JOINT AND SOLIDARY OBLIGATIONS

 Must the division of shares always be equal? Explain.

Ex: If D1, D2, and D3 owe P300,000 to C, how should payment be made if the obligation is
joint? How would it be different if the obligation is solidary?
Ans #1: Collective (passive) joint, need bayaran nila D1, D2 at D3 si C corresponding sa shares
nila, presumed that it is divided into as many equal shares but pwede unequal if stipulated. For
solidary each debtor is liable for the breach of all others, they will be bound together to pay the
300,000 and C can demand one, some or all of the debtors simultaneously if the payment is not
yet fully collected.
Ans #2: In a joint obligation, each debtor must pay only P100,000 to C. Once a debtor has settled
his portion of the payment, he is not responsible for the other portions of his co-debtors.
 But if the obligation is solidary, any of the 3 debtors may be required to shoulder not only his
share but the shares of the other 2 as well. Therefore, D3 may be required to pay the entire
P300,000 to C, subject to reimbursement of P100,000 each from D1 and D2 as their respective
shares
Ex: If D owes P600,000 to C1, C2, and C3, how should payment be collected if the obligation is
joint? How would it be different if the obligation is solidary?
Ans: In a joint obligation, each creditor may collect only P200,000 from D. Once a creditor has
collected his portion of the payment, he is not entitled to collect the other portions pertaining to
his co-creditors.
 But if the obligation is solidary, any of the 3 creditors may collect not only his share but the
shares of the other 2 as well. Therefore, C3 may collect the entire P600,000 from D, subject to
his duty to distribute P200,000 each to C1 and C2 as their respective shares.
Ex: If D1, D2, and D3 owe P900,000 to C1, C2, and C3, how should payment be made and
collected if the obligation is joint? How would it be different if the obligation is solidary?
Ans: In a joint obligation, each debtor is bound to pay only for his share (P300,000), while each
creditor may collect only his share (also P300,000). Once a debtor has settled his part of the
obligation, he is not bound to shoulder any other debtor's portion. Similarly, once a creditor has
collected his portion of the payment, he is not entitled to collect the other portions pertaining to
his co-creditors. Thus, if D1 already paid P300,000 to C3, the other creditors will have to collect
from the unpaid debtors and not from D1.
 On the other hand, if the obligation is solidary, any of the 3 debtors may be required to pay
the full amount, while any of the 3 creditors may collect such full amount. Therefore, C3 may
collect the entire P900,000 from D2, subject to his duty to distribute P300,000 each to C1 and C2
as their respective shares. Meanwhile, D1 and D3 will have to reimburse P300,000 each to D2.
 This is because a solidary obligation on the debtors' side means that every debtor is willing to
shoulder not only his share but even the shares of the others. On the creditors' side, solidary
means that each creditor has the right to collect not only his portion but even the portions of his
co-creditors.
Additional Question: Must the division of shares always be equal? = No. It is equal only if there
is no stipulation providing for unequal sharing. Hence, it is possible that D1 will be required to
shoulder 50% of the total debt while D2 shoulders 30% and D3 shoulders only 20%. The same
can be done as far as creditors' shares are concerned.
Additional Question: If the contract clearly shows plurality of debtors and creditors but does not
specify whether they are bound jointly or solidarily, which legal rules must then be applied to
determine their rights and liabilities?
Answers:
✓ The legal presumptions is that the obligation is joint (1207)
✓ Because joint is a lot less complicated than solidary. Hence, the law favors the joint set-up
when the situation does not clearly provide for a solidary set-up.
kanya-kanyang bayad (kkb) and
kanya-kanyang kuha (kkk)
is definitely simpler than
"all for one, one for all"
 kkb/kkk = joint
 all for one, one for all = solidary
✓ The legal presumption is that the obligation is joint. It is only considered solidary when it is
clearly provided to be so. There must be an indicator that the parties are bound as
debtors/creditors in a solidary manner; otherwise, the rules on joint obligations will apply. Be
careful with some popular legal phrases though. Contracts that state “jointly and severally” to
describe the liability of the debtors have been interpreted by the Supreme Court to refer to
solidary liability (even if they mention “joint” in the phrase).
