor. between bringing an the event will not elapsed, or
action for rescission of take place. (b) if it has become
the obligation OR evident that the
bringing an action for event cannot
specific performance, occur.
with damages in
either case.
Where no date of fulfilment is stipulated,
Improvement condition must be fulfilled within a
VII. Improvement atVIII.the Improvement by the reasonable time or time probably
debtor’s expense, the thing’s nature or by contemplated according to the nature of the
debtor shall ONLY time shall inure to the obligation [Art. 1185, par 2].
have usufructuary benefit of the creditor.
rights.
C. OBLIGATIONS WITH A PERIOD OR
TERM
Upon the happening of the resolutory
condition, the rules of Article 1189 shall be
Art. 1193. Obligations for whose fulfillment
applied to the party who is bound to return
a day certain has been fixed, shall be
(i.e. the creditor in the original obligation).
demandable only when that day comes.
Obligations with a resolutory period take
Impossible Conditions effect at once, but terminate upon arrival of
the day certain.
Art. 1183. Impossible conditions, those
contrary to good customs or public policy A day certain is understood to be that which
and those prohibited by law shall annul the must necessarily come, although it may not
obligation which depends upon them. If the be known when.
obligation is divisible, that part thereof
If the uncertainty consists in whether the day
which is not affected by the impossible
will come or not, the obligation is
or unlawful condition shall be valid.
conditional, and it shall be regulated by the
The condition not to do an impossible thing rules of the preceding Section.
shall be considered as not having been
agreed upon.
Art. 1180. When the debtor binds himself
to pay when his means permit him to do so,
In testaments (Art. 873) and donations (Art. the obligation shall be deemed to be one
727), an unlawful or impossible condition with a period, subject to the provisions of
does not annul the transaction. The condition Article 1197.
is merely deemed not written.

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Period or Term: Interval of time, which Effect of Advance Payment or Delivery

either suspends demandability or produces
Art. 1195. Anything paid or delivered
extinguishment.
before the arrival of the period, the obligor
The period must be: future, certain, and being unaware of the period or believing
possible.[Tolentino] that the obligation has become due and
demandable, may be recovered, with the
A fortuitous event does not interrupt the
fruits and interests.
running of the period. It only relieves the
contracting parties from the fulfillment of This is in contrast to payment by mistake of
their respective obligations during the period. the obligor before the occurrence of the
suspensive condition, where fruits and
interests may no longer be recovered.
Term/Period and Condition
Distinguished
Loss, Deterioration, or Im provem ent
Term/Period Condition of the Thing Before Period Expires
IX. Interval of time which
X. Fact or event which is Art. 1194. In case of loss, deterioration or
is future and certain future and improvement of the thing before the arrival
uncertain of the day certain, the rules in Article 1189
shall be observed.
Must necessarilyXI. May or may not
come, although it happen
may not be known
Benefit of the Period
when
Art. 1196. Whenever in an obligation a
XII. No effect on existence
XIII. Gives rise to an
period is designated, it is presumed to have
of the obligation, only obligation or
been established for the benefit of both the
its demandability or extinguishes one
creditor and the debtor, unless from the
performance already existing
tenor of the same or other circumstances it
XIV. No retroactive effect
XV. Has retroactive effect should appear that the period has been
unless there is an established in favor of one or of the other.
agreement to the
contrary
Period for the benefit of either
XVI. When it is left XVII. When it is left creditor or debtor
exclusively to the will exclusively to the will
of the debtor, the of the debtor, the very Creditor Debtor
existence of the existence of the XVIII. Creditor may demand
XIX. Debtor may oppose
obligation is not obligation is affected the fulfillment or any premature
affected performance of the demand on the part of
obligation at any time the obligee for the
but the obligor performance of the
Kinds of Period [Art 1193] cannot compel him to obligation, or if he so
(1) Ex die – period with a suspensive effect. accept payment desires, he may
Obligation becomes demandable after before the expiration renounce the benefit
the lapse of the period. of the period. of the period by
performing his
(2) In diem – period with a resolutory effect. obligation in advance.
Obligation becomes demandable at once
but is extinguished after the lapse of the
period.

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If the period is for the benefit of the General Rule: The court is not authorized to
debtor alone, he shall lose every right fix a period for the parties [De Leon]
to m ake use of it
(1) When after the obligation has been
Exceptions: If the Court determines that
contracted, he becomes insolvent, unless
one of the 3 circumstances are present, it
he gives a guaranty or security for the
must decide the period “probably
debt;
contemplated by the parties” [Araneta v. Phil.
(2) When he does not furnish to the creditor Sugar Estates, 1967]
the guaranties or securities which he has
(a) obligation does not fix a period, but
promised;
from its nature and circumstances, it
(3) When by his own acts he has impaired can be inferred that a period was
said guaranties or securities after their intended
establishment, and when through a
(b) the period is void, such as when it
fortuitous event they disappear, unless he
depends upon the will of the debtor
immediately gives new ones equally
satisfactory; (c) If the debtor binds himself when his
means permit him to do so.
(4) When the debtor violates any
Art. 1197 does not apply to contract of
undertaking, in consideration of which
services and to pure obligations.
the creditor agreed to the period;
The court, however, to prevent unreasonable
(5) When the debtor attempts to abscond
interpretations of the immediate
[Art. 1198]
demandability of pure obligations, may fix a
(6) When required by law or stipulation; reasonable time in which the debtor may pay
[Tolentino]
(7) If parties stipulated an acceleration
clause [Tolentino] The only action that can be maintained by the
creditor under Art. 1197 is the action to ask
The obligation immediately becomes due and
the courts to fix the term within which the
demandable even if the period has not yet
debtor must comply with his obligation. The
expired. The obligation becomes a pure one.
fulfillment of the obligation itself cannot be
[Tolentino]
demanded until after the court has fixed the
period for compliance therewith, and such
period has arrived.
W hen Courts May Fix Period
Art. 1197 applies to a situation in which the
Art. 1197. If the obligation does not fix a
parties intended a period. [Where] no period
period, but from its nature and the
was intended by the parties… Their mere
circumstances it can be inferred that a
failure to fix the duration of their agreement
period was intended, the courts may fix the
does not necessarily justify or authorize the
duration thereof.
courts to do so. Based on the reasons [herein],
The courts shall also fix the duration of the the agreement subsisted as long as the
period when it depends upon the will of the parents and the children mutually benefited
debtor. from the arrangement. Effectively, there is a
resolutory condition in such agreement.
In every case, the courts shall determine
When a change in the condition occurs, the
such period as may under the circumstances
agreement may be deemed terminated.
have been probably contemplated by the
[Macasaet v Macasaet, 2004]
parties. Once fixed by the courts, the period
cannot be changed by them.

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D. ALTERNATIVE OR FACULTATIVE I. Alternative obligations:

OBLIGATIONS Several prestations are due but
the performance of one is
Alternative and Facultative sufficient. [De Leon]
Conditions Distinguished

Right of Choice [Art. 1200]

