10 Kinds of Obligation

1. Pure
2. Conditional
3. Alternative
4. Facultative
5. Joint
6. Solidary
7. Divisible
8. Indivisible
9. Obligation w/ a period
10. Obligation w/ a penal clause

1. PURE OBLIGATION
- w/o condition, demandable at once (pure has resolutory condition/period)

2. CONDITIONAL OBLIGATION
- there is condition in performance; future & uncertain
     2Kinds
     a. Suspensive condition – happening of condition gives RISE to obligation
     b. Resolutory condition – happening of condition EXTINGUISHES obligation

6 MISCELLANEOUS RULES ON CONDITIONAL OBLIGATION

1. Impossible conditions, contrary to law, shall ANNUL obligation.
2. The condition not to do an impossible thing is considered not agreed upon.
3. The condition that happens in determinate time, EXTINGUISHES obligation.
4. The condition that happens in INDETERMINATE time, obligation only effective at arrival.
5. The condition is fulfilled if DEBTOR prevents fulfillment.
6. The effect of conditional obligation, once fulfilled:
- to give: retroact to the day of constitution of obligation
- has reciprocal prestations: fruits & interests be mutually compensated
- has unilateral obligation: debtor shall give fruits & interests

RULES in case of Loss, Improvement, or Deterioration of thing during the pendency of condition
1. LOST
a. w/ debtor’s fault – damages
b. w/o debtor’s fault – extinguishes obligation

2. DETERIORATION
a. w/ debtor’s fault  - (1) cancel obligation & damages; or (2) fulfill obligation w/ damages
b. w/o debtor’s fault – creditor suffer impairment

3. IMPROVEMENT
a. By nature/time – benefit to creditor
b. at expense of debtor – debtor no right than that granted to usufructuary (debtor no right to
compensate amount for improvement)

EFFECTS OF FULFILLMENT OF SUSPENSIVE CONDITION

General Rule: The obligation becomes effective retroactively to the day obligation was constituted.
Exceptions:
1. In reciprocal obligation, fruits & interests during pendency of condition shall compensate each
other.
2. In unilateral obligation, debtor gets fruits & interests unless there is a contrary intent.

3 EFFECTS OF FULFILLMENT OF RESOLUTORY CONDITION

1. Extinguish obligation.
2. Both parties restore what they received plus fruits & interests.
3. The rule on L, D, or I will apply to person who has to return the thing.
When one of debtors in reciprocal obligation does not comply w/ his obligation
1. The right of injured party is (1) cancel contract & damages; or (2) fulfill obligation & damages

3 Kinds of Obligation (Accdng to PERSON OBLIGED)

1. UNILATERAL – only 1 party obliged to comply
2. BILATERAL – both parties; performance not same time
3. RECIPROCAL – both parties; performance same time

3. OBLIGATION W/ A PERIOD
- demandability/extinguishment subject to the expiration of period

PERIOD – interval of time; either suspends demandability or produces extinguishment

DAY CERTAIN – must come, not known when

7 CASES CONSIDERED TO BE “OBLIGATION W/ A PERIOD”

1. Little by little
2. In partial payment
3. Payable ASAP
4. When I can afford it
5. When I have the money
6. When I am able to
7. When my means permit me to do so

PERIOD CONDITION
certain uncertain
future only future/past but unknown
(*influence upon obligation) (*) on the very existence of
only upon its demandability obligation itself

FOR WHOSE BENEFIT IS THE PERIOD?

General Rule: Both the debtor & creditor.
Therefore, NEITHER of them can demand performance of obligation.
Exception: If the term of obligation has to favor one of them.

5 INSTANCES WHEN DEBTOR LOSES RIGHT TO USE “PERIOD”

1. Debtor is insolvent.
2. Debtor attempts to abscond.
3. Impairment of guarantees/securities.
4. Failure to furnish guarantees/securities promised.
5. Violation of undertaking.