Ex: D1, D2, and D3 have agreed in writing to deliver a bridal car to C1 and C2 for the latter’s
upcoming wedding. D1 and D2 have already prepared their funds for the purchase of the car. D3
is not cooperating. If no car is delivered on the due date, how will the creditors enforce the
obligation?
*** Please take note of the provision that says “indivisibility is not the same as solidarity”***
- An indivisible obligation is not necessarily a solidary obligation at the same time.
Ans: As joint creditors, C1 and C2 must both make a demand upon D1, D2, and D3, who are
considered to be joint debtors. C1 cannot represent C2, nor can C1 oblige D1 to acquire the
entire car using only his own funds. This is because the contract does not clearly provide for a
solidary obligation. Thus, the rules of joint obligations must apply. Since D3 is not cooperating,
it is obvious that D1 and D2 are not responsible for his share in the obligation. But then again,
D1 and D2 cannot offer to deliver 2/3 of a car because the obligation is also indivisible. The rule
in 1224 will apply here: Just convert the car into cash indemnity. Divide the amount by 3. Each
debtor will settle his share separately. But D3 will also be liable for damages arising from delay.
 Of course, if it's clearly established to be solidary from the start, then the approach can be
much simpler.
Ex: In a contract containing a solidary obligation, the stipulation states that D1, D2, and D3 are
liable to pay P300,000 to C. It further states that D1 will be liable on April 21, while D2 will be
liable on May 21. Lastly, D3 will only be liable if he wins his labor case against his former
employer. When April 21 arrives, how much can C collect and from whom?
Additional Question:
- What if D1 cannot be found on April 21? Can C go to D2 to collect payment?
- How much can C collect on that day?
***Now we are combining a solidary obligation with a conditional obligation and an obligation
with a period.***
Ans: On April 21, C can collect P100,000 only. The total amount must be divided in order to
give effect to the 2 suspensive periods and 1 suspensive condition stipulated. But since the
obligation is clearly solidary, C can collect the P100,000 (pertaining to D1's share) from any of
the 3 debtors. Even D2 and D3 may be required to shoulder D1's share because they are all
solidary debtors. On May 21, the share of D2 may then be collected from D1, D2, or D3. If D3
wins his labor case, the last P100,000 may be collected from any of the 3 debtors.
***Now, assignment of credit...***
Ex: D owes P600,000 to C1, C2, and C3. Before the due date, C1 has decided to assign (transfer
his credit) to F, his best friend. What would be the rules if the creditors happened to be bound
jointly? What if they're bound solidarily?
Ans: In the case of joint creditors, C1 can easily assign his share of P200,000 to F, since his
share is not the concern of the other creditors anyway. But in the case of solidary creditors, C1
can only assign his share to F if both C2 and C3 will consent to it. If C3 refuses to allow it, then
no transfer to F from C1 will happen legally. The reason for this is the power of a solidary
creditor to collect not only his own share but also those of his co-creditors. If for some reason,
C3 does not trust F, it is not proper to risk letting F collect C3's share when the due date arrives.
Additional Question: What then can be a solution to C1's dilemma in the above problem?
Ans: C1 can assign his share in the credit to C2 instead. An assignment in favor of a fellow
solidary creditor does not require approval from the other co-creditors. The law presumes that
solidary co-creditors already trust one another.
Ex: D1, D2, and D3 owe P900,000 to C. Assuming that the debtors are jointly bound, what
would be the implication if D3 happened to be insolvent on the due date for payment? How
would it be different if the obligation is solidary and D1 already paid the full P900,000 to C?
Ans: If the obligation is joint and D3 became insolvent, then the burden would fall upon the
creditor since D1 and D2 are not responsible for the share of D3. But in a solidary obligation,
take note that any debtor may be required to settle the full amount, as what D1 did in this
situation. D1's problem would now be the reimbursement.
Additional Question: So, can D1 require D2 to reimburse P600,000 (including D3's share)? Or
can D1 require the creditor to return P300,000 representing D3's share?
Ans: Neither. The share of D3 (P300,000) will be proportionally divided among the remaining
debtors. This means D2 will reimburse an additional P150,000 (half of D3's share) while D1 will
shoulder the other P150,000 until D3 is able to pay. Check out 1217.