Alternative Facultative
Obligations Obligations Belongs to the debtor, UNLESS—

XX. Of the two or more

XXI. Of the two or more (1) it is expressly granted to the creditor
prestations, several prestations, only one (2) it is expressly granted to a third person
are due. is due, while the
other/s may be
performed in Lim itations to the right of choice
substitution of the [Tolentino]
one due.
(1) indivisible (cannot choose part of one
XXII. May be compliedXXIII.
with May be complied with prestation and part of another; See Art.
by performance of one by performance of 1199, par. 2)
of the prestations another prestation in
which are alternatively substitution of that (2) impossible prestations
due. which is due. (3) unlawful prestations
XXIV. Choice of prestation
XXVI. Choice of prestation (4) those which could not have been the
may pertain to debtor, pertains only to the object of the obligation
creditor, or third debtor.
person.
W hen choice shall produce effect
XXV.
Choice shall produce no effect except from
XXVII. Loss/impossibilityXXX.
of Loss/impossibility of
the time it has been communicated. [Art.
all prestations due to the prestation due to
1201]
fortuitous event shall fortuitous event is
extinguish the sufficient to
obligation. extinguish the
Form of notice
obligation.
XXVIII.
Notice of selection or choice may be in any
XXIX. Loss/impossibility of form provided it is sufficient to make the
one of the prestations Loss/impossibility of other party know that the selection has been
does not extinguish the substitute/s does made. It can be:
the obligation. not extinguish the
(1) oral
obligation, provided
the obligation which (2) in writing
is due subsists
(3) tacit
XXXI. Culpable loss of any
XXXII.
of Culpable loss of the (4) any other equivocal means [Tolentino]
the objects object which the
alternatively due debtor may deliver in Selection may be implied from the fact of
before the choice is substitution before performance [Tolentino]
made may give rise to the substitution is
liability on the part of effected does not give
the debtor. rise to any liability on Consent of other party
the part of the The law does not require the other party to
debtor. consent to the choice made by the party
entitled to choose. The only possible

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exception is when the debtor has chosen a Loss of Specific Things or

prestation which could not have been the Impossibility of Performance of
object of the obligation; the creditor’s Prestations in an Alternative
consent would bring about a novation of the Obligation
obligation [Ibid.]

If Debtor’s Choice [Art. 1204]

Consent in obligations with various
Fortuitous Event Debtor’s Fault
debtors and creditors
All prestations lost/impossible
In a joint obligation w/ various debtors and
creditors, the consent of all is necessary to Debtor is released Creditor shall have a
make the selection effective. If the obligation from the obligation. right to indemnity for
is solidary, and there is no stipulation to the damages based on
contrary, the choice by one will be binding the value of the last
personally upon him but not as to the others thing which
[Tolentino]. disappeared or
service which become
impossible, plus
Debtor cannot make a choice, or damages other than
delays selection the value may also be
If through the creditor's acts the debtor awarded
cannot make a choice according to the terms Som e prestations lost/im possible
of the obligation, the latter may rescind the
contract with damages. [Art 1203] Debtor to perform Debtor to perform
that which he shall that which the
If the debtor does not select at the time when choose from among creditor shall choose
performance should be effected, the choice the remainder. from among the
can be made for him by the creditor by remainder, without
applying Art. 1167 in obligations to do (debtor liability for damages.
considered to have waived his right, subject
to equity considerations) [Tolentino]. One prestation remains
Debtor to perform Debtor to perform
that which remains. that which remains.
Effect of notice of choice
The effect of the notice is to limit the
obligation to the object or prestation If Creditor’s Choice [Art. 1205]
selected. The obligation is converted into a Fortuitous Event Debtor’s Fault
simple obligation to perform the prestation
chosen. Once a selection has been All prestations lost/impossible
communicated, it is irrevocable [Ibid.] Debtor is released Creditor may claim
from the obligation. the price/value of
any of them, with
Instances when obligation is indemnity for
converted into a sim ple obligation damages.
(1) The person with the right of choice has
Som e prestations lost/im possible
communicated his choice [Arts. 1201, 1205
par 1] Debtor to deliver that Creditor may claim
which he shall any of those
(2) Only one prestation is practicable [Art.
choose from among subsisting without a
1202]
the remainder. right to damages OR
price/value of the
thing lost, with right
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to damages. Ones which cannot be validly performed in

parts [Tolentino]
One prestation remains
Debtor to perform Creditor may claim
that which remains. the remaining thing Rules
without a right to (1) Divisibility/indivisibility refers to the
damages OR the performance of the prestation and not to
price/value of the the thing which is the object thereof. The
thing lost with right thing may be divisible, yet the obligation
to damages. may be indivisible.
(2) When the obligation has for its object the
II. Facultative obligations: Only execution of a certain number of days of
one prestation is agreed upon, work, the accomplishment of work by
but the obligor may render metrical units, or analogous things which
another in substitution. [Art. by their nature are susceptible of partial
1206] performance, it shall be divisible [Art.1225,
par. 2].
(3) Even though the object or service may be
Loss or deterioration of Substitute in physically divisible, an obligation is
Facultative Obligations [Art. 1206] indivisible if so provided by law or
Before Substitution is After Substitution is intended by the parties.
Made Made (4) In obligations not to do, divisibility or
If due to bad faith or The loss or indivisibility shall be determined by the
fraud of obligor: deterioration of the character of the prestation in each
obligor is liable. substitute on particular case.
account of the (5) A joint indivisible obligation gives rise to
XXXIII.
obligor’s delay, indemnity for damages from the time any
XXXIV. negligence, or fraud, one of the debtors does not comply with
renders the obligor his undertaking [Art. 1224].
XXXV.
liable because once
If due to the the substitution is
negligence of the made, the Effect
obligor: obligor is not obligation is
liable. converted into a Creditor cannot be compelled to receive
simple one with the partially the prestation in which the
XXXVI. obligation consists; neither may the debtor
substituted thing as
the object of the be required to make the partial payment [Art.
obligation. 1248], UNLESS:
(1) The obligation expressly stipulates the
contrary.
E. DIVISIBLE AND INDIVISIBLE
OBLIGATIONS (2) The different prestations constituting the
objects of the obligation are subject to
different terms and conditions.
Divisible Obligations (3) The obligation is in part liquidated and in
Ones which are susceptible of partial part unliquidated.
performance, that is, the debtor can legally
perform the obligation by parts and the
creditor cannot demand a single performance
of the entire obligation [Tolentino]
Indivisible Obligations
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UP LAW BOC OBLIGATIONS
Cessation of Indivisibility
a) By conversion of the obligation into
an obligation to pay damages
b) By novation of the obligation
c) By death of creditor or the debtor
(division among heirs of the
deceased)
F. OBLIGATIONS WITH A PENAL
CLAUSE
Penal Clause
An accessory undertaking to assume greater
liability in case of breach.
If the principal obligation is void, the penal
clause shall also be void. However, the nullity
of the penal clause does not carry with it the
nullity of the principal obligation [Art.1230].
Purposes of Penalty
(1) Funcion coercitiva de garantia - to insure
the performance of the obligation.
(2) Funcion liquidatoria - to liquidate the
amount of damages to be awarded to the
injured party in case of breach of the
principal obligation (compensatory).
(3) Funcion restrictamente penal - to punish
the obligor in case of breach of the
principal obligation (punitive).
Rules on Penalty
(1) The penalty shall substitute the
indemnity for damages and payment of
interest in case of non-compliance [Art.
1226], UNLESS:
a. There is an express provision
to that effect
b. The obligor refuses to pay the
penalty
c. The obligor is guilty of fraud
in non-fulfillment
In this case, damages and interest aside
from the penalty may be awarded
[Tolentino]
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CIVIL LAW
(2) Debtor cannot exempt himself from the
performance of the principal obligation
by paying the stipulated penalty UNLESS
this right has been expressly reserved for
him [Art. 1227].
(3) Creditor cannot demand the fulfillment of
the principal obligation and demanding
the satisfaction of the penalty at the
same time UNLESS the right has been
clearly granted to him [Art. 1227]. A tacit
or implied grant is admissible.
a. If the creditor chooses to demand
the satisfaction of the penalty, he
cannot afterwards demand the
fulfillment of the obligation.
b. If there was fault on the part of the
debtor, creditor may demand not
only the satisfaction of the penalty
but also the payment of damages.
c. If the creditor has chosen to demand
the fulfillment of the principal
obligation and the performance
thereof becomes impossible without
his fault, he may still demand the
satisfaction of the penalty.
Enforcement of the Penalty
The enforcement of the penalty can be
demanded by the creditor only when the non-
performance is due to the fault or fraud of the
debtor. However, the creditor does not have
to prove fault or fraud, since the non-
performance gives rise to the presumption of
fault. Thus, the burden of proof to show that
non-performance was due to force majeure or
creditor’s acts lies with the debtor.
[Tolentino]
Proof of Actual Damage
Proof of actual damage suffered by the
creditor is NOT NECESSARY in order that the
penalty may be enforced [Art. 1228]
That proof of actual damages is not
necessary is applicable only to the general
rule stated in Art. 1226, where penalty shall
substitute for damages and interest, but not
to the exceptions where interest or damages
aside from the penalty may be awarded.
UP LAW BOC OBLIGATIONS
Liquidated dam ages
The penalty is exactly identical with what is
known as “liquidated damages” in Art. 2226.
In cases where there has been partial or
irregular compliance, as in this case, there
will be no substantial difference between a
penalty and liquidated damages insofar as
legal results are concerned and either may be
recovered without the necessity of proving
actual damages and both may be reduced
when proper. [Filinvest v CA, G.R. No.138980,
2005]
W hen Penalty m ay be Reduced [Art.
1229]:
(1) If the principal obligation has been partly
complied with.
(2) If the principal obligation has been
irregularly complied with.
(3) If the penalty is iniquitous or
unconscionable, even if there has been no
performance.
The question of whether a penalty is
reasonable or iniquitous can be partly
subjective and partly objective. Its resolution
would depend on such factor as, but not
necessarily confined to, the type, extent and
purpose of the penalty, the nature of the
obligation, the mode of breach and its
consequences, the supervening realities, the
standing and relationship of the parties, and
the like, the application of which, by and
large, is addressed to the sound discretion of
the court. [Ligutan v CA, G.R. No. 138677,
2002]
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CIVIL LAW
IV. Joint and Solidary
Obligations
A. JOINT OBLIGATIONS
The whole obligation, whether capable of
division into equal parts or not, is to be paid
or performed by several debtors (joint
debtors) and/or demanded by several
creditors (joint creditors).
Each debtor is liable only for a proportionate
part of the debt, and each creditor is entitled
only to a proportionate part of the credit.
[Tolentino]
Terms used for Joint Obligations
(1) Mancomunada
(2) Mancomunada simple
(3) Pro rata
(4) “We promise to pay”, followed by
signatures of two or more persons
Presumption of Joint Obligation
An obligation is presumed joint if there is a
concurrence of several creditors, or of several
debtors, or of several creditors and debtors in
one and the same obligation [Art. 1207]
Exceptions:
(1) When the obligation expressly states that
there is solidarity
(2) When the law requires solidarity, i.e.
quasi-delicts (Art. 2194), joint payees by
mistake (Art. 2157), acts under articles 19-
22 if committed by two or more persons
acting jointly
(3) When the nature of the obligation
requires solidarity
(4) When a charge or condition imposed
upon heirs or legatees, and the testament
expressly makes the charge or condition
in solidum
(5) When the solidary responsibility is
imputed by a final judgment upon several
defendants
UP LAW BOC OBLIGATIONS CIVIL LAW

