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INTRODUCTION TO LAW
“Law” – rule of action or any system of uniformity
- Types: divine, natural, moral, physical, state
- Characteristics: rule of conduct, obligatory, promulgated by
legitimate authority, common observance and benefit
OBLIGATIONS
GENERAL PROVISIONS
1156 - An obligation is a juridical necessity to give, to do or not
to do.
“Juridical Necessity” – debtor must comply with this obligation, his
failure will bring undesirable consequences
*There are some obligations that can’t be enforced because they are
not recognised as binding by the law.
ESSENTIAL REQUISITES
1. Passive subject (debtor/obligor)
2. Active subject (creditor/obligee)
3. Object or prestation (subject matter of the obligation)
4. Juridical/legal tie (efficient cause) – reason why the
obligation exists
KINDS OF OBLIGATION
1. Real obligation – to give
2. Personal obligation – to do or not to do
1157 – Obligations arise from:
(1) Law
(2) Contracts
(3) Quasi-contracts
(4) Act or omissions punished by law, and
(5) Quasi-delicts.
“Quasi-contracts” – arise from lawful, voluntary and unilateral acts
which are enforceable to the end that no one shall be unjustly
enriched or benefitted at the expense of the other
“Quasi-delicts” or “torts” – arise from the damage cause to another
through an act/omission there being fault or negligence but no
contractual relations exists between the parties
1158 – Obligations derived from the law are not presumed. Only
those expressively determined in this code or in special laws
are demandable, and shall be regulated by the precepts of the
law, which established them.
“Special laws – laws not in the civil code. E.g. Corporation code,
negotiable instruments law, insurance code, national internal
revenue code, revised penal code, labour code
*Article 1168 is an exception
1159 – Obligations arising from contracts have the force of law
between the contracting parties and should be complied with in
good faith.
“Contract” – meeting of minds
(1) Binding force – can’t be valid if against the law
(2) Requirement of a valid contract – not contrary to laws,
morals, good customs, public order and policy
“Compliance in good faith” – performance in accordance with the
stipulation of the contract
1160 – Obligations from quasi-contracts shall be subject to the
provisions of Chapter 1, Title XVII of this book.
KINDS OF QUASI_CONTRACTS
- Negotiorum Gestro – voluntary management of property
or affairs of another without knowledge of latter
- Solutio Indebiti – juridical relation created when something
is received when there is no right to demand it
Requisites
(1) There is no right to receive the thing delivered.
(2) The thing was delivered by mistake.
1161 – Civil obligations arising from criminal offenses shall be
governed by the penal laws.
CIVIL LIABILITY ARISING FROM QUASI-DELICTS
 
(1)
Moral evil and material damages – every person criminally
liable for an act or omission is also civilly liable for
damages
(2) Others, failure to pay contractual debt
SCOPE OF CIVIL LIABILITY
(1) Restitution – return the thing or pay the value if the thing is
lost
(2) Reparation
(3) Indemnification for consequential damages – pay for
damages
1162 – Obligation derived from quasi-delicts shall be governed
by the provisions of Chapter 2, Title XVII of this book, and by
special laws.
REQUISITES FOR QUASI-DELICTS
1. There must be an act/omission;
2. There must be fault/negligence;
3. There must be damaged caused;
4. There must be a direct relation or connection between the
act or omission and the damage; and
5. There is no pre-existing relation between the parties.
*CRIME VS. QUASI-DELICTS
(1) Malicious intent vs. only negligence
(2) Punishment vs. indemnification
(3) Affect public interests vs. private interests
(4) Criminal/Civil liability vs. only civil
(5) Can’t be compromised by parties themselves vs. can be
(6) Guilt of the accused must be proved beyond reasonable doubt
vs. preponderance (i.e. superior/greater weight) of evidence
NATURE AND EFFECT OF OBLIGATIONS
1163 – Every person obliged to give something is also obliged
to take care of it with the proper diligence of a good father of a
family, unless the law or the stipulation of the parties requires
another standard of care.
“Specific/determinate thing” – designated of physically segregated
others of the same class
“Generic/indeterminate thing” – class or genus to which it pertains
and cannot be pointed out with particularity
DUTIES FOR DETERMINATE THING
(1) Preserve the thing
a. As if it were your own family
b. Another standard of care (extraordinary care for
courier services) – 1173, 1174
c. Factors to be considered – debtor’s not at fault
if it wasn’t his fault/negligence (fortuitous event /
force majeure)
d. Reasons for debtor’s obligation – thing would
subsist in the same condition as it was when the
obligation was contracted
(2) Deliver the fruits of the thing
(3) Deliver the accessions and accessories
(4) Deliver the thing itself
(5) Answer for damages in case of non-fulfilment or breach
DUTIES FOR GENERIC THING
(1) To deliver the thing with quality intended
(2) To be liable for damages in case of fraud
1164 – The creditor has the right to the fruits of the thing from
the time the obligation to deliver it arises. However, he shall
acquire no real right over it until the same has been delivered
to him.
KINDS OF FRUITS
- Natural – spontaneous products of the soil or other
products from animals
- Industrial – produced by lands of any kind through
cultivation or labour
- Civil – derived by virtue of a juridical relation (e.g. Rent)
WHEN OBLIGATION TO DELIVER FRUITS ARISES
1. Perfection/birth of a contract
2. Suspensive conditions/ period – fulfilment of condition
unless otherwise stated
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3. Contract of sale, perfection
4. Obligations arising from the 5 sources, determined by
specific provisions
“Personal right” – Right or power of creditor to demand from debtor
to give, do or not do – directed against a particular person
“Real right” – Right over a specific thing - no definite passive
subject, directed against the whole world
*He shall not acquire any real right over it until the same has been
delivered to him. – In the case that the creditor has not delivered the
thing, the debtor cannot ask for recovery of possession but only
specific performance or rescission of the obligation.
1165 – When what is to be delivered is a determinate thing, the
creditor, in addiction to the right granted him by Art. 1170 may
compel the debtor to make the delivery.
If the thing is indeterminate, he may ask for the obligation is
complied with at the expense of the debtor.
If the obligor delays, or has promised to deliver the same thing
to two or more persons who do not have the same interest, he
shall be responsible for fortuitous event until he has effected
the delivery.
REMEDIES OF CREDITOR IN REAL OBLIGATION
(1) Specific real obligation
a. Specific performance; or
b. Rescission or cancellation; or
c. Demand payment for damages, where it is the
only feasible remedy.
*Can’t use force to compel, must be brought to court
(2) Generic real obligation
a. Can be done at the expense of the debtor
b. Right to recover damages
*Genus Nunquam Perit (Genus never perishes)
1166 – The obligation to give a determinate thing includes that
of delivering all its accessions and accessories, even though
they may have not been mentioned.
“Accessions” – fruits of thing or additions or improvements upon a
thing
“Accessories” – thing joined to or included with the principal for the
embellishment, better use or completion
*All are included although they may have no been mentioned
1167 – If a person is obliged to do something fails to do it, the
same shall be executed at his cost.
The same rule shall be observed if he does it in contravention
of the tenor of the obligation. Furthermore, it may be decreed
that what has been poorly done be undone.
*Refers to obligations to do
SITUATIONS
1. Fails to perform
2. Performs but contrary to terms
3. Performs but in a poor manner
REMEDIES OF CREDITOR IN POSITIVE PERSONAL
OBLIGATION
(1) Failed to comply
a. Performance done by himself or another, at the
expense of the debtor; and
b. Recover damages
(2) Complied but done in contravention or done poorly
a. Be undone if it is still possible
*Specific personal obligations cannot be ordered to do because it is
involuntary servitude. Indemnification is the only remedy then.
1168 – When the obligation consists of not doing, and the
obligor does what has been forbidden, it shall be undone at his
expense.
*There is no delay in this type of obligation
Remedy – Undoing of the forbidden plus damages.
1169 – Those obliged to deliver or to do something incur in
delay from the time the obligee judicially or extra-judicially
demands from them the fulfilment of the obligation.
 