 P300,000 - original share of D2
 P150,000 - share of D3 shouldered by D2
 The other half of D3's P300,000 will be shouldered by D1 himself.
[ Finally, take note that under 1214, the debtor must prioritize payment to the solidary co-
creditor who made the first demand for payment (in case 2 or more co-creditors happened to
make a demand). But under 1217, the creditor who receives 2 or more offers to pay from the
solidary co-debtors does not need to accept the first offer of payment. He can even choose the
last offer if it happens to be the best offer, e.g., first offer was check payment but last offer was
cash. ]
 OBLIGATIONS WITH A PENAL CLAUSE
 Before we proceed, let us be clear on one thing: The Civil Code (which contains the rules
on Obligations and Contracts) is not a criminal statute. Unlike the Revised Penal Code
(which contains most of the classic definitions and penalties for crimes), the Civil Code
does not provide for criminal penalties such as imprisonment. Thus, when we use the
term "penalty" or "penal clause" in the Civil Code context, we must stress that we are
NOT referring to the possibility of sending the debtor to prison as a consequence of his
breach.

 Whenever there is a breach of the principal obligation by the debtor, the creditor's usual
recourse is to sue for indemnity for damages (sometimes with either specific performance
or rescission). However, the law already allows the parties to anticipate the damage that
the creditor might suffer in case of breach, and even to stipulate the value of such damage
as part of the contract. This is what we refer to as a penal clause or sometimes simply a
penalty.
 The penal clause is "conventional" if it is stipulated by the contracting parties (e.g., a
monthly finance charge of 2% for any outstanding balance on a credit card bill). But in
some cases, the penal clause is "legal" because it is mandated by law (e.g., a surcharge of
25% for late payment of taxes).
 The term "penalty" or "penal clause" does not actually have to be used, for as long as the
added charge is designed to compensate the creditor for his losses on account of the
debtor's breach (i.e., compensatory penal clause) or even to punish the debtor for his
failure to perform (i.e., punitive penal clause).
 Please take note of some abbreviations I will start using from this point forward...
Principal Obligation (PO)
Penal Clause or Penalty (PC)
Indemnity for Damages (ID)
 If the PC is "subsidiary," this means it is designed to substitute for the PO once the debtor
breaches the PO. Hence, payment of the penalty already releases the debtor from the duty
to deliver the PO. But if the PC is "cumulative," then it is understood that collecting the
penalty does not mean the creditor is abandoning the principal. The creditor may collect
both.
 Likewise, stipulating a PC normally means the creditor can only collect the penalty and
no more ID. Whatever damages are anticipated are already sufficiently covered by the
PC. This actually makes it easier to sue because the creditor would just present the
authentic contract and then prove the debtor's breach in order to enforce the PC.
Conversely, collecting ID the traditional way requires a lot of evidence to be presented
(e.g., bills and receipts to prove the extent of damage suffered by the creditor). So, it is
but fair that the debtor not be required to pay anything anymore once he settles the
penalty.
 Note, however, that both the penalty stated and additional damages may be collected in
the 3 cases mentioned in 1226. Here, the creditor can enforce the PC by simply
presenting the contract and proving the breach. But if he intends to collect additional
damages, then he must now submit evidence in support of his claim (e.g., clear and
convincing proof of fraud in the performance by the debtor).
  (replied to the orange part)= By the way, conventional PC is a standard business practice
nowadays. You find it in many kinds of agreements, especially in loans and employment
contracts. Even the UST Library states a penalty for late returning of borrowed books,
right? Gown and toga rental businesses also have a similar stipulated penalty when they
lend out their garments.
 This, in turn, might lead you to think that parties, specifically the creditor, may stipulate
whatever they want for their conventional PC. Remember though that even this power to
stipulate is not absolute.

Q: If you're the judge here, what would be your ruling? Ex: D agreed to deliver 10,000 sacks of
cement to C for a construction project. Their contract contained a penal clause that stated D
would pay a penalty of P3,000,000 in case of breach. On the due date, D delivered only 9,980
sacks, which C accepted and used. If C sues D, would the judge be inclined to award the full
penalty in favor of the creditor?
Ans: Not likely. Stipulating a PC gives no assurance that such amount will be awarded by the
court. As stated in 1229, the court maintains the power to equitably reduce the penalty if:
1. The PO has been partly or irregularly complied with by the debtor (despite the breach);
or
2. The PC is iniquitous or unconscionable
é In the above scenario, there is no doubt that the creditor substantially benefitted from the
debtor's delivery despite the breach. Likewise, the stated penalty of P3,000,000 seems to
be excessive under the circumstances. A reduction of the penalty is called for.
Q: What should the creditor do in case of breach? What would you do if you're the creditor here?
Ex: D agreed to deliver a sports car to C. In case of breach, the penal clause states D must deliver
an equivalent quantity of shabu to C. What are the implications?
Ans: The PO is valid but the PC is void and cannot be enforced in court. If D fails to deliver the
sports car, C can sue for ID instead, which means C will need to present a lot of evidence to
support his claim.
Q: What about this? If no delivery is made, what legal option will the creditor have? Ex: D
agreed to ship smuggled electronic appliances to C. In case of breach, the penal clause states D
will pay P5,000,000 to C. What are the implications?
Ans:
- cannot bring to court since what's stipulated on the contract is illegal
- the creditor can get NOTHING
- The PO is void and therefore the PC would also be void. Being merely an accessory
obligation, a PC cannot be valid if the PO it supports is invalid. The creditor cannot sue
the debtor for anything in this case: not the PO, not the PC, nor the ID. Damages cannot
be awarded if the obligation was never a legitimate one to begin with.
- the obligation to perform is nullified therefore he can’t ask for anything
(handouts)
 The next chapter deals with Extinguishment of Obligations.
 The first handout is exclusively for Payment/Performance. All other ways of
extinguishing an obligation will be in the second material.
The first handout actually has 2 portions:
1. Regular Payment
Regular Payment will highlight the following subtopics:
 - Who can make the payment?
- Who can receive the payment?
- If an amount of money is owed, how should the payment be made?
2. Special Forms of Payment
Once we get to Special Forms of Payment and until we finish the whole chapter (last topic is
Novation), we will be using a simplified approach in our discussions. We'll just focus on what
the concept is and then provide an example to illustrate how it works.
Kinda like this:
- Meaning of Consignation
- Example of Consignation
- Meaning of Novation
- Example of Novation