Presumption of Divisibility in Joint
Obligations
Credit or debt shall be presumed to be
divided into as many equal shares as there
are creditors or debtors, the credits or debts
being considered distinct from one another.
[Art.1208]
insolvent, the others shall not be liable for
his share.
When there are several debtors or creditors,
but the prestation is indivisible, the
obligation is joint, UNLESS solidarity has
been stipulated [Tolentino]

Principal Effects of Joint Liability

[Tolentino]
(1) Demand by one creditor upon the debtor,
produces the effects of default only with
respect to the creditor who demanded
and the debtor on whom the demand was
made, but not with respect to others.
(2) Interruption of prescription by the judicial
demand of one creditor upon a debtor
does not benefit the other creditors nor
interrupt the prescription as to other
debtors.
(3) Vices of each obligation arising from the
personal defect of a particular debtor or
creditor do not affect the obligation or
right of the others.
(4) Insolvency of a debtor does not increase
the responsibility of his co-debtors, nor
does it authorize a creditor to demand
anything from his co-debtors.
(5) Defense of res judicata is not extended
from one debtor to another.
W hen Indivisible [Art. 1225]
(1) Obligations to give definite things
(2) Obligations not susceptible of partial
performance
(3) Indivisibility is provided by law or
intended by the parties, even though
object or service may be physically
divisible
(4) In obligations not to do, when character
of prestation requires indivisibility
Plurality of Creditors in Joint
Indivisible
If one or some of the creditors demands the
prestation, the debtor may legally refuse to
deliver to them. He can insist that all the
creditors together receive the thing, and if
any of them refuses to join the others, the
debtor may deposit the thing in court by way
of consignation. [Tolentino]

Plurality of Debtors in Joint

I. Joint Divisible Obligation
Indivisible
One where a concurrence of several creditors,
The obligation can be performed by them
or of several debtors, or of several creditors
only by acting together. Hence all must be
and debtors, by virtue of which, each of the
sued. If any of the debtors is not willing to
creditors has a right to demand, and each of
perform, the prestation is converted into an
the debtors is bound to render compliance
indemnification for damages. [Tolentino]
with his proportionate part of the prestation
which constitute the object of the obligation
(obligacion mancomunada).
Failure of one debtor to perform in a
joint indivisible obligation gives rise
to indem nity for dam ages
II. Joint Indivisible Obligations
Art. 1224. A joint indivisible obligation
Art. 1209. If the division is impossible, the
gives rise to indemnity for damages from the
right of the creditors may be prejudiced only
time anyone of the debtors does not comply
by their collective acts, and the debt can be
with his undertaking. The debtors who may
enforced only by proceeding against all the
have been ready to fulfill their promises
debtors. If one of the latter should be
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shall not contribute to the indemnity beyond obligation (solidary creditor or active
the corresponding portion of the price of the solidarity) [Tolentino]
thing or of the value of the service in which
the obligation consists.
Solidarity may exist although the creditors
and the debtors may not be bound in the
Sum m ary: in case of breach same manner and by the same periods and
conditions. [Art. 1211]
Joint Divisible Joint Indivisible
Obligations Obligations
Terms used for Solidary Obligations
In case of breach of In case of breach
obligation by one of where one of the joint (1) Mancomunada solidaria
the debtors, debtors fails to
(2) Joint and several
damages due must comply with his
be borne by him undertaking, the (3) In solidum
alone. obligation can no (4) Juntos o separamende
longer be fulfilled or
performed. Thus, the (5) “I promise to pay”, followed by signatures
action must be of two or more persons
converted into one (6) Individually and collectively
for indemnity for
damages, with each (7) Individually liable
debtor liable only for (8) Individually and jointly liable
his part in the price
or value of the
prestation. Distinguished from Indivisibility
Joint Indivisible Obligations and Art. 1210. The indivisibility of an obligation
Prescription does not necessarily give rise to solidarity.
The act of a joint creditor which would Nor does solidarity of itself imply
ordinarily interrupt the period of prescription indivisibility.
would not have an effect on prescription
because the indivisible character of the
obligation requires collective action of the Solidarity Indivisibility
creditors. Hence, the act of one alone is Refers to the legal Refers to the
ineffective to interrupt prescription tie (vinculum juris), prestation that is not
[Tolentino] and consequently to capable of partial
the subjects or performance
parties of the
B. SOLIDARY OBLIGATIONS obligation
More than one Exists even if there is
An obligation where there is concurrence of creditor or more only one creditor
several creditors, or of several debtors, or of than one debtor and/or one debtor
several creditors and several debtors, by (plurality of subjects)
virtue of which, each of the creditors has the Each creditor may Each creditor cannot
right to demand, and each of the debtors is demand the entire demand more than
bound to render, entire compliance with the prestation and each his share and each
prestation which constitutes the object of the debtor is bound to debtor is not bound
obligation (obligacion solidaria). pay the entire to pay more than his
Each debtor is liable for the entire obligation prestation share
(solidary debtor or passive solidarity), and Effect of breach: Effect of breach:
each creditor is entitled to demand the entire Obligation is
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Solidarity remains converted to As to Uniformity