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However, the demand by the creditor shall not be necessary in
order that delay must exist:
(1) When the obligation or the law expressively so
declares;
(2) When from the nature and the circumstances of the
obligation it appears that the designation of the time
when the thing is to be delivered or the service is to
be rendered was a controlling motive for the
establishment of the contract; or
(3) When the demand would it be useless, as when the
obligor has rendered it beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the
other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. From the moment
one of the parties fulfils his obligation, delay by the other
begins.
MEANING OF DELAY
- “Ordinary Delay” – failure to perform an obligation on time
- “Legal Delay” or “default” or Mora – failure to perform an
on obligation on time which failure constitutes a breach in
the obligation
KINDS OF DELAY OR DEFAULT
(1) Mora Solvendi – delay on the part of the debtor to fulfil his
obligation
(2) Mora Accipiendi – delay on the part of the creditor to
accept the performance of the obligation
(3) Compensatio Morae – delay of the obligors in reciprocal
obligations
*No delay in negative personal obligations
REQUISITES OF DELAY OR DEFAULT BY THE DEBTOR
(1) Failure to perform on the date agreed upon
(2) Demand was made by the creditor (judicial or extra
judicial)
(3) Failure of debtor to comply with such demand
EFFECTS OF DELAY
1. Mora Solvendi
a. Debtor is guilty of breach.
b. He is liable to the creditor for interest or
damages.
c. He is liable even for a fortuitous event, which is
to deliver a determinate thing. *But if he was
able to prove that the loss would have resulted
the same thing even if he weren’t in default, the
court can mitigate damages.
*He is not relieved of his liability if the obligation was
to deliver a generic thing.
2. Mora Accepiendi
a. Creditor is guilty of breach
b. He is liable for damages suffered, if any by the
debtor
c. He bears the rick of loss of the thing
d. Debtor is not liable for interest
e. Debtor may release himself from the obligation
by the consignation of deposit in court
3. Compensatio Morae
a. There is no default or delay on the part of both
parties. If the delay of one party follows the
other, the court shall equitably temper the
liability of the first infractor. If it can’t be
determined, the contract is deemed
extinguished and both bear their own damages.
– 1192
WHEN THE DEMAND IS NOT NECESSARY TO PUT THE
DEBTOR IN DELAY
1. When the obligation so provides
2. When the law so provides – paying taxes
3. When time is of the essence
4. When the demand would be useless (unfinished house)
5. When there is a performance by a party in reciprocal
obligation
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1170 – Those who are guilty of fraud, negligence, or delay and
those who in any manner contravene the tenor thereof, are
liable for damages.
GROUNDS FOR LIABILITY
(1) Fraud (Deceit/Dolo) – deliberate/ intentional evasion, done
in bad faith or with a malicious intent
a. Incidental (Dolo Incidente) – committed during
the performance of the obligation
b. Casual (Dolo Causante) – Done for the contract
to be executed (vitiates consent)
(2) Negligence (Fault/Culpa) – voluntary act or omission, no
bad faith
(3) Delay (Mora)
(4) Contravention of the terms of the tenor
FRAUD VS. NEGLIGENCE
(1) Deliberate intentions vs. no intention
(2) Waiver of liability of future fraud is void vs. for negligence
is allowed
(3) It must be clearly proved vs. presumed
(4) Liability cannot be mitigated vs. it can be
1171 – Responsibility arising from fraud is demandable in all
obligations. Any waiver of action for future fraud is void.
*Waiver of past fraud is valid. – Act of generosity
1172 – Responsibility arising from negligence in the
performance of every kind of obligation is demandable, but the
courts, according to circumstances, may regulate such liability.
VALIDITY OF WAIVER OF ACTION ARISING FROM
NEGLIGENCE
(1) Future negligence may be renounced except where the
nature of the obligation requires the exercise of
extraordinary diligence.
(2) When negligence shows bad faith, it is considered fraud.
KINDS OF NEGLIGENCE
1. Contractual Negligence (culpa contractual) – In contracts
2. Civil Negligence (culpa aquiliana) – in torts / quasi-delicts
3. Criminal Negligence (culpa criminal) – damages, crimes
*To be entitled for full damages, the negligence of the debtor must
be the sole cause of damage
1173 – The fault of negligence of the obligor consists in the
omission of that diligence is required by the nature of
obligation and corresponds with the circumstances of the
person, of the time, and of the place. When negligence shows
bad faith the provisions of article 1171 shall apply.
If the law or contract does not state the diligence which is to be
observed in the performance, that which is expected of a good
father of a family shall be required.
“Negligence” – failure to observe the protection of the interests of
another person
FACTORS TO BE CONSIDERED
(1) Nature of the obligation
(2) Circumstances of the person
(3) Circumstance of time
(4) Circumstance of place
MEASURE OF LIABILITY OF DAMAGES
- Good faith – liable for natural and probable consequences
- Bad faith – liable for all damages
KINDS OF DILIGENCE REQUIRED
(1) Agreed upon by the parties
(2) Required by law
(3) That of a good father of a family
1174 – Except in cases expressly specified by the law, or when
it is otherwise declared by the stipulation, or when the nature of
the obligation requires the assumption of risk, no person shall
be responsible foe these events which could not be foreseen of
which though foreseen, were inevitable.
“Fortuitous Event” – event that could not be foreseen, if foreseen, is
inevitable.
KINDS OF FORTUITOUS EVENTS
 