4. ALTERNATIVE OBLIGATION
- w/ 2 or more prestations, only 1 is due.

5. FACULTATIVE OBLIGATION
- w/ ONLY 1 prestation but can be substituted.

ALTERNATIVE prestations LOST w/ debtor’s fault

Creditor entitled to damages but needs ff requisites:
1. Debtor can choose.
2. All prestations lost/become impossible due to debtor’s fault.
 ALTERNATIVE OBLIGATION
several prestations due,
giving one is sufficient
right to choose (debtor)
unless granted to creditor
If 1 of the prestation is
illegal, others may be valid,
obligation remains
loss/impossibility of ALL
prestations due, w/o tion due, w/o debtor’s fault,
debtor’s fault, extinguishes
obligation
FACULTATIVE OBLIGATION
one prestation due, but can
be subtituted
right to choose DEBTOR
ONLY
nullity of principal carries
w/ it nullity of accessory/
substitute
loss/impossibility of presta-
extinguishes obligation

(3) SUMMARY OF RULES, OBLIGATIONS, & RIGHTS OF DEBTOR IN ALTERNATIVE OBLIGATION

1. If 1 of prestations lost through fortuitous event, shall still be perform by choosing (creditor) from
the remainder.
2. If 1 of prestations lost through debtor’s fault, creditor may claim any of remainders w/ damages.
3. If ALL prestations lost through debtor’s fault, creditor choose price w/ damages.

RULES on LOSS/DETERIORATION of the thing intended as SUBSTITUTE in FACULTATIVE OBLIGATION

1. If there is a loss/deterioration of thing intended as substitute, debtor is NOT liable if NOT HIS
FAULT.
But if substitution is already made, debtor is liable for loss of substitute when in DELAY, NEGLIGENCE,
or FRAUD.

6. JOINT OBLIGATION
- obligation is to be paid proportionately by debtors or to be demanded proportionately by creditors

7. SOLIDARY OBLIGATION
- each one of debtors has right to render or each one of creditors has right to demand the entire
compliance w/ prestation

MAXIMS & SYNONYMS

MAXIMS SYNONYMS
JOINT Obligation “To each his own” proportionate
SOLIDARY “One for all, all individually &
Obligation for one” collectively

(3) SOLIDARY OBLIGATION EXIST ONLY IF: *RULES

1. Law states
2. Stipulation states
3. Nature of obligation requires

2 PRESUMPTIONS THAT OBLIGATION IS JOINT

1. The debts be divided as many shares as there are debtors/creditors.
2. The debtors/creditors are distinct from one another.

8. DIVISIBLE OBLIGATION
- prestation is capable of partial performance

9. INDIVISIBLE OBLIGATION
- prestation incapable of partial performance

10. OBLIGATION W/ A PENAL CLAUSE

- one w/ accessory undertaking attached to obligation to assume greater liablity in case of breach/non-
fulfillment of obligation

3 PURPOSES OF PENAL CLAUSE

1. Ensure performance of obligation
2. Substitute for damages & interest in case of noncompli-ance
3. Penalize debtor in case of breach

In case obligation has a PENAL CLAUSE

General Rule: Penalty takes the place of damages & interest in case of non-compliance.
Exceptions:
1. Stipulation states.
2. Debtor refuse to pay penalty.
3. Debtor guilty of fraud in performance of obligation.

NULLITY OF PRINCIPAL OBLIGATION OR THE PENAL CLAUSE

Nullity of principal obligation = nullity of penal clause
Nullity of penal clause = NOT nullity of principal obligation

10 MODES OF EXTINGUISHMENT OF OBLIGATIONS

1. Payment or performance
2. Prescription
3. Compensation
4. Confusion/merger
5. Condonation/remission
6. Fulfillment of resolutory condition
7. Annulment
8. Rescission
9. Novation
10. Loss of thing due

1. PAYMENT/PERFORMANCE
- Payment means delivery of money & performance of obligation

2 PLACE OF PAYMENT
1. At place agreed upon
2. If w/o agreement
a. Object is indeterminate – paid at domicile of DEBTOR
b. Object is determinate – place of thing at the time of constitution of obligation

4 SPECIAL MODES OF PAYMENT

a. Application of payment
b. Cession
c. Tender of payment & consignation
d. Dacion in payment

a. APPLICATION OF PAYMENT
- designation of debt to w/c payment must be applied when debtor has several obligations of same
kind in favor of same creditor.

3 REQUISITES OF APPLICATION OF PAYMENT

1. Only 1 debtor & 1 creditor
2. 2 or more debts, same kind
3. All debts are due
4. Insufficient payment to exinguish ALL debts
3 RIGHTS TO MAKE APPLICATION OF PAYMENT
1. Right belongs to CREDITOR.
2. If debtor does not avail, creditor can give him receipt designating the debt from which payment will
be applied.
3. If debtor accepts the receipt, he cannot complain unless THERE IS just cause to invalidate the
contract.

b. CESSION
- debtor abandons ALL his property for creditor’s benefit to obtain payment from proceeds of his
property

5 REQUISITES OF VALID CESSION

1. 1 debtor & 2 or more creditors
2. Debtor is in partial/total insolvency.
3. Debtor to deliver ALL his property to creditors
4. Debt is due & demandable.
5. Creditors must sell the properties & apply the proceeds to their respective credits proportionately.

