BUSINESS LAW (MODULE 8)

ISABEL C. FLORES

BSBA 2C

Activity

The activity is to simply answer the question, “What are the different kinds of obligations?”

ASWER: The different kinds of obligation are principal obligation, accessory obligation, and
obligation with a penal clause.

Application

1. What are the purposes of incorporating a penal clause to an obligation?

ANSWER: Article 1226, penal clauses are incorporated to obligations to insure their

performance (to make the consequence of breach as onerous as possible) and to
substitute penalty for indemnity for damages and payment of interests in non-
compliance. The main purposes are reparation and punishment.

2. In an obligation with a penal clause, may the creditor still recover damages and interest
in addition to the stipulated penalty?

ANSWER: Yes, According to Article 1227, debtor may object the enforcement

of penalty if there is performance on his part or if the creditor already required fulfillment
of obligation.

Test Your Understanding

Explain or state briefly the rule or reason for your answer.

1. X promises to deliver to Y a specific horse. Their contract contains a penal clause that in
case of non-fulfillment, X shall pay a penalty of P 10,000. X wants to just pay the penalty
instead of delivering the horse. Does Y have the right to refuse to accept the penalty in
lieu of the horse?

ANSWER: Yes, According to Article 1227, X cannot exempt himself from delivering the
horse by paying the penalty, unless this right was reserved for him.
2. In the same problem, X was able to show that Y did not suffer any damage by X’s
violation of his obligation. Can Y still enforce the penalty?

ANSWER: Yes, according to article 1228, Y does not have to prove that he suffered
damages in order to demand penalty, Since X was violated the obligation. Y can enforce
penalty.