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- Ordinary - common
- Extraordinary – uncommon
REQUISITES OF A FORTUITOUS EVENT
(1) Independent of the human will or at least debtor’s will
(2) Event could not be foreseen, or if foreseen is inevitable
(3) Renders it impossible for the debtor to comply with his
obligation in a normal manner
(4) Debtor must be free from any participation in or the
aggravation of, the injury of the creditor, that is, there is no
concurrence negligence on his part
EXCEPTIONS
(1) When expressly specified by the law
a. The debtor is guilty of fraud, negligence, or
delay, or contravention of the tenor
b. The debtor has promised to deliver the same
specific thing to two or more persons who do
not have the same interests
c. The obligation arises from a crime
d. Thing to be delivered is generic
(2) When declared by stipulation
(3) When the nature of the obligation requires the assumption
of risk
1175 – Usurious Transactions – DOESN’T MATTER
Creditor can charge any interest as long as it is not iniquitous or
unconscionable (unjust or unreasonable)
1776 – The receipt of the principal by the creditor, without
reservation with the respect to the interest, shall give rise to the
presumption that said interest has been paid.
The receipt of a later instalment of a debt without reservation
as to prior instalments, shall likewise raise the presumption
that such instalments have been paid.
“Presumption” – inference of a fact not actually known arising from
its usual connection with another which is known or proved.
KINDS OF PRESUMPTIONS
- Conclusive – one which cannot be contradicted
- Disputable – one which can be contradicted by presenting
proof
WHEN PRESUMPTIONS DON’T APPLY
(1) With reservation as the interest
(2) Receipt without indication of particular instalment paid
(3) Receipt for part of the principal
(4) Payment of taxes
(5) Non-payment proven
1177 – The creditors, after having pursued the property in
possession of the of the debtor to satisfy their claims, may
exercise all the rights and bring all actions of the latter for the
same purpose, save for those which are inherent in his person;
that they may also impugn (dispute) the acts which the debtor
may have done to defraud them.
REMEDIES
(1) Specific performance with damages
(2) Pursue leviable property
(3) Exercise all rights and bring all the actions of the debtor
(4) Ask the court to rescind or impugn acts or contracts which
the debtor may have done to defraud him
1178 – Subject to the laws, all rights acquired in virtue of an
obligation are transmissible, if there has been no stipulation to
the contrary.
EXCEPTIONS
(1) Prohibited by law
a. Contract of a partnership
b. Contract of agency
c. Contract of Commodatum
(2) Prohibited by stipulation of the parties
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DIFFERENT KINDS OF OBLIGATIONS a. Possible – capable of fulfilment
b. Impossible
PURE AND CONDITIONAL OBLIGATIONS (4) As to cause or origin
1179 – Every obligation whose performance does not depend a. Potestative – depends on the will of one of the
on upon the future or uncertain events, or upon a past event contracting parties
unknown to the parties, are demandable at once. b. Casual – depends on chance or third party
Every obligation which contains a resolutory condition shall c. Mixed – depends on partly chance and partly
also be demandable, without prejudice to the effects of the will of third party
happenings of the event. (5) As to mode
“Pure Obligation” – one that is not subject to any condition and no a. Positive – performance of act
specific date of fulfilment is mentioned and it is immediately b. Negative – omission of act
demandable. (6) As to numbers
“Conditional Obligation” – one whose consequences are subject in a. Conjunctive – several prestations must all due
one-way or another to the fulfilment of a condition. b. Disjunctive – several prestations and one or
“Condition” – a future and uncertain event, upon the happening of some must are due
which, the effectivity or extinguishment of an obligation subject to it (7) As to divisibility
depends. a. Divisible – susceptible to partial performance
CHARACTERISTICS OF AN OBLIGATION b. Indivisible
(1) Future and uncertain WHEN SUSPENSIVE CONDITION DEPENDS ON THE WILL OF
(2) Past but unknown THE DEBTOR
*Condition must not be impossible. (1) Conditional obligation is void
TWO PRINICPAL KINDS OF OBLIGATIONS (2) Only the condition is void – if there was a pre-existing
(1) “Suspensive Condition” (precedent/antecedent) – obligation
fulfilment will give rise to an obligation WHEN SUSPENSIVE CONDITION DEPENDS ON THE WILL OF
(2) “Resolutory Condition” (subsequent) – fulfilment will THE CREDITOR
extinguish the obligation It is valid.
DISTINCTION BETWEEN SUSPENSIVE AND RESOLUTORY WHEN RESOLUTORY CONDITION DEPENDS ON THE WILL OF
1. Upon fulfilment, obligation arises vs. extinguishes THE DEBTOR
2. If it doesn’t take place, the tie of law doesn’t exist vs. it is It is valid.
still consolidated WHEN SUSPENSIVE CONDITION DEPENDS ON PARTLY THE
3. Until it takes places, it is just a mere hope vs. hovers over WILL OF THE DEBTOR
the possibility of extinction
WHEN AN OBLIGATION IS DEMANDABLE AT ONCE 1183 – Impossible conditions, those contrary to good customs
(1) When it is pure or public policy and those prohibited by law shall annul the
(2) When it is subject to a resolutory condition obligation which depends on them. If the obligation is divisible
(3) When it is subject to a resolutory period that part thereof which is not affected by the impossible or
unlawful condition shall be valid.
1180 – When the debtor binds himself to pay when his means The condition not to do an impossible thing shall be
permit him to do so, the obligation shall be deemed to be one considered as not having been agreed upon.
with a period, subject to the provisions of article 1197 TWO KINDS OF IMPOSSIBLE CONDITIONS
WHEN THE DURATION OF THE PERIOD DEPENDS ON THE (1) Physically impossible
DEBTOR (2) Legally impossible
(1) The debtor promises to pay when his means permit him to EFFECTS OF IMPOSSIBLE CONDITIONS
do so (1) Conditional obligation void – both obligation and condition
(2) Other cases is void
a. Little by little (2) Conditional obligation valid – if the condition is negative,
b. As soon as possible obligation becomes pure and valid
c. From time to time (3) Only the affected obligation is void – if the obligation is
d. At any time I have the money divisible
e. In partial payments (4) Only the condition is void – if there was a pre-existing
f. When I am in a position to pay obligation