c. DACION IN PAYMENT (dacion en pago)

- alienation of property to the creditor in satisfaction of debt

3 REQUISITES OF DACION IN PAYMENT

1. Consent of creditor
2. NOT prejudicial to another creditor
3. Debtor not insolvent declared by a judicial decree

CESSION DACION IN PAYMENT

all properties
require more than 1 creditor
NOT act of novation
NOT transfer ownership
requires partial/total insol-
vency
NOT all properties
NOT require all creditors
act of novation
transfer ownership
may happen
during solvency of debtor

d. TENDER OF PAYMENT & CONSIGNATION

TENDER OF PAYMENT – act of offering the creditor what is due to him w/ a demand that the creditor
accept it
CONSIGNATION – act of depositing thing due w/ the court when creditor cannot/refuses acceptance of
payment

5 REQUISITES OF CONSIGNATION
1. Debt due.
2. Creditor refused the tender of payment w/o just cause
3. Notice of consignation  already given to persons interested in fulfillment of obligation
4. Consignation of thing/amount due
5. Subsequent notice of consignation to interested persons

5 VALID CONSIGNATION W/O PREVIOUS TENDER OF PAYMENT

1. Creditor is absent/unknown.
2. Creditor is incapacitate to receive at time it is due.
3. Creditor refused give a receipt, w/o just cause.
4. 2 or more persons claim the right to collect.
5. Title of obligation lost.
2. LOSS OF THING DUE
- perishes, disappears, or goes out of commerce; existence is unknown; cannot be recovered

3 REQUISITES TO EXTINGUISH OBLIGATION DUE TO LOSS

1. Determinate thing.
2. W/o debtor’s fault.
3. No delay.

3. CONDONATION/REMISSION
- gratuitous abandonment of right by the creditor

3 REQUISITES OF A VALID CONDONATION/REMISSION

1. It must be gratuitous.
2. Accepted by obligor.
3. Obligation is demandable.

4. CONFUSION/MERGER
- meeting in 1 person of qualities of debtor & creditor w/ same obligation

3 REQUISITES OF VALID CONFUSION/MERGER

1. The merger of characters of debtor & creditor must be in same person.
2. Take place between principal debtor & creditor.
3. Clear & definite.

5. COMPENSATION
- 2 persons are debtors & creditors of each other

6 ESSENTIAL REQUISITES OF COMPENSATION

1. Parties both principal debtors & creditors of each other.
2. Compensation is not prohibited by law.
3. No retention/controversy by 3rd person.
4. 2 debts are due & demandable.
5. 2 debts are liquidated.
6. 2 debts both in money/consumable things.

(2) CLASSES OF COMPENSATION

1. As to effect
a. TOTAL – obligations completely extinguished.
b. PARTIAL – a balance remains

2. As to origin or cause
a. LEGAL – by law
b. VOLUNTARY/CONVENTIONAL – agreement of parties
c. JUDICIAL – order from the court
d. FACULTATIVE – 1 of parties can choose/oppose claiming compensation

6. NOVATION
- substitution/change of obligation
- substitution of debtor
- subrogation of creditor

(3) OBLIGATIONS MAY BE MODIFIED BY:

1. Changing object/principal conditions. (REAL NOVATION)
2. Changing the person of debtor/creditor. (PERSONAL NOVATION)
a. Substitution – change of debtor
b. Subrogation – change of creditor
3. Changing person of the parties & the objects of principal condition. (MIXED NOVATION)

4 REQUISITES OF NOVATION
1. Old valid obligation.
2. Agreement of parties to new obligation.
3. Extinguishment of old obligation.
4. Validity of new obligation.

2 FORMS OF NOVATION BY SUBSTITUTION OF DEBTOR

1. EXPROMISION – w/ consent of creditor, NO consent of old debtor
     2REQUISITES
     a. Initiative of 3rd person.
     b. Consent of creditor.
2. DELEGACION – all must agree (creditor, old debtor, new debtor)
     3REQUISITES
     a. Initiative from old debtor.
     b. Consent of debtor.
     c. Acceptance by creditor.

7. SUBROGATION
- change of creditor

2 KINDS OF SUBROGATION
1. CONVENTIONAL – consent of original parties & 3rd person
2. LEGAL – by law
     a. creditor pays another preferred creditor even w/o debtor’s knowledge
     b. 3rd person pays the express approval of debtor
     c. 3rd person pays even w/o knowledge of debtor