indemnity for
(1) Uniform – Parties are bound by the same
damages
conditions or terms
All debtors are liable Only the debtors (2) Non-uniform – Parties are bound by
for breach guilty of breach of different conditions or terms
committed by a co- obligation liable for
debtor damages
All debtors are Other debtors are Active Solidary Obligation (among
proportionately not liable if one creditors)
liable for insolvency debtor is insolvent Art. 1214. The debtor may pay any one of
of one debtor the solidary creditors; but if any demand,
judicial or extrajudicial, has been made by
one of them, payment should be made to
Kinds of Solidary Obligations him.
As to Source
(1) Legal – imposed by law A relationship of mutual agency is created
(2) Conventional – agreed upon by parties among co-creditors.
(3) Real – imposed by the nature of the
obligation Effects of Active Solidarity [Tolentino]
(1) Death of solidary creditor does not
As to Parties Bound transmit solidarity to his heirs but rather
to all of them taken together (joint)
(1) Active (solidarity among creditors) – Each
creditor has the authority to claim and (2) Each represents the other in receiving
enforce the rights of all, with the resulting payment and all other advantageous acts
obligation of paying everyone what (i.e. interrupt prescription and render the
belongs to him. debtor in default for the benefit of all
creditors)
(2) Passive (solidarity among debtors) – Each
debtor can be made to answer for the (3) One creditor does NOT represent all
others, with the right on the part of the others in acts such as novation (even if
debtor-payor to recover from the others advantageous), compensation and
their respective shares. remission. In this case, even if debtor is
released, the other creditors can still
(3) Mixed (solidarity among creditors and
enforce their rights against the creditor
debtors) – Solidarity is not destroyed by who made the novation, compensation or
the fact that the obligation of each debtor
remission [Art. 1215, par. 2]
is subject to different conditions or
periods. The creditor can commence an (4) The creditor who collects the debt, shall
action against anyone of the debtors for be liable to the others for the share in the
the compliance with the entire obligation obligation corresponding to them. [Art.
minus the portion or share which 1215, par 2]
corresponds to the debtor affected by the (5) The credit is divided equally among them,
condition or period. unless agreement to the contrary.
(6) Debtor may pay any one of the solidary
creditors; but if any demand, judicial or
extrajudicial, has been made by one of
them, payment should be made to him
who demanded [Art. 1214]

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A solidary creditor cannot assign his rights
without the consent of the others [Art. 1213].
Such an assignment produces no effect
whatsoever
Passive Solidary Obligation
Art. 1216. The creditor may proceed
against any one of the solidary debtors or
some or all of them simultaneously. The
demand made against one of them shall not
be an obstacle to those which may
subsequently be directed against the others,
so long as the debt has not been fully
collected.
Art. 1217. Payment made by one of the
solidary debtors extinguishes the obligation.
If two or more solidary debtors offer to pay,
the creditor may choose which offer to
accept.
He who made the payment may claim from
his co-debtors only the share which
corresponds to each, with the interest for the
payment already made. If the payment is
made before the debt is due, no interest for
the intervening period may be demanded.
When one of the solidary debtors cannot,
because of his insolvency, reimburse his
share to the debtor paying the obligation,
such share shall be borne by all his co-
debtors, in proportion to the debt of each.
Effects of Passive Solidarity [Tolentino]
(1) Each debtor can be required to pay the
entire obligation, but after payment he
can recover from the co-creditors their
respective shares
(2) Each debtor may set up his own claims
against the creditor as payment of the
obligation
(3) Remission of the entire debt affects all
debtors, but when remission is limited to
the share of one debtor, the other debtors
are still liable for the balance of the
obligation
a. The remission of the whole
obligation, obtained by one of
the solidary debtors, does not
entitle him to reimbursement
from his co-debtors. [Art.
1220]
(4) All debtors are liable for the loss of the
thing due, even if only one of them is at
fault, or after incurring delay it is lost by
fortuitous event
(5) Interruption of prescription as to one
debtor affects all others, but renunciation
of prescription already had does not
prejudice the others. (Reason:
prescription extinguishes the mutual
representation among solidary debtors)
(6) Interests due by delay of one is borne by
all of them

Defenses Available to a Solidary

Art. 1222. A solidary debtor may, in actions Debtor [Art. 1222]
filed by the creditor, avail himself of all
defenses which are derived from the nature (1) Those derived from the nature of the
of the obligation and of those which are obligation
personal to him, or pertain to his own share. a. Defenses inherent in an
With respect to those which personally obligation include non-
belong to the others, he may avail himself existence of the obligation
thereof only as regards that part of the debt because of absolute
for which the latter are responsible. simulation or illicit object,
nullity due to defect in
capacity or consent of all
A relationship of mutual guaranty is created debtors, unenforceability,
among co-debtors. non-performance of
suspension condition or non-
arrival of period,
extinguishment of the

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obligation, res judicata, and illegality [Art. 1218].

prescription.
(2) Those personal to him
Art 2047 specifically calls for the application
a. Personal defenses such as of the provisions on solidary obligations to
minority, insanity, fraud, suretyship contracts. In particular, Art 1217
violence, or intimidation will recognizes the right of reimbursement from a
serve as a complete co-debtor in favor of the one who paid (i.e.,
exemption of the defendant the surety). In contrast, Art 1218 is definitive
debtor from liability to the on when reimbursement is unavailing, such
creditor that only those payments made after the
(3) Those pertaining to his own share obligation has prescribed or became illegal
shall not entitle a solidary debtor to
(4) Those personally belonging to other reimbursement. [Diamond Builders v Country
co-debtors but only as regards that Bankers, 2007]
part of the debt for which the latter are
responsible.
Loss of the thing or im possibility of
perform ance of the passive/mixed
Comparing demand upon Solidary solidary obligation [Art. 1221]
Debtor and Paym ent by a Solidary
Debtor Without
fault of The obligation shall be
Demand Upon a Payment by a the extinguished.
Solidary Debtor Solidary Debtor debtors
The demand made Full payment made All debtors shall be responsible
against one of them by one of the solidary With fault to the creditor, for the price and
shall not be an debtors extinguishes of any of the payment of damages and
obstacle to those the obligation [Art. the interest, without prejudice to
which may 1217]. debtors their action against the guilty or
subsequently be negligent debtor.
directed against the
others so long as the Through a All debtors shall be responsible
debt has not been fortuitous to the creditor, for the price and
fully collected [Art. event the payment of damages and
1216]. after one interest, without prejudice to
incurred their action against the guilty or
The creditor may If two or more in delay negligent debtor.
proceed against any solidary debtors offer
one of the solidary to pay, the creditor
debtors or all may choose which
simultaneously [Art. offer to accept [Art.
1216]. 1217].
A creditor’s right to The solidary debtor
proceed against the who made the
surety exists payment shall have
independently of his the right to claim
right to proceed from his co-debtors
against the principal the share which
corresponds to them
with interest,
UNLESS barred by
prescription or