1181 – In conditional obligations, the acquisition of rights, as
well as the extinguishment or loss of those already acquired,
shall depend upon the happening of the event which
constitutes the condition.
EFFECTS OF HAPPENING OF CONDITION
- Acquisition of rights – Suspensive
- Loss of rights already acquired – Resolutory
1182 – When the fulfilment of the condition depends upon the
sole will of the debtor, the obligation shall be void. If it depends
upon chance of upon the will of a third person, the obligation
shall take effect in conformity with provisions of this Code.
CLASSIFICATIONS OF CONDITIONS
(1) As to effect
a. Suspensive
b. Resolutory
(2) As to form
a. Express – condition is clearly stated
b. Implied – merely inferred
(3) As to possibility
1184 – The condition that some event happen at a determinate
time shall extinguish the obligation as soon as the time expires
or if it has become indubitable that the event will not take place.
POSTIVE CONDITION
The obligation is extinguished
(1) As soon as the time expires without the event taking
place; or
(2) As soon as it has become indubitable that the vent will not
take place even though the time has not expired.
1185 – The condition that some event will not happen at a
determinate time shall be render the obligation effective from
the moment the time indicated has elapsed, or if it has become
evident that the event cannot occur.
If no time has been fixed, the condition shall be deemed
fulfilled at such time as may have probably been contemplated,
being in the mind the nature of the obligation
NEGATIVE CONDITION
The obligation shall become effective and binding

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(1) From the moment the time indicated has elapsed without
the event taking place; or
(2) From the moment it has become evident that the event
cannot occur, although the time indicated has not elapsed.
1186 – The condition shall be deemed fulfilled when the obligor
voluntarily prevents its fulfilment.
CONSTRUCTIVE FULFILMENT OF SUSPENSIVE OBLIGATION –
REQUISITES
(1) Condition is suspensive
(2) The obligor prevents the fulfilment of the condition
(3) He acts voluntarily
CONSTRUCTIVE FULFILMENT OF RESOLUTORY OBLIGATION
Debtor is bound to return what he has received upon the fulfilment of
the obligation
1187 – The effects of a conditional obligation to give, once the
condition has been fulfilled, shall retroact to the day of the
constitution of the obligation. Nevertheless, when the
obligation imposes reciprocal prestations upon the parties, the
fruits and interests during the pendency of the condition shall
be deemed to have been mutually compensated. If the
obligation is unilateral, the debtor shall appropriate the fruits
and interests received, unless from the nature and
circumstances of the obligation it should be inferred that the
intention of the person constituting the same was different.
In obligations to do and not to do, the courts shall determine, in
each case, the retroactive effect of the condition that has been
complied with.
RETROACTIVE FULFILMENT OF SUSPENSIVE CONDITION
1. Obligation to give – Effects shall retroact to the day when
the obligation has been constituted.
2. Obligation to do or not to do – No fixed rule is provided,
depends on the court
RETROACTIVE EFFECTS AS TO FRUITS AND INTEREST IN
OBLIGATIONS TO GIVE
(1) Reciprocal obligations – no retroactivity because they
have been mutually compensated.
(2) Unilateral obligations – fruits belong to the debtor during
the pendency of the condition unless stated otherwise
1188 – The creditor may, before the fulfillment of the condition,
bring the appropriate actions for the preservation of his right.
The debtor may recover what during the same time he has paid
by mistake in case of a suspensive condition.
RIGHTS PENDING THE FULFILLMENT OF SUSPENSIVE
CONDITION
(1) Rights of the creditor – preservation of his rights to
prevent alienation or concealment of the property
(2) Rights of the debtor – recover what he has paid by
mistake (solutio indebiti)
1189 – When the conditions have been imposed with the
intention of suspending the efficacy of an obligation to give,
the following rules shall be observed in case of the
improvement, loss or deterioration of the thing during the
pendency of the condition:
(1) If the thing is lost without the fault of the debtor, the
obligation shall be extinguished;
(2) If the thing is lost through the fault of the debtor, he shall be
obliged to pay damages; it is understood that the thing is lost
when it perishes, or goes out of commerce, or disappears in
such a way that its existence is unknown or it cannot be
recovered;
(3) When the thing deteriorates without the fault of the debtor,
the impairment is to be borne by the creditor;
(4) If it deteriorates through the fault of the debtor, the creditor
may choose between the rescission of the obligation and its
fulfillment, with indemnity for damages in either case;
(5) If the thing is improved by its nature, or by time, the
improvement shall inure to the benefit of the creditor;
(6) If it is improved at the expense of the debtor, he shall have
 