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UP LAW BOC
V. Extinguishment of
Obligations
Art. 1231. Obligations are extinguished:
(1) By payment or performance;
(2) By the loss of the thing due;
(3) By the condonation or remission of the
debt;
(4) By the confusion or merger of the rights
of creditor and debtor;
(5) By compensation;
(6) By novation.
Other causes of extinguishment of
obligations, such as annulment, rescission,
fulfillment of a resolutory condition, and
prescription, are governed elsewhere in this
Code.
A. PAYMENT OR PERFORMANCE
1. Paym ent
(1) The delivery of money OR
(2) The performance of an obligation
[Art.1232]
2. Object of Payment
Principle of Integrity of Payment
Art. 1233. A debt shall not be understood
to have been paid unless the thing or service
in which the obligation consists has been
completely delivered or rendered, as the
case may be.
Article 1244. The debtor of a thing cannot
compel the creditor to receive a different
one, although the latter may be of the same
value as, or more valuable than that which is
due.
In obligations to do or not to do, an act or
forbearance cannot be substituted by
another act or forbearance against the
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OBLIGATIONS CIVIL LAW
obligee's will. (1166a)
Exceptions to Art. 1244:
(1) If the obligation is facultative
(2) If the creditor agrees (Dation in payment)
(3) Substantial Performance by Debtor
(Creditor only has a right to damages)
[Art 1234]
Art. 1248. Unless there is an express
stipulation to that effect, the creditor cannot
be compelled partially to receive the
prestations in which the obligation consists.
Neither may the debtor be required to make
partial payments.
However, when the debt is in part liquidated
and in part unliquidated, the creditor may
demand and the debtor may effect the
payment of the former without waiting for the
liquidation of the latter.
Art. 1235. When the obligee accepts the
performance, knowing its incompleteness or
irregularity, and without expressing any
protest or objection, the obligation is deemed
fully complied with.
3. By whom
Payor must have free disposal of the thing
due and capacity to alienate it. [Art. 1239]
(1) The debtor or his duly authorized agent
(2) The debtor’s heir or successor in interest
(3) A third person interested in the
fulfillment of the obligation (i.e. co-
debtor, guarantor) whether the debtor
consents to it or not, and even without
debtor’s knowledge [Art 1302]. This
includes payment by a joint debtor
[Monte de Piedad v Fernando Rodrigo,
1936] but not a solidary co-debtor.
(4) A third person not interested in the
obligation; but the creditor is not bound
to accept payment by him, unless there
is a stipulation to the contrary [Art 1236].
UP LAW BOC
Note: When payment is made by a 3rd
person without the consent of the debtor,
such payment has NO EFFECT on the
running of the prescriptive period.
[Tolentino]
Payment by a third person
Art. 1236. The creditor is not bound to
accept payment or performance by a third
person who has no interest in the fulfillment
of the obligation, unless there is a
stipulation to the contrary.
Whoever pays for another may demand from
the debtor what he has paid, except that if
he paid without the knowledge or against
the will of the debtor, he can recover only
insofar as the payment has been beneficial
to the debtor.
Art. 1237. Whoever pays on behalf of the
debtor without the knowledge or against the
will of the latter, cannot compel the creditor
to subrogate him in his rights, such as those
arising from a mortgage, guaranty, or
penalty.
Articles 1236 and 1237 merely lay down a
presumption. However, by virtue of the
parties’ freedom to contract, the parties could
stipulate otherwise. But such mutual
agreement, being an exception to presumed
course of events as laid down by Articles 1236
and 1237, must be adequately proven
[Carandang v de Guzman, 2006].
Reimbursement & Subrogation
Distinguished
Reimbursement Subrogation
Personal action to Includes
recover amount paid reimbursement, but
also the exercise of
other rights attached
to the original
obligation (e.g.
guaranties,
securities)
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OBLIGATIONS CIVIL LAW
Art. 1238. Payment made by a third person
who does not intend to be reimbursed by the
debtor is deemed to be a donation, which
requires the debtor's consent. But the
payment is in any case valid as to the creditor
who has accepted it.
4. To whom
(1) The person in whose favor the obligation
has been constituted; or
(2) His successor in interest; or
(3) Any person authorized to receive it [Art.
1240]
Payment to a person who is incapacitated to
administer his property shall be valid:
(1) if he has kept the thing delivered, OR
(2) insofar as the payment has been
beneficial to him. [Art. 1241 par 1]
Payment made in good faith to any person in
possession of the credit shall release the
debtor. [Art. 1242]
Payment made to the creditor by the debtor
after the latter has been judicially ordered to
retain the debt shall not be valid. [Art. 1243]
Payment to a third person [Art. 1241
par 2]
Payment made to a third person shall also be
valid insofar as it has redounded to the
benefit of the creditor.
That payment has redounded to the benefit
of the credit must be proved, EXCEPT:
(1) If after the payment, the third person
acquires the creditor's rights;
(2) If the creditor ratifies the payment to the
third person;
(3) If by the creditor's conduct, the debtor
has been led to believe that the third
person had authority to receive the
payment. [Art. 1241]
UP LAW BOC
5. W here: Place of Paym ent
(1) In the place designated in the obligation.
(2) In the absence of stipulation—
a. If obligation is to deliver a
determinate thing: wherever the
thing might be at the moment the
obligation was constituted.
b. In any other case: domicile of debtor
[Art. 1251]
6. W hen: Tim e of Paym ent
Upon demand, EXCEPT-
(1) When time is of the essence
(2) When the debtor loses the benefit of the
period
(3) When the obligation is reciprocal
7. Form of Payment
Art. 1249. The payment of debts in money
shall be made in the currency stipulated,
and if it is not possible to deliver such
currency, then in the currency which is legal
tender in the Philippines.
The delivery of promissory notes payable to
order, or bills of exchange or other
mercantile documents shall produce the
effect of payment only when they have been
cashed, or when through the fault of the
creditor they have been impaired.
In the meantime, the action derived from the
original obligation shall be held in the
abeyance.
Legal Tender:
Such currency which in a given jurisdiction
can be used in the payment of debts, and
which cannot be refused by the creditor.
When payment not in legal tender is accepted
by the creditor:
1. Demandability of obligation is suspended
2. Produces the effect of payment when:
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OBLIGATIONS CIVIL LAW
a. It is encashed; or
b. It was impaired due to creditor’s
fault. [Tolentino]
Extraordinary inflation or deflation
Art. 1250. In case an extraordinary
inflation or deflation of the currency
stipulated should supervene, the value of
the currency at
the time of the establishment of the
obligation shall be the basis of payment,
unless there is an agreement to the contrary.
For extraordinary inflation (or deflation) to
affect an obligation, the following requisites
must be proven:
(1) an official declaration of extraordinary
inflation or deflation from the BSP
(2) obligation was contractual in nature; and
(3) parties expressly agreed to consider the
effects of the extraordinary inflation or
deflation [Equitable PCI Bank v Ng
Sheung, December 19 2007]
(Note: the 3rd requisite does not folow the
scheme of Article 1250)
A.1 APPLICATION OF PAYMENTS
Designation of the debt to which should be
applied a payment made by a debtor who
owes several debts to the same creditor.
Requisites:
(1) There is a plurality of debts
(2) Debts are of the same kind
(3) Debts are owed to the same creditor and
by the same debtor
(4) All debts must be due, UNLESS parties so
stipulate, or when application is made by
the party for whose benefit the term has
been constituted
(5) Payment made is not sufficient to cover
all debts [Art. 1252]
Rules on Application
(1) Preferential right of debtor - debtor has
the right to select which of his debts he is
paying.
UP LAW BOC OBLIGATIONS CIVIL LAW

(2) The debtor makes the designation at the

time he makes the payment.
A.2. DATION IN PAYMENT
(3) If not, the creditor makes the application,
Delivery and transmission of ownership of a
by so stating in the receipt that he issues,
thing by the debtor to the creditor as an
unless there is cause for invalidating the
accepted equivalent of the performance of
contract.
the obligation (dacion en pago).
(4) If neither the creditor nor debtor exercises
the right to apply, or if the application is
not valid, the application is made by Requisites:
operation of law.
(1) Existence of a money obligation
(5) If debt produces interest, the payment is
(2) Alienation to the creditor of a property by
not to be applied to the principal unless
the debtor with the creditor’s consent
the interests are covered.
(3) Satisfaction of the money obligation
(6) When no application can be inferred from
the circumstances of payment, it is
applied: (a) to the most onerous debt of A.3. PAYMENT BY CESSION
the debtor; or (b) if debts due are of the
same nature and burden, to all the debts Special form of payment where the debtor
in proportion. assigns/abandons ALL his property for the
benefit of his creditors in order that from the
(7) Rules of application of payment may not proceeds thereof, the latter may obtain
be invoked by a surety or solidary payment of their credits.
guarantor.
Requisites:
Rules on application of payment cannot be
made applicable to a person whose (1) There is a plurality of debts
obligation as a mere surety is both contingent (2) There is a plurality of creditors
and singular. There must be full and faithful
compliance with the terms of the contract. (3) Partial or relative insolvency of debtor
[Reparations Commission vs. Universal Deep (4) Acceptance of the cession by the creditors
Sea Fishing Corp, 1978] [Art. 1255]
The debtor’s right to apply payment can be
waived and even granted to the creditor if the Debtor is released only for the net proceeds
debtor so agrees [Premiere Development v unless there is a stipulation to the contrary.
Central Surety, 2009]

Cession and Dation Distinguished

Lim itations:
Cession Dacion en pago
1. Right of creditor to refuse partial payment
[Art. 1248] Plurality of creditors One creditor
2. Rule on satisfaction of interest before the Debtor must be Debtor not
Principal. [Art. 1453] partially or relatively necessarily in state
insolvent of financial difficulty
3. Debtor cannot apply payment to a debt
which is not yet liquidated Universality of Thing delivered is
property is ceded equivalent of
4. He cannot choose a debt with a period
performance
(established for the creditor’s benefit) before
the period has arrived. Merely releases Extinguishes
debtor for the net obligation to the
5. Stipulation as to preference of payment.
[Tolentino] proceeds of things extent of the value
ceded or assigned, of the thing
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unless there is delivered, as agreed (4) Amount or thing due was placed at the
contrary intention upon, proved or disposal of the court
implied from the
(5) After the consignation has been made,
conduct of the
the persons interested were notified
creditor
thereof
Involves all Does not involve all W hen tender and refusal not required
properties of debtor properties of debtor [Art. 1256]
Creditor does not Creditor becomes (1) Creditor is absent or unknown, or does
become owner of the owner not appear at the place of payment.
ceded property
(2) Creditor is incapacitated to receive the
thing due at the time of payment.
A.4. TENDER OF PAYMENT AND (3) Without just cause, creditor refuses to
CONSIGNATION give receipt.
(4) Two or more persons claim the same
Tender of payment: Manifestation made right to collect (i.e. Interpleader)
by the debtor to the creditor of his desire to (5) Title of the obligation has been lost.
comply with his obligation, with offer of
immediate performance.
(1) Preparatory act to consignation W hat constitutes valid consignation
(2) Extrajudicial in character In order that the consignation of the thing
due may release the obligor, it must first be
announced to the persons interested in the
Consignation: Deposit of the object of fulfilment of the obligation.
obligation in a competent court in
accordance with the rules prescribed by law The consignation shall be ineffectual if it is
whenever the creditor unjustly refuses not made strictly in consonance with the
payment or because of some circumstances provisions which regulate payment. [Art.
which render direct payment to the creditor 1257]
impossible or inadvisable.
(1) Principal act which constitutes a form How consignation is m ade
of payment
Consignation shall be made by depositing the
(2) Judicial in character things due at the disposal of judicial authority,
before whom the tender of payment shall be
Requisites of consignation proved, in a proper case, and the
announcement of the consignation in other
(1) There is a debt due cases.
(2) Consignation is made because of some The consignation having been made, the
legal cause interested parties shall also be notified
a. There was tender of payment and thereof.
creditor refuses without just cause
to accept it
b. Instances when consignation W ho bears the expenses
alone would suffice as provided The expenses of consignation, when properly
under Art. 1256 made, shall be charged against the creditor.
(3) Previous notice of consignation was given [Art. 1259]
to those persons interested in the
performance of the obligation

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W ithdrawal of Consigned Amount gives rise to the obligation on the part of the
SELLER to enter into a contract of sale.
Before the creditor has accepted the
Tender of payment alone is NOT enough
consignation, or before a judicial declaration
[Adelfa Properties v CA]. On the other hand, in
that the consignation has been properly
an “Option Contract”, tender of payment is
made, the debtor may withdraw the thing or
enough to perfect the contract of sale
the sum deposited, allowing the obligation to
remain in force [Art. 1260, par 2].
The amount consigned with the trial court Effects of W ithdrawal by Debtor [Arts.
can no longer be withdrawn by the debtor 1260- 1261]
because creditor’s prayer in his answer that
(1) Before approval of the court - Obligation
the amount consigned be awarded to him is
remains in force.
equivalent to an acceptance of the
consignation, which has the effect of (2) After approval of the court or acceptance
extinguishing debtor’s obligation [Pabugais v by the creditor, with the consent of the
Sahijwani, 2004]. latter - Obligation remains in force, but
guarantors and co-debtors are liberated.
Preference of the creditor over the thing is
Effects of Consignation lost.
If accepted by the creditor or declared (3) After approval of the court or acceptance
properly made by the Court: by the creditor, and without creditor’s
consent - Obligation subsists, without
(1) Debtor is released in same manner as if
change in the liability of guarantors and
he had performed the obligation at the
co-debtors, or the creditor’s right of
time of consignation
preference.
(2) Accrual of interest is suspended from the
moment of consignation.
(3) Deterioration or loss of the thing or B. LOSS OF THE THING DUE OR
amount consigned, occurring without the IMPOSSIBILITY OR DIFFICULTY OF
fault of debtor, must be borne by creditor PERFORMANCE
from the moment of deposit
Any increment or increase in the value of the Loss
thing after consignation inures to the benefit
of the creditor A thing is lost when it perishes, goes out of
commerce or disappears in such a way that
its existence is unknown or it cannot be
Note: recovered [Art. 1189, no. 2]
Unless there is an unjust refusal by a creditor
to accept payment from a debtor, Article 1256 Effects of Loss [Arts. 1262-1263]
cannot apply. The possession of the property
by the petitioners being by mere tolerance as Obligation to Deliver a Obligation to Deliver
they failed to establish the existence of any Specific Thing a Generic Thing
contractual relations between them and the Obligation is Loss of a generic
respondent, the bank deposit made by the extinguished if the thing does not
petitioners intended as consignation has no thing was destroyed extinguish an
legal effect [Llobrera v Fernandez, May 2, without fault of the obligation, EXCEPT
2006]. debtor and before he in case of delimited
has incurred delay. generic things, where
the kind or class is
In a “Contract To Sell”, tender and limited itself, and the
consignation is necessary to bring into effect whole class perishes.
the suspensive condition of payment which
PAGE 220 OF 574
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An obligation to pay money is generic;
therefore, it is not excused by fortuitous loss
of any specific property of the debtor [Gaisano
v Insurance Company, 2006].
Actions Against Third Persons
Art. 1269. The obligation having been
extinguished by the loss of the thing, the
creditor shall have all the rights of action
which the debtor may have against third
persons by reason of the loss.
Other cases where loss is attributed
to debtor
(1) Law provides that the debtor shall be
liable even if the loss is due to fortuitous
events [Arts. 1942, 1979, 2147, 2159].
(2) Obligor is made liable by express
stipulation.
(3) Nature of the obligation requires an
assumption of risk.
(4) Fault or negligence concurs with the
fortuitous event.
(5) Loss occurs after delay.
(6) Debtor has promised to deliver the same
thing to two or more different parties.
(7) Obligation arises from a criminal act.
(8) Borrower in commodatum: saves his own
things and not the thing of the creditor
during a fortuitous event.
Loss of the thing when in possession
of the debtor
Loss was due to the debtor’s fault. Burden of
explaining the loss of the thing falls upon him,
UNLESS due to an earthquake, flood, storm,
or other natural calamity [Art. 1265].
In Reciprocal Obligations
Extinguishment of the obligation due to loss
of the thing or impossibility of performance
affects both the creditor and debtor; the
entire juridical relation is extinguished.
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CIVIL LAW
Partial loss
Art. 1264. The courts shall determine
whether, under the circumstances, the partial
loss of the object of the obligation is so
important as to extinguish the obligation.
Partial loss due to a fortuitous event does not
extinguish the obligation. The thing due shall
be delivered in its present condition, without
any liability on the part of the debtor,
UNLESS the obligation is extinguished when
the part lost was of such extent as to make
the thing useless.
Impossibility of Performance
[Arts. 1266-1267]
When prestation becomes legally or
physically impossible (by fortuitous event or
force majeure), the debtor is released.
Impossibility must have occurred without
fault of debtor, and after the obligation has
been constituted.
Subjective im possibility
Where there is no physical or legal loss, but
the thing belongs to another, the
performance by the debtor becomes
impossible. The debtor must indemnify the
creditor for damages.
Partial Impossibility
Courts shall determine whether it is so
important as to extinguish the obligation.
(1) If debtor has performed part of the
obligation when impossibility occurred,
creditor must pay the part done as long
as he benefits from it.
(2) If debtor received full payment from
creditor, he must return excess amount
corresponding to part which was
impossible to perform.
Doctrine of Unforeseen Events
UP LAW BOC
Art. 1267. When the service has become so
difficult as to be manifestly beyond the
contemplation of all the parties, the obligor
may also be released therefrom, in whole or
in part.
C. CONDONATION
Condonation or Remission of the Debt
An act of liberality, by virtue of which, without
receiving any equivalent, the creditor
renounces the enforcement of the obligation.
The obligation is extinguished either in whole
or in such part of the same to which remission
refers.
Requisites:
(1) Debt must be existing and demandable.
(2) Renunciation must be gratuitous.
(3) Debtor must accept the remission. [Art.
1270]
If the renunciation is not gratuitous, the
nature of the act changes and it may be:
(1) Dation in payment – when the creditor
receives a thing different from that
stipulated;
(2) Novation – when the object or principal
conditions of the obligation have
changed;
(3) Compromise – when the matter
renounced is in litigation or dispute and
in exchange of some concession which
the creditor receives.
Although the debtor must accept the
remission, nothing prevents the creditor from
making a unilateral declaration of his right,
abandoning and thereby extinguishing his
credit, as expressly allowed by Art 6.
Kinds of Condonation:
A. As to extent
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OBLIGATIONS CIVIL LAW
1. Total – extinguishes the entire
obligation.
2. Partial – refers to only a particular
aspect of the obligation, i.e. amount
of indebtedness or an accessory
obligation.
B. As to Form
Art. 1270. Condonation or remission is
essentially gratuitous, and requires the
acceptance by the obligor. It may be made
expressly or impliedly.
One and the other kind shall be subject to the
rules which govern inofficious donations.
Express condonation shall, furthermore,
comply with the forms of donation.
1. Express Condonation
Made formally: in accordance with
forms of ordinary donations. [Art.
1270]
An express remission must be
accepted in order to be effective.
When the debt refers to movable or
personal property, Art 748 will
govern; if it refers to immovable or
real property, Art 749 applies.
2. Implied Condonation
Inferred from the acts of the parties.
Presumptions of Condonation:
(1) Whenever the private document in which
the debt is found is in the possession of
the debtor, it shall be presumed that the
creditor delivered it voluntarily, unless
the contrary is proved. [Art. 1272]
(2) Delivery of a private document evidencing
credit made voluntarily by the creditor to
the debtor implies the renunciation of the
action of creditor against the latter. [Art.
1272]
UP LAW BOC OBLIGATIONS CIVIL LAW