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no other right than that granted to the usufructuary.
APPLIES IF
1. Obligation is a real obligation;
2. Object is specific;
3. Obligation is subject to a suspensive condition;
4. Condition is fulfilled;
5. There is loss, deterioration, or improvement during the
pendency of the condition.
KINDS OF LOSS
a. Physical loss - perishes
b. Legal loss – out of commerce
c. Civil loss – existence is unknown
RULES IN CASE OF LOSS, DETERIORATION, OR
IMPROVEMENT DURING PENDENCY OF SUSPENSIVE
CONDTION
(1) Loss of the thing without the debtor’s fault – obligation is
extinguished and debtor is not liable
(2) Loss through the debtor’s fault – Creditor can demand
damages plus incidental damages
(3) Deterioration without the debtor’s fault – Creditor suffers
(4) Deterioration with the debtor’s fault – Rescission plus
damages or specific performance plus damages
(5) Improvement by the nature or by time – Creditor benefits
(6) Improvement of thing at the expense of the debtor –
Debtor can enjoy the use of fruits as long as its with him
1190 – When the conditions have for their purpose the
extinguishment of an obligation to give, the parties, upon the
fulfillment of said conditions, shall return to each other what
they have received.
In case of the loss, deterioration or improvement of the thing,
the provisions which, with respect to the debtor, are laid down
in the preceding article shall be applied to the party who is
bound to return.
As for the obligations to do and not to do, the provisions of the
second paragraph of Article 1187 shall be observed as regards
the effect of the extinguishment of the obligation.
EFFECTS OF FULFILMENT OF RESOLUTORY CONDITION
(1) In obligation to give
a. Return to the status quo
b. If it legally owned by a third party, the remedy of
the party entitled is against the other
c. Also applies to the fruits and interest
(2) In obligation to do or not to do
a. Courts shall determine
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 fulfillment, 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.
KINDS OF OBLIGATION ACCORDING TO THE PERSON
OBLIGED
1. “Unilateral” – where only one party is obliged to comply
with a prestation
2. “Bilateral” – when both parties are mutually bound to one
another
a. “Reciprocal” – same cause
b. “Non-reciprocal” – Performance on one is not
dependent
REMEDIES IN RECIPROCAL OBLIGATIONS
(1) Choice of remedies
a. Specific performance plus damages; or
b. Rescission plus damages
(2) Remedy for rescission for non-compliance
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*Court may grant guilty party term for performance – extra term or
period to do specific performance, when guilty is willing to comply
but just needs more time
LIMITATIONS ON RIGHT TO DEMAND RESCISSION
(1) Resort to the courts – cannot take law into our own hands
(2) Power of the court to fix a period
(3) Right of a third person – if with another person already,
rescission is not available
(4) Substantial violation
(5) Waiver of right
1192 – In case both parties have committed a breach of the
obligation, the liability of the first infractor shall be equitably
tempered by the courts. If it cannot be determined which of the
parties first violated the contract, the same shall be deemed
extinguished, and each shall bear his own damages.
WHERE BOTH PARTIES ARE GUILTY OF BREACH
1. First infractor known – his liability will be equitably
reduced
2. First infractor cannot be determined – contract is
extinguished and each shall bear his own costs
OBLIGATIONS WITH A PERIOD
1193 – Obligations for whose fulfillment a day certain has been
fixed, shall be demandable only when that day comes.
Obligations with a resolutory period take effect at once, but
terminate upon arrival of the day certain.
A day certain is understood to be that which must necessarily
come, although it may not be known when.
If the uncertainty consists in whether the day will come or not,
the obligation is conditional, and it shall be regulated by the
rules of the preceding Section.
“Obligation with a period” – is one whose effects or consequences
are subjected to the expiration or arrival of said period or term.
“Period” – future and certain event
PERIOD VS CONDITION
1. Time – certain vs. uncertain
2. Influence of the obligation – fixes the time vs. mere
hope/extinguishment
3. When left to debtor’s will – court fixes duration vs. invalid
4. Retroactivity – none vs. there is retroactivity
KINDS OF PERIOD OR TERM
(1) According to effect
a. Suspensive
b. Resolutory
(2) According to source
a. Legal period – provided by law
b. Conventional or voluntary period – agreed by
the parties
c. Judicial period – fixed by the court
(3) According to definiteness
a. Definite - fixed
b. Indefinite
c.
1194 – In case of loss, deterioration or improvement of the
thing before the arrival of the day certain, the rules in Article
1189 shall be observed.
*Look at 1189
1195 – Anything paid or delivered before the arrival of the
period, the obligor being unaware of the period or believing
that the obligation has become due and demandable, may be
recovered, with the fruits and interests.
*Entitled to what was given, with fruits and interest
*Debtor has the burden of proving he was unaware
*If period had arrived, debtor has no right to recover the thing but
only the fruits and interest
*No recovery in personal obligations
1196 – Whenever in an obligation a period is designated, it is
presumed to have been established for the benefit of both the
creditor and the debtor, unless from the tenor of the same or
 
BA 161
other circumstances it should appear that the period has been
established in favor of one or of the other.
EXCEPTIONS TO THE GENERAL RULE
If these are stipulated
1. Terms is for the benefit of the debtor alone – He cannot
be compelled to pay prematurely but he can if desires to
do so
2. Terms is for the benefit of the creditor alone – He may
demand fulfillment even before the arrival of the term but
debtor cannot require him to accept payment before
expiration of period
1197 – If the obligation does not fix a period, but from its nature
and the circumstances it can be inferred that a period was
intended, the courts may fix the duration thereof.
The courts shall also fix the duration of the period when it
depends upon the will of the debtor.
In every case, the courts shall determine such period as may
under the circumstances have been probably contemplated by
the parties. Once fixed by the courts, the period cannot be
changed by them.
*If the obligation does not state a period and no period is intended,
the court is not authorized to fix a period.
EXCEPTIONS TO THE RULE
1. No period is fixed but a period was intended
2. Duration of the period depends upon the will of the debtor
1198 – The debtor shall lose every right to make use of the
period:
(1) When after the obligation has been contracted, he
becomes insolvent, unless he gives a guaranty or
security for the debt;
(2) When he does not furnish to the creditor the
guaranties or securities which he has promised;
(3) When by his own acts he has impaired said
guaranties or securities after their establishment, and
when through a fortuitous event they disappear,
unless he immediately gives new ones equally
satisfactory;
(4) When the debtor violates any undertaking, in
consideration of which the creditor agreed to the
period;
(5) When the debtor attempts to abscond.
WHEN OBLIGATION CAN BE DEMANDED BEFORE LAPSE OF
PERIOD
(1) When debtor becomes insolvent
(2) When debtor does no furnish guaranties or securities
promised
(3) When guaranties or securities given have been impaired
or have disappeared
(4) When the debtor violates the undertaking
(5) When the debtor attempts to abscond
ALTERNATIVE OBLIGATIONS
1199 – A person alternatively bound by different prestations
shall completely perform one of them.
The creditor cannot be compelled to receive part of one and
part of the other undertaking.
(3) “Simple Obligation” – one prestation
(4) “Compound Obligation” – two or more prestations
a. “Conjunctive Obligation” – one where there
are several prestations and all are due
b. “Distributive Obligation” – one where one two
or more of the prestations is due
a. “Alternative Obligation” – several
prestations are due but the
performance of one is sufficient
b. “Facultative Obligation” – one
where only one prestation is due
but the debtor may substitute
another
6