(3) Accessory obligation of pledge has been
remitted when thing after its delivery is
found in the possession of the debtor or
third person. [Art. 1274]
Effect
Art. 1273. Renunciation of the principal debt
shall extinguish the accessory obligations,
but remission of the latter leaves the
principal obligation in force.
Obligation is not extinguished when
confusion takes place in the person of
subsidiary debtor (i.e. guarantor), but merger
in the person of the principal debtor shall
benefit the former.
Note: Where, however, the mortgagee
acquires ownership of the entire mortgaged
property, the mortgage is extinguished; but
this does not necessarily mean the
extinguishment of the obligation secured
thereby, which may become an unsecured
obligation.

D. CONFUSION OR MERGER OF
RIGHTS E. COMPENSATION

Confusion: The meeting in one person of Compensation: Offsetting of two

the qualities of creditor and debtor of the obligations which are reciprocally
same obligation. extinguished if they are of the same value, or
extinguished to the concurrent amount if of
Requisites different values.
(1) It should take place between principal Requisites [Art. 1279]
debtor and creditor. [Art 1276]
(1) Each obligor is bound principally, and at
(2) The very same obligation must be the same time a principal creditor of the
involved; other
(3) The confusion must be total, i.e. as (2) Both debts must consist in a sum of
regards the whole obligation. money, or if the things due are fungible,
of the same kind & quality

Effects Note: The term ‘consumable’ is

erroneously used in Art 1279. The
(1) In general appropriate term is ‘fungible’.
Art. 1275. The obligation is extinguished [Tolentino]
from the time the characters of the debtor (3) Both debts are due
and creditor are merged in the same person.
(4) Debts are liquidated and demandable
(5) There must be no retention or controversy
(2) In case of joint or solidary obligations over either of the debts, commenced by
third persons and communicated in due
Confusion in Confusion in
time to the debtor
Joint Obligation Solidary Obligation
(6) Compensation is not prohibited by law
Extinguishes the Extinguishes the To warrant the application of set off under
share of the person in entire obligation, but
Article 1278 of the Civil Code, the debtor’s
whom the two the other debtors admission of his obligation must be clear and
characters concur may be liable for
categorical and not one which merely arise by
[Art 1277] reimbursement if inference or implication from the customary
payment was made
execution of official documents in assuming
prior to remission. the responsibilities of a predecessor [Bangko
Sentral v COA, 2006].

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Effects Kinds of Compensation

(1) Both debts are extinguished to the As to extent
concurrent amount, even though the
(1) Total – when two debts are of the same
creditors and debtors are not aware of
amount (Art. 1281)
the compensation.
(2) Partial
(2) Accessory obligations are also
extinguished.
As to cause
Debtor claiming its benefits must prove
compensation; once proven, effects retroact (1) Legal
from the moment when the requisites
(2) Voluntary
concurred.
(3) Judicial
(4) Facultative
Compensation Distinguished from
Other Modes of Extinguishment
Compensation Confusion (1) Legal Com pensation – takes place by
operation of law from the moment all
There must always Involves only one requisites are present.
be two obligations. obligation.
Since it takes place ipso jure, when used as a
defense, it retroacts to the date when all its
requisites are fulfilled.
There are two There is only one
persons who are person whom the
mutually debtors and characters of the
Art. 1290. When all the requisites
creditors of each creditor and debtor
mentioned in article 1279 are present,
other in two separate meet.
compensation takes effect by operation of
obligations, each
law, and extinguishes both debts to the
arising from the
concurrent amount, even though the
same cause.
creditors and debtors are not aware of the
compensation.
Compensation Payment
Capacity to dispose Requires capacity to Legal compensation may apply to:
and receive the thing dispose of the thing
i. Awards of attorney’s fees, against the
is unnecessary since paid and capacity to
litigant and not his lawyer [Gan Tion v
compensation receive
CA, 1969]
operates by law
ii. Bank deposits, against the accounts of
May be partial Must be total a depositor whose checks were
performance dishonored [BPI v CA, 1996]
Note: While a bank generally has a
Compensation Counterclaim right of set-off over deposits for the
payment of any withdrawals on the
Takes place by Must be pleaded to part of a creditor, the question of
operation of law be effectual whether the remedy is properly
exercised is a separate matter and
depends on the bank’s role as the
depository bank and as collecting
agent for the check. The depositary
bank must have acted with the highest
degree of care, otherwise it may not
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exercise such right of setoff. (6) Damage caused to the partnership by a