1200 – The right of choice belongs to the debtor, unless it has
been expressly granted to the creditor.
The debtor shall have no right to choose those prestations
which are impossible, unlawful or which could not have been
the object of the obligation.
*Right of choice, as a rule, given to the debtor – unless stated
otherwise
LIMITATIONS
1. Cannot choose impossible, unlawful or which could not
have been the object of the obligation – Prestations are
void.
2. When only one is practicable – obligation becomes simple
3. Cannot choose one part and another part to be given
together
1201 – The choice shall produce no effect except from the time
it has been communicated.
COMMUNICATION OF NOTICE THE CHOICE HAS BEEN MADE
(1) Effect of notice
a. Once given, obligation becomes simple
b. Choice is irrevocable, if it needs to be changed,
consent by both parties are needed.
(2) Proof and form of notice – orally or in writing
1202 – The debtor shall lose the right of choice when among
the prestations whereby he is alternatively bound, only one is
practicable.
1203 – If through the creditor's acts the debtor cannot make a
choice according to the terms of the obligation, the latter may
rescind the contract with damages.
*The debtor cannot make a choice due to the fault of the creditor,
then he has the right to rescind and recover damages.
*He is not bound to rescind.
1204 – The creditor shall have a right to indemnity for damages
when, through the fault of the debtor, all the things, which are
alternatively the object of the obligation, have been lost, or the
compliance of the obligation has become impossible.
The indemnity shall be fixed taking as a basis the value of the
last thing which disappeared, or that of the service, which last,
became impossible.
Damages other than the value of the last thing or service may
also be awarded.
EFFECTS OF THE LOSS OF OBJECTS OF THE OBLIGATION
(1) Some of the objects – obligation goes on
(2) All of the objects – creditor has right to indemnity of
damages. Value will be based on the last thing, which has
disappeared.
1205 – When the choice has been expressly given to the
creditor, the obligation shall cease to be alternative from the
day when the selection has been communicated to the debtor.
Until then the responsibility of the debtor shall be governed by
the following rules:
(1) If one of the things is lost through a fortuitous event,
he shall perform the obligation by delivering that
which the creditor should choose from among the
remainder, or that which remains if only one subsists;
(2) If the loss of one of the things occurs through the
fault of the debtor, the creditor may claim any of those
subsisting, or the price of that which, through the
fault of the former, has disappeared, with a right to
damages;
(3) If all the things are lost through the fault of the debtor,
the choice by the creditor shall fall upon the price of
any one of them, also with indemnity for damages.
The same rules shall be applied to obligations to do or not to
do in case one, some or all of the prestations should become
impossible. (1136a)
RULES IN CASE THE LOSS BEFORE THE CREDITOR HAS
MADE CHOICE
 
BA 161
(1) When a thing is lost through a fortuitous event – creditor
can choose form the remaining
(2) When a thing is lost through the debtor’s fault – choose
from the remaining with a right to damages or the price of
the lost thing and a right to damages
(3) When all things are lost through the debtor’s fault – can
demand price of any one of them and right to damage
(4) When all things are lost through a fortuitous event –
obligation is extinguished
1206 – When only one prestation has been agreed upon, but the
obligor may render another in substitution, the obligation is
called facultative.
The loss or deterioration of the thing intended as a substitute,
through the negligence of the obligor, does not render him
liable. But once the substitution has been made, the obligor is
liable for the loss of the substitute on account of his delay,
negligence or fraud.
EFFECT OF LOSS
1. Before substitution – If the principal thing is lost through a
fortuitous event, then obligation is extinguished. If not, he
is liable for damages. If the substitute is lost, doesn’t
render him liable.
2. After substitution - If the principal thing is lost, he is not
liable. If the substitute is lost, it would depend if it was the
fault of the debtor or not.
ALTERNATIVE VS. FACULTATIVE
(1) Number of prestations – several vs. one but can be
substituted
rd
(2) Right of choice – Creditor or 3 person vs. debtor
(3) Loss through fortuitous event – doesn’t vs. does
(4) Loss through fault of the debtor
JOINT AND SOLIDARY OBLIGATIONS
1207 – The concurrence of two or more creditors or of two or
more debtors in one and the same obligation does not imply
that each one of the former has a right to demand, or that each
one of the latter is bound to render, entire compliance with the
prestation. There is a solidary liability only when the obligation
expressly so states, or when the law or the nature of the
obligation requires solidarity.
1208 – If from the law, or the nature or the wording of the
obligations to which the preceding article refers the contrary
does not appear, the credit or debt shall be presumed to be
divided into as many shares as there are creditors or debtors,
the credits or debts being considered distinct from one
another, subject to the Rules of Court governing the multiplicity
of suits.
KINDS OF OBLIGATIONS ACCORDING TO THE NUMBER OF
PARTIES
(1) “Individual obligation” – where there is only one obligor or
one oblige
(2) “Collective obligation” – where there are two or more
debtors and/or two or more creditors. Can be joint or
solidary
“Joint Obligation” – Whole obligation to be paid proportionately by
the different debtors and/or is to be demanded proportionately by
the different creditors
“Solidary Obligation” – One where each one of the debtors is bound
to render, and/or each one of the creditors has a right to demand
from any of the debtors, entire compliance with the prestation.
COLLECTIVE OBLIGATION PRESUMED TO BE JOINT
1. No problem in the determination of
a. Person liable to pay
b. Person entitle to demand payment
c. Extent of the liability of the debtor
d. Extent of the liability of the creditor
2. Where there is plurality of parties and the share of each of
the obligation is specified.
3. When it is not specified, we follow that
a. There are as many debts as there are debtors
b. There are as many credits as there are creditors
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c. The debts and / or credits are considered debtor vs. they are all liable
distinct and separate from one another
d. Each debtor is liable only for a proportionate 1211 – Solidarity may exist although the creditors and the
part of the debt debtors may not be bound in the same manner and by the same
e. Each creditor is entitled only to proportionate periods and conditions.
part of the credit KINDS OF SOLIDARY OBLIGATIONS
WORDS TO INDICATE JOINT LIABILITY (1) Uniform – when the parties are bound by the same
• Mancomunada stipulation
• Mancomunadamente (2) Non-uniform or varied
• Pro rata *There may be a solidary obligation although the parties are not
• Proportionately bound in the same manner and by the same period and conditions.
• “We promise to pay” signed by two or more persons *Creditor may bring his action in toto against any of the solidary
WHEN OBLIGATION SOLIDARY debtors less the shares of the other debtors with unexpired terms or
(1) Obligation expressively says so unfulfilled conditions.
(2) Law requires solidarity
(3) The nature of the obligation requires solidarity 1212 – Each one of the solidary creditors may do whatever may
WORDS TO INDICATE SOLIDARY LIABILITY be useful to the others, but not anything which may be
• Jointly prejudicial to the latter.
• Severally *If any creditor performs any act prejudicial to the others, the
obligation is extinguished and he shall be responsible for damages.
• Solidaria
This based on mutual agency.
• In solidium
“Mutual agency” – The right of one to act for and in the name of the
• Together
others
• Separately
• Individually 1213 – A solidary creditor cannot assign his rights without the
• Collectively consent of the others.
• Juntos *In the absence of consent of the others, a solidary creditor cannot
• Separadamente assign his rights to a third person.
• “I promise to pay” signed by two or more persons *If the assignment is to a co-creditor, then the consent of the other
KINDS OF SOLIDARITY creditors is not necessary.
(1) According to parties bound
a. “Passive Solidarity” – Debtors are in solidarity 1214 – The debtor may pay any one of the solidary creditors;
only but if any demand, judicial or extrajudicial, has been made by
b. “Active Solidarity” – Creditors are in solidarity one of them, payment should be made to him.
only *To avoid confusion, the debtor’s payment should be paid to the
c. “Mixed Solidarity” – Both debtors and creditors creditor who demanded, judicially or extra-judicially from that debtor.
are in solidarity with each other.
(2) According to source 1215 – Novation, compensation, confusion or remission of the
a. “Conventional Solidarity” – Solidarity is agreed debt, made by any of the solidary creditors or with any of the
upon by both parties solidary debtors, shall extinguish the obligation, without
b. “Legal Solidarity” – Solidarity imposed by law prejudice to the provisions of Article 1219.
c. “Real Solidarity” – Solidarity is imposed by the The creditor who may have executed any of these acts, as well
nature of obligation as he who collects the debt, shall be liable to the others for the
*Solidarity is not presumed. share in the obligation corresponding to them.
“Novation” – It is the total or partial extinction of an obligation
1209 – If the division is impossible, the right of the creditors through the creation of a new one which substitutes it.
may be prejudiced only by their collective acts, and the debt “Compensation” – the extinguishment to the concurrent amount of
can be enforced only by proceeding against all the debtors. If debts of two persons who, in their own rights, are debtors and
one of the latter should be insolvent, the others shall not be creditors of each other.
liable for his share. “Confusion” or “merger” – It is the meeting in one person of the
*This article is for joint invisible obligations. qualities of creditor and debtor with respect to the same obligation.
*It is joint as to liabilities of debtors or rights of creditors but “Remission” or “ condonation”– It is the gratuitous abandonment of
indivisible as to compliance. the creditor of his right against the debtor (FORGIVE or form of
*Should any of the debtors be unable to comply with the delivery of donation).
the indivisible object, the debt will convert into one for damages, with LIABILITY FOR SOLIDARY CREDITOR
each debtor responsible for their own proportionate shares. The creditor who executed any of these actions should be liable to
*Should any of the debtors be insolvent, but the creditor, and not the the others for their corresponding shares considering that such acts
co-debtors, carries the burden of the proportionate share of the are prejudicial to them.
unwilling debtor. Co-debtors still pay for their proportionate shares EFFECT ON JOINT OBLIGATIONS
but if they suffer any damages, they can recover them from the These actions do not extinguish or modify the obligation except with
unwilling debtor. respect to the creditor or debtor affected, without extending its
operations to any other part of the debt or of the credit.
1210 – The indivisibility of an obligation does not necessarily
give rise to solidarity. Nor does solidarity of itself imply 1216 – The creditor may proceed against any one of the
indivisibility. solidary debtors or some or all of them simultaneously. The
INDIVISIBILITY VS. SOLIDARITY demand made against one of them shall not be an obstacle to
(1) Prestations Vs. Juridical or Legal tie those, which may subsequently be directed against the others,
(2) Only the debtor guilty of breach is liable for damages vs. so long as the debt has not been fully collected.
all debtors are liable for the breach of one debtor *Not applicable for joint obligations
(3) Can exist with only one debtor and creditor vs. at least two *It is up to the solidary creditor to determine against whom he will
debtors or creditors enforce collection.
(4) The other debtors are not liable for the insolvency of one

  8

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 PAYMENT BY A SOLIDARY DEBTOR
(1) Between the solidary debtors and creditors – Payment in
full of one solidary debtor extinguishes the whole
obligation. Creditor can choose from whom to accept if
two or more debtors offer to pay.
(2) Among the solidary debtors – After payment of the debt,
the paying debtor can demand reimbursement from his c-
debtors for their proportionate share with interest (if there
is).
Incase of insolvency of one solidary debtor, the co-debtors
will assume the burden of that share of the insolvent by
pro rata basis.
(3) Among the solidary creditors – The receiving creditor is
responsible for the others corresponding shares.
1218 – Payment by a solidary debtor shall not entitle him to
reimbursement from his co-debtors if such payment is made
after the obligation has prescribed or become illegal.
*When the obligation is already prescribed or become illegal, it is
extinguished.
“By prescription” – one acquires the ownership and other rights
through the lapse of time in the manner and under the condition laid
down by the law.
- The following actions must be brought into action within
10 years from the time the right of action occurs
o Written contract
o Obligation created by law
o Judgment
- The following actions must be commenced with six years
o Oral contract
o Quasi-contract
- The following actions must be instituted within four years
o Injury to rights of the plaintiff
o Quasi-delict
1219 – The remission made by the creditor of the share, which
affects one of the solidary debtors, does not release the latter
from his responsibility towards the co-debtors, in case the debt
had been totally paid by anyone of them before the remission
was effected.
*If the payment is made first, the remission has no effect.
*If the remission is made before the payment and payment is made,
solutio indebiti arises.
1220 – The remission of the whole obligation, obtained by one
of the solidary debtors, does not entitle him to reimbursement
from his co-debtors.
*But in the case of novation, compensation, or confusion, the debtor
with whom it is affected is entitled to recover from his co-debtors
their corresponding shares.
1221 – If the thing has been lost or if the prestation has become
impossible without the fault of the solidary debtors, the
obligation shall be extinguished.
If there was fault on the part of any one of them, all shall be
responsible to the creditor, for the price and the payment of
damages and interest, without prejudice to their action against
the guilty or negligent debtor.
If through a fortuitous event, the thing is lost or the
performance has become impossible after one of the solidary
debtors has incurred in delay through the judicial or
 