[Associated Bank v Tan, 2004] partner

(2) Voluntary Com pensation – takes Right of a Guarantor

place when parties who are mutually
A guarantor may set up compensation as
creditors and debtors of each other agree
regards what the creditor may owe the
to compensate their respective
principal debtor. [Art. 1280]
obligations even though one of the
requisites of compensation may be
lacking
Effect of Assignment of Rights by the
Creditor to a Third Person [Art. 1285]
Art. 1282. The parties may agree upon the
Debtor cannot set up against
compensation of debts which are not yet
assignee compensation
due. With
pertaining to him against
debtor’s
assignor UNLESS he
consent
reserved such right at the
The only requisites of conventional
time he gave his consent
compensation are (1) that each of the parties
can dispose of the credit he seeks to With Debtor may set up
compensate, and (2) that they agree to the debtor’s compensation of debts
mutual extinguishment of their credits knowledge previous to the assignment
[United Planters v CA, 2009]. but without but not of subsequent ones
consent
Debtor may set up
(3) Judicial Compensation – takes place
Without compensation of all credits
by judicial decree
debtor’s prior and also later to the
knowledge assignment until he had
Art. 1283. If one of the parties to a suit over knowledge of the assignment
an obligation has a claim for damages
against the other, the former may set it off
by proving his right to said damages and the
amount thereof.
F. NOVATION
(4) Facultative Compensation - When it
can be claimed by one of the parties who,
however, has the right to object to it. Novation
- Compensation which can only be set up
Extinguishment of an obligation by the
at the option of a creditor, when legal
substitution or change of the obligation by a
compensation cannot take place because
subsequent one which extinguishes or
some legal requisites in favor of the
modifies the first either by changing the
creditor are lacking.
object or principal conditions, or by
substituting the person of the debtor, or by
subrogating a third person in the rights of the
Obligations which cannot be
creditor.
com pensated [Arts. 1287-1288]
Unlike other modes of extinguishment, it is a
(1) Contracts of depositum
juridical act of dual function—it extinguishes
(2) Contracts of commodatum an obligation, and at the same time, it
(3) Future support due by gratuitous title creates a new one in lieu of the old. It
operates as a relative, not an absolute,
(4) Civil liability arising from a penal offense extinction.
(5) Obligations due to the government
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Requisites benefit third persons who did not give their

(1) A previous valid obligation
(2) Agreement of all the parties to the new
obligation
(3) Animus novandi or intent to novate
(4) Substantial difference between old and
new obligations and, consequently,
extinguishment of the old obligation
(5) Validity of the new obligation
consent to the novation OR those who may
be affected, upon agreement between the
parties.
Original or new obligation with
suspensive or resolutory condition
Art. 1299. If original obligation was subject
to a suspensive or resolutory condition, the
new obligation shall be under the same
condition, unless it is otherwise stipulated.

Effect
If Original If New Compatible Incompatible
In General Obligation is Obligation is Conditions Conditions
Void Void (a) Fulfillment of (a) Original obligation
Old Novation is New both conditions: is extinguished,
obligation is void if the obligation is new obligation while new
extinguished original void, the old becomes obligation exists
and obligation obligation demandable
replaced by was void, subsists, (b) Fulfillment of
the new one EXCEPT UNLESS the (b) Demandability
condition
stipulated. when parties shall be subject to
concerning the
annulment intended that fulfillment/
original
may be the former nonfulfillment of
obligation: old
claimed only relations shall the condition
obligation is
by the be affecting it
revived; new
debtor, or extinguished obligation loses
when in any event force
ratification [Art. 1297]
validates acts (c) Fulfillment of
1. New condition
that are
obligation concerning the
voidable [Art.
void: No new obligation:
1298]
novation no novation;
1. Original requisite of a
2. New
obligation is previous valid and
obligation
void: No effective
voidable:
novation. obligation lacking
Novation is
2. Original effective
obligation
voidable: Kinds of Novation
Effective if As to form
contract is
ratified (1) Express – declared in an unequivocal
before terms
novation. (2) Implied – the old and new obligations are
on every point incompatible with each
other
Accessory obligations are also extinguished,
but may subsist only insofar as they may
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Novation is not presumed As to essence or object

In the absence of an unequivocal declaration (1) Objective/ Real
of extinguishment of the pre-existing
(2) Subjective/ Personal
obligation, only proof of incompatibility
between the old and new obligation would a. Substitution of debtors
warrant a novation by implication. [California
i. Expromision
Bus Line vs. State Investment, 2003]
ii. Delegacion
b. Subrogation of a third person to the
Test of Incompatibility
rights of the creditor
Whether or not the old and new obligation
i. Conventional
can stand together, each one having an
independent existence. No incompatibility ii. Legal
exists when they can stand together. Hence,
there is no novation. Incompatibility exists (1) Objective Novation
when they cannot stand together. Hence,
there is novation. a. Change of the subject matter
b. Change of cause or consideration
For there to be implied novation, the changes c. Change of the principal conditions or
must be essential, i.e. referring to the object, terms
cause, or principal conditions of the
obligation. (2) Subjective Novation
a. Substitution of debtors
As to effect
Expromision Delegacion
(1) Total
Initiative for change Debtor (delegante)
(2) Partial does not emanate offers or initiates the
from the debtor, and change, and the
may even be made creditor (delegatorio)
Total Partial without his accepts a third
knowledge. person (delegado) as
(1) Transfers to the A creditor, to
consenting to the
person subrogated the whom partial
substitution.
credit with all the payment has
rights thereto been made, may Requisites
appertaining, either exercise his right
(1) Consent of the Consent of old
against the debtor or for the
creditor and the debtor, new debtor,
third persons. remainder, and
new debtor. and creditor.
shall be
(2) Obligation is not
preferred to the (2) Knowledge or
extinguished, even if
person consent of the old
the intention is to pay
subrogated in his debtor is not
it.
place in virtue of required.
(3) Defenses against the the partial
old creditor are Effects
payment.
retained, unless (1) Old debtor is (1) Insolvency of the
waived by the debtor. released new debtor
revives the
(2) Insolvency of the
obligation of the
new debtor does
old debtor if it was
not revive the old
anterior and
obligation in case
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the old debtor did public, and known

not agree to to the old debtor.
i. Conventional Subrogation – takes
expromision.
(2) New debtor can place by agreement of parties
(3) If with knowledge demand
and consent of the reimbursement of
Difference between Conventional
old debtor, the the entire amount
Subrogation and Assignment of Credit
new debtor can he has paid from
[Licaros v Gatm aitan, 2001]
demand the original
reimbursement of debtor. He may Conventional
Assignment of credit
the entire amount compel the subrogation
paid and with creditor to
Debtor’s consent is Debtor’s consent is not
subrogation of subrogate him to
necessary. required.
creditor’s rights. all of his rights.
Extinguishes an Refers to the same right
(4) If without
obligation and which passes from one
knowledge of the
gives rise to a new person to another,
old debtor, the
one. without modifying or
new debtor can
extinguishing the
demand
obligation.
reimbursement
only up to the Defects/vices in Defects/vices in the old
extent that the the old obligation obligation are not
latter has been are cured. cured.
benefited without
subrogation of
creditor’s rights. ii. Legal Subrogation – takes place by
operation of law

For subjective novation, it is insufficient that

Legal subrogation is not presumed, except in
the juridical relation between the parties to
the following circumstances:
the original contract is extended to a third
person. If the old debtor is not released, no (1) When creditor pays another creditor
novation occurs and the third person who has who is preferred, even without the
assumed the debtor’s obligation becomes debtor’s knowledge
merely a co-debtor or surety or co-surety. (2) When a third person not interested in
[Conchinyan, Jr. v. R&B Surety and Insurance the obligation pays with the express or
Company, 1987] tacit approval of the debtor
(3) When, even without the knowledge of
the debtor, a person interested in the
An accessory surety may not be released if he fulfillment of the obligation pays,
expressly waives his discharge from the without prejudice to the effects of
obligation in case of change or novation in confusion as to the latter’s share (Art.
the original agreement [Molino v Security 1302)
Diners International Corp, 2001].

b. Subrogation
Transfers to the person subrogated the credit
with all the rights thereto appertaining, either
against the debtor or against third persons,
be they guarantors or possessors of
mortgages, subject to stipulation in a
conventional subrogation. [Art. 1303]
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