BA 161
extrajudicial demand upon him by the creditor, the provisions
of the preceding paragraph shall apply.
(1) Loss is without fault and before delay - Extinguished
(2) Loss is due to the fault on the part of a solidary debtor –
they are all liable for the price of the thing and damages.
But the debtor at fault cannot ask for reimbursement from
his co-debtors if he paid for the price and damage
(3) Loss is without fault but after delay – Same as (2)
1222 – A solidary debtor may, in actions filed by the creditor,
avail himself of all defenses, which are derived from the nature
of the obligation and of those, which are personal to him, or
pertain to his own share. With respect to those, which
personally belong to the others, he may avail himself thereof
only as regards that part of the debt for which the latter are
responsible.
DEFENSES AVAILABLE TO A SOLIDARY DEBTOR
(1) Defenses derived from the nature of the obligation – third
party pays, fraud, prescription, remission, illegality, or
absence of consideration, res judicata, non-performance
of a suspensive condition
(2) Defenses personal to, or which pertain to share of, debtor
sued – insanity, incapacity, mistake, violence, minority
(3) Defenses personal to other debtors
DIVISIBLE AND INDIVISIBLE OBLIGATIONS
1223 – The divisibility or indivisibility of the things that are the
object of obligations in which there is only one debtor and only
one creditor does not alter or modify the provisions of Chapter
2 of this Title.
“Divisible Obligation” – partial fulfillment
“Indivisible Obligation” – not capable of partial fulfillment
TEST FOR DISTINCTION
• Purpose of the obligation, or
• Intention of the parties
*An obligation is presumed indivisible when there is only one
creditor and one debtor. 1225
KINDS OF DIVISION
(1) “Qualitative division” – based on quality
(2) “Quantitative division” – based on quantity
(3) “Ideal or Intellectual division” – one which exists only in
the minds of the parties
KINDS OF INDIVISIBILITY
(1) “Legal indivisibility” – Law declares it so
(2) “Conventional indivisibility” – agreed upon by the parties
(3) “Natural indivisibility” – nature of the object or prestation
1224 – A joint indivisible obligation gives rise to indemnity for
damages from the time anyone of the debtors does not comply
with his undertaking. The debtors who may have been ready to
fulfill their promises shall not contribute to the indemnity
beyond the corresponding portion of the price of the thing or of
the value of the service in which the obligation consists.
* The non compliance of any one of the debtors in a joint and
indivisible obligation shall be converted into one for damages.
1225 – For the purposes of the preceding articles, obligations
to give definite things and those, which are not susceptible of
partial performance, shall be deemed to be indivisible.
When the obligation has for its object the execution of a certain
number of days of work, the accomplishment of work by
metrical units, or analogous things, which by their nature are
susceptible of partial performance, it shall be divisible.
However, even though the object or service may be physically
divisible, an obligation is indivisible if so provided by law or
intended by the parties.
In obligations not to do, divisibility or indivisibility shall be
determined by the character of the prestation in each particular
case.
OBLIGATIONS DEEMED INDVISIBLE
(1) Obligations to give definite things
(2) Obligations not susceptible to partial performances
9
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(3)Obligations provided by the law to be indivisible even if has been clearly granted him. However, if after the creditor has
thing or service can be divisible – taxes (although not decided to require the fulfillment of the obligation, the
recently) performance thereof should become impossible without his
OBLIGATIONS DEEMED DIVISIBLE fault, the penalty may be enforced.
(1) Obligations which have for their object the execution of a *Penalty is a not a substitute for performance except when he is
certain number of days of work expressively given the right to do so.
(2) Obligations which have for their object the PENAL CLAUSE ASSUMED SUBSIDIARY
accomplishment of work by metrical units 1. When there is performance – There is no need to demand
(3) Obligations which by their nature are susceptible of partial for penalty unless” this right has been clearly granted”.
performance 2. When there is no performance – creditor may ask for
DIVISIBLITY IN OBLIGATIONS NOT TO DO penalty or specific performance. These remedies are
*The character of the prestations in each particular case will alternative. But he can ask for penalty, if the choice was
determine their divisibility and indivisibility specific performance and it has become impossible to do
*Obligations “to do” or “not to do” are generally indivisible. so without the fault of the debtor.

OBLIGATIONS WITH A PENAL CLAUSE 1228 – Proof of actual damages suffered by the creditor is not
1226 – In obligations with a penal clause, the penalty shall necessary in order that the penalty may be demanded.
substitute the indemnity for damages and the payment of *All the creditor has to prove is the violation of the obligation by the
interests in case of noncompliance, if there is no stipulation to debtor.
the contrary. Nevertheless, damages shall be paid if the obligor *Damages recoverable in addition to the penalty – creditor must
refuses to pay the penalty or is guilty of fraud in the fulfillment provide evidence of such damages.
of the obligation.
The penalty may be enforced only when it is demandable in 1229 – The judge shall equitably reduce the penalty when the
accordance with the provisions of this Code. principal obligation has been partly or irregularly complied with
“Principal Obligation” – one which can stand by itself and does not by the debtor. Even if there has been no performance, the
depend for its validity and existence upon another obligation penalty may also be reduced by the courts if it is iniquitous or
“Accessory Obligation” – one, which is, attached to a principal unconscionable.
obligation WHEN PENALTY CAN BE REDUCED BY THE COURT
“Penal Clause” – accessory undertaking attached to an obligation to (1) When there is partial or irregular performance
assume greater liability in case of breach (2) When the penalty agreed upon is iniquitous or
unconscionable
PURPOSES OF PENAL CLAUSE
(1) Insure performance by creating an effective deterrent 1230 – The nullity of the penal clause does not carry with it that
against breach of the principal obligation.
(2) Substitute a penalty for the indemnity of damages and The nullity of the principal obligation carries with it that of the
payment of interests in case of non-compliance penal clause.
PENAL CLAUSE VS CONDITION *Accessory follows the principal and not vice-versa.
1. Constitutes to an obligation although accessory vs. does
not
2. Demandable at default vs. never demandable
KINDS OF PENAL CLAUSE
(1) As to its origins
a. “Legal penal clause” – provided by law
b. “Conventional penal clause” – agreed upon by
the parties
(2) As to its purpose
a. “Compensatory penal clause” – penal clause
takes the place of damages
b. “Punitive penal clause” – penalty is merely a
punishment for breach
(3) As to its demandability or effect
a. “Subsidiary or alternative penal clause” – only
the penalty clause can be enforced
b. “Joint or cumulative penal clause” – both the
principal obligation and penalty clause can be
enforced
*Penalty clauses are substitutes for indemnity for damages. Proof of
actual damages is not necessary for the penalty to be enforced.
WHEN CREDITOR CAN RECOVER DAMAGES
On top of the penalty
a. When so stipulated by the parties;
b. When the obligor refuses to pay the penalty, in which
case the creditor can recover legal interest thereon; or
c. When the obligor is guilty of fraud in the fulfillment of the
obligation
*Penalty is only demandable when there is a breach in the obligation

1227 – The debtor cannot exempt himself from the performance

of the obligation by paying the penalty, save in the case where
this right has been expressly reserved for him. Neither can the
creditor demand the fulfillment of the obligation and the
satisfaction of the penalty at the same time, unless this